WHY DO GREAT COMPANIES FAIL

UNPARALLED ACCUMULATION OPTIMISED SUCCESS

TRACK RECORD OF ABUNDANT BUSINESS CONFIRMS
OF SUCCESS RESOURCES SYSTEM STRATEGY

NO GAP MOMENTUM
A VIEW THAT
BETWEEN EXPEC- DEEPLY ETCHED IS MISTAKEN
RESOURCES WILL
TATIONS & PERFOR RECEPIES FOR
WIN OUT
MANCE LEADERSHIP

CONTENTMENT RESOURCES VULNERABILITY FAILURE TO

WITH CURRENT SUBSTITUTE FOR TO NEW “REINVENT”
PERFORMANCE CREATIVITY RULES LEADERSHIP

INABILITY TO ESCAPE INABILITY TO INVENT

THE PAST THE FUTURE

tksabarwal 1
Successful Managers begin
Competitiveness
Business To believe
Growth and profits
strategy They are best

Build layers
of staff
Dynamics of satisfactory To cope with
underperformance growth

External
Decline into arrogance
Satisfactory Initiative and And internal
Under Innovation stifled focus
performance On control

tksabarwal 2
 AVERAGE ANNUAL
Corp profileINCREASE
IN
50% STOCK PRICE- 1977-1988

40%

30%

20% 45.5
Company
‘C’
10% 13.6
6.5 Company
Company ‘ B’
‘A’

tksabarwal 3
 EFFORT AUDIT

V.HIG 7
H
6
E
F 5
F 4 C
O E
3
R O
T 2

1
None 0
Company A Company B Company C

tksabarwal 4
 THE VIRTUOUS CIRCLE
SUPERIOR CUSTOMER
DDTS/ SATISFACTIO
SERVICE N

FEWER CUSTOMER
DEFECTIONS

DEDICATED
WORK TEAM

HIGH
EMPLOYEE PROFITS
SATISFACTION GROWTH

INVESTMENT
IN HR

INVESTMENT TO
ENHANCE
PRODUCTIVITY
tksabarwal 5
 THREE KINDS OF THINKING PROCESS
MECHANICAL INTUTIO STRATEGIC
SYSTEMS HINKING N THINKING

PROBLEM
PROTOTYPE

PROCESS ANALYSIS OF
OF ESSENCE
THOUGHT

SOLUTION

LOCAL OPTIMIZATION TRANSFORMATIO

REARRANGEMENT N
OF ELEMENTS OR SEEING TREE
NOT THE FOREST
tksabarwal OR CHANGED 6
CONFIGURATION
 AN ACTION A HABIT CHARACTER

REAP

SOW A
SOW REAP SOW REAP SOW
HOUGHT DESTINY

REAP

AN ACTION A HABIT CHARACTER

tksabarwal 7
 Basic definitions
Strategic management—refers to the managerial process of forming a
strategic vision,setting objectives, crafting a strategy; implementing and
executing the strategy,and then over time initiating whatever corrective
adjustments in the vision, objective, strategy, and execution are deemed
appropriate.
Strategic vision—is a road map of a company’s future—providing specifics
about technology and customer focus,the geographic and the product
markets to be pursued, the capabilities it plans to develop and the kind of
company that management is trying to create.
Mission statement– is typically focused on its present business scope—”who
we are and what we do;”mission statement broadly describe an
organization’s present capabilities, customer focus, activities, and business
makeup.
Objectives—are an organization's performance targets—the results and
outcomes it want to achieve. They function as yardsticks for tracking an
organization’s performance and progress.
Strategic objectives—relate to outcomes that strengthen an organization’s
overall business position and competitive vitality

tksabarwal 8
 Mission statement-IBM

THE CUSTOMER MUST EXCELLENCE & SUPERIOR

THE INDIVIDUAL MUST
BE GIVEN THE BEST PERFORMANCE MUST BE
BE RESPECTED
POSSIBLE SERVICE PURSUED

tksabarwal 9
Tasks of strategic management

TASK -2 TASK- TASK-4 TASK-5

TASK - 3
1

DEVELOPING IMPLEMENTING
STRATEGY TO EVALUATION
STRATEGIC SETTING AND
ACHIEVE AND
VISION AND OBJECTIVES EXECUTI;NG
OBJECTIVES CONTROL
MISSION STRATEGY

