CA-IPCC SM Short Notes

Strategic Management

(Summary for Quick Revision)

(These notes are not meant for any commercial purpose. They have been published with the sole motive to assist IPCC students in getting hold of the subject. They can be shared further for non-economic purpose only)

Chapter 1- Business Environment

Business:  The term business refers to all economic activities pursued mainly to satisfy the material needs of the society, with the purpose of earning profits.

Objectives of Business:  Survival, Stability, Efficiency, Growth and Profitability.

Environment:  Our Environment is our surroundings. This includes living and non-living things around us.

Business Environment:  A business environment represents all external forces, factors or conditions that exert some degree of impact on the business decisions, strategies and actions taken by the firm.

(My other IPCC Study Material also uploaded on my site)

Characteristics of Business Environment

  1. Environment is complex
  2. Environment is dynamic
  • Environment is multi-faceted
  1. Environment has far reaching impact

Environmental Analysis:  Environment analysis is a systematic process that begins with the identification of environmental factors, assessing their nature and impact, auditing them to find their impact on the business, and making various profiles for positioning.

Steps in Environmental Analysis

Step 1: Monitoring or identifying environmental factors.

Step 2: Scanning and selecting the relevant factors and grouping them.

Step 3: Defining variables for analysis.

Step 4: Using different methods, tools, and techniques for analysis.

Step 5: Analyzing environmental factors and forecasting.

Step 6: Designing profiles.

Step 7: Strategic positioning and writing a report.

Environmental Scanning: Environmental scanning is the process of continually acquiring information on events occurring outside the organization to identify and interpret potential trends.

Environmental Influence on Business

Step I: It is useful to take an initial view of the nature of the organization’s environment in terms of how uncertain it is.

Step II:  The auditing of environmental influences is done to identify from among the many different environmental influences which factor is going to affect the development or growth of an organisation and in which way – positive or negative. For this various domains are observed like political conditions, govt policies, social trends, technological developments etc.

Step III:  The organization focuses more on an explicit consideration of its immediate environment – for example, the competitive arena in which the organization operates.

Relationship between Organization and Its Environment

  1. Exchange of Information
  2. Exchange of resources
  • Exchange of influence and power

Organization’s Response to Its Environment

  1. Administrative Response
  2. Competitive Responses
  • Collective Response

Organization’s Strategic Response to Its Environment

  1. Conservative Approach – Least resistance approach
  2. Cautious Approach – Proceed with caution approach
  • Dynamic Response – Confidant approach

(Strategic Management is also very crucial in Project Management Study)

Important elements of Business Environment

Internal Environment: Internal environment is the conditions, people, events and factors within an organization that influence its activities and choices.

External Environment: The external environment comprises of all the entities that exist outside the boundaries of a business, but have significant influence on its growth and survival.

Micro Environment:  Micro-Environment is the immediate environment which has a direct impact on the business operations and their success.

Macro Environment: Macro environment is the major external and uncontrollable factors that influence an organization’s decision making, and affect its performance and strategies.

Demographics: A phenomenon used very widely in various domain of an economy with the universal reference – the population of the specified area or territory and its unique characteristics like gender composition, age, interest, job profile, income brackets, eating habits, religion, occupational categories etc.

Demographic factors of interest to a business

  1. Population Size
  2. Geographic Distribution
  • Ethnic Mix
  1. Income Distribution

Economic environment: Economic environment refers to the state of the economy as a whole in which the company has to devise strategies according to the prevailing scenario like boom or depression. This domain includes factors like the general economic mood of the economy of the nation, availability of resources and its viability.

Political Environment:  It includes the conditions or happenings related with the government and its policies like stability, peace, foreign policies of the govt., popularity quotient of its leaders particularly the Prime Minister or the President.

Legal Environment:  Legal environment deals with all the laws or new ordinances introduced by the govt in the nation for e.g. GST has been introduced in India by the govt.

Social Environment: Social environment of business includes the social factors related with customs, values, eating habits, family structure, festivals, education and social practices being followed etc.

Factors and influences operating in socio-cultural environment

  • Social concerns
  • Social attitudes and values
  • Family structure
  • Role of women in society
  • Educational levels

Technological environment: It includes forces relating to scientific improvements and innovations which provide new ways of producing goods and services and new methods and techniques of operating a business.

