STRATEGIC MANAGEMENT AND BUSINESS POLICY Strategic analysis and choice (c) Dr. Azhar Kazmi 2008

Learning objectives Describe the process of strategic choice Explore the tools and techniques for strategic analysis Examine the subjective factors in strategic choice Discuss the manner in which organisations handle unforeseen environmental events through formulation of contingency strategies Itemise the contents of a typical strategic plan for an organisation Discuss the strategic plan preparation and content for private and public sector organisations in India (c) Dr. Azhar Kazmi 2008

CASE: Strategic Choices for Bajaj Allianz General Insurance 1-2000 Insurance sector liberalize 2-Bajaj forms Strategic alliance with Allianz of Germany-74/26 % ( Areas of strengths ?) 3-12 Competitors: Govt-4, Private-8 4- Direct Competition: product offerings; market segment 5- Major competitors- ICICI Lombard, Reliance; New India assurance etc 6- Vision Statement- Be first Choice of customers - Be a preferred employer; -Be No 1 insurer creating value (c) Dr. Azhar Kazmi 2008

CASE: Strategic Choices for Bajaj Allianz General Insurance SWOT Analysis: Strength: Strong Promoters Weakness: All India presence, poaching of employees Opportunities: Untapped market Threat: Every one wants bigger share of market What are strategic choices before BA ? Which strategy they should adopt? (c) Dr. Azhar Kazmi 2008

Scope of General Insurance business General Insurance areas: Health and Medicare Motor Vehicles Home Travel Employees Factories Offices Other areas (c) Dr. Azhar Kazmi 2008

Process of strategic choice Focussing on strategic alternatives Analysing the strategic alternatives Evaluating the strategic alternatives Choosing from among the strategic alternatives (c) Dr. Azhar Kazmi 2008

Gap analysis for focussing on strategic alternatives Time T2 T1 Performance gap Desired performance Present performance Performance (c) Dr. Azhar Kazmi 2008

Generic business strategies Cost leadership Differentiation Broad target COMPETITIVE SCOPE Focussed Cost leadership Narrow target Focussed differentiation Low-cost products/services Differentiated products/services COMPETITIVE ADVANTAGE (c) Dr. Azhar Kazmi 2008

Dynamic competitive positioning (c) Dr. Azhar Kazmi 2008

Possible Business Definition of an Oral Care Company . (c) Dr. Azhar Kazmi 2008

Strategic analysis Tools and techniques for strategic analysis Corporate portfolio analysis GE nine-cell matrix Corporate parenting analysis SWOT analysis Experience curve analysis Life cycle analysis Industry analysis Strategic groups analysis Competitor analysis (c) Dr. Azhar Kazmi 2008

General Electric nine-cell matrix High Medium Low Strong Average Weak BUSINESS STRENGTH / COMPETITIVE POSITION GREEN YELLOW RED ZONE STRATEGIC SIGNAL INVEST / EXPAND SELECT / EARN HARVEST / DIVEST INDUSTRY ATTRACTIVENESS (c) Dr. Azhar Kazmi 2008

General Electric nine-cell matrix Eight Factors for Industry competitiveness: Market Size and growth rate Industry profit margin Competitive intensity Seasonality Cyclicality Economies of scale Technology and social environment Legal and human right (c) Dr. Azhar Kazmi 2008

General Electric nine-cell matrix Factors for business strength Competitiveness: Relative market share Profit Margins Ability to compete on price and quality Knowledge of customer and market Completive strength and weakness Technological capability Caliber of management (c) Dr. Azhar Kazmi 2008

Consolidated SWOT profile -------------------------------------------------------------------------------------------------------- ETOP Sector impact SAP Impact factor Economic ↑ Market → Finance ↓ International ↓ Marketing → Political → Operations ↑ Regulatory → Personnel → Social ↑ Information management ↑ Supplier → General management ↑ Technology ↑ Up arrows indicate favourable impact; down arrows indicate unfavourable impact, while horizontal arrows indicate a neutral impact. (c) Dr. Azhar Kazmi 2008

Porter’s five forces model of competition in an industry Potential threats from firms which make substitute products or services Forces of competition created by rivalry Buyers’ bargaining power Potential threat from entry of new firms Suppliers’ bargaining power (c) Dr. Azhar Kazmi 2008

Components of competitor analysis Future goals of competitor Current strategy of competitor Key assumptions made by competitor Capabilities of competitor (c) Dr. Azhar Kazmi 2008

Subjective factors in strategic choice Considerations for governmental policies Perception of critical success factors and distinctive competencies Commitment to past strategic actions Strategist's decision styles and attitude to risk Internal political considerations Timing and competitor considerations. (c) Dr. Azhar Kazmi 2008

Contingency strategies Contingency strategies are formulated in advance to deal with uncertainties that are a natural part of the business The prospects of emergencies or disasters The phenomenon of serendipity A model of contingency planning consists of three steps: Identifying the contingent events Establishing the trigger points Developing and strategies and tactics (c) Dr. Azhar Kazmi 2008

Strategic plan A strategic plan (also called corporate, group, or perspective plan): It is a document which provides information regarding the different elements of strategic management and the manner in which an organisation and its strategists propose to put the strategies into action. (c) Dr. Azhar Kazmi 2008

Contents of a comprehensive strategic plan …. A clear statement of strategic intent covering the vision, mission, business definition, goals and objectives. Results of environmental appraisal, major opportunities and threats, and critical success factors. Results of organisational appraisal, major strengths and weaknesses, and core competencies. Strategies chosen and the assumptions under which those strategies would be relevant. Contingent strategies to be used under different conditions. (c) Dr. Azhar Kazmi 2008

….Contents of a comprehensive strategic plan Strategic budget for the purpose of resource allocation for implementing strategies and the schedule for implementation. Proposed organisational structure and the major organisational systems for strategy implementation including the top functionaries and their role and responsibility Functional strategies and the mode of their implementation Measures to be used to evaluate performance and assess the success of strategy implementation. (c) Dr. Azhar Kazmi 2008

Strategic Plan preparation at Infosys Technologies Exhibit 9.10 (Page 301) Strategic Group every year July initiates 3-5 year plan strategic plan process Makes environmental scanning, Competitive analysis and model building Makes a formal presentation to Board of Directors followed by another one to top managers (c) Dr. Azhar Kazmi 2008

Strategic Plan preparation at Infosys Technologies (c) Dr. Azhar Kazmi 2008

Nest Session Activating Strategies Reading Chapter-10 Case Study: MP Rural Development Project (c) Dr. Azhar Kazmi 2008