IMPROVE/ IMPROVE/ RECYCLE TO

REVISE AS REVISE AS
CHANGE AS CHANGE AS TASKS 1,2,3.4
NEEDED NEEDED
NEEDED NEEDED AS NEEDED

tksabarwal 10
Strategy factors internal/external

External
Economic
Company factors
Societal Competitive
Opportunities &
Political Conditions and
Threats to the
Regulatory & Overall industry
Company’s
Community attractiveness
Well-being
considerations

Conclusions
Crafting
About Identification
Strategy
Factors On Evaluation
That fits
Implications Of
The
The mix of considerations that For Strategy
Overall
Determine a company’s strategic situation strategy alternatives
situation

Company
resources
Strengths/weakne Personal ambitions
sses Business Internal
Shared values
Competencies Philosophies & factors
And
And Ethical principals
Company culture
Competitive To key
capabilities executives

tksabarwal 11
The Business System
Diamond
Business
Process

Values
Jobs and and
structure beliefs

Management and
measurement system
tksabarwal 12
 ENVISIONING THE OPPURTUNITIES

CREATE A VISION
OF THE FUTURE
SET STRATEGIC DEFINE THE
DIRECTIONS & SCOPE OF
PRIORITIES INNOVATION

ASSES THE FIRM’S TO

FUTURE SEEDING
ENVIRONMENT STAGE

CREATING A
VISION
1. WHAT DO WE WANT TO STAND FOR AS A COPRPORATION.

2. WHAT KINDS OF PRODUCTS DO WE WANT TO OFFER.

3. WHAT KIND OF CUSTOMERS DO WE WANT TO SERVE

4. WHAT DO WE WANT OUR PRODUCTS TO MEAN TO OUR

CUSTOMERS.
tksabarwal 13
 IDENTIFYING OPPURTUNITIES

• FAST GROWING SEGMENTS • UNMET/ ILL MET NEEDS

• NEW TRADE/ CONSUMER • NEW/ EMERGING NEEDS
GROUPS
MARKET

OPPUR-
TUNITIES

TECHNOLOGIES
COMPTT

• NEW • SCOPE AND FOCUS

COMPONENTS • WEAKNESS/ GAPS
• NEW MATERIALS • SUBSTITUTION POTS
• NEW PROCESSES • EMERGING COMPTT
• NEW STANDARDS

tksabarwal 14
SWOT Analysis

 Formal framework for identifying

growth opportunities.

 Helps focus the matching

process.

 Goes beyond just developing

lists.

tksabarwal 15
Examples of Strengths

 Reputation/brand image
 Distribution channels
 Research and development skills
 Experienced management talent
 Experienced sales force

***Note that all of the above are

“sustainable” strengths.

tksabarwal 16
Examples of Weaknesses

 Includes the lack of the previous

 High debt

 Lack of manufacturing
capacity/capability

tksabarwal 17
 Examples of Opportunities

 Upturn in consumer confidence

 Trends in consumer needs/wants

 Demographic trends

 Changes in distribution
patterns/consumer shopping behavior

tksabarwal 18
 Formulating
Product/Market Strategies

MARKETS

Existing New

Existing Market Market

penetration developmen
t
OFFERINGS

New Diversificati
New offering on
developmen
t

tksabarwal 19
 Selecting Product/Market Strategies

 Is the strategy consistent with organization

mission, goal, and capabilities.

 What are the costs and benefits of alternative

strategies and their probabilities of success?

 Includes an analysis of competitive structure,

market growth or decline factors, and opportunity
costs.

tksabarwal 20
 Developing Product/Market Strategies

 Selecting Target Markets

 Determining the Marketing Mix

Product/Service
Price
Promotion/Communication
Place/Distribution

tksabarwal 21
Budgeting for the Strategy

 Formal, quantitative expression of the

organization’s plan in financial terms.
What will it cost???

 Important so that organization goals are

attained.

tksabarwal 22
 Developing Reformulation and Recovery
Strategies

 Plans seldom go exactly as expected since

they are based on assumptions regarding
consumer response, competitive reaction,
and environmental factors.
 Important to periodically conduct
marketing audits to determine problem
areas.
 Preplanning of reformulation/recovery
strategies allows faster response times in
determining remedial action (contingency
plans).
tksabarwal 23
 Levels of Strategy

Business Strategy (competitive

strategy) is concerned with how a firm
competes within a particular market
Corporate strategy is concerned with
where a firm competes

tksabarwal 24
 Levels of Strategy (cont’d)