Global Environment:  Global environment represents the process of liberalization.

Globalization:  Globalization refers to the linkage between markets that exist across national borders. These linkages may be economic, financial, social or political.

The reasons why companies go global:

  1. Domestic markets are no longer enough to absorb whatever is produced.
  2. Foreign markets have grown enough to justify foreign investment.
  • Availability of cheaper and reliable resources in other countries.
  1. Reduction in transportation cost for export to remote countries.
  2. Rapid shrinking of time and distance across the globe due to faster communication, quicker transportation, growing financial flows and rapid technological changes.

Factors that influence globalization

  • Sports Meets
  • Terrorist Attacks
  • Natural Disasters
  • Emerging new market
  • The culture and attributes towards change

Importance of Globalization

  1. Proper use of Resources
  2. Multiple choices
  3. Foreign Exchange
  4. Creates Employment
  5. Government incentives
  6. Technology
  7. Spreading of Risk of Loss

Competitive environment:  The immediate economic factors- firm’s customers, it’s competitors, raw material or spares suppliers, direct or indirect buyers, and near-substitute variants available in the market – impacting directly the firm’s sales, revenue or profit.

How to Deal with Competition?

  1. Who are the competitors?
  2. What are their product and services?
  • What are their market shares?
  1. What are their financial positions?
  2. What gives them cost and price advantage?
  3. What are they likely to do next?
  • How strong is their distribution network?
  • What are their manpower strengths?

Cooperation in a Competitive Environment

Collusion: Collusion is an agreement between two or more entities or persons to kill any sort of direct competition among them by adopting anti-market tactics. This way they try to create a false situation of fake monopoly thereby defrauding others (business or consumers) of their legal rights. Their aim is to obtain undue profit which is always forbidden by law.

Cartel: A cartel is a formal agreement among competing firms. The aim of such collusion (also called the cartel agreement) is to increase individual members’ profits by reducing competition.

Keiretsu: It is a complex arrangement in which firms take equity stakes in one another as a long standing strategic alliance.

Conglomerate: It is a strategy that expands the firm’s operations into industries and markets that are not similar or related to firm’s initial base.

Consortium: A consortium is an association of two or more individuals, companies, organizations or governments (or any combination of these entities) with the objective of participating in a common activity or pooling their resources for achieving a common goal.

Porter’s Five Forces Model of Industry Attractiveness

  1. Threat of new entrants
  2. Bargaining power of customers
  • Bargaining power of suppliers
  1. Rivalry among current players
  2. Threat from substitutes

Chapter 2 – Business Policy and Strategic Management

Business Policy:  Business Policy tends to emphasis on the rational-analytical aspect of strategic management. It presents a framework for understanding strategic decision making. Such a framework enables a person to make preparations for handling general management responsibilities.

Strategy: Strategy is a detailed plan which aims at using the available resources of the firm upto the maximum possible extent to achieve the goals of the company. Another aim is to be able to compete resourcefully with its rivals. Strategy describes a broad framework for deciding the future course of action.

Strategic Levels in Organizations

  • Corporate Level
  • Business Level
  • Functional Level

Levels of Strategy

  • Corporate level Strategy
  • Business Level Strategy
  • Functional Level Strategy

Corporate Strategy:  Corporate strategy is the growth design of the firm as it spells out the growth objective – the direction, extent, pace and timing of the firm’s growth.

Business Strategy:  Those elaborate plans or actions that firms devise to compete in a given product/ market scope or setting; addresses the question- “How do we compete within an industry?”

Functional Strategy:  As the name suggests, this Strategy deals with comparatively restrained plan in which the aim is to provide directions to a particular function of the company like Finance, Marketing, Production etc., allocation of resources is planned for various operations going on in that functional area and coordination is established among all the elements of that function for optional contribution to the achievement of the SBU and corporate-level objectives.

Competitive Strategy: The competitive strategy evolves out of consideration of several factors that are external to the firm. The external environment affects the internal environment of the firm. The economic and technical subdomains of the external environment are considered as major factors leading to new opportunities for the organization and also as closing threats.

