WELCOME TO

Lecture of
Strategic
Management

Introduction

Organisations translate their vision into programs and

actions to deliver outcomes
Economic thought till 20th century dominate by the concept
of invisible hand, it means firm do not have an ability to
impact the external environment
1799 Eli Whitney began mass production
Due to industrial revolution organizations began to exploit
economies of scale in production and economies of scale
in distribution
Scope of business strategy as a way to control market
forces and shape competitive environment

Frederick Winslow Taylor

Frederick Winslow Taylor, father of scientific management
was focus on machine and the system of their utilization
Scientific law govern work so scientific method can be
used to analyse work
Workers are different so match workers with their job and
then train them thoroughly
Use employee self interest to motivate
Separate the responsibility of workers and managers
Scientific management lead to the development of Time &
Motion study

Strategy

Strategy means the art of general from Greek word

stratAgos by which general sought to deceive enemy
Clausewitz, a Prussian, was the first great student of
strategy and father of modern study of strategy
Term strategy has expanded far beyond its original military
meaning and now use all areas where the horizon is long
term
The set of decisions and actions that result in the
formulation and implementation of plans design to
achieve a company's objective

Characteristics of Strategy
Universal:

corporate, govt, military, SMEs

Is an abstraction: has no concrete form of
substance
Is the art of general: broad long range and
far reaching
Is a general plan of attack
Is direction and destination
Is a set of decision made

Strategic Management

Strategic

management is

the

continuous

planning, monitoring, analysis and assessment of

all that is necessary for an organization to meet its
goals and objectives

3 Fundamental Questions

Where do we compete?

How do you compete?

How do you execute?

Early School of thoughts

Early thought on strategy played an important role in

formalizing the place of strategy as a formal tool in
managing company
Subsequent theories explain the end and means that is
how the firm can maximize its potential in the marketplace
Today strategy use creatively
Corporate strategy has become combination of different
approaches of traditional theories and thinking of the new
approaches towards strategy
New approaches are Resource based Theory, Positioning
Theory and Strategic Intent approach

Positioning Approach

The behavioral basis for predicting competitors action and

reactions was anticipated 40 years ago by Philip Selznick
Position the firm takes over the long term in order to be
competitive that constitutes strategy
It implies firm should be performing different activities from
rivals or performing the same activity in different ways
This allows it to create a unique and valuable position involving
a different set of activities from the competitor
Positioning is always a function of difference in activities on
the supply side though on the demand side the activities may be
similar

Resource Based View

Cocca Cola verses Pepsi

Coke superiority in tangible( warehouses , bottling plant
computerization , cash) and intangible assets(reputation,
brand name awareness, tight competitive culture , global
business system)
Capability to use this asset effectively , managing
distribution globally influencing retailer shelf allocation ,
marketing survey , investing in bottling infrastructure,
speed decision making to take advantage of changing
global condition
Combination of asset and capabilities are the competitive
advantage which are durable and not easily imitated

Resource-Based View of the

Firm
A method of analyzing and identifying a firms strategic advantages
based on examining its distinct combination of assets skills
capabilities and intangibles as an organisation
RBV is perspective that firms competitive advantages are due to
their endowment of strategic resources that are valuable, rare, costly
to imitate, and costly to substitute.
Once core competencies are identified, nurtured and deployed
throughout the firm become the basis for lasting competitive
advantage

Types of Resources
1. Tangible resources
Organizational assets that are relatively easy to identify and often
found in firms balance sheet , including physical assets, financial
resources, organizational resources, and technological resources.
2. Intangible resources organizational
Assets that are difficult to identify and account for and are typically
embedded in unique routines and practices, including human
resources, innovation resources, and reputation resources, brand
name , trademark , accumulated experience with in an organization
3. Organizational capabilities
The competencies and skills that a firm employs to transform inputs
into outputs.

What Makes the Resource Valuable

Once the manager begin to identify their firms resources ,

they face the challenge of determining which of those
resources represent strength or weaknesses , which
resource generates core competencies that are sources of
sustained competitive advantage .
This has been a complex task for managers attempting to
conduct a meaningful internal analysis .
The RBV has addressed this by setting forth some key
guideline that help determine what constitute a valuable
asset , capability or competency that is what makes a
resource valuable

What Makes the Resource Valuable

1.
2.
3.
4.
5.
6.

