Thursday, February 21, 2013

Corporate Strategy Planning

Introduction

following on from these definitions:

  • A corporate strategy is the set of management decisions – designed by executives, the board, senior management team or whoever are the final decision makers in the organisation – that are meant to get the better of adversaries or attain the organisations ‘ends’.
  • Tactics are the plans or procedures that they adopt to implement these strategic decisions.

Who is Michael Porter?
Amongst the most significant authors on strategy of recent decades is the Harvard academic, business guru, strategist and author, Michael Porter (1947-).
As well as developing a number of specific tools and frameworks for analysis, Porter highlighted that the purpose of strategy was to gain and defend some form of competitive advantage – which in our definition of strategy fits quite neatly with the idea of “getting the better of an adversary”.
Porter said in his groundbreaking books in 1980 (Competitive Strategy) and 1985 (Competitive Advantage) that these are really only three forms of competitive advantage:

1. Cost Leadership – having lower costs than any other competitor enables either superior profits or a capacity to offer lower prices.
2. Differentiation – being able to offer customers something different to anyone else in the market, as long as it is something that customers value and will prefer.
3. Focus – being acknowledged as a specialist and having expertise and knowledge of particular customers or activities and processes that are highly prized.
So, from Porter’s perspective, the purpose of a corporate, business unit or functional strategy would be to develop, refine, defend and exploit one of these three sources of competitive advantage.


What are the different levels of strategy?




Strategy can be developed at many levels – in a multi-layered organisation there may be:


  • Corporate level strategy – decisions made for the whole corporation or organisation to gain the better of adversaries or attain ends.
  • Business unit or divisional strategy – decisions made for the business unit or division to gain the better of adversaries or attain the business units end.
  • Functional strategies – such as marketing/finance/human resources/IT/technology/ operational/production/etc. strategies. There would be marketing decisions (or finance or HR decisions, etc) designed to get the better of an adversary or attain a marketing/finance, etc, end.

So what do we mean by ends? Other terms that are frequently used here for the same concept are goals or missions or visions.
Organisations typically have (or should have) a set of goals, desired outcomes or a view of their purpose (mission), or their future achievements and positions (visions) in mind. Ideally these are clearly articulated and understood by everyone in the organisation. When these ends (goals, mission, vision) are clearly understood, then the board, management, staff and partners


Process of Corporate Strategy


Goal-Setting

The purpose of goal-setting is to clarify the vision for your business. This stage consists of identifying three key facets: First, define both short- and long-term objectives. Second, identify the process of how to accomplish your objective. Finally, customize the process for your staff, give each person a task with which he can succeed. Keep in mind during this process your goals to be detailed, realistic and match the values of your vision. Typically, the final step in this stage is to write a mission statement that succinctly communicates your goals to both your shareholders and your staff.

Analysis

Analysis is a key stage because the information gained in this stage will shape the next two stages. In this stage, gather as much information and data relevant to accomplishing your vision. The focus of the analysis should be on understanding the needs of the business as a sustainable entity, its strategic direction and identifying initiatives that will help your business grow. Examine any external or internal issues that can affect your goals and objectives. Make sure to identify both the strengths and weaknesses of your organization as well as any threats and opportunities that may arise along the path.

Strategy Formulation

The first step in forming a strategy is to review the information gleaned from completing the analysis. Determine what resources the business currently has that can help reach the defined goals and objectives. Identify any areas of which the business must seek external resources. The issues facing the company should be prioritized by their importance to your success. Once prioritized, begin formulating the strategy. Because business and economic situations are fluid, it is critical in this stage to develop alternative approaches that target each step of the plan.

Strategy Implementation

Successful strategy implementation is critical to the success of the business venture. This is the action stage of the strategic management process. If the overall strategy does not work with the business' current structure, a new structure should be installed at the beginning of this stage. Everyone within the organization must be made clear of their responsibilities and duties, and how that fits in with the overall goal. Additionally, any resources or funding for the venture must be secured at this point. Once the funding is in place and the employees are ready, execute the plan.

