Transcript Strategic Management

Chapter [5]
Formulation
of
Functional Strategy
• There are 3 levels of strategies ~
• Corporate level strategy
• Business level strategy
• Functional level strategy
• Why functional strategy ~
• SDs are implemented by all parts of management.
• To control activities in functional areas.
• To reduce time spent in decision making by
functional managers.
• Similar situations are handled in consistent manner
• To establish coordination across different
functional areas.
Marketing Strategy
• Marketing is the set of activities of identifying
the customer’s need and satisfying them in
return of some consideration.
• Formulation of marketing strategy is the
process of dividing the total market into pieces
(Marketing Segmentation), then choosing the
appropriate segment (Market Targeting) and
finally serving the selected segment better then
the competitors (Market Positioning).
Product
Process
Price
Marketing
Mix
Physical
evidence
Place
People
Promotion
Marketing Plan
• Executive Summary
– Plan overview and Management’s support to
Strategy.
• Current Marketing Situation
– Current Market, Product, Competitors and
Distribution system.
• Threat and Opportunity
– Anticipated Opportunity and threat of future.
• Objectives and Issues
– Marketing objectives and issues that can
affect them.
• Marketing Strategy
– Strategy to be followed for all marketing mix.
• Budget
– Projected Costs - Benefits.
• Controls
– Controls that will be used to monitor
progress. Checks and corrective actions.
Marketing Strategy Techniques
• Social Marketing ~
• “Issued in the public interest by Airtel”
• Augmented Marketing ~
• “Movies on-demand, recording of live match”
by TataSky.
• Direct Marketing ~
• Tele shopping, catalogue selling, Mail-order
• Relationship Marketing ~
• Quotations in SMS by Cell Phone companies.
• Service Marketing ~
• Marketing of Services
• Person Marketing ~
• Political party.
• Place Marketing ~
• “Truly Asia Malaysia”, “Incredible India”
• Enlightened Marketing ~
• Innovative, sense-of-mission, customer oriented etc.
• Differential Marketing ~
• Different strategy for different market.
• Synchro Marketing ~
• For irregular demand of the product.
• Concentrated Marketing ~
• For large share of one or sub-market
• De-marketing ~
• For decreasing demand of the products
Financial Strategy
Acquisition
of
fund
Evaluating
Net worth
Financial
strategy
Usage
of
fund
Budget
• Acquiring needed capital/funding :~
– Debt or Equity
– Debt : Too much debt can endanger survival.
– Equity : Too much equity liquidate ownership.
• Budget :~
– Reasonable v/s Optimistically
– Period of budget : 1day to 1 year.
– Types : Sale, Expenses, Capital, Factory
– Limitations ~
•
•
•
•
Over-budget and Under-budget can cause problem
Budget can become substitute for objective.
Can hide inefficiency if based on precedent.
Sometimes used as instrument of tyranny.
• Management / Usage of funds :~
– Issues related to efficiency and effectiveness.
– If plans are not clear usage is inefficient.
– Good management of funds makes the difference between
strategically successful and unsuccessful company.
– Priorities of management may conflict with shareholders,
Strategist resolves the issues.
• Evaluating worth of business :~
– 3 approaches ~
• Net worth – Common stock + Additional paid-in-capital +
retained earning +/- amount of goodwill +/- over/under valued
asset.
• 5 times the firm’s current annual profit.
• Market determined worth –
– Selling price of a similar business
– Price-earning ratio (no. of share * average net income)
– Outstanding share method (no. of share * market price/share)
Production Strategy
Production
System
Financial
strategy
R&D
PPC
• Production System :~
– It is concerned with –
Capacity
Product design
Location
Layout
Degree of automation.
– These factors influences organization’s ability
to implement strategy.
• Production Planning and Control :~
– It is concerned with Demand forecasting
Material supply
Cost & quality management Inventory
Maintenance of plant & equipment
– Strategy is required to see how efficiently
resources are
operations.
utilised
in
day-to-day
• Research & Development :~
– R&D helps in implementation of many corporate
strategies.
– Successful organization formulate that R&D strategy
which ties external environment to internal strength.
– Guidelines ~
• When Technical progress is low and market growth is
moderate then in-house R&D is preferred.
• When Technical progress is high and market growth is
moderate then R&D from outside source is preferred.
• When Technical progress is low and market growth is
high then R&D from outside source is preferred.
• When Technical progress is high and market growth is
high then R&D from outside source is preferred.
– R&D approaches ~
• First : Be the first firm to market new technology
product.
• Second : Be the innovative imitator of successful
product.
• Third : Be the low-cost producer of new technology
product.
Logistic Strategy
• It is a process responsible for supplies into and
out of the organization.
• It ensure right material at right place in right
time of right quality at the right cost.
• Factors to be concerned are third party
contract, route determination, sources and
destination of material.
• Benefits ~
Cost saving
Reduced delivery time
Competitive advantages
Reduced inventory
Customer satisfaction
Supply Chain Management
Manufacturer
Supplier
Distributer
Retailer
Dealer
Process of planning and implementing
activities of Sourcing, Procurement and
Logistics.
Traditionally companies used to manage
supply chain themselves but now they are
outsourcing this activity, so SCM is
important.
 Companies are now focusing on their corecompetencies and outsources other
functions to those that specializes in the
activities.
 SCM is a cross-functional approach to
manage all movement and storage of raw
material, WIP inventry and finished goods
from point-of-origin to point-to-consumption.