Strategy is partly proactive and partly reactive

Proactive strategy

  • It is an approach where organization takes the initiative or acts as first mover.
  • It is an approach to a business situation that involves anticipating market and competition changes in advance of their actual occurrence and making appropriate organizational shifts in response.
  • Many high technology business operators need to take a more proactive strategy to deal with the rapidly changing marketplace for their company’s products.

Example: Steve Job’s initiative to develop smart phones in Apple.

Reactive Strategy

  • It is an approach where organizations react to their competitor’s actions.
  • It is a slow response to changes in a firm’s environment and undertaken only when a management is forced to take rear guard action.

Example: Samsung/Sony/Nokia’s smart phones developed in reaction to steve Job’s initiative to develop smart phones in Apple.

Strategic Management:  Strategic management is a process to determine mission, vision, values, goals, objectives, roles and responsibilities, timelines, etc.

Objectives of strategic management

  • To create competitive advantage.
  • To guide the company successfully through all changes in the environment.

Strategic Management Framework

Stage One – (Planning and Analysis) Where are we Now?

Stage Two – (Strategy Formulation) Where do we Want to Be?

Stage Three – (Alternative Selection) How Might we Get There?

Stage Four – (Evaluation) Which Way is the Best?

Stage Five – (Implementation and Control) How can we Ensure Arrival?

Strategic Decision Making

Strategic decision making, or strategic planning, describes the process of creating a company’s mission and objectives and choosing the course of action a company should pursue to achieve those goals.

Strategic Management Model

Strategic planning is part of the strategic management process. Strategic management entails both strategic planning and implementation, and is the process of identifying and executing the organization’s strategic plan, by matching the company’s capabilities with the demands of its environment.

Strategic Management Process:  The strategic management process begins with careful analysis of a firm’s internal strengths and weakness and external opportunities and threats.

  • Analysis
  • Formulation
  • Implementation
  • Evaluation

Vision, Mission, Objectives and Goals

Strategic Vision:  Strategic vision is a road map of a company’s future – providing specifics about technology and customer focus, the geographic and product markets to be pursued, the capabilities it plans to develop, and the kind of company that management is trying to create.

(The newest concept catching the fancy of the corporate world is Change Management)

How to develop a strategic vision

  1. To think creatively about how to prepare a company for the future.
  2. Forming a strategic vision is an exercise in intelligent entrepreneurship.
  • Organizations need to change direction not in order to survive but in order to maintain their success.
  1. Creates enthusiasm for the course that the management has charted and engages members of the organization.
  2. The best-worded vision statement clearly and crisply illuminates the direction in which organization is headed.

Mission Statement:  A company’s Mission statement is typically focused on its present business scope – “Who we are and what we do”, mission statements broadly describe an organizations present capabilities, customer focus, activities, and business makeup.

Components of a mission statement

Customers Satisfaction

Products and/or services with best of quality and workmanship

Markets = Local, National & International

Technology – up gradation or change

Issues of survival, growth and profitability challenges

Philosophy- profit motive or social motive or both

Self actualization – what we are, why we started, where we aim to reach

Care for positive public image of the company

Honest caring about the betterment of the employees

Objectives:  Objectives are organizations’ performance targets – the results and outcomes it wants to achieve. They function as a yardstick for tracking an organization’s performance and progress.

(Get to know the last date of IPCC registrations and do let your friends also know)

Chapter 3 – Strategic Analysis

Strategic Analysis:  Strategic analysis seeks to determine alternative course of action that could best enable the firm to achieve its mission and objectives.

Strategic analysis tries to find out the answers to three basic questions:

  1. How effective has the present strategy been?
  2. How effective well that strategy be in the future?
  3. How effective will the selected alternative strategy be in the future?

Issues to be Considered for Strategic Analysis

  • Strategy evolves over a period of time
  • Balance between the internal and external factors
  • Analysis risk involved and consequences thereon

Classification of Strategic Risks

Situational Analysis:  This is an extremely complex process, which demands a systematic approach for identifying and analyzing macro-environmental factor external to the organization and matching them with the firm’s capabilities

Important factors to be taken into account while doing a situation analysis:

  1. Product situation
  2. Competitive situation
  • Distribution situation
  1. Environmental factors
  2. Opportunity and issue analysis

Strategic Analysis Framework

The Methods of Industry and Competitive Analysis

SWOT Analysis

Shorthand for strengths, weaknesses, opportunities, and threats; a fundamental step in assessing the firm’s external environment; required as a first step of strategy formulation and typically carried out at the business level of the firm.