Competitors superiority: Does the resource help fulfill a

customer need better than those of the firms competitors?
Resource scarcity :Is resource in short supply
Inimitability : Is resource easily copied or acquired
Appropriability: Who actually get the profit created by a
resources ( Walt Disney: Warren buffet)
Durability: How rapidly will the resource depreciate?
Substitutability: Are other alternatives available

The Value of a Core

Competence

Using the resource based view in

Internal analysis

To use RBV in internal analysis , a firm must identify and

evaluate its resources to find those that provide the basis for
future competitive advantage. This process involves defining
the various resources the firm possesses and examining them
which resources them which resources have truly strategic
value
Stresses the choices manager can make to learn to develop new
competencies and otherwise to change the strength the firm
possesses
Competitive advantage
is achieved by continuously
developing existing and creating new resources and capabilities
and response to rapidly changing market condition

Theory of Stretch

Is based on the proposition , competitiveness is born in the

gap between companies resources and its managers goal

Long term competitive success depends on managers

willingness to continually challenge their frame of reference

Creating stretch a misfit between resources and aspiration is

the single most important task of strategy

Three Levels of Strategy

Corporate

level: board of directors, CEO &

administration [Highest]
Business level: business and corporate
managers [Middle]
Functional level: Product, geographic, and
functional area managers [Lowest]

Corporate Level Strategy

What

businesses are we in? What

businesses should we be in?
Four areas of focus
Diversification

management (acquisitions and

divestitures)
Synergy between units
Investment priorities
Business level strategy approval (but not
crafting)

Corporate Level Strategy

It is fundamentally and simply concerned with deciding
what type of business the organization should be in and
how the overall group of activities should be formed and
managed .
Corporate strategy deals with issues of strategic
management at the level of the firm as a whole.
Such issues involve the basic character, capability and
competence of the firm; the direction in which it should
develop its activity; the nature of its internal architecture;
governors and structure; the nature of its relationships
with its sector, its competitors and the wider
environment.
Corporate strategies usually fit within the three main
categories of stability, growth and retrenchment

Corporate-Level Strategies
Valuable
strengths

Firm
Status

Concentric Diversification
(Economies
Corporate
of Scope)
growth
strategies
Conglomerate
Diversification
(Risk Mgt.)

Critical
weaknesses
Abundant
environmental
opportunities

Corporate
stability
strategies
Corporate
retrenchment
strategies
Can still go for business-level
growth (economies of scale)
Environmental Status

Critical
environmental
threats

Business-Level Strategies
Business strategy refers to the actions
and approaches crafted by management
to create successful performance in one
particular line of business.
It is also concerned with creating
competitive advantage in each of the
strategic

business

organization.

units

of

the

Benefits of Strategic Management

Enhances the firms ability to prevent problems
Emphasizes group-based strategic decisions likely to be based on
best available alternatives
Improves employees understanding of the productivity-reward
relationship
Reduces gaps/overlaps in activities among employees as their
participation clarifies differences in roles
Resistance to change is reduced
31

Risks of Strategic Management

The time that managers spend on the strategic management

process may have a negative impact on operational
responsibilities.
If the formulators of strategy are not intimately involved in
its implementation, they may shirk their individual
responsibility for the decision reached.
Strategic managers must be trained to anticipate and
respond to the disappointment of participating subordinates
over unattained expectations.

33

Critical Tasks of Strategic Management

11

Formulate the companys mission

22

Develop company profile, reflecting its internal conditions

33

Assess companys external environment

44

Analyze companys options

55

Identify most desirable options

66

Select long-term objectives and grand strategies

77

Develop annual objectives and short-term strategies

88

Implement the strategic choices

99

Evaluate success of the strategic process

DEFINITION Decision Making

The act of narrowing down the possibilities, choosing
a course of action and determining the actions
potential consequences.

the process of
responding to a
problem by searching
and selecting a
solution or course of
action.

Strategic Decision Making

Organizational develop effective strategies which are
Sustainable
Permit to deliver greater value
Create a similar value or greater value at lower cost
Phases are
1. Identification Phase
2. Developmental Phase
3. Selection Phase

Decision Making Process

Identification Phase
Decision recognition : Opportunity ,problem are recognize and evoke decisional
activity
Diagnosis: Collect information
2.
Developmental Phase
Search: search alternative solution to problem
Design: Modify readymade solution as per problem of evolved new solution
3.
Selection Phase
Screen: most desirable alternative select and infeasible are eliminated
Evaluation criteria: Either through a process of analysis and judgement or
bargaining among decision makers
Authorization: Individual making decision does not have authority then moves
up the organizational hierarchy until it reaches a level at which necessary
authority resides
1.

Types of processes of decision

making
Command mode: Strategy driven by organization leader
Symbolic mode: Strategy driven by mission and vision of
the future
Rational mode: driven by formal structure and planning
system
Transactive mode: strategy formulation is driven by
internal processes and mutual adjustment
Generative mode: most strongly influenced by the
initiative of organizational actors
The process of decision making starts at vision and then
backwards by focusing on how to achieve that vision.

Strategic decision making

Process
Phenomena
Grouping
Abstraction
Determination of approach
Provisional formulation of hypothetical solution by indepth
analysis
Emergence of conclusion
Concrete forms of conclusion
Draft plan of actions
Implementation by line managers

Stages of Strategic Management

Strategy
formulatio
n

Strategy

implementation

Strategy
control

Steps in Strategic Management Process

1.
2.

3.
4.

5.

