Strategy and Management 4th Sem

8/8/2019 Strategy and Management 4th Sem

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STRATEGY AND

MANAGEMENT

ININTERNATIONALORGANIZATI

ON



STRATGEIC MANAGMENT

STRATEGIC MANAGEMNET IS THE

COMBINATION OF THREE PROCESS :

STARGEY FORMULATION

STRATEGY IMPLEMENTATION

STARTEGY EVALUATION



The Strategic Planning process

3

Strategic

Vision &

Mission

External

environment

Analysis

(opportunity &Threat analysis)

Internal

Environment(strengths/

Weakness

Analysis)

GoalFormulation

&

Strategy

Formulation

ImplementationSWOT Analysis

Feedback and control



Concept of strategic Management

4

Strategy : Goal indicate what Organization wants to achieve

Strategy is a game plan for getting there. It can be marketing

Strategy , technology strategy and sourcing strategy etc.

Business Policy : It includes the determination and

Evaluation of different alternative to achieve the

Objective of the company. It helps in decision making.

Planning :It include corporate planning , division planning ,

Business planning , Product planning.



Assessment of the business environment

Internal environment

Analysis of each functional areas such asfinance , marketing human resources etc.

Study of management areas

Study of human side

Analysis of organizational strength and

weaknesses.



External Environment Analysis

Social factors

Demographic characteristics : population ,age , rural & urban mobility,income distribution. For example baby boom in US after 1980¶s world war.

S ocial attitude and values : customs , beliefs ,ritual , changing life styles,purchasing power .

R ural India : rise in purchase power, education levels , increasing awareness due to media. For example LG developed ³no frill´ TV for rural areas named ´Sampoorna .́

F amily structure and changes in family values : both parents are working .

E ducation levels : awareness and consciousness of rights and work ethics ,consumer rights awareness and Law.

C hange in ethical environment : increasing consumption of liquor and tobacco .

S ocial responsibilities of business : treatment to reduce pollution , forest degradation , ban in use of plastic , companies adopting villages , creating facilities for general public , health services.

N on conventional energy sources : use of wind energy and solar energy as a alternative source of energy , environment friendly practices.



Economic Factors

Capitalistic

Socialist or mixed economies

National economic policies such as annual budgets ,liberalization , protection , taxation , fiscal and monetary

policies , rate of savings and investment , export ±import

policies.

National economic indicators such as rate of growth of GDP , National Income , inflation , per capita income

&disposable incomes.



T echnology) revolution

Impact of IT (Information

Cutting edge technologies

ERP enterprise resources planning systems

For example :

Change from black and white TV to Plasma TV

Normal tyres to Radial tyres

Form narrowband to wireless broadband.

Fixed landline to mobile

Technological Factors



Political & Regulatory Factors

U nderstanding of political and government regulatory philosophy

Political stability.



Competitor Analysis

Identifying competitors and the threats they pose ?

Strategy of the competitors

Strength and weakness of the competitors

Competitive advantage and disadvantages of

relative competitors

Competittors ,past , present and future strategies. Competitors respond to a new product or pricing

strategy.





Internal Analysis

Basic strategic management tools to evaluatecompany resources and internal environment are :

Present strategy

Company¶s resources

SWOT analysis

Value chain analysis Strategic cost analysis

Competitive strength analysis



STRATEGY

IMPLEMENTATION

Allocation of sufficient resources (financial ,personnel , time , technology support)

Establishing a chain of command or somealternative structure cross functional teams)

Managing process which includes monitoringresults , comparing to benchmarks and bestpractices , evaluating the efficacy and efficiencyof the process , controlling variances and

making adjustment to the process , controllingfor variances and making adjustment to theprocess as necessary.



Strategy evaluation

Measuring the effectiveness of theorganizational strategy

There are two approaches , the industrialorganization approach based on economictheory and deals with issues like competitiverivalry , resource allocation , economies of scaleassumptions ±bounded rationality ,self disciplinebehavior, profit maximization. The socialapproach deals primarily with humaninteractions assumptions ±bounded rationality ,satisfying behavior, profit sub-optimality



Core competencies

A Core competencies is the company¶s key strengthwhich includes a number of constituent skills. For example core competencies of Eureka Forbes is itsexpertise in door-to-door selling. They are called

distinctive competencies. To be considered a distinctive competencies , the

competency must meet three test : Customer value

Competitor unique

Extendibility (developing new product/services or enter newmarket)



Cooperative strategies

Cooperative strategies is used like competitive strategies to gain competitiveadvantage within an industry by working with other firm.