Strength:  Strenths is an inherent capability of the organization which it can use to gain strategic advantage over its competitors.

Weakness: A weakness is an inherent limitation or constraint of the organization which creates strategic disadvantage to it.

Opportunity:  An opportunity is a favourable condition in the organization’s environment which enables it to strengthen its position.

Threat:  A threat is an unfavourable condition in the organization’s environment which causes a risk for, or damage to, the organization’s position.

Significance of SWOT Analysis

  1. It provides a Logical Framework
  2. It presents a Comparative Analysis
  3. It guides the strategist in Strategy Identification

(Don’t look for ICAI result anywhere except the official ICAI website – www.icai.org)

TOWS Matrix

Business Portfolio:  A business portfolio is a collection of businesses and products that make up the company.

Portfolio Analysis:  A set of techniques that help strategist in taking strategic decisions with regard to individual products or businesses in a firm’s portfolio.

Strategic Business Unit (SBU):  A strategic Business Unit (SBU) is a profit center which focuses on product offering and market segment. An SBU may be a business unit within a larger corporation, or it may be a business unto itself.

Experience curve:  Experience curve shows the relationship between production cost and cumulative production quantity.

Product Life Cycle:  PLC is a curve which shows the relationship of sales with respect of time for a product. It is an S-shaped curve. The curve passes through the four successive stages namely – Introduction – Growth – Maturity – Decline . e.g. Maruti 800 car. When it was introduced, it became a hit after some time, the sales topped at one level and later it became obsolete.

Boston Consulting Group (BCG) Matrix: This is the simplest way to portray a corporation’s portfolio of investments in the form of different types of products classified as stars, wildcats, cows and dogs on the basis of their market growth rate and relative market share.

Ansoff’s Product Market Growth Matrix:  It is a portfolio analysis technique representing several strategies available to firms in the form of 2×2 matrix with products shown horizontally and markets vertically both scaled as existing and new.

ADL Matrix:  The ADL Matrix is a two dimensional 4×5 matrix stating several strategies for a firm, bases on stage of industry maturity and firm’s competitive position.

GE Matrix:  GE Matrix is a two dimensional matrix stating several strategies like invest, protect, harvest and divest to choose from on the basis of firm’s business position and market attractiveness.

The criteria used to rate market attractiveness and business position are assigned in different ways because some criteria are more important than others. Then each SBU is rated with respect to all criteria. Finally, overall rating for both factors is calculated for each SBU. Based on these ratings, each SBU is labeled as high, medium or low with respect to (a) market attractiveness, and (b) business position.

Chapter 4 – Strategic Planning

Planning:  it is the basic or elementary task of management which bridges the gap between ‘where we are’ and ‘where the co wants to go’. It is an elaborate statement of activity in which it is determined when is to be done, how is to be done and who is going to perform a specific job.

Strategic Planning:  Strategic Planning is a highly demanding process in which key decisions of the company are taken and agreeing on action that will shape and guide the future of an organisation and justify its existence.

Approaches for Strategic Planning

  1. Top down
  2. Bottom up

Strategic Uncertainty:  The strategic uncertainty is represented by a future trend or event that has inherent unpredictability.

The Stages of Corporate Strategy Formulation Implementation Process

Stage I: Developing a strategic vision

Stage II: Setting objectives

Stage III: Crafting a strategy to achieve the objectives and vision

State IV: Implementing and executing the strategy

State V: Monitoring developments, evaluating performance and making corrective adjustments

(CPT exam form need to be attested by a Chartered Accountant)

Glueck and Jauch Generic Strategic Alternative

  • Stability strategies
  • Expansion strategies
  • Retrenchment and strategies
  • Combinations strategies

Michael Porter’s Generic Strategies

General Business Strategy:  A generic business strategy is one that can be adopted by any firm, regardless of the product or industry involved, to achieve a competitive advantage.