Logistic v/s SCM

Logistic
includes
transportation(inbound
warehousing.
management
& outbound)
of
and

SCM additionally focuses on Cost reduction
and customer satisfaction.
Implementing SCM strategy

A key requirement for successfully
implementing SCM strategy is networking for
information sharing.

Implementation involves 7 factors to be
covered
:
Product
development,
Procurement, Manufacturing, Distribution,
Outsourcing,
Customer
service
and
Performance measurement.
• Product Development ~
SCM ensures that all partners will help in shorting
Product Development Life Cycle and help Org.
remain competitive.
• Procurement ~
SCM ensures appropriate resource planning,
source identification, order placement, inbound
transporting and storage.
• Manufacturing ~
SCM ensures flexibility in manufacturing process
by minimizing lot size.
• Physical distribution ~
SCM ensures availability of good at right place, at
right time, in right condition.
• Outsourcing ~
SCM ensures company focuses on on competency
and rest are outsourced.
• Customer Service ~
SCM ensures that there is a network interface
between company and customer to deliver
services to them.
• Performance Measurement ~
SCM provides measures of performance such as
cost, service, productivity and quality.
HR Strategy
• HR is a good source of competitive
advantages.
• Strategic responsibility of HRM ~
– Assessing staffing need and staff
development.
– Motivating employee.
– Managing healthcare insurance.
– Developing performance incentives.
– Involving employees in SDM.
• Reasons why HR creates problems in strategy
implementation ~
– Disruption of social and political structure.
– Failure to match employee’s aptitude and task.
– Inadequate top management support.
– Resistance to change
• Common methods to resolves issues ~
– Transferring managers
– Leadership workshop.
– Promotions.
– Job enlargement
- Job enrichment.
– Gives less order, announce few decisions
– Depend on chatting and informal questioning
– Show management commitment to strategy
implementation.
– Match aptitude with individual’s skill.
– Involve employees in strategy formulation.
HR Strategy ~
Aim
• To develop employees and give them better working
condition.
• To ensure a fit between employee and job.
• To link between HR with strategic goal of the company.
Focus ~
• Pre-selection practices
– Resource planning and Job analysis
• Selection Practices
– Recruitment and selection practice
• Post-selection practices
– Training, maintenance, performance appraisal,
compensation
Strategic Role of HR Management ~
 Provide Purposeful direction
 Creating Competitive Atmosphere
 Facilitation of change
 Diversion of Workforce
 Empowerment of Human Resource
 Building core competency
 Development of work ethics and culture