Evaluation and Control

Strategy evaluation and control actions include performance measurements, consistent review of internal and external issues and making corrective actions when necessary. Any successful evaluation of the strategy begins with defining the parameters to be measured. These parameters should mirror the goals set in Stage 1. Determine your progress by measuring the actual results versus the plan. Monitoring internal and external issues will also enable you to react to any substantial change in your business environment. If you determine that the strategy is not moving the company toward its goal, take corrective actions. If those actions are not successful, then repeat the strategic management process. Because internal and external issues are constantly evolving, any data gained in this stage should be retained to help with any future strategies.






What is a strategic plan?

A plan, whether strategic, tactical, operational, marketing, finance – or whatever – is really just a set of decisions that have been captured in some form (document, web page, PowerPoint presentation, video, etc) that set out the answer to three key questions:

1. Where are we now?

2. Where are we going?

3. How will we get there?

Accordingly, a plan is formed by:

  • Analyzing the existing and expected future trends and factors affecting the organisation/business unit, etc
  • Setting down clear statements of the outcomes that will help to achieve the ends that the organisation has set itself (these statements of outcomes are commonly called objectives)
  • Describing some tactics and actions that will lead to achieving the outcome.
Strategic Intent

Strategic Intent : 



  • Strategic Intent Like individuals, organizations must define what they want to do and why they want to do this. 
  • This “why they want to do” underlies the end result that is likely to be achieved through what they want to do. In management literature, this end result is referred to as strategic intent. 
  • Strategic Intent has a hierarchy – vision, mission, and goals & objectives. Strategic intent is defined as “Strategic intent envisions a desired leadership position and establishes the criterion the organization will use to chart its progress.”


Attributes of Strategic Intent : 



  • Attributes of Strategic Intent Sense of Direction : Strategic Intent implies a particular view about long-term market or competitive position that an organization hopes to build in future.
  •  It should be a view of the future – conveying a sense of direction. 
  • Sense of Discovery : Strategic intent is differential as each organization differs from others; it implies a competitively unique point of view about the future. 
  • It holds out to employees of exploring new competitive territory. Sense of Destiny : Strategic intent has an emotional edge to it. It is an end result that employees perceive as inherently worthwhile.


Strategic Intent of Reliance Industries :


Strategic Intent of Reliance Industries Dhirubhai Ambani, promoter of RIL, started a business of exporting rayon, cashew nuts, and spices and importing nylon in 1959 with a meager capital of Rs. 15,000/-. This business grew and he established a synthetic fabric mill in 1966. This mill was upgraded continuously and by 1975, it was rated as one of the best mills in India by a team of World Bank. Afterward, it went for backward integration at successive levels and, today, it has become a petrochemical company and has occupied number one position in Indian Provate sector.


Strategic Intent of Reliance Industries : 


Strategic Intent of Reliance Industries In 1970s, Dhirubhai Ambani told one of his close colleagues, “do you know who these Tatas and Birlas are? We have to get past them one day. I have inherent desire to become number one industrialist of the country. This intent of Dhirubhai became the strategic intent of RIL. RIL pursued its growth strategy relentlessly. RIL always believed, “If you want to become world-class company, you must have world-class technology and world-class people. For world-class technology, RIL acquired best-in-class technology. For people mobilization, RIL adopted the approach, “If you are a big fish, small pond will not suit you. Come and join the best-in-class company”. The result is: RIL has a very high percentage of Indian repatriate employees. For mobilizing financial resources, RIL relied on public participation.


Hierarchy of strategic Intent : 


Hierarchy of strategic Intent

Vision 
Mission 
Goal
Objective


Strategic Intent of Indian Oil Corporation : 

  • Strategic Intent of Indian Oil Corporation IOC is the largest Indian company engaged in the business of crude oil refining and offers a variety of products related to oil sector. 
  • IOC’s strategic intent consists of the following elements in the order given below: Vision : IOC aims to achieve international standards of excellence in all aspects of energy and diversified business with focus on customer delight through quality products and services. Mission : Maintaining national leadership in oil refining, marketing, and pipeline transportation. 
  • Objectives : Focusing on cost, quality, customer care, value addition, and risk management.