Porter’s Strategy:  According to porter, strategies allow organizations to gain competitive advantage from three different bases:

  • Cost leadership,
  • Differentiation, and
  • Focus

Cost Leadership Strategy:  It is a strategy which emphasizes on being a cost leader by producing standardized products at a very low per-unit cost for the consumers who are price sensitive.

Differentiation Strategies: A differentiation strategy calls for the development of a product or service that offers unique attributes that are valued by customers to be better than or different from the products of the competition.

Focus Strategies: Competitive strategies based on targeting a specific niche within an industry. Focus strategies can occur in two form: cost-based focus and differentiation – based focus.

Best Cost Provider Strategy:

It offers more value for the money to the customer by either lower prices than rival brands with comparable features or matches the price of rivals and provides better features.

In this framework the columns and rows identify the four fundamental alternatives firms can use in seeking competitive advantage:

  1. Low cost provider
  2. Broad Differentiation
  • Focused low cost
  1. Focused Differentiation

(ITSM is an integral and important part of IPCC Syllabus and it should be studied with utmost dedication)

Grand Strategies/Directional Strategies

Stability strategy

In stability strategy, the firm –

  • Stay with its current businesses and product-market, postures and functions
  • Maintains the existing level of effort, and
  • Remains satisfied with incremental growth.

Expansion Strategy:  It is one in which we are growing significantly faster than the market or market segment is growing overall. It implies that the company is willing to take on competitors in order to take market share from them, in addition to absorbing the growth in the market place itself.

Expansion through Intensification

  1. Market Penetration
  2. Market Development
  3. Product Development

Expansion through Diversification

  1. Innovation
  2. Capacity Utilisation
  3. Synergy

Types of Related Diversification

  1. Vertical Integration Diversification: The expansion of the firm’s value chain to include activities performed by suppliers and buyers; the degree of control that a firm exerts over the supply of its inputs and the purchase of its outputs. Vertical integration strategies and decisions enlarge the scope of the firm’s activities in one industry.

Forward Integration: It is a strategy that moves the firm down-stream into an activity currently performed by a buyer.

Backward Integration: It is a strategy that moves the firm up-stream into an activity currently conducted by a supplier.

  1. Horizontal integration Diversification: This involves addition or acquisition of one or more similar businesses at the same stage of the production marketing chain.
  2. Concentric Diversification: It is a Strategy in which the firm’s operation are expanded into similar industries and also markets; it helps in extending the firm’s USP to these new yet familiar streams of business that are similar to the firm’s initial business domain.
  3. Conglomerate Diversification: It is a strategy that expands the firm’s operation into industries and markets that are not similar or related to the firm’s initial base; does not involve sharing the firm’s distinctive competence across different lines of business.

( CA CPT result is usually announced after one month of conduting the CA CPT exam)

Expansion through Mergers and Acquisitions: Expansion through Mergers and Acquisitions (i.e. takeover/absorption/amalgamation) is an attractive method of Diversification.

Retrenchment Strategy: A strategy used by corporations to reduce the diversity or the overall size of the operations of the company. This strategy is often used in order to cut expenses with the goal of becoming a more financial stable business. Typically the strategy involves withdrawing from certain markets or the discontinuation of selling certain products or service in order to make a beneficial turnaround.

Turnaround strategy: The financial recovery of a company that has been performing poorly for an extended time. It is a rapid change of corporate strategy that is needed to deal with issues such as falling profitability, lower return on investment or loss of market share.

Divestment Strategy: Divestment strategy involves the sale or liquidation of a portion of business, or a major division, profit centre or SBU.

Liquidation Strategy: A liquidation strategy involves closing down a firm and selling off all its assets and paying off its liabilities.

Combination Strategy: Here, we adopt different strategies for different units or products of an organization.

Combination = Stability + Expansion + Retrenchment

(Strategic Management is also applied in varied forms during Strategic Planning Process)

Chapter 5 – formulation of Functional Strategy

Functional Strategy: It relates to a single functional operation and the activities related therein. If it is studied to identify the hierarchy levels of strategy formulation, these strategies are followed by the personnel who work below the SBU or business-level group.