Formulate
the
companys
Vision and Mission
Assess
the
external
environment competitive and
general contexts
Conduct an internal analysis
Analyze the companys options
by matching its resources with
the external environment
Identify the most desirable
options in light of the mission

6. Select a set of long-term

objectives and grand strategies that
will achieve the most desirable
options
7. Develop annual objectives and
short-term strategies that are
compatible
with
long-term
objectives and grand strategies
8. Implement the strategic choices
9. Evaluate the success of the
strategic process for future decision
making

Strategies and their Role in Strategic Management

Strategic management demands a clear analysis of situation facing

organization have
A strategic direction endorsed by the team and stakeholders
A clear business strategy and vision for the future
A framework for governance
An ability to exploit opportunity and respond to external changes
Framework for managing risk
The firm has to continuously interact with the market, the business and
technology environments and keep reevaluating its options in terms of the
prevalent or changing conditions and develop its strategies in following
areas

Strategies and Their role in

Strategic Management

Environmental scan at corporate level

The mission of the firm
Business segmentation
Horizontal strategy
Vertical Integration
Corporate Philosophy
Strategic Posture of the firm
Corporate performance Objective
Portfolio Management
Organizational and managerial Infrastructure
Human resource management of key personnel

THANK YOU

EIHs big profit run: Company has made

over Rs 400 crore in pre-tax profit
Share prices of Indian Hotels and Hotel Leela venture have
dropped 9 per cent and 23 per cent respectively over the past year
as the two hotels have together piled up losses of over Rs 2,300
crore over three years.
But in this ocean of distress is EIH (Oberoi and Trident), with a
pre-tax profit of Rs 145 crore last year.
Its share price has gained 9 per cent in 12 months.
While the industry has been bleeding red over the past few
years, Oberoi has earned a cumulative pre-tax profit of over Rs
400 crore over the past three years.
Apart from Oberoi, ITC is the only other profitable hotel.

So what makes Oberoi, India's most profitable

top-rung hotel?

A lean corporate structure, marginal debt with hardly any interest

liability (unlike most other hotel companies), better cost
management and no significant investments in acquiring land
assets have helped the group grow profits.
"We are recognised for luxury hotels and prefer a bespoke
approach to hotel development looking for good
opportunities. All our new projects whether owned or those
that we manage for our partners, we are judicious in selection of
sites and conscious of the need to always create value for all
stake holders," says Vikram Oberoi, MD& COO, The Oberoi
Group.

Hotel experts say most global brands across the world have adopted an
asset light strategy and successfully expanded through the
management contract route. Contrary to this, Indian Hotels and Hotel
Leelaventure's expansion was based on asset development through
acquisition of hotels or greenfield developments. These companies
purchased land and property at the peak of the real estate valuation
cycle, says Siddharth Thaker, managing partner of Prognosis Global
Consulting, a hotel consultancy. This has now hamstrung these
companies with an overload of debt.
"In the past few years, the industry has been facing the double
challenge of weak demand and increased supply of rooms. EIH was
able to increase market share and hence the strong profit growth," says
Oberoi.

Adds Homi Aibara, partner and consultant, Mahajan & Aibara, a

management consultancy firm: "EIH has lower debt and legacy
properties which continue to perform well; its cautious approach,
given the current market conditions has helped."
It begins with a bottle of jam
Luxury hotels need to pay great attention to the smallest of details. The
Oberoi Group wanted to ensure fruit content in all the jams it served
was not less than 50 per cent. That meant it had to import jam, leading
to an annual bill of Rs 2 crore.
But the company started working with local organic suppliers and
managed to shave 60 per cent off the cost a savings of Rs 1.2 crore
that went straight to the bottomline. Similarly, it rationalised its
mineral water sourcing from two brands to one and saved Rs 1 crore.
Another Rs 4 crore was saved by reviewing sales and marketing and
international consortias/bulk contracts.

"We set up our own sales and distribution network in key source
markets, reducing distribution cost," says Oberoi. The hotel also grew
its direct online bookings by 30 per cent, saving Rs 3 crore in
commission. This attention to cost, without compromising on the
customer experience, helped boost profitability.
The chain of 30 hotels in six countries is run with a management staff
of only 32 members. Each general manager runs an individual profit
centre and is evaluated on a guest and employee satisfaction,
profitability and revenue penetration index.
Despite these measures, there was small dip in pre-tax profit in fiscal
2015. This was due to additional depreciation charges in accordance
with the new Companies Act 2013. "The hotel division profits grew by
over 25 per cent if not for the changed depreciation and new CSR
norms," says says Kapil Chopra, president of the Oberoi Group.
Several measure on the revenue front also helped.

Factors Responsible for Growth

Rising income in households
Increase in niche tourism such as eco-tourism, luxury tourism and medical
tourism
Tourism and hospitality sector attracted second highest FDI i.e. US $3.2
billion in the year 2013
100 percent FDI allowed through automatic route in hotel and tourism sector
Diversity of the country attracts an ever increasing number of tourists every
year
Government initiatives in improvement of infrastructure like airports,
highways, ports and railways
India is a labour intensive country
India has been ranked as the fourth most preferred travel destination by
Lonely Planet selecting the country among the top five destinations from
167 countries.