Business Envt & s m

8/9/2019 Business Envt & s m

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BUSINESS ENVT & S M

Dr Archana Sharma


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The Basic Framework of Strategy According to

Grant

The FirmGoals and values

Resources andcapabilities

Structure and

Systems

The Industry

EnvironmentCompetitors

Customers

Suppliers

INTERNAL EXTERNAL

STRATEGY

STRATEGY IS A LINK BETWEEN THE FIRM & ITS ENVIRONMENT


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Why is Strategy Needed?

Strategy, which can be applied at any level or for any size ofcompany, is needed to answer the following question:

What actions are most likely to achieve the organisations

goals given its internal and external context? And how can

these be implemented to maximise company performance

Examples of Strategies:

Business Strategy

Technology-Innovation Strategy

Customer Relationship Strategy

Human Resources Strategy Military strategy


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contd

INTERNAL ENVIRONMENT

Areas of technical expertise (e.g. IT, design, R & D, manufacturing,

materials engineering, innovation, JIT, logistics)

Corporate culture (e.g. diversity, operating excellence, customer

focus, training) - vision and mission statement Brand awareness (e.g. brand communication)

Company organisation (e.g. pyramid, flat, global, cross-regional)

EXTERNAL ENVIRONMENT

Industrial context (e.g. military and civil marine engineering) Legislation (e.g. environmental legislation)

Social and Demographic trends

Customer (needs and preferences)


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Business Strategy

Business Strategy is the framework of a

company in which it intends to compete and

obtain revenues.

It is the link between the internal and external

contexts.

It can take a front seat or a back seat depending

on internal and external conditions. Business strategy is a management tool.


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The role of Business Strategy

The primary role of business strategy is to ensure that

the internal context of a company matches the external

context so as to guarantee (sustainable) performance.

INTERNAL

CONTEXT

EXTERNALCONTEXT

PERFORMANCE


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Strategic management process

(contd Conducting an internal analysis

Assessing organisational resources, capabilities, activities,

and culture:

Strengths (core competencies) create value for the customerand strengthen the competitive position of the firm.

Weaknesses (things done poorly or not at all) can place the

firm at a competitive disadvantage.

Steps 2 and 3 combined are called a SWOTanalysis. (Strengths, Weaknesses, Opportunities,

and Threats)


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Identifying Opportunities

Orgn

resource

capabilities

Opportunity

In

envt

Orgn

opportunity


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Levels of organisational strategy

Multi

Business

SBU 1SBU 3

marketingHuman

ResourceManufacturingR&DFinance

SBU 2

Corporate

Business

Functional


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Types of Corporate strategy

Corporate-level strategies

Top managements overall plan for the entire

organisation and its strategic business units

Types of corporate strategies

Growth: expansion into new products and

markets

Stability: maintenance of the status quo

Renewal: redirection of the firm into new

markets


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contd

Growth strategy

Seeking to increase the organisationsbusiness by

expansion into new products and markets. Types of growth strategies

Concentration

Focusing on a primary line of business andincreasing the number of products offered or

markets served.


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Vertical integrationBackward vertical integration: attempting

to gain control of inputs (become a self-supplier).

Forward vertical integration: attemptingto gain control of output through control of

the distribution channel and/or providecustomer service activities (eliminatingintermediatries)


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Horizontal integrationCombining operations with another competitor in the

same industry to increase competitive strengths and

lower competition among industry rivals.

DIVERSIFICATION

Related diversification

Expanding by merging with or acquiring firms in different,

but related industries that are strategic fits. Unrelated diversification

Growing by merging with or acquiring firms in unrelated

industries where higher financial returns are possible.


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contd

Stability strategy

A strategy that seeks to maintain the

status quo to deal with the uncertainty of adynamic environment, when the industry is

experiencing slow- or no-growth

conditions, or if the owners of the firm

elect not to grow for personal reasons.


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contd

Renewal strategies

Developing strategies to counter organisation

weaknesses that are leading to performance declines.

Retrenchment: focusing of eliminating non-critical

weaknesses and restoring strengths to overcome current

performance problems.

Turnaround: addressing critical long-termperformance

problems through the use of strong cost elimination

measures and large-scale organisational restructuring

Solutions.


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Strategic Planning Model

A B C D E

Environmental Scan

Assessment

Background

Information

Situational Analysis

SWOT Strengths,

Weaknesses,

Opportunities,

Threats

Situation Past,

Present and Future

Significant Issues

Align / Fit with

Capabilities

Mission & Vision

Values / Guiding

Principles

Major Goals

Specific Objectives

Performance

Measurement

Targets / Standards of

Performance

Initiatives and

Projects

Baseline Components

Performance

Management

Review Progress

Balanced Scorecard

Take Corrective

Actions

Down to Specifics Evaluate

Where we are Where we want to be How we will do it How are we doing

Gaps Action Plans Feedback upstream

revise plans


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Assessment


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Assessment Model:

S W O T

Assessment

External Assessment: Marketplace,competitors, social trends, technology,

regulatory environment, economic cycles .