Role of Functional Strategy

  1. They provide support to the overall business strategy.
  2. They spell out how functional managers will work so as to ensure better performance in their respective functional areas.

Marketing:  Marketing is a societal process by which individuals and groups obtain what they need and want through creating, offering, and freely exchanging products and services of value with others.

Marketing Strategy:  Marketing strategy deals in all the actions related with the developing, pricing, distributing, and promoting products that meet the needs of specific customer groups.

Marketing Strategy Issues

  1. Distribution network
  2. Advertising
  3. Customers
  4. Pricing
  5. Warranty
  6. Remuneration and incentives

Delivering Value to Customers: Understanding your customers’ values will lead you to develop products and services that can provide high profit-potential for your business.

Value Delivery network

The Marketing Process

Market Segmentation, Market Targeting & Market Positioning

Marketing Mix: A mixture of several ideas and plans followed by a marketing representative to promote a particular product or brand is called marketing mix. It is also known as the 4 P’s of Marketing, is the combination of product, price, place (distribution), and promotion.

Expanded Marketing Mix

  • People
  • Physical evidence
  • Process

Marketing Analysis

  • Marketing Planning
  • Implementation
  • Marketing Control

Marketing Planning: This stream of planning focuses on designing & implementing various strategies to achieve marketing targets like increased sales, more customers, extended branches or franchises etc.

Marketing Plan: A marketing plan is roadmap for how to promote a business. It can increase brand awareness, generate revenue, build lead generation or retain customers.

Elements of a Marketing Plan

  • Executive Summary and Table of contents
  • Mission statement
  • Summary of performance till date
  • Summary of financial projections
  • Market overview
  • SWOT Analysis of Major SBUs
  • Portfolio Summary of all the SBUs
  • Market Assumptions
  • Marketing Objectives and Goals
  • Financial projections for at least Three Years
  • Marketing Strategy

Marketing Strategy Techniques

  • Social Marketing Augmented Marketing
  • Direct Marketing Relationship Marketing
  • Services Marketing
  • Person Marketing
  • Organization Marketing
  • Place Marketing: Differential Marketing
  • Synchro Marketing
  • Concentrated Marketing
  • De-Marketing

Financial Strategy: The strategies related to several financial aspects of a business like attracting working or fixed capital, deciding about the sources of short term & long term fund, envisage estimates of future financial statements – quarter wise or year wise and allocating budgets for various activities to ensure best usage of available funds and aiming to increase the shareholders’ wealth etc. are called financial strategies.

Evaluating the Worth of a Business

  1. Net Worth Method
  2. Capitalization of Earnings
  3. Market Price Method

Production Strategy Formulation: The strategies related to various aspects of production system, operational planning and control are called Production strategy.

Logistics Strategy: Logistics is a process which integrates the flow of supplies into, through and out of an organization to achieve a level of service which ensures that the right materials are available at the right place, at the right time, of the quality, and at the right cost.

Research and Development Strategy: Research and development (R&D) strategies are the strategies related to development of new products and processes and improvement the old ones. R&D people perform tasks like simplifying technology, changing processes and raw materials, adapting products/processes to local markets, and altering products to particular taste and specifications.

Three Major R&D Approaches

  1. Market New Technological products
  2. Imitate others
  3. Cost Leadership

Human Resource Strategy Formulation : Human Resource strategies are related to areas like assessing the staffing needs, their recruitment, selection, training, development, compensation, motivation, employees’ healthcare etc.

Prominent Areas where the Human Resource Manager can play Strategy Role in Managing Human Resources

  • Providing purposeful direction
  • Creating competitive atmosphere
  • Facilitation of change
  • Diversity of workforce
  • Empowerment of human resources
  • Building core competency
  • Development of work ethics and culture

Chapter 6 – Strategy Implementation and Control

Strategic management entails both strategic planning and implementation, and is “the process of identifying and executing the organization’s strategic plan, by matching the company’s capabilities with the demands of its environment.”

The basic elements of strategic management

  • Strategic Analysis
  • Strategic Formulation
  • Strategic Choice
  • Strategic Implementation
  • Strategic Evaluation

Strategy Formulation and Implementation Matrix

Principal Combinations of Efficiency (Operational Management) and Effectiveness (Strategic Management)

Steps in the process of Strategy Implementation

  1. Formulation of plans, programmes and projects.
  2. Design of appropriate organizational structure.
  • Installation of suitable systems.
  1. Determination of functional policies.
  2. Decision making on resource allocation.
  3. Providing various behavioural inputs, so that the plans work.