Vision : 
  • Vision Burt Nanus, a well-known expert of organizational vision, has defined vision as “a realistic, credible, and attractive future for an organization.” Realistic : A vision must be based on reality to be meaningful for an organization; it should not be merely day-dreaming but a dream to be converted into reality. Credible. A vision must be believable to be relevant to members of the organization concerned.
  •  One of the purposes of a vision is to aspire those in the organization to achieve a level of excellence, and to provide direction for their actions Attractive. 
  • A vision must be attractive so as to inspire and motivate organizational members. People must want to be a part of the future that is envisioned for the organization. Future. A vision is not for the present; it is for the future. Simply, a vision is not where an organization is now but where it will be in future.


Examples of Vision : 

  • Examples of Vision RIL – 
To achieve global leadership in polymers, fibres and resin businesses through innovative research and technology development in materials, products, and applications through efficient, disciplined, target-oriented, and cost-effective research and development activities. 




  • Infosys – To be a globally respected company that provides best of breed software solutions by best-in-class people. 
  • Tata Tea – to be India’s foremost tea-based beverage company. 













  • Dihe - to provide dynamic learning environment by imparting holistic education to develop outstanding professionals and entrepreneurs who exemplify humanistic values, are socially responsible stewards and create and dissemination practitioner - oriented knowledge that will uplift society.


Role of Vision in Strategy Formulation :

  • Role of Vision in Strategy Formulation Vision provides clue about where the organization is heading for in future. Since various strategies try to ensure that the organization reaches its destination, these should be in accordance with the vision. 
  • Vision of an organization tries to place it in a unique position which requires unique actions. 
  • These actions are defined by various strategies. 
  • Since vision is a source of inspiration to organizational members and encourages them for commitment, they tend to give their full contributions in strategy formulation and implementation.


Developing a vision : 

  • Developing a vision Developing a vision is like having a dream to be converted into reality in future. Following steps are relevant for development of a vision: Conducting a vision audit – to assess the current direction and momentum of the organization. 
  • Targeting the vision – What are the boundaries and constraints to the vision? What must be the vision accomplish? What critical issues must be addressed in the vision?
  •  Setting the vision context – identifying what the organization’s future environment might look like.
  • Developing the future scenarios Generating the alternative visions Choosing the Final Vision


Mission : 

  • Mission The company mission is defined as the fundamental unique purpose that sets a business apart from other firms of its type and identifies its scope of its operations in product and market terms. 
  • Difference between Vision and Mission The essence of vision is forward-looking view of what an organization is to become in future, 
  • mission states what the organization is and why it exists. While vision places emphasis on visionary long-term concept of the organization with very high level of achievement, mission deals mostly with how the organization will interact with various stakeholders, products/services it offers, and the way these are offered.


Mission Statement : 


Mission Statement Mission statement is the description of organizational mission. 
  • Explicit mission statement is desirable as it serves the purpose of communicating to the organization’s members about the corporate philosophy, character, and image of the organization which govern their behavior in the organization. 
  • Following points should be considered while preparing the mission statement: Mission should be clear, both in terms of intentions and words used. 
  • It should be feasible, neither too high to be unachievable, nor too low to demotivate the people for work It should be precise but explanatory, neither too narrow so as to restrict the organization's activities, nor too broad to make itself meaningless.
  •  It should be distinctive, both in terms of the organization’s contributions to the society and how these contributions can be made.


Examples: Mission Statements of : 


Examples: Mission Statements of 
  • Infosys: To achieve our objectives in an environment of fairness, honesty, and courtesy towards our clients, employees, vendors and society at large." 
  • Tata Tea: Achieve market and thought leadership for branded tea in India Be recognized as the foremost innovator in tea and tea based beverage solutions Drive long-term profitable growth Co-create enhanced value for all stakeholders Make Tata Tea a great place to work
  •  DIHE : To provide world-class professional education in the field of management by providing high quality instructions, excellent academic and research environment which will help our young scholars to develop competencies in dealing with global complexity, emerging technologies and changes and social and cultural diversity.


Example : Tata International : 


Example : Tata International Vision : To be the “ Leading International Business Company” of the country and “International Arm” of the Tata Group, with a significant overseas reach, presence and linkages, and with focus on facilitating globalization of Tata Group’s core business. 
  • Mission: Promote the Tata Brand Equity internationally. Promote internationally, products and services from the Tata Group, as also from other utility conscious Indian and overseas companies. 
  • Source world-class products and services for marketing in India. Promote businesses with strong comparative advantages for the company, and upgrade the company’s strengths in the areas of technology, marketing, and finance. Identify global sources of technology, marketing, and finance and other services to facilitate strategic-alliances, joint ventures, and collaborations of Tata-group,
  •  in India and overseas. Be a market driven company and continually strive to stakeholder value and satisfaction through consistent quality in all areas of our operations. Nurture and develop human resources, to enable us to undertake the challenges of leadership and innovation, in our areas of activity.


Role of Mission in Strategy Formulation : 

  • Role of Mission in Strategy Formulation Organizational Mission, when clearly defined, helps strategists in formulating their strategies in the following ways: It helps in deciding the direction in which the organization proceeds. 
  • The strategic actions needs to be aligned to these. It helps the organization to clarify its aspirations and those of various stakeholders. 
  • It serves as a reference point in dealing with its various stakeholders within and outside the organization. I
  • t helps in integrating the organization with its relevant environment by taking suitable actions the way these have been specified in the mission. It helps in integrating the various subsystems of the organization as these subsystems look at their objectives and operations in the light of organizational mission.
  •  It conveys clear message about the organization to those outsiders who come in contact with it. They develop positive attitudes towards organization if they are well aware about its mission.


Components of Mission : 

  • Components of Mission Organization’s Self-concept (Identity) It’s role in the industry, change agent or follower Organization’s Philosophy (Creed or ethos) Assumptions, beliefs, values, aspirations etc. 
  • Organizational Image External manifestation on the basis of which society and its people create a positive or negative view about the organization Long-term Objectives Survival, growth, profitability, shareholder value Nature of Business Product/service, market segment and technology


Business Definition 

  • Business Definition A business definition is a clear-cut statement of the business or a set of businesses, the organization engages in presently or wishes to pursue in future. 
  • Then it prescribes the arena in which the organization will play and compete. Business can be defined along three dimensions-product, customer, and technology. However, whatever dimension is chosen for defining business, it must reflect two features: focus and differentiation.
  •  Focus of business may be defined in terms of the kind of functions the business performs rather than the broad spectrum of industry in which the organization operates. Differentiation in business is how an organization differentiates itself from others so that the business concentrates on achieving superior performance in the market.


Focus in Business Definition : 


Focus in Business Definition

Examples of Business Definition : 

Examples of Business Definition


The context of defining business : 

  • The context of defining business An organization has to define its business in three contexts: Customer Segment : what is our business is not determined by the producer but by the consumer….by the want the customer satisfies when he buys a product or service Who is the customer? (location, behavior, how to reach) Product : Every organization defines the business it participates in and the product it offers. What does the customer buy? Technology : Technology consists of equipment, machines, tools and other physical aspects , and sets of activities , methods, and processes used for the production and delivery of product. What does the customer consider value?


Example: Hero Honda : 


Example: Hero Honda Business Definition:
 World-class quality auto products that provide the highest level of customer satisfaction. Customer segment: Individuals who enjoy riding motorcycles with perfection, like speed, styles, and fuel economy, located across the country. 
Product : It emphasizes world-class quality auto products- presently motorcycles, leaving the scope for adding similar other products in future. Initially, it concentrated on fuel-economy and introduced CD-100 with the slogan “fill it, shut it, forget it”. Later additional features have been added. Technology: 
The JV with Honda of Japan with core competency in automobile engines provided the needed technological edge. Product-delivery and after-sales activities have been ensure through a network of dealers armed with service centers backed up by qualified technicians trained by the company.


Goals and Objectives : 

  • Goals and Objectives Goals and objectives are the end results which an organization strives for. 
  • There may be different ways in expressing end results like market leadership, a certain percentage increase in sales in a particular year etc. 
  • These terms are used interchangeably meaning one and the same thing.

Features of Goals and Objectives :

Features of Goals and Objectives 
  • SMART 
  • S – Specific
  •  M – Measurable 
  • A – Attainable 
  • R– Relevant 
  • T – Time-bound
  •  DUMB 
  • D – Doable 
  • U – Understandable
  •  M – Manageable
  •  B – Beneficial


Role of Objectives : 

Role of Objectives Directions for Decision Making Clear definition of objectives encourages unified planning Objectives work as a motivating force Voluntary coordination is achieved easily if the objectives are clearly specified and mutually agreed upon Performance Standards –Objectives provide standard against which performance of the organization can be measured. Basis for Decentralization Integrating Organization, Group and Individual

Factors affecting Objective Setting : 


Factors affecting Objective Setting Forces of environment (external stakeholders) Organization’s Resources (both human and non-human) and Internal Power Relationships Value System of Top Executives (Ex. - money-oriented vs. philanthropic) Awareness by Management of the past objectives

Issues in Objective Setting :
  • Issues in Objective Setting Specificity ranges from generalized organizational objectives to specific individual objectives 
  • Multiplicity Multiple objectives aimed simultaneously – numbers should match 
KRAs Periodicity Set for different time periods – long-term, medium-term and short-term) Reality should be based on reality of those factors which affect objective setting Quality good-which provide specific direction for action and tangible basis for performance evaluation vs. bad-which fail to do so)


Areas of Objective Setting : 


Areas of Objective Setting Growth Volume, 
  • turnover, assets Profit RoI,
  •  profit margin, shareholder value Marketing Market share, 
  • new products, 
  • new markets, customer value Employees Attracting and retaining talent, 
  • benefits, HRD, IR Social Community Services,
  •  Rural Development, 
  • Family welfare, 
  • Development of ancillary industries
  • Change in Objectives Change in Aspiration level of Top Management 
  • Demand for change by Stakeholders Change in Environment Change in Life-cycle of Organization

Environment Analysis

SWOT Analysis

SWOT OF INDIA

STRENGTHS

  • Highly educated , skilled ,young, capable & dynamic  human resources.
  • English speaking & analytical studentsWorld class business-social-spiritual –political leader, Professor, scientist, Manager-Doctor-Engineer-Civil servants etc 
  • Big India Strategic position at various platforms Democracy, Big market & free media Range of emerging professional champions
  • Very rich in  Natural & Living resources Biodiversity & Traditional knowledge baseDiversity vs. Ideas-Innovation-Integration.
  •  Powerful spiritual strength (yoga-Ayurvada-Healing-therapy services) Geographical location (whole markets are shifting toward Asian nations) IT & Software superpower

WEAKNESS
  • Lack of trained & skill work force   Small supply of specialize professional Lack of spirits of entrepreneurship, patriotism and leadership skill Lack of effective & execution framework Lack of Indian management models 
  • Lack of transparency-Trust-Responsibility Lack of learning habits & Team work spirit Blindly respect anything taught by elders Poor InfrastructureCultural DifferencesFear/Uncertainity from Pakistan and china Poor Legal System Bureaucracy Poor globalsation skill

OPPORTUNITY 
Creation of global brands BPO & Call center offerings Resource Based SectorsChinese domestic & export marketLeverage relationship in Middle East markets Indian Domestic Market Growth

THREATS
  • Internal competition for resources Over promise / Under deliveryRegional Geo-political uncertaintyRising Labour cost Competition from other countries
  • Blinding Nationalism Corruption / Piracy / trustPolitical & religious instability Over Population

 PESTLE Analysis






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