3. Strategic Management
Strategic Management is the art and science of formulating,
implementing and evaluating cross-functional decisions that enable
an organization to achieve it’s objectives.
Elements of Strategic Management:
Strategic Analysis
Strategic Choice
Strategic Implementation
Strategic Analysis is the investigation of the objective factors being
considered in the process of strategic choice.
Strategic Strategic Strategic
Analysis Choice Implementation
Evaluation Process
4-3
5. Approaches to Assess How Well
the Present Strategy Is Working
Qualitative assessment – Quantitative assessment –
What is the strategy? What are the results?
Completeness Is company achieving its
financial and strategic
Internal consistency objectives?
Rationale Is company an above-
average industry
Relevance performer?
4-5
6. Key Indicators of How Well
the Strategy Is Working
Trend in sales and market share
Acquiring and/or retaining customers
Trend in profit margins
Trend in net profits, ROI
Overall financial strength and credit ranking
Efforts at continuous improvement activities
Trend in stock price and stockholder value
Image and reputation with customers
Leadership role(s) – Technology, quality, e-commerce,
innovation, etc.
4-6
7. Analysing Company’s Resources &
Competitive Position
S W O T represents the first letter in
S trengths
W eaknesses
O pportunities
T hreats
For a company’s strategy to be well-conceived, it must be
Matched to its resource strengths and weaknesses
Aimed at capturing its best market opportunities and
erecting defenses against external threats to its well-being
4-7
8. Identifying Resource Strengths
and Competitive Capabilities
A strength is something a firm does well or an attribute that
enhances its competitiveness
Valuable competencies or know-how
Valuable physical assets
Valuable human assets
Valuable organizational assets
Valuable intangible assets
Important competitive capabilities
An attribute that places a company in a position of market
advantage
Alliances or cooperative ventures with partners
4-8
9. Identifying Resource Weaknesses
and Competitive Deficiencies
A weakness is something a firm lacks, does poorly, or a
condition placing it at a disadvantage
Resource weaknesses relate to
Inferior or unproven skills, expertise, or intellectual
capital
Lack of important physical, organizational, or intangible
assets
Missing capabilities in key areas
Resource weaknesses and deficiencies
are competitive liabilities!
4-9
10. Identifying a Company’s
Market Opportunities
Opportunities most relevant to a company are those
offering:
Good match with its financial and organizational resource
capabilities
Best prospects for profitable & long-term growth
Potential
for competitive
advantage
4-10
11. Identifying External Threats
Emergence of cheaper/better technologies
Introduction of better products by rivals
Entry of lower-cost foreign competitors
Onerous regulations
Rise in interest rates
Potential of a hostile takeover
Unfavorable demographic shifts
Adverse shifts in foreign exchange rates
Political upheaval in a country
4-11
12. Role of SWOT Analysis in
Crafting a Better Strategy
The most important part of S W O T analysis is not
developing the 4 lists of strengths, weaknesses,
opportunities, and threats, but rather
Using the 4 lists to draw conclusions
about a company’s overall situation and
Acting on the conclusions to
Better match a company’s strategy to its
resource strengths and market opportunities,
Correct the important weaknesses, and
Defend against external threats
4-12
13. Competencies vs. Core Competencies
vs. Distinctive Competencies
A competence is the product of organizational learning
and experience and represents real proficiency in
performing an internal activity
A core competence is a well-performed
internal activity central (not peripheral or incidental)
to a company’s competitiveness and profitability
A distinctive competence is a competitively valuable
activity a company performs better than its rivals
4-13
14. Core Competencies -- A
Valuable Company Resource
A competence becomes a core competence when the
well-performed activity is central to a company’s
competitiveness and profitability
Often, a core competence results from collaboration
among different parts of a company
Typically, core competencies reside in a company’s
people, not in assets on a balance sheet
A core competence gives a company a potentially
valuable competitive capability and represents a definite
competitive asset
4-14
15. Examples: Core Competencies
Know-how in creating operating systems for cost
efficient supply chain management
Speeding new/next-generation products to market
Better after-sale service capability
Skills in manufacturing a high quality product
System to fill customer orders accurately and swiftly
4-15
16. Distinctive Competence -- A
Competitively Superior Resource
It’s a specific ability possessed by a particular
organization exclusively, or in a relatively large measure
A distinctive competence is a competitively significant
activity that a company performs better than its
competitors
A distinctive competence
Represents a competitively valuable capability rivals do
not have
Presents attractive potential for being a cornerstone of
strategy
Can provide a competitive edge in the marketplace —
4-16 because it represents a competitively superior resource
17. Examples: Distinctive
Competencies
Sharp Corporation
Expertise in flat-panel display technology
Toyota and Honda
Low-cost, high-quality manufacturing capability and short
design-to-market cycles
Intel
Abilityto design and manufacture ever more powerful
microprocessors for PCs
Wal-Mart
Low-cost distribution and use of state-of-the-art retail
technology
4-17
18. Determining the Competitive
Value of a Company Resource
To qualify as competitively valuable or to be the basis for
sustainable competitive advantage, a “resource” must
pass 3 tests:
1. Should provide access to potential market….
2. Should contribute to the customer benefits of the end
product….
3. Should be difficult for the rivals to imitate….
4-18
19. Organisational Capability Profile
Organisational capability means the potential of the
company to use its strengths & to overcome its
weaknesses with a view to avail the opportunities
provided & face the threats posed by its external
enviornment.
Organisational Capability Profile includes 3 factors:
4-19
20. General Management
Factors
It is concerned with the accomplishment of
organisational objectives by utilising physical, financial
& human resources.
A Manager performs 5 basic functions:
4-20
21. Planning
Suitable
Organisati
onal
structure
Optimum Right
Levels of People in
Control Right
Effective Places
Planning
Effective
Effective
Methods of
Leadership
Motivation
4-21
22. Organising
Means to an end.
It is essential to carry out pre-determined course of action
Organising includes:
Giving a structure to a task
Authority – Responsibility Relationship.
Co-ordination
Control
Pressure to complete the desired objectives.
Organising is a medium to complete tasks as per priority
4-22
23. Directing
It involves efforts directed towards achieving
organisational goals
The basic function of management is:
Motivating
Commanding
Leading
Activating
It deals with inducing the willingness & cooperation of
employees towards attaining the objectives
It also enables a sense of coordination of activities
4-23
24. Staffing
Centered around human resource management.
It includes:
Job Design & Analysis
HR Planning
Recruitment & Selection
Training & Development
Performance Appraisal & Compensation
Union Mgmt & Grievance Handling
Maintaining records
It is one of the most complicated task to handle.
4-24
25. Controlling
It includes all activities that are undertaken to ensure the
actual performance confirm to the planned performance
The controlling activities include:
Establish performance standards
Measure actual performance
Compare actual performance to planned standards
Take corrective action
4-25
26. Functional Management
Factors
Functional competence refers to the strengths of the
organisation in the functional areas of management viz;
4-26
27. Marketing Management
Customer
Analysis
Social
Responsibili Buying
ty
Opportunity
Selling
Analysis
Product &
Marketing
Service
Research
Planning
Price
Distribution
Planning
4-27
28. Contd…
Marketing System Audit
Marketing Intelligence system
Market & Sales Forecast
Marketing Cost
Marketing Productivity Audit
Profitability
Cost Reduction
Marketing Function Audit
Product – line & offerings
Distribution
Pricing
4-28
31. Production & Operation
Management
Managing the resources required to produce the products
or render services provided by the organisation.
It reflects:
Product Design
Product Cost
Production Efficiencies
Production Process
Inventory
Work Force
Product Quality
4-31
32. Human Resource Management
It is said that, the difference between two organisations in
term of competencies is due to the difference in the
capabilities of their Human Resources.
Human Resource
Department
HR Human Industrial
Employment Compensation
Development Relations Relations
4-32
33. Research & Development
It is concerned with:
creationof knowledge;
design of goods & services; &
the operation of production process
Survival & Development
4-33
34. Value Chain Analysis
It separates the activities of the firm into a sequential
chain.
Michael Porter’s representation of the value chain
distinguishes between:
Primary Activities (those involved with the transformation
of inputs and interface with the customer)
Support Activities (those involved with other activities
which support the primary function of the organisation)
4-34
35. Support Activities
FIRM’S INFRASTRUCTURE
HUMAN RESOURCE MANAGEMENT
TECHNOLOGY DEVELOPMENT
PROFIT MARGIN
PROCUREMENT
I L O O L M S
N O P U O A
E
E R
B G T G R
R K
O I A B I E V
U S T O S T I
N T I U T I C
D I O N I N E
N D C G
C
Primary Activities
4-35
37. Strategic Advantage
It is the outcome of organizational capabilities
The rewards are in terms of financial parameters (eg. Profit,
shareholder value) or in terms on non-financial parameters
(eg. Market share, goodwill)
4-37
