introduction to strategic management for marketers

7/29/2019 introduction to strategic management for marketers

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AIBS

International Strategic Management

Dr. Meghna Sharma


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AIBSWhat is Strategy?

Strategy is the overall plan fordeploying resources toestablish a favorable position.

Tactic is a scheme for a specificmaneuver.


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AIBSCharacteristics of strategic decisions

Important

Involve a significant commitment of resources

Not easily reversible


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AIBSBasic Framework

The firm

Goals & Values

Resources &

Capabilities

Structures &

Systems

External

Environment

Competitors

Customers

Suppliers

etc

Strategy


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AIBS

Basic Model of

Strategic Management

Four Basic Elements


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AIBSEnvironmental Scanning


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AIBS

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Environmental Scanning

SWOT analysis

PEST analysis

Five forces analysis


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AIBS

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SWOT analysis

Strengths (internal)

Weaknesses (internal)

Opportunities (external)

Threats (external)


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AIBS

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PEST Analysis

Political factors

Economic factors

Socio-cultural factors

Technological factors


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AIBS

EEP Session-2 10

Political/Legal Factors

Political ideology of the government

Legislation and Acts

Anti Monopolies legislation

Environmental protection laws

Taxation policy

Employment laws

National Public policy Global Public Policies


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AIBSEconomic Factors

Economic growth

Inflation

Employment

Disposable income

Business cycles

Availability and cost of energy

Availability and prices of raw materials


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AIBS

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Socio-Cultural Factors

Demographic factors Role of women Extent of Poverty Extent of Inequality

Regional Disparities Caste and creed Race and religion Food habits


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AIBSTechnological Factors

New discoveries and innovations Speed of technology transfer Rates of obsolescence Internet connections Information and Communications

Technology (ICT)


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AIBS

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Strategic Management Process


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AIBSStrategic Management Process

Step 1: Identifying the organisations current mission,objectives, and strategies Mission: the firms reason for being

Who we are,

What we do, and

Where we are now Goals: the foundation for further planning

Measurable performance targets

Step 2: Conducting an external analysis The environmental scanning of specific and general

environments Focuses on identifying opportunities and threats

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Step 3: Conducting an internal analysis Assessing organisational resources, capabilities,

activities and culture: Strengths (core competencies) create value for the

customerand strengthen the competitive position ofthe firm.

Weaknesses (things done poorly or not at all) canplace the firm at a competitive disadvantage.

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

Opportunities, and Threats)

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Step 4: Formulating strategies Develop and evaluate strategic alternatives

Select appropriate strategies for all levels in the

organization that provide relative advantage overcompetitors

Match organizational strengths to environmentalopportunities

Correct weaknesses and guard against threats

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Step 5: Implementing strategies Implementation: effectively fitting organisational

structure and activities to the environment

Effective strategy implementation requires an

organisational structure matched to itsrequirements.

Step 6: Evaluating results How effective have strategies been?

What adjustments, if any, are necessary?

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AIBS

The most important strategy concepts:Vision: what does the company see for the future?

Mission: why does the company exist?

Strategy: covers the definition of objectives as well as the

methods and tools to help reaching the objectives.Objective: they say, what does the company want to

implement in a given time?

Tools: the way defined to fulfil the mission and objectives, atthe end of which the vision becomes reality.

Strategic action: a main task derived from strategicobjectives often formulated as projects.

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AIBSVision and Mission

Vision Picture of what the firm wants to be

What the firm ultimately wants to achieve

An effective vision statement is the responsibility of theleader who should work with others to form it

Foundation for the mission

Mission Specifics business(es) in which firm intends to compete

and customers it intends to serve

More specific than the vision


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AIBS

The Strategic Management Process


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AIBS

Managers

Owners/Stakeholders

Trade Associations

Customers

The Public atlarge

Employees

Government

Suppliers

Local community

Constituents of Strategic Building


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AIBS

Organizational Capacity

Enterprise Synergies

Structural

Position

Process

Execution

Competitiveadvantage

Financial performance

The Architecture of Strategy


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AIBS

Differentiation

Cost leadership

Quick Response

Competitive

Advantage

Economic

Valueadded

Market

Value

added

Competitive Advantage: The focal Point of Strategy


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AIBSCriteria for Resources and Capabilities That