Issues in Strategy Implementation

  1. Project implementation
  2. Procedural implementation
  • Resource allocation
  1. Structural implementation
  2. Functional implementation
  3. Behavioural implementation

CA IPCC result is going to be announced soon…….

Organization Structure

Organizational Structure: Organizational structure is typically hierarchical arrangement of lines of authority, communications, rights and duties of an organization.

Types of Organizational Structure

Functional Structure: The organization is divided into various specific departments; e.g. human resource, marketing, finance and operations etc.

Divisional Structure: It is composed of divisions. Each one represent s a separate business to which the top corporate office delegates responsibilities for performance and day-to-day operations to division managers. By such delegating the corporate office is responsible for formulating and implementing strategies for division and their control.

A division structure may consist of the following divisions:

  1. Divisional by geographic area
  2. Divisional by product
  • Divisional by customer
  1. Divisional by process

Strategic Business Unit (SBU): SBU Structure groups similar divisions into strategic business units and delegates authority and responsibility for each unit to a head senior executive, who reports directly to the top management / CEO.

Matrix Structure: this is another type of structure which aims at combining the advantages of vertical and horizontal flows of authority and communication.

Core Competencies: Core Competencies are created by superior application of various resources be it human, physical or technological. They comprise peculiar abilities in various domains plus intellectual abilities and cultural richness. It therefore, symbolizes the core strength of an organization due to which they enjoy a little or significant competitive advantage over its competitors.

Identification Test

Leverage Test, Value Enhancement Test, Imitability Test

Value Chain Analysis (VCA) and Core Competencies

  1. Validate core competencies in current businesses
  2. Export or leverage core competencies to the value chains of other existing businesses
  3. Use Core Competencies to reconfigure the Value Chains of existing businesses
  4. Use core competencies to create new Value Chains

Strategic Leaders: Strategic leaders are those at the top of the company (in particular, the CEO), but other commonly recognized strategic leaders include members of the board of directors, the top management team, and division general managers.

Responsibilities of strategic Leader

  1. Managing human capital (it is termed as the most critical skill)
  2. Fostering escalated target achievements time after time.
  3. Ready to make bold decisions like M S Dhoni.
  4. Interested in getting direct feedback through personal interactions & face-to-face communications.
  5. Holding some key strategic positions or decision making powers that cannot be delegated.

Leadership Roles to be Played by Managers

  1. Keeping track of the activities of the subordinates or the team, observing their work & progress, conducting discussions to solve any sort of problem, bottleneck or even personal issues to ensure their best contribution in terms of efforts.
  2. Promoting a culture and esprit de corps that mobilizes and energizes organization members to execute strategy in a competent fashion and perform at a high level.
  3. Keeping the organization responsive to changing conditions, alert for new opportunities, bubbling with innovative ideas, and ahead of rivals in developing competitively valuable competencies and capabilities.
  4. Exercising ethics leadership and insisting that the company conduct its affairs like a model corporate citizen.
  5. Pushing corrective actions to improve strategy execution and overall strategic performance.

Leadership Style

  • Transformational Leadership Style
  • Transactional Leadership Style

Strategic Change: Strategic change is a complex process and it involves a corporate strategy focused on new markets, products, services and new ways of doing business.

Steps to Initiate Strategic Change

Step-I: Recognize the need for change:

Step-II: Create a shared vision to manage change

Step-III: Institutionalize the change

Strategic Control

The control function involves monitoring the activity and measuring results against pre-established standards, analyzing and correcting deviations as necessary and maintaining / adapting the systems.

Strategic Control

“Strategic control focuses on the dual questions of whether:

  1. The strategy is being implemented as planned; and
  2. The results produced by the strategy are those intended”.

Types of Strategic Control

  • Premise control
  • Strategic surveillance
  • Special alert control
  • Implementation control

Corporate Culture: Corporate culture refers to a company’s values, beliefs, business principles, traditions, ways of operating, and internal work environment.