Business-Level Strategy (competitve strategy)
 How to create competitive advantage in each busness in
which the company competes:
 low cost leadership
 differentiation
 focus low cost/ focus differentiation
 Business (or Competitive) Strategy is concerned with the
use of resources and capabilities to create competitive
advantages in each of businesses or industries in which a
company competes
 Corporate-Level Strategy (companywide strategy)
 Corporate (or Company-wide) Strategy is the overall plan
for a multi-business unit company.
 Corporate strategy is what makes the corporate whole add
up to more than the sum of its business unit parts

tksabarwal 25
 Premises of Corporate
Strategy
Competition occurs at the business unit level
• corporations don’t compete; only their business units do
• value is created at the business unit level, it is only added at the
corporate level
• Successful corporate strategy must grow out of and reinforce
competitive strategy
Corporate Strategy inevitably adds costs and
constraints to business units
• Corporate overhead and costs of communication between HQ
and SBUs
• bureaucratic costs, costs of coordination, costs of monitoring
Shareholders can readily diversify themselves
• Shareholders can diversify their own portfolios of stocks, and
they can often do it more cheaply with less risk than
corporations
• Shareholders can buy shares at market prices and avoid paying
large acquisition premiums
tksabarwal 26
 Implications from these
Premises
Corporate Strategy cannot succeed unless it
truly adds value to business units:
 by providing tangible benefits that offset costs of lost
independence
 economies of scope in operations
 economies of scale in administration and internal financing
 add value to shareholders in a way that shareholders
could not replicate by themselves

tksabarwal 27
DECOMPOSING THE ECONOMIC ENGINE

WHAT IS OUR BASIC VALUE POSITION?

CONCEPT OF
HOW HAVE WE SEGMENTED THE MARKET?
SERVED MKT
WHAT KIND OF CUSTOMERS DO WE SERVE?
-1-
WHERE ARE OUR CUSTOMERS?

WHERE IN THE BUSINESS SYSTEM WE TAKE

REVENUE & PROFIT?
MARGIN WHERE DO OUR MARGINS COME FROM?
STRUCTURE WHAT HAS DETERMINED THE SIZE OF THE
-2- MARGIN?
WHAT ARE THE MAJOR COST & PRICE DRIVERS?
WHAT DO WE BELIEVE WE KNOW HOW
CONFIGRATION TO
OF SKILL & DO WELL?
ASSETS WHAT KINDS OF SKILLS PREDOMINATE
-3- IN
OUR INDUSTRY?
WHAT IS THE TRAJECTORY OF OUR
DEVELOPMENT SPENDING?
HOW ALERT ARE WE TO NEW
FLEXIBILITY & VALUE
ADAPTIVENESS DELIVERY MODELS?
-4- HOW EASILY COULD INVESTMENTS
PROGRAMME BE RECONFIGURED?
tksabarwal WHICH CONSTITUENCIES WOULD
28
RESIST CHANGE?
FINDING THE LIMITS OF THE CURRENT

ECONOMIC ENGINE
WHAT CUSTOMER NEEDS ARE’T WE SERVING.
-1-

COULD PROFITS BE EXTRACTED AT A

-2- DIFFERENT POINT IN THE VALUE
CHAIN.

MIGHT CUSTMER NEEDS BE

BETTER SERVED BY AN
-3- ALTERNATE CONFIGURATION OF
SKILLS & ASSETS.

WHAT IS OUR
- 4- VULNERA-
BILITY TO’ NEW
RULES’
OF THE GAME
tksabarwal 29
 PLANNING- CREATING & DELIVERING SERVICES

CORPORATE OBJECTIVES &

RESOURCES
MARKET OPPURTUINITY ANALYSIS RESOURCE ALLOCATION ANALYSIS

MARKET POSITIONING STATEMENT OPERATING ASSETS STATEMENT

•WHAT PRODUCT/S •WHAT PHYSICAL FACILITIES

•WITH WHAT DISTINGUISHING •WHAT EQUIPMENT
CHARACTERISTICS •WHAT INFO & COMM TECHNO LOGY
•TO WHAT TARGET MARKET •WHAT HUMAN RESOURCES
SEGMENT (NUMBER SKILLS)