External Assessment: Marketplace,competitors, social trends, technology,

regulatory environment, economic cycles .

Internal Assessment: Organizational assets,

resources, people, culture, systems, partnerships,

suppliers, . . .

Internal Assessment: Organizational assets,

resources, people, culture, systems, partnerships,

suppliers, . . .


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StrengthsAssessment

StrengthsStrengths Those things that you do well, theThose things that you do well, thehigh value or performance pointshigh value or performance points

Strengths can be tangible: Loyal customers,Strengths can be tangible: Loyal customers,

efficient distribution channels, very high qualityefficient distribution channels, very high quality

products, excellent financial conditionproducts, excellent financial condition

Strengths can be intangible: Good leadership,Strengths can be intangible: Good leadership,

strategic insights, customer intelligence, solidstrategic insights, customer intelligence, solid

reputation, high skilled workforcereputation, high skilled workforce

Often considered Core CompetenciesOften considered Core Competencies BestBest

leverage points for growth without draining yourleverage points for growth without draining your

resourcesresources


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WeaknessesAssessment

WeaknessesWeaknesses Those things that prevent you fromThose things that prevent you fromdoing what you really need to dodoing what you really need to do

Since weaknesses are internal, they are withinSince weaknesses are internal, they are within

your controlyour control

Weaknesses include: Bad leadership, unskilledWeaknesses include: Bad leadership, unskilled

workforce, insufficient resources, poor productworkforce, insufficient resources, poor product

quality, slow distribution and delivery channels,quality, slow distribution and delivery channels,

outdated technologies, lack of planning, . . .outdated technologies, lack of planning, . . .


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OpportunitiesAssessment

OpportunitiesOpportunities Potential areas for growth andPotential areas for growth andhigher performancehigher performance

External in natureExternal in nature marketplace, unhappymarketplace, unhappy

customers with competitors, better economiccustomers with competitors, better economic

conditions, more open trading policies, . .conditions, more open trading policies, . .

Internal opportunities should be classified asInternal opportunities should be classified as

StrengthsStrengths

Timing may be important for capitalizing onTiming may be important for capitalizing on

opportunitiesopportunities


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ThreatsAssessment

ThreatsThreats Challenges confronting the organization,Challenges confronting the organization,external in natureexternal in nature

Threats can take a wide rangeThreats can take a wide range bad pressbad press

coverage, shifts in consumer behavior, substitutecoverage, shifts in consumer behavior, substitute

products, new regulations, . . .products, new regulations, . . .

May be useful to classify or assign probabilities toMay be useful to classify or assign probabilities to

threatsthreats

The more accurate you are in identifying threats,The more accurate you are in identifying threats,the better position you are for dealing with thethe better position you are for dealing with the

sudden ripples of changesudden ripples of change


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Baseline


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Why create a baseline?Baseline

Puts everything about the organization into aPuts everything about the organization into asingle context for comparability and planningsingle context for comparability and planning

Descriptive about the company as well as theDescriptive about the company as well as the

overall environmentoverall environment

Include information about relationshipsInclude information about relationships

customers, suppliers, partners, . . .customers, suppliers, partners, . . .

Preferred format is the Organizational ProfilePreferred format is the Organizational Profile


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Organizational Profile

1. Operating Environment

Baseline

Products and ServicesProducts and Services Suppliers, DeliverySuppliers, DeliveryChannels, Contracts, Arrangements, . . .Channels, Contracts, Arrangements, . . .

Organizational CultureOrganizational Culture Barriers, Leadership,Barriers, Leadership,

Communication, Cohesiveness . . . .Communication, Cohesiveness . . . .

Workforce ProductivityWorkforce Productivity Skill levels, diversity,Skill levels, diversity,

contractors, aging workforce, . . .contractors, aging workforce, . . .

InfrastructureInfrastructure Systems, technology, facilities, . .Systems, technology, facilities, . .

RegulatoryRegulatory Product / Service Regulation, ISOProduct / Service Regulation, ISO

Quality Standards, Safety, Environmental, . . .Quality Standards, Safety, Environmental, . . .


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2. Business Relationships

Baseline

Organizational StructureOrganizational Structure Business Units,Business Units,Functions, Board, Management Layers, . . .Functions, Board, Management Layers, . . .

Customer RelationshipsCustomer Relationships Requirements,Requirements,

Satisfaction, Loyalty, Expectations, . . .Satisfaction, Loyalty, Expectations, . . .