The two general types of cooperative strategies are collusion and strategicalliances.

Collusion is the active cooperation of firms within an industry to reduce output andraise prices in order to get around the normal economic law of supply and demand.Collusion may be explicit , in which firms cooperate thr ough direct communicationand negotiation , or tactics in which firms cooperate indirectly through an informalsystem of signals.

A strategic alliances is a partnership of two or more corporations or business units toachieve strategically significant objectives that are mutually beneficial.

Mutual service consortia is a partnership of similar companies in similar industrieswho pool their resources to gain a benefit that is too expensive to develop alone ,such as advanced technology.

Joint venture is a ³cooperative business , activity , formed by two or more separateorganizations for strategic purpose

Licensing arrangement is an arrangement in which the licensing firms grant rights toanother firm in another country or market to produce and /or sell a product .

Value chain partnership is a strong and close alliance in which one company or unit

forms a long-term arrangement with a key supplier or distributor for mutualadvantage.



Business level strategy

Business level strategies details actions taken

to provide value to customers and gain a

competitive advantage by exploiting core

competencies in specific , individual product or service markets.

business level strategy is concerned with firm¶s

position in an industry , relative to competitors

and to the five forces of competition



Porters Principles of industry Competition

Michael Porter in 1980 developed this

principle to evaluate industry competitive

intensity .

There are five fundamental forces which

determine the intensity of competition

Intensity of rivalry among existing competitors

Barriers to entry by new competitors

Availability of substitute products and services

Buyers bargaining power



The five forces model of competition :

Firms in other industries

Offering substitute products

Rivalry among

Competing sellersCompetitive pressures

Jockeying for better market

Position and competitive

advantage

Potential new

entrants

Suppliers

Of key

inputs

Buyers

Competitive pressures coming from the market

Attempts of outsiders to win buyers over to their productsCompetitive

Pressures

Growing out

Of supplier

Ability to

Exercise

Bargaining

power and

leverage

Competitive

Pressures

growing out

Of supplier

Ability to

Exercise

Bargaining

Power and

leverage

Competitive pressure

coming from the threat

of entry of new rivals



Crafting A Strategy

20

Strategies are converted into objectives which in turns are converted into

action plan and finally it is implemented, results are evaluated and

control measures are taken or changes are made responding to

unpredictable happenings in the surrounding environment.

Corporate strategy : to establish a business positions in diversified

industries and to improve market share.

Business strategy :it is concern with the performance of a specific

business line in the competitive market.

Functional strategy :it is concern with the strategy for various

department like R&D, production, marketing etc

Operating strategy : it is concern with frontline organizational units



Study of the Cultural background of the country and their

people can have significant influence on the organizational

decision and strategy policies.Global sourcing and global markets

V alue chain of multinational corporations such as GM , Ford

Motors car company , Hyundai have Globalize for competitive

advantage.

Satellite TV and other information systems have made us all

global citizens.

MNC¶s firm spreading their operation all over world.

Cultural differences and Globalization



Theory of international trade

From the ancient time people belonging to different countries havecarried on trading activities . History records with many instances of maritime trade of ancient India with several far east countries of theglobe , beside trading with Greece and Rome.

The technology and the techniques connected with maritime tradewould have been different in different periods of history ; but thefundamental objectives remains the same, namely , enriching thenations by means of foreign trade. Study of international trade has thefollowing benefit and importance It broadens the mental outlook of the people

It helps to develop international outlook It emphasizes the need for international co-operation

It helps to study specific problem such as artificial tariff barriers , exchangecontrol , international immobility of factors of production and differentnational policies.



International trade :nature ,

scope and importance

During 16th middle age , foreign trade was highly reguated and controlled by thestate which was considered to be omnipotent and omniscient . Every efforts wasmade to accumulate gold by exporting manufactured goods in order to create afavorable external balance of payment for massive gold inflows.

The classical theory : Adam and Smith , the father of political economy , developedthe concept of free trade of economic liberalism , the philosophy being calledLaissez faire.

During the course of 20th century , after world war I the nature of international tradeunderwent substantial changes and refinement of the old theory becameindispensable. Abandonment of the gold standard , appearance of internationalmonopolies and cartels , post war hyper inflation and the great depression of thethirties caused serious imbalance in the external balance of payment position of several countries.

New and modern literature : Jacob Viner¶s book on ³studies in the theory of international trade´ is a monumental and scholarly treatment of the history of thedoctrine.



CORPORATE GOVEREANCE

ORGANIZATION STRUCTURE

Organizational structure depends upon the product to bedeveloped. Wheel Wright and Clark define a continuum of organizational between two extremes functional organizationsand project organizations

Functional organizations are organized according to thetechnological disciplines. Senior functional managers are

responsible for allocating resources. A project organization exists of product oriented flows : projectand teams. The project members leave their functionaldepartment and devote all their time to the project



Classification of organization

structure The product to be developed is comprehensible for one

person. one person likely to have all the knowledgeneeded to develop manufacturing and assembly.

The product to be developed has a fairly low complexity,

but total work is high. These kind of product are likely tobe developed within one functional department.

The product to be developed consists of a lot of differentelements , such as software , PCB , power supply andmechanical structure.

The product is complex . Total work is very high .Employees can thus participate on a full time basis.



Human Organization structure

According to the management science , most human organizationsfall roughly into four categories : Pyramid or hierarchies : an arrangement with leader who leads leaders. In

a hierarchy every employee tends to rise to his level of incompetence.

Committees or juries : these consist of peers who decide as a group,perhaps by voting. Committee are usually assigned to perform or leadfurther actions after the group comes to a decision, whereas members of a jury come to a decision.

Matrix organization : this organizational type assigns ach worker twobosses in two different hierarchies . One hierarchy is ³functional ³ andassures that each type of expert in the organization is well trained, and

measured by a boss who is super-expert in the same field and the other direction is ³executive´ and tries to get project completed using theexperts.

Ecologies : this organizational has intense competition. Bad parts of theorganization starve . Good part get more work. Every body is paid for what they actually do, and runs a tiny business that has to show a profit ,or they are fired.



Business strategy implementation

Implementation strategy entails converting theorganization¶s strategic plan into action through thedevelopment of programs, budgets and procedures .It is

job of whole management team. all managers becomestrategy implementers in their area of authority andresponsibility, and all employees are participants. Program : it is statement of the activities or step needed to

accomplish a single-use plan. It may involve restructuring thecorporation , changing company¶s internal culture , or beginning a

new research \efforts. Budgets : is a statement of a corporation's programs in terms of dollars.

Procedures : (SOP) standard operating procedures are system of sequential steps or techniques that describe in detail how aparticular task or job is to be done.



Global strategic management

A well defined global strategy can help a firm to gain competitive advantage .This advantage can arise from the following resources : Efficiency

Economics of scale from access to more customers and markets.

Exploit anther country¶s resources ±labor , raw material Extend the product life cycle

Operational flexibility ± shift production as costs , exchange rates

Strategic

First mover advantage and only provider of a product to a market

Cross subsidization between countries.

Transfer prices

Risk Diversify macroeconomic risk (business cycle not perfectly correlated among

countries)

Diversifying operational risks (labor problems, earthquakes), war)

Learning

Broaden learning opportunities due to diversity of operating environment

Reputation

Crossover customers between markets



Framework of strategic

objectives

Strategic objectives

Efficiency operations

Flexibility

Innovation And learning

Sources of Competitive Advantage

Nationaldifferences

Scale of economies

Exploit factorscost differences

Scale in eachactivity

Sharinginvestmentsand costs

Scope

economies

Market or policy-induced changes

Balancing scalewith strategic &operational risks

Portfoliodiversification

Societal differencesin management andorganization

Experience cost reduction andinnovation

Sharedlearningacross

activities



The nature of competitive advantage in

global industries

A global industry have a potential to compete in all markets of thatproduct or services.

A global firm¶s competitive advantage depends on economies of scaleand economies of scope gained across markets.

Differences in country cost

Common Customer needs favor globalization

The existence of many global competitors will have a cost advantageover local competitors and industry is ripe for globalization.

Country comparative advantage resides in the factor endowments andcreated endowments of particular region which includes land, naturalresources , labor.

The following drivers determine an industry¶s globalization potential : Cost drivers

Location of strategic resources



Global strategy

Multi-domestic strategy

Product customized for each market

Product is same in all countries

Centralized control little decision makingauthority on the local level

Effective when differences between countriesare small

Advantage : cost , coordinated activities , faster product development

Documents

Strategy and Management 4th Sem