Become Core Competencies

CoreCompetencies

Valuable Rare

Costly to ImitateNonsubstitutable

H R d C biliti


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AIBS

How Resources and Capabilities

Provide Competitive Advantage

The firm is organized appropriately toobtain the full benefits of the resourcesin order to realize a competitiveadvantage

Valuable Allow the firm to exploit opportunitiesor neutralize threats in its externalenvironment

Rare Possessed by few, if any, current andpotential competitors

Costly toimitate

When other firms cannot obtain themor must obtain them at a much higher

cost

Nonsubstitutable


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AIBSStrategy Framework

Strategy Frameworks

qIndustry level analysisuPorters 5 Forces

qFirm level analysisuSWOT

uCore competencies

uValue Chain

qOther forms of analysisuBCG 2x2 Matrix

uBenchmarking, best practices


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AIBS

Porters 5 Forces

THE INDUSTRYRivalry Among

Established Firmscompetitive structure

demand conditions

exit barriers

Bargaining Power of Suppliers

High if:

product has few substitutes and

is important, few suppliers

supplier has many other outlets

for product

high switching costs

threat of vertical integration

forward

Bargaining Power of Buyers

High if:

few large buyers

product unimportant to output

buyers purchase in large

quantities and purchase large

percentage of industry output

low switching costs, little

differentiation threat of vertical integration

backward

Risk of Entry

(Barriers to Entry)

brand loyalty absolute cost advantages

econ of scale, cap reqt

government regulations

distribution access

Threat of Substitute Products

existence ofdifferentproducts

that serve consumers needs in

a similar way


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AIBSBases ofcompetition

1. Customer orienteda. Who they are?b. When they use it?c. How they use it??

2. Marketing Orienteda. Theme/ Copy Strategyb. Media Distribution Strategyc. Distribution Strategyd. Pricing Strategy

Resource OrientedStrategy

a. Raw Materialb. Employeesc. Financial Resources

Geography Oriented


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AIBSThe Five Forces of

Competition Model


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AIBSThreat of New Entrants: Barriers

to Entry Economies of scale

Product differentiation

Capital requirements Switching costs

Access to distribution channels

Cost disadvantages independent of scale Government policy

Expected retaliation


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AIBSBarriers to Entry

Economies of Scale

Marginal improvements in efficiency that a

firm experiences as it incrementally increases

its size

Advantages and disadvantages of large-

scale and small-scale entry


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AIBSBarriers to Entry (contd)

Product differentiation

Unique products

Customer loyalty

Products at

competitive prices

Capital Requirements

Physical facilities

Inventories

Marketing activities

Availability of capital


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Switching Costs

One-time costs customers incur when they

buy from a different supplier

New equipment

Retraining employees

Psychic costs of ending a relationship


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Access to Distribution Channels

Stocking or shelf space

Price breaks

Cooperative advertising allowances

Cost Disadvantages Independent of

Scale

Proprietary product technology

Favorable access to raw materials


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Cost disadvantages independent of scale

Proprietary product technology

Favorable access to raw materials Desirable locations

Government policy

Licensing and permit requirements

Deregulation of industries


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Expected retaliation

Responses by existing competitors may

depend on a firms present stake in the

industry (available business options)


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AIBSBargaining Power of

Suppliers Supplier power increases when:

Suppliers are large and few in number

Suitable substitute products are notavailable

Individual buyers are not large customers of suppliersand there are many of them

Suppliers goods are critical to buyers marketplace success

Suppliers products create high switching costs.

Suppliers pose a threat to integrate forward into buyersindustry


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AIBSBargaining Power of Buyers

Buyer power increase when:

Buyers are large and few in number

Buyers purchase a large portion of anindustrys total output

Buyers purchases are a significant portion of asuppliers annual revenues

Buyers can switch to another product without incurring high

switching costs


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AIBSThreat of Substitute Products

The threat of substitute products increases

when:

Buyers face few switching costs

The substitute products price islower

Substitute products quality and performance

are equal to or greater than the existingproduct

Differentiated industry products that are valued by

customers reduce this threat


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AIBSIntensity of Rivalry Among

Competitors Industry rivalry increases when:

There are numerous or equallybalanced competitors

Industry growth slows ordeclines

There are high fixed costs or highstorage costs

There is a lack of differentiationopportunities or low switching costs

When the strategic stakes are high

When high exit barriers prevent competitors


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AIBSInterpreting Industry Analyses

Low entry barriers

UnattractiveIndustry

Suppliers and buyers havestrong positions

Strong threats fromsubstitute products

Intense rivalry amongcompetitors Low prof i t potent ial


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AIBSInterpreting Industry Analyses

AttractiveIndustry

High entry barriers

Suppliers and buyers haveweak positions

Few threats fromsubstitute products

Moderate rivalry amongcompetitors High p rof i t po tent ial


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AIBSCompetitor Analysis

Competitor Intelligence

The ethical gathering of needed information

and data that provides insight into:

A competitors direction (future ob ject ives)

A competitors capabilities and intentions (current s trategy)

A competitors beliefs about the industry (i tsassumpt ions)

A competitors capabil i t ies


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AIBSCompetitor Analysis

Components


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AIBSCompetitor Analysis (contd)

How do our goalscompare with ourcompetitors goals?

Where will the

emphasis be placedin the future?

What is the attitudetoward risk?

Future Objectives


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How are we currentlycompeting?

Does this strategysupport changes inthe competitivestructure?

Future Objectives

Current Strategy


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Do we assume thefuture will bevolatile?

Are we operatingunder a status quo?

What assumptions doour competitors holdabout the industryand themselves?

Future Objectives

Current Strategy

Assumptions


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What are ourstrengths and

weaknesses? How do we rate

compared to ourcompetitors?

Future Objectives

Current Strategy

Assumptions

Capabilities


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What will ourcompetitors do inthe future?

Where do we holdan advantage overour competitors?

How will thischange ourrelationship withour competitors?

ResponseFuture Objectives

Current Strategy

Assumptions

Capabilities


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AIBSStakeholders

Individuals and groups who can affect, and

are affected by, the strategic outcomes

achieved and who have enforceable

claims on a firms performance

Claims are enforced by the stakeholders

ability to withhold essential participation


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AIBS

The Three

Stakeholder

Groups


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AIBSCapital Market Stakeholders

Shareholders and lenders expect the firm

to preserve and enhance the wealth they

have entrusted to it

Returns should be commensurate with the

degree of risk to the shareholder


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AIBSProduct Market Stakeholders

Customers

Demand reliable products at low prices

Suppliers

Seek loyal customers willing to pay highest sustainable pricesfor goods and services

Host communities

Want companies willing to be long-term employers andproviders of tax revenues while minimizing demands on public

support services Union officials

Want secure jobs and desirable working conditions


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AIBSOrganizational Stakeholders

Employees

Expect a dynamic, stimulating and rewarding

work environment

Are satisfied by a company that is growingand actively developing their skills

S


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AIBSStakeholder Involvement

Two issues affect the extent of stakeholderinvolvement in the firm

1.How to divide returns

to keep stakeholders

involved?CapitalMarket

ProductMarket

Organizational

2.How to increase

returns so everyonehas more to share?


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AIBS

Firm level analysis

qFirst, consider units ofanalysisuCorporate level

uBusiness level

uFunctional level


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AIBS

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Levels of strategy

T k f C t St t


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AIBSTasks of Corporate Strategy

Moves to achieve diversification

Actions to boost performance of individual businesses

Capturing valuable cross-business synergies to provide

1 + 1 = 3 effects!

Establishing investmentpriorities and steering

corporate resources into themost attractive businesses


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AIBS

Initiating approaches toproduce successful performancein a specific business

Crafting competitive moves to build

sustainable competitive advantage

Developing competitively valuablecompetencies and capabilities

Unitingstrategic activities of functional areas

Gaining approval of business strategies by corporate-levelofficers and directors

T k f F ti l St t i


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AIBSTasks of Functional Strategies

Game plan for a strategically-relevantfunction, activity, or business process

Detail how key activitieswill be managed

Providesupportforbusiness strategy

Specify how functional objectives

What Is a Strategic Plan?


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AIBS

Its strategic visionand business

mission

Itsstrategy

Its strategicand

financial

objectives

What Is a Strategic Plan?