Value ChainValue Chain Relationship between everyone inRelationship between everyone in

the value chain . . . .the value chain . . . .

Partner RelationshipsPartner Relationships Alliances, longAlliances, long--termterm

suppliers, customer partnerships, . . .suppliers, customer partnerships, . . .


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3. Key Performance Categories

Baseline

CustomerCustomer

Products and ServicesProducts and Services

FinancialFinancial Human CapitalHuman Capital

OperationalOperational

External (Regulatory Compliance, SocialExternal (Regulatory Compliance, Social

Responsibility, . . . )Responsibility, . . . )


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Gap AnalysisBaseline

Baseline / Org Profile Challenges / SWOT

Gap = Basis for Long-Term

Strategic Plan

Gap = Basis for Long-Term

Strategic Plan


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Components


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Developing GoalsComponents

Cascade from the top of the StrategicCascade from the top of the StrategicPlanPlan

Mission, Vision, Guiding Principles.Mission, Vision, Guiding Principles.

Look at your strategic analysisLook at your strategic analysis SWOT,SWOT,Environmental Scan, Past Performance,Environmental Scan, Past Performance,

Gaps . .Gaps . .

Limit to a critical fewLimit to a critical few such as five tosuch as five to

eight goals.eight goals.

Broad participation in the development ofBroad participation in the development of

goals:goals:

Consensus from aboveConsensus from above buybuy--in at thein at the


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Examples of GoalsComponents

Reorganize the entire organization for better responsiveness to customersReorganize the entire organization for better responsiveness to customers

We will partner with other businesses, industry leaders, and government agencies in

order to better meet the needs of stakeholders across the entire value stream.

We will partner with other businesses, industry leaders, and government agencies in

order to better meet the needs of stakeholders across the entire value stream.

Manage our resources with fiscal responsibility and efficiency through a single

comprehensive process that is aligned to our strategic plan.

Manage our resources with fiscal responsibility and efficiency through a single

comprehensive process that is aligned to our strategic plan.

Improve the quality and accuracy of service support information provided to our

internal customers.

Improve the quality and accuracy of service support information provided to our

internal customers.

Establish a means by which our decision making process is market and customer

focus.

Establish a means by which our decision making process is market and customer

focus.

Maintain and enhance the physical conditions of our public facilities.Maintain and enhance the physical conditions of our public facilities.


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Objectives

RelevantRelevant -- directly supports the goaldirectly supports the goal

Compels the organization into actionCompels the organization into action

Specific enough so we can quantify andSpecific enough so we can quantify andmeasure the resultsmeasure the results

Simple and easy to understandSimple and easy to understand

Realistic and attainableRealistic and attainable Conveys responsibility and ownershipConveys responsibility and ownership

Acceptable to those who must executeAcceptable to those who must execute

May need several objectives to meet aMay need several objectives to meet a

goalgoal

Components


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Goals vs. Objectives

GOALS OBJECTIVES

Very short statement, fewwords Longer statement, moredescriptive

Broad in scope Narrow in scope

Directly relates to the

Mission Statement

Indirectly relates to the Mission

Statement

Covers long time period

(such as 10 years)

Covers short time period (such

1 year budget cycle)

Components


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P.E.S.T. elements

Political aspects: What are the political implications,

connections, actions needed etc.? e.g. Gulf war

Economical aspects : Is it viable, does it make

economic sense (short or long-term), how much?? Social aspects : What are the social consequences of

the idea, strategy, changes etc. e.g. how will eBanking

affect the customers?

Technological aspects: What technology is needed,

available, is this a quantum leap for the

consumer/supplier?


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Forces in the industry analysis


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Five competitive forces

Threat of new entrants

The ease or difficulty with which new competitorscan

enter an industry.

Threat of substitutes

The extent to which switching costs and brandloyalty

affect the likelihood of customers adopting substitutes

products and services. Bargaining power of buyers

The degree to which buyers have the marketstrength to

hold sway over and influence competitors in an industry.


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Bargaining power of suppliers

The relative number of buyers tosuppliers and threats from substitutes and

new entrants affect the buyersupplierrelationship.

Current rivalry

Intensity among rivals increases whenindustry growth rates slow, demand falls,and product prices descend.


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Competitive strategies

Cost leadership strategy

Seeking to attain the lowest total overall costsrelative to

other industry competitors.

Differentiation strategy

Attempting to create a unique and distinctive productor

service for which customers will pay a premium.

Focus strategy Using a cost or differentiation advantage to exploit a

particular market segment rather a larger market.


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Innovation strategies

Possible events

Radical breakthroughs in products.

Application of existing technology to new uses.

Strategic decisions about innovation

Basic research

Product development

Process innovation

First mover

An organisation that brings a product innovation to

market or use a new process innovations

Documents

Business Envt & s m