Developing Business Strategy

Strategy Development Process

Group-3:

Anita

Archit

Bharathi

Jyotis

Abhishek

The Mission The Vision Goal/Purpose Objective Strategy

Strategy

Two types of Analysis  Environmental analysis

 Industry Level Analysis

A P P R A To determine the To determine To determine and environmental Threats I environmental understand the Market to the company’s Opportunities to Competitive structure present strategy and S company for achieving and making decisions A objectives its objectives to anticipate it L Steps of Analyzing the environment

A N A L Y S I S

Types of Environment  External Environment (Macro)  Political Environment  Economic Environment  Social Environment  Supplier Environment  Technological Environment

 Internal Environment (Strategic Advantage Profile)  Production Function  Finance Function  Marketing Function  Operation Function  Personnel Management

External Environment  Political Environment  Change in

government policies affect company business  Influences Supplier, Consumer & Competitor function  Company face production constraint due to antitrust laws, fair trade decisions, tax rate, pollution & pricing policies  Allocation of Product Research Grant to companies

External Environment  Economic Environment  Every market is

unique and has elastic consumption pattern  Microeconomics trends like Prime interest rate, Inflation rate, GNP, Disposal income, Propensity to spend etc.  Changes in Wealth distribution or Wealth management pattern in the society

External Environment  Social Environment  Change in

values, beliefs, lifestyle, attitude, opinion creates potential for an organization. (Eg.- Women in the work force)  Demographic change has implication on several business

External Environment  Supplier Environment  Change in

availability of Raw Materials and Sub-assemblies  Change in price of Raw Materials  Entry of new suppliers & exit of existing Big supplier  Technological breakthrough in Raw Materials affecting company’s Manufacturing process

External Environment  Technological Environment  Cost of Technology

is very important  Rate of change of technology influences the strategy formation  Receptivity of New Technology by the public affects organizational strategy

 Internal Factors Analysis  Also termed as Strategic Advantage Plan  Comprises of the Internal departments of the

organization  Organizational strategies based on the functions and objectives of individual departments

Internal Environment  Production Function to produce output that has a value which exceeds the combined cost of inputs and the Transformation process  Should meet the Forecasted demand

Small Industry

Big Industry

 Main objective

Strategies

Strategies

• Low initial Investment • Superior Quality products • Customization • Low Investment in Variable cost

• Production group continuous interact with other departments • Helps to produce Value added products for customers

Internal Environment  Finance Function  Tells the

efficiency and the investing ability of the company  Evaluation of company’s performance can be done between present year and last year  Estimates Cost of Capital and formulate strategies to reduce the cost of capital  Define the amount of Working Capital

Internal Environment  Marketing Function  Involves

study of product market  Brings together the Organization & the External environment  Efficiency in bringing closer the various departments of the organization  Tells about the Market share, strength in supermarkets, product quality, pricing etc.

Internal Environment  Operation Function  Concerned with production of goods

and services  Managing the Process that’s converts the Input into output  Maintains the level of Inventory  Maintains long term relationship with the suppliers

Internal Environment  Personnel Management  Managing the

most important Assets of the organization, the Employees  Recruiting & training, providing fair compensation plans to the employees  Maintain Fair terms and conditions to the employees  Track recording of achieving Objectives

Industry Level Analysis Study Porters Five Forces Model  To find out the number of firms in the industry & their respective market shares  Major new products in the market  Shifts in Pricing structure of products  Shifts in consumer Preference  Change in PLC for the industry 

 Porters Five Forces Model Potential Entrants

Bargaining power of Suppliers

Suppliers

Threat of Substituted products

Industry Competitors

Substitutes

Threat of new entrants

Buyers

Bargaining power of Buyers

 Game Theory 

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Game Theory proposed by John von Neumann and Oskar Morgenstern by their book Theory of Games and Economic Behavior in 1944 Consist game elements like players, set of rules, actions, information, outcomes, payoffs & equilibrium Helps organization to overcome competition Organization can understand rivals behavior Helps to understand Business better

 Game Theory

Techniques which improve company’s competitive instinct. o

Fish bowl o

o

o o

Everybody brings his or her own views Advocates of certain stay in the center of the Fish bowl Advocates debate on their data and facts Decision makers evaluate quality of facts, expose weak positions and analyze strategic options

 Game Theory

Techniques which improve company’s competitive instinct. o

Red team/ Blue team o

o

o

o

Managers are put in charge of teams representing major competitors Plan the strategies they would be use beat the organization Increases organizational Competitive Intelligence Quickens organizational reflexes by building competitive awareness

 Game Theory

Techniques which improve company’s competitive instinct. o

Future Mapping o

o

o

o

Way of looking at different scenario for Future Looking at several alternative Futures or ‘End States’ Assign profanity to each states to identify the forces to determine whether that scenario actually unfold Identify actions with Biggest return and least Risk or both

Future is here

 Strategic Systems Planning (SSP) is used to study an organization’s information needs, identify strategic opportunities and develop a plan to address those information needs  Strategic systems planning is always performed with an organization’s senior management and is not undertaken as an end in itself. The objective is to create action by implementing the Strategic Systems Implementation Plan  The “system” shows you how to develop a set of strategies and action plans – and to arrange them in such a way that vastly increases your chances of having a sustainable, profitable long term business

 Strategic Leadership provides the vision and direction for the growth and success of an organization. To successfully deal with change, all executives need the skills and tools for both strategy formulation and implementation. Managing change and ambiguity requires strategic leaders who not only provide a sense of direction, but who can also build ownership and alignment within their workgroups to implement change.

 Is a term coined by James Brain Quinn in 1980  Constantly integrating the simultaneous incremental process of strategy formulation and implementation is the central art of effective strategic management  Implementing in large organization is complex and time consuming

General Concern Broadcasting of an general idea Formal development of a change plan Use of a Crisis or Opportunity Adaptation

According to Peter Senge (1993) Learning Organization are: …organizations where people continually expand their capacity to create the results they truly desire, where new and expansive patterns of thinking are nurtured, where collective aspiration is set free, and where people are continually learning to see the whole together.

STAGE 1: PREPERATION STAGE 2: PLANNING STAGE 3: RESOURCE DEVELOPMENT STAGE 4: IMPLEMENTAION

 Before any process can begin, basic preparation must be made. This includes making a commitment to planning, enlisting appropriate personnel, gathering data, getting necessary commitments, setting aside appropriate calendar time, and determining the process to be used.

 During the planning phase, or the actual development phase, the strategy is formulated. Various meetings are held that lead church members to process the data and make decisions concerning strategic objectives, goals, and action plans. The direction for the church is set with specific actions that lead to fulfilling the desired intent.

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Once the plan has been completed, necessary resources for implementation must be identified. This phase includes identifying both existing resources and new resources that must be secured, as well as determining how these resources are to be allocated. All of the resources will not be available at the beginning of implementation. These resources will include:  The allocation of personnel to staff ministries, programs, activities or events planned  The development of a budget that resources the objectives, goals and action plans  The development of a calendar reflects the objectives, goals and action plans

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The final phase of strategy development is implementing the vision, taking action, and making it happen. One of the most frustrating experiences in life is getting to the goal line, yet failing to score. History reveals that the most common point of breakdown of strategy development is at the point of implementation. Horror stories are legendary, both within the corporate world, as well as among associations and churches, of organizations that started the process but never completed it.

 A systematic way to examine all activities a company performs and how they interact among themselves to identify sources of competitive advantage  Every company’s value chain is composed of nine categories of activities (value addition steps) which can be classified under two major headings:  Primary activities- Connected with the physical creation of

the firm’s product or services, its marketing, delivery & post sales service  Support activities: which provide inputs for infrastructure for primary activities

 Helps to analyze strategic relevant internal activities in the competitive advantage

 Primary Activities  Inbound Logistics Operations Outbound Logistics Marketing & Sales Service

 Support Activities  Firm Infrastructure Human resource Management Technology Development Procurement

 Organisations response to the changing environment is often within the parameters of the organisations culture, which over time becomes more and more apparent. In this respect, culture is traditionally seen as a preventative to change, which stifles strategy innovation and results in a momentum of that can lead to strategic drift.  This view therefore supports the assumption that strategic change must always be accompanied by an appropriate cultural change. Changing Environment Condition  Eventually transformational change is required if the demise of the organisation has to be avoided.

Strategic Gap leading to crisis

Unchanging organizational Culture and Activity