ACompanysStrategic

PlanConsists

of

Thi ki St t i ll


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AIBSThinking Strategically:

Three Big Central Questions

1. Whats the companys present situation?

- industry conditions and competitive pressure

- current performance and market standing

- resource strength and capabilities and competitive weaknesses

2. Where does the company need to go from here?

Business(es) to be in and market positions to stake out

Buyer needs and groups to serve

Direction to head

3. How should it get there?

A companys answer to howwill we get there? is its strategy


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AIBS

Mintzbergs Definition

Strategy is a pattern in a stream of

actions over time.


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AIBS

Mintzbergs Definition

Strategy is a pattern in a stream of

actionsover time.

Th Fi P


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AIBSThe Five Ps

Plan


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AIBSThe Five PsPloy

Plan


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AIBSThe Five PsPloy

Plan

Pattern


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AIBSThe Five PsPloy

Plan

Pattern

Position

Perspective


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AIBS

Different Kinds of

Strategy

Intended Strategy


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AIBS

Intended Strategy

UnrealizedStrategy

Deliberate

Different Kinds of

Strategy


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AIBS

Intended Strategy

UnrealizedStrategy

Emergent

Strategy

Deliberate

Different Kinds of

Strategy


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AIBS

Intended Strategy

UnrealizedStrategy

EmergentStrategy

Deliberate

RealizedStrategy

Different Kinds of Strategy

Dimensions of Strategy


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AIBSDimensions of Strategy

Strategies contain goals, policies, and

action sequences.

Strategies develop around a few key

concepts.

Strategies deal with the unpredictable and

the unknowable.

Strategies require hierarchies of mutual

support strategies.

Examples of Strategies Based


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AIBSExamples of Strategies Based

on Distinctive Capabilities

Sophisticated distribution systems Wal-

Mart

Product innovation capabilities 3M

Corporation

Complex technological process Michelin

Defect-free manufacturing Toyota andHonda

Specialized marketing and merchandising

know-how

Coca-Cola


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AIBS

Global sales and distribution capability Black& Decker

Superior e-commerce capabilities

DellComputer

Personalized customer service Ritz Carlton

hotels


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AIBS

Balanced Scorecard

Where it started


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AIBSWhere it started . . .

Introduced in 1992, by Robert Kaplan and David Norton,the Balanced Scorecard is the most commonly usedframework for ensuring that agencies execute theirstrategies. Today, about 70% of the Fortune 1,000companies utilize the Balanced Scorecard to help

manage performance.

Balanced Scorecards are used as the roadmap forcreating the Strategic Management System .

What is a Balanced Scorecard


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AIBSWhat is a Balanced Scorecard

A strategic and operational tool

Owned by the Executive

Shared by everyone

Balances:- Long and short term

Hard and soft measures

Leading and trailing indicators

Internal/external perspectives

Like writing a novel, not writing a list

Measures support change, not monitoring

It is NOT


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AIBSIt is NOT

A new idea

An end in itself

A playing field for internal politics

An initiative of Finance, HR,

Marketing etc.

Boardroom art

A make-work exercise


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AIBS

When you can measure what you arespeaking about, and express it in

numbers, you know something about it;

but when you cannot measure it, whenyou cannot express it in numbers, your

knowledge is of a meager and

unsatisfactory kind.

William Thompson (Lord Kelvin), 1824-1907

Balanced Score Card


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AIBSBalanced Score Card

1) A measurement system

2) A strategic managementsystem

3) A communication tool

BSC as a Measurement System


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AIBSBSC as a Measurement System

Translates mission, vision and strategythrough objectives and measures

Provides a framework to describe the key

elements in the achievement of the strategyMeasures four perspectives

- Customer Relations

- Financial

- Internal Service Process

- Learning, Innovation and Growth

The scorecard measures are


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AIBSThe scorecard measures are

balanced into four areas

The user/Customer perspective

The finance perspective

The internal process perspective The future (learning and growth)

perspective

AIBSKaplan and Norton Model


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AIBS

Customer

Balanced

ScorecardFinancials

Learning

& growth

Business

Processes

Kaplan and Norton Model

(1996)

AIBS


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AIBS

AIBSFinancial Perspective


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AIBSFinancial Perspective

What financial steps are necessary to ensure theexecution of our strategy/goals?

