1 Strategy

2 Strategy Current set of plans,decisions & objectives that have been adopted to achieve the organizational goals Current set of plans,decisions & objectives that have been adopted to achieve the organizational goals

3 Organizational Purpose Organizations are created for a purpose called the overall goal or mission Organizations are created for a purpose called the overall goal or mission

4 Mission Called official goal Called official goal Mission is organization’s reason for existence Mission is organization’s reason for existence Describes organization’s vision, values & beliefs Describes organization’s vision, values & beliefs It communicates current & prospective stakeholders what the organization stands for & what it is trying to achieve It communicates current & prospective stakeholders what the organization stands for & what it is trying to achieve It gives legitimacy to organizational purpose It gives legitimacy to organizational purpose

5 Vision Vision is that igniting spark that can inspire and energise people to do better. Vision is that igniting spark that can inspire and energise people to do better. The latest trend in many organisations is to apply the "VIP" approach i.e. "Vision Integrated Performance." The latest trend in many organisations is to apply the "VIP" approach i.e. "Vision Integrated Performance."

6 Values There are fundamental beliefs that are inculcated and practiced in the organisation There are fundamental beliefs that are inculcated and practiced in the organisation the Johnson and Johnson credo says, "We believe our primary responsibility is to the doctors, nurses and patients, mothers and all others who use our products and services". the Johnson and Johnson credo says, "We believe our primary responsibility is to the doctors, nurses and patients, mothers and all others who use our products and services". It must be remembered that unless these values are internalised by one and all in the organisation, they become fancy advertisements matter or beautiful wall hangings. It must be remembered that unless these values are internalised by one and all in the organisation, they become fancy advertisements matter or beautiful wall hangings. British Airways' "putting people first" British Airways' "putting people first" JET AIRWAYS "the joy of flying “ JET AIRWAYS "the joy of flying “ BPL's "believe in the best". BPL's "believe in the best".

7 Some Vision Statements SIEMENS: Where technology touches lives DU PONT: Better things for better living through Chemistry HYUNDAI: Building a better world through innovative technology NOKIA: Connecting people XEROX: The document company IBM: Solutions for a small planet PHILIPS: Let's make things better BPL: Believe in the best SIEMENS: Where technology touches lives DU PONT: Better things for better living through Chemistry HYUNDAI: Building a better world through innovative technology NOKIA: Connecting people XEROX: The document company IBM: Solutions for a small planet PHILIPS: Let's make things better BPL: Believe in the best

8 Operative Goals Describe the ends sought through actual operating procedures Describe the ends sought through actual operating procedures Describe specific measurable outcomes Describe specific measurable outcomes Are often concerned with short term result Are often concerned with short term result Operative vs. official goals represent actual vs. stated goals Operative vs. official goals represent actual vs. stated goals Operative goals are directions for day to day decisions and activities within departments Operative goals are directions for day to day decisions and activities within departments

9 Operative Goals (contd..) Operative goals are concerned with Operative goals are concerned with Overall performance or profitability reflected as ROI, earnings per share Overall performance or profitability reflected as ROI, earnings per share Resources pertain to acquisition of men, material, technology from the env. Resources pertain to acquisition of men, material, technology from the env. Market refers to market standing desired by the organization, e.g. No. 1 automobile giant in the world Market refers to market standing desired by the organization, e.g. No. 1 automobile giant in the world

10 Operative Goals (contd..) Employee development e.g. T&D, MDP, employee safety and stress mgt. Employee development e.g. T&D, MDP, employee safety and stress mgt. Innovation & change development of flexibility to adapt to the new env. Innovation & change development of flexibility to adapt to the new env. Productivity amt. Of output achieved from available resources. E.g. units produced per employee Productivity amt. Of output achieved from available resources. E.g. units produced per employee

11 Goal Type, Their Purpose & Importance Type of GoalsPurpose of Goals Official Goals, mission: Legitimacy Operative goals:Employee direction and motivation Decision guidelines Standard of performance

12 Thinking Strategically To help managers answer questions such as: To help managers answer questions such as: * Where is the organization now? * Where does the organization want to be? * What changes are happening among competitors? * What courses of action will help us achieve our goals? Answers define an overall direction for the organization's grand strategy Answers define an overall direction for the organization's grand strategy

13 Strategy Can be premeditated i.e explicit set of guidelines developed in advance (planning mode). Can be premeditated i.e explicit set of guidelines developed in advance (planning mode). Or it can just emerge i.e not necessarily well thought out (evolutionary mode) Or it can just emerge i.e not necessarily well thought out (evolutionary mode)

14 Three Levels of Strategy in Organizations (Types of Strategy) Corporate-Level Strategy: What business are we in? Corporation Business-Level Strategy: How do we compete in each of our businesses? Textiles UnitChemicals UnitAuto Parts Unit Functional-Level Strategy: How do we support the business-level strategy? Finance R&D ManufacturingMarketing

15 Chandler Studied American firms from Studied American firms from Concluded Concluded 1. Changes in the strategy preceded changes in structure 2. All organizations began as centralized structures and later adopted different structures (simple, functional, divisional) 3. Concept of forward and backward integration strategic

16 Limitations of Chandler’s Work Studied only very large and powerful organizations Studied only very large and powerful organizations Small, medium organizations and public sector were ignored Small, medium organizations and public sector were ignored He was more concerned about growth than profitability (strategy- structure fit leading to growth ) He was more concerned about growth than profitability (strategy- structure fit leading to growth ) Wrigley used the same paradigm and differentiated organizations in to the following Wrigley used the same paradigm and differentiated organizations in to the following 1. Single business (no diversification) 2. Dominant business (70-90% of sales coming from one business or vertically integrated chain) 3. Related business (diversified in related areas with no one business accounting for more than 70% of sales) 4. Unrelated business (diversified in unrelated areas with no one business accounting for more than 70% of sales) Acc to Wrigley related and unrelated business strategies were associated with multi divisional structures, and single business strategies related to functional structures. Acc to Wrigley related and unrelated business strategies were associated with multi divisional structures, and single business strategies related to functional structures. No single structure was found consistently in the dominant business category No single structure was found consistently in the dominant business category Thus strategy does influence structure Thus strategy does influence structure

17 Porter’s Competitive Strategy Use one of the three which gives you competitive advantage Use one of the three which gives you competitive advantage 1. Cost 2. Differentiation 3. Focus

18 Porter’s Competitive Strategy: Cost Requires the organization to be the cost leader and not merely one of the contenders for the position Requires the organization to be the cost leader and not merely one of the contenders for the position It includes efficiency of operations It includes efficiency of operations Economies of scale Economies of scale Technological innovation Technological innovation Low cost labor Low cost labor Preferential access to raw material Preferential access to raw material

19 Porter’s Competitive Strategy: Differentiation Emphasizes high quality Emphasizes high quality Extraordinary service Extraordinary service Innovative design Innovative design Technological capability Technological capability Unusual and positive brand image Unusual and positive brand image The key is that the attribute chosen must be different from those offered by rivals and significant enough to justify a price premium that exceeds the cost of differentiation The key is that the attribute chosen must be different from those offered by rivals and significant enough to justify a price premium that exceeds the cost of differentiation

20 Porter’s Competitive Strategy: Focus This approach aims at a competitive advantage in a narrow segment This approach aims at a competitive advantage in a narrow segment

21 Porter’s Competitive Strategies Competitive Scope CompetitiveAdvantageStrategyExample Broad Low Cost Low-CostLeadership Dell Computer/ low cost airlines/ Big Bazaar (Future Gp.)detergent/telecom services BroadUniquenessDifferentiation Starbucks Coffee Co./Café Coffee Day/Mocha/ Pantaloon(Future Gp.) Narrow Low Cost Focused Low-Cost Leadership EnterpriseRent-a- Car/car for the common people NarrowUniquenessFocusedDifferentiation fashion & jewellery industry/luxury cars

22 Structural Implications of Porter’s Model Cost Leadership Cost Leadership Structure high in complexity (specialization, departmentalization, tall structure), high formalization and centralization Structure high in complexity (specialization, departmentalization, tall structure), high formalization and centralization Differentiation Strategy Differentiation Strategy Structure low in complexity, low formalization, decentralized decision making. Structure low in complexity, low formalization, decentralized decision making.

23 Miles and Snow’s Strategy Typology Prospector Prospector Values creativity, risk-taking, and innovation Values creativity, risk-taking, and innovation Learning orientation; flexible, fluid, decentralized structure Learning orientation; flexible, fluid, decentralized structure Strong capability in research Strong capability in research IT sector E.g. Microsoft, Google IT sector E.g. Microsoft, Google Defender Defender Emphasis on production efficiency, low overhead Emphasis on production efficiency, low overhead Efficiency orientation; centralized authority and tight cost control Efficiency orientation; centralized authority and tight cost control Close supervision; little employee empowerment Close supervision; little employee empowerment A manufacturing/assembling plant (Chinese industries) A manufacturing/assembling plant (Chinese industries)

24 Miles and Snow’s Strategy Typology (cont’d) Analyzer Analyzer Balances efficiency and learning; tight cost control with flexibility and adaptability Balances efficiency and learning; tight cost control with flexibility and adaptability Efficient production for stable product lines; emphasis on creativity, research, risk-taking for innovation Efficient production for stable product lines; emphasis on creativity, research, risk-taking for innovation FMCG sector FMCG sector Reactor Reactor No clear organizational approach; design characteristics may shift abruptly depending on current needs No clear organizational approach; design characteristics may shift abruptly depending on current needs A temporary approach Eg. Xerox in s A temporary approach Eg. Xerox in s

25 Organization Design outcomes of strategy Strategy:Differentiation Strategy:Differentiation Org. design:Learning Orientation, flexibility, strong horizontal coordination,emphasis on R&D,customer intimacy, risk taking Org. design:Learning Orientation, flexibility, strong horizontal coordination,emphasis on R&D,customer intimacy, risk taking

26 Organization Design outcomes of strategy Strategy: Low Cost leadership Strategy: Low Cost leadership Org. Design:efficiency orientation, strong central authority,tight cost control, standard operating procedures,efficient procurement & distribution systems,routine tasks and limited employee empowerment Org. Design:efficiency orientation, strong central authority,tight cost control, standard operating procedures,efficient procurement & distribution systems,routine tasks and limited employee empowerment

27 Miller 1. Innovation: 2. Market differentiation: Miles& Snow’s prospector strategy 3. Breadth: product diversification of Chandler 4. Cost control: Porter’s cost leadership According to Miller Porter’s differentiation can be seen as market differentiation and product differentiation as innovation According to Miller Porter’s differentiation can be seen as market differentiation and product differentiation as innovation Breadth can be achieved by doing more innovation or by moving in to stable markets Breadth can be achieved by doing more innovation or by moving in to stable markets

28 Strategy-Structure Relationship Structure follows strategy as changing structure is a slow process Structure follows strategy as changing structure is a slow process