How Culture can Promote better strategy executions of culture?

  1. Identify the supportive and non-supportive elements of the culture
  2. Hold candid discussions with all concerned about those aspects of the culture that have to be changed.
  • Communicate to employees the basis for cultural change and its benefits to all concerned.
  1. Altering incentive compensation (to reward the desired cultural behavior), visibly praising and recognizing people who display the new cultural traits.
  2. Recruiting and hiring new managers and employees who have the desired cultural values.

Chapter 7 – Reaching Strategic Edge

Business Process Reengineering

Business Process:  Business process is a set of steps of the process or a activities that you and the personnel providing services perform to complete the transaction.

Reengineering: The complete rethinking, reinventing and redesigning of how a business or set of activities operate.

BPR: Business process Reengineering (BPR) involves fundamental rethinking and radical redesigning and radical redesigning of a business process so that a company can create best value for the customer by eliminating barriers that create distance between employees and customers.

Business Processes of a firm that need redesigning

  1. Processes pertaining to development and delivery of product(s) and /or services
  2. Process involving interface(s) with customers
  • Process comprising management activities

Steps Involved in Implementing Business Process Reengineering (BPR)

Step 1: Determining objectives and framework of the organization.

Step 2: Identify customers – their profile, their steps in acquiring, using and disposing a product and determine their needs.

Step 3: Develop a flowchart of the existing total business processes.

Step 4: Try to simplify the process by eliminating tasks and steps where possible.

Step 5: Determine which parts of the process can be automated through introduction of advanced technologies.

Step 6: Evaluate each activity in the process to determine whether it is strategycritical or not.

Step 7: Design a new structure for performing the activities and reorganize the personnel who perform these activities into the new structure.

Step 8: Implement the redesign.

(This subject can also be read as a part of Business Strategy undertaken by big organizations)

The Role of Information Technology in BPR

The impact of IT-systems on BPR can be identified with respect to following:

  1. Operational speed, drastic reduction in time,
  2. Global village, i.e. overcoming restrictions of geography and/or distance,
  3. Restructuring of relationships,
  4. Information systems that provide timely, reliable and accurate information, and
  5. Business Values – IT-initiative, thus, provide business values in three distinct areas:

Efficiency – by way of increased productivity,

Efficiency – by way of better management,

Innovation – by way of improved products and services.

Benchmark: A “benchmark”  is a reference or measurement standard used for comparison. Dictionary defines a benchmark as a standard or a point of reference against which things may be compared and by which something can be measured and judged.

Benchmarking: In simple words, benchmarking is an approach of setting goals and measuring productivity based on best industry practices.

The Benchmarking Process

  1. Identifying the need for benchmarking and planning
  2. Understanding existing business processes
  • Identifying best processes
  1. Comparing own processes and performance with that of others
  2. Preparing a report and Implementing the steps necessary to close the performance gap
  3. Evaluation

What is TQM?

Total Quality Management (TQM) is a people-focused management system that aims at continual increase in customer satisfaction at continually lower real cost.

Principles Guiding TQM

  1. Commitment
  2. Cultural
  3. Continuous Improvement
  4. Co-operation

Employee involvement

Employee empowerment

  1. Customer focus
  2. Control
  3. Cross-functional
  4. Cause analysis
  5. Change
  6. Concept of Teams

Operational principles of TQM

  1. Universal Quality Responsibility
  2. Quality measurement
  3. Inventory Reduction
  4. Value improvement
  5. Supplier Teaming
  6. Training

What is Six Sigma?

Six Sigma is a business strategy developed by Motorola in 1986 to achieve process improvement. Six Sigma is a highly disciplined process that helps us focus on developing and delivering near-perfect products and services.

What’s Makes Six Sigma Different?

  1. Six Sigma is customer focused
  2. Six Sigma projects produce major returns on investments
  • Six Sigma changes how management operates

Six Themes of Six Sigma

Theme I: Genuine Focus on the Customer

Theme II: Data and Fact Driven Management

Theme III: Process Focus, Management, and Improvement

Theme IV: Proactive Management

Theme V: Boundary-less Collaboration

Theme VI: Drive for Perfection; Tolerance for Failure

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