Are the programs/ departments goals,implementation, and execution contributing to

the bottom line?Are we meeting operational and financial

targets?

Dimensions of Quality: Efficiency

AIBSInternal Service Process


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AIBSInternal Service Process

Perspective

What critical processes must we excel at tosatisfy our customers/stakeholders?

What must be done internally to meet

patient/customer expectations?Dimension of Quality:

Effectiveness

Appropriateness

Safety

AIBSCustomer Relations Perspective


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AIBSCustomer Relations Perspective

Who are our target customers?How do our customers see us?

How do customers rate our performance?

Dimension of Quality:Accessibility

Acceptability

Continuity

AIBSLearning, Innovation and Growth


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AIBSg,

Perspective

How can we continue to improve?

What capabilities and tools do our

employees need to execute ourstrategy/goals?

Dimension of Quality:

Competence

Participation

AIBS


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AIBS

AIBSBuilding the Balanced


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AIBSBuilding the Balanced

Scorecard

The key

question

How do you

create value?

AIBSA strategic tool


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AIBSA strategic tool

Starts with strategy

Continuous process

Needs to becomeculturally embedded

AIBSThe story of a scorecard


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AIBS

To be successful for our shareholders, we must be (position in market),

which means that we must return super ior f inancial resul ts in .......

Our customers are the people who wil l secure these results for us so we

must offer our customers super ior value by .........

To deliver this super ior value we must excel in the way we manage the

processes for .......

These processes are operated by our people. We must provide our people

with ....... to achieve excellent performance.

The story of a scorecard

AIBS


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AIBS

The Balanced Scorecard

(Exercise)

Where does it fit?

AIBS

LLSG Mi i St t t


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AIBS

LLSG Mission Statement

In the spirit of innovation and collaboration,

London Laboratory Services Group (LLSG)provides the health care system withappropriate and comprehensive diagnostic,therapeutic and consultative services of the

highest quality.

AIBS

LLSG Goals/Strategy


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AIBS

The London Laboratory Services Group will:

be recognized as a centre of excellence and leader in

providing diagnostic services

develop an understanding of the needs of the users of our

services

be responsive to the needs of other health care providers

communicate openly with users of our services

be a leader in developing and implementing new technologies

provide diagnostic and therapeutic services for the hospital,

the region and beyond

AIBSLLSG Goals/Strategy contd


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AIBSSG G /S gy

The London Laboratory Services Group will:

provide cost effective and efficient services

provide an atmosphere of team work which is responsive toand supportive of learning

collaborate with researchers to advance medical science

partner with educational institutions to provide training formedical professionals

develop partnerships with industry and other institutionswhich will enhance the range and scope of laboratoryservices

AIBSBSC as a Communication Tool


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AIBS

Describes and translates strategy toemployees through clear and objective

performance measures

Example

Goal: LLSG will provide cost effective and

efficient services

Objectives: Reduce costsIncrease productivity

Measures: Supply costs

Workload

AIBSTodays Exercise


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AIBSToday s Exercise

Form 4 groups- one for each perspective

Within each group:

1. Appoint a scribe/presenter

2. Brainstorm objectives3. Record all objectives

4. Present objectives to other groups

5. Record other objectives as suggested by theother groups

AIBS


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AIBS

Brainstorming Exercise

Purpose: to generate

multiple ideas, in thiscase for developing BSC

objectives

AIBSBSC Objectives


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BSC Objectives

1. Describe the activities that we mustperform well to successfullyimplement strategy/goals

2. Answer the questions associated witheach perspective

3. Start with an action verb: increase,develop, improve, lower, achieve etc.

AIBSBrainstorming Exercise


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a sto g e c se

Rules:

1.No idea is a bad idea

2.Be creative

3.Take risks4.No criticism allowed

AIBSBrainstorming Exercise


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Method: Round Table

1. Out loud; round robin, one by one,each person states an idea which

the scribe then recordsOR

In silence; write ideas down onsticky notes. Pass notes to scribe to

review out loud and record

2. Continue around the table until all

Documents

introduction to strategic management for marketers