SERVICES OPERATING CONCEPTS

GEOGRAPHIC SCOPE OF OPERATIONS
SERVICES MARKETING CONCEPT •AREAS SERVED
WHAT CUSTOMER BENEFITS •SINGLE VS MULTISITE
•CORE PRODUCT •FACILITIES LOCATION
•TELECOM LINKAGE
•SUPPLMENTARY ‘S’ SCHEDULING
•SERVICE RELIABILITY LEVELS •HRS-DAYS-SEASON
•ACCESSABILITY (WHERE & WHEN) •CONTINUOUS/ INTERMITENT
AT WHAT COST FACILITY DESIGN- LAYOUT
•MONEY OPERATING ASSESTS DEPLOYMENT
•TIME •WHAT TASKS-WHERE-WHEN
•LEVERAGE THROUGH INTERMEDIARIES
•MENTAL HASSLE OPERATING COSTS
•PHYSICAL EFFORT •LEVERAGE THRU’ CUSTOMER ASSETS
SERVIC DELIVERY (PARTNERSHIP & SELF SER.
•SPECIFIC TASKS ASSIGNED TO “FRONT-
PROCESS
BACKSTAGE OPERATIONS
tksabarwal 30
 Porter’s model
Firms in other industries
offering substitute
products

Suppliers Rivalry among competing

of raw sellers
materials, Buyers
parts, Competitive pressure
component created by jockeying for
s etc. better market position
and comptt advantage

Potential new entrants

tksabarwal 31
Means to competitive advantage

Competitive
advantage
Strategic assets
And market
achievements
Core and distintictive
competencies

Core capabilities

Company resources

tksabarwal 32
 Product portfolio analysis

Relates attractiveness and competitiveness

indicators to facilitate strategic thinking
suggesting specific marketing strategies to
achieve a balanced mix of products that will
ensure growth and profit performance in the long
run
•Helps a multibusiness firm to decide how to allocate
scarce resources among product markets they compete
in.
•Procedure consists of cross- classifying each activity
each activity with respect to two independent
dimensions.
•Dimensions are
•Attractiveness of the reference market
•Firm’s capacity to take advantage of opportunities
within the market
tksabarwal 33
BCG GROWTH –SHARE MATRIX

There are two basic assumptions underlying the BCG

matrix
2. Concerning the existence of experience effect.
Higher market share leads to cost advantage.
The largest competitor will be the most
profitable at current prices. The implication of
this assumption is that the expected cash flow is
market share specific.
3. The PLC model highlights the desirability of a
balanced mix of products situated in different
phases of PLC. Implication is that the cash needs
for products in rapidly growing markets are
expected to be greater than they are for those
in the slower growing ones

tksabarwal 34
 BCG matrix

22
stars Problem child
4 1
Market growth rate

5 3

Cash cows dogs

6
7

8
0
10x 1x 0.1x
Relative market share

tksabarwal 35
 Portfolio alternatives
+ -
+
stars Problem children +

disaster

in
no
Market growth rate

va

mediocrity
t or
wer
follo

- -
cash cows dogs

Relative market share

+ -

tksabarwal 36
 Multi-factor grid

B
C
Selective
high Offensive
Development
Growth
(problem
(stars)
children)
attractiveness

average

A D
weak

Disinvestments Low profile

(dogs) (cash cows)

weak average high

competitiveness

tksabarwal 37
 Evaluation of MFPG

MFPG Basically leads to same kind of analysis as BCG

matrix but the major difference is that the link
between the competitiveness and financial
performance is lost.

tksabarwal 38
 Strategy levels

Corporate
level managers
Corporate strategy

Business strategies Business level general

mangers

Heads of Functional strategies

functional areas
within business
unit or division
Operating strategies Plant
managers,geographi
c unit managers

tksabarwal 39
 Company value chain
Primary activities and costs

Purchased Distribution
Supplies and And Sales and Profit
operations service
Inbound Outbound marketing margins
logistics logistics

Product –technology and systems development

Support
Activities
Human resources management
& costs

General administration

tksabarwal 40
 Experience effect

experience effect

120
100
80
cost per unit

60
40
20
0
1million 2milliion 4million 8million
units

Series1 Series2 Series3

tksabarwal 41
 The 7s model

structures

strategy Systems

Super ordinate
goals

Skills style

staff

tksabarwal 42
 7s etiology
1. Strategy—a coherent set of actions aimed at gaining a
sustainable advantage over competition., improving positin
vis-à-vis customers, or allocating resources.
2. Structure—org. chart showing who reports to whom.
3. Systems. The processes and flows showing how thing are
done on day to day basis. ( info systems, capital budgeting
systems, qc systems, etc.)
4. Style—tangible evidence of what is important, it is more
concerned with behavior of management.
5. Staff– people in the organization, important to think of
corporate demographics rather than individual personalities.
6. Shared values-- the value of the organization must be
shared by each member.
7. Sills—are those capabilities that are possessed by the
organization as a whole as opposed to people in it.
tksabarwal 43