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A

StrategicManagemen tN.CHANDRASEKARAN

Vice President Corporate AffairsTake Solutions

andDirector

Center for Logistics & SCM , LIB A,Chennai

P.S. AN AN TH AN AR AY AN ANManagement Consultant and Visiting Faculty

OXFORDUNIVERSITY PRESS

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Detailed ContentsPreface - v1. I N T R O D U C T I O N T O S T R A T E G IC M A N A G E M E N T 1

Case Study: Path-breaking Strategic InitiativesReliance Industries Ltd 11.1 Introduction to M ana gem ent and Strategy 21.2 Strategic M ana gem ent 41.3 Evolution of Strategic M an ag em en t 4

1.3.1 Schools of tho ug ht , . 61.4 Relevance of Strategic M an ag em en t for an Or gan izatio n 91.5 Challenges to Strategic M an ag em en t 101.6 T he Strategic M an ag em en t Process 11

1.6.1 Deliberate and emerge nt strategies . 1 21.7 Strategic M an ag em en t in Ind ia 12Case Study: Growth in the Face of ChallengesIndian Oil Corporation Limited 15

2 . OBJECTIVES OF STRATEG IC MA NAG EM ENT 1 9Case Study: Globalization Initiatives in Power and Related ProductNational Thermal

Power Corporation 192.1 Developing a Vision Statem ent 21

2.1.1 Cha racteristics of a good vision statem ent 222.1.2 Defining a sha red vision 232.2 Developing a Mission State me nt 232.3 Deve loping Co re Values . 262.4 Situationa l Analysis . . 27

2.4.1. Situational analysis through SW O T . . . 282.4.2 Situational analysis using T O W S ma trix 28

2.5 Defining Or gan izatio nal Goals and Objectives 292.5.1 Adv antages in structu ring objectives 312.5.2 Fina ncia l, non -financ ial, an d social objectives . 31

2.6 Resolving Conflicts in Co rpo rat e Objectives 322.6.1 Ran king and comprehensiveness 332.6.2 Critical success factors . . 33

Case Study: Changing Strategic ObjectivesProcter & Gamble Hygiene and Health Care Ltd 363 . E N V I R O N M E N T A N D S T RA T EG Y 3 8

Case Study: Management of the EnvironmentEID Parry India Ltd 383.1 Organ izational Environm ent Charac teristics and Dimensions , 423.2 External Environ men t 43

3.2.1 Env ironm ental sustainability 43

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3.2.2 Climatic determ inism 453.2.3 Clim ate-related strategy 473.2.4 Im pac t of pollution on a firm's strategy 49

3.3 Political En viro nm ent 503.3.1 Com mun ism 503.3.2 Ca pitalism 503.3.3 Dem ocracy 523.3.4 Socialism 533.3.5 Im pa ct of political env iron m enta l factors on firms' strategy 53

3.4 Econom ic Environment 553.4.1 Business cycles meaning and nat ure 553.4.2 Types of cycles , 553.4.3 Phases of a business cycle 553.4.4 Im pa ct of eco nom ic factors on strategy 583.4.5 Economic dow nturn in 2008 58

3.5 Technological Env ironm ent 593.5.1 Im pa ct of techological factors on strategy 60

3.6 Sociocultural Env ironm ent 613.6.1 Im pa ct of socioc ultural factors on strategy 63

3.7 List of Ex tern al Factors 633.8 Environmental Scanning 64

3.8.1 Exte rnal environm ent scanning 643.8.2 Inte rnal environm ent scanning 663.9 Synthesis of Ex tern al Factors 66

3.10 Synthesis of Int ern al Factors 68Case Study: Successful Management of Environment AshokLeyland 73

4 . S T R A T E G I C A N A LY S IS : M O D E L S A N D T E C H N I Q U E S 7 9Case Study: Tools and Techniques for Investing in GrowthABC Consumer Products Ltd 794.1 Introdu ction 814.2 Forecasting Mo dels 814.3 Strategic M odels 844.4 Financial Mo dels 84

4.4.1 Break-even mo del 844.4.2 Budget mo del 854.4.3 Pro form a financial projections 854.4.4 R atio analysis 85

4.5 Econom etric Models 854.6 Simulation M odels 86

4.6.1 Types of simulation mo dels 864.6.2 App lications and limitations 87

4.7 Decision Sup port M odels 87

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4.7.1 Dec ision trees or m ulti-a ttribu te utility analysis mo dels 874.7.2 Ana lytical hierarc hy process . 874.7.3 Influence diagram s 88

4.8 Sensitivity Analysis . . 884.9 Porter's Five Forces Th eo ry 894.10 Eva luating Cu rre nt Pro duc t Portfolios ' 924.10.1 Pro du ct life cycle 92

4.10.2 Exp erience curves . . . 95 ,4.10.3 Prod uct portfolio pla nnin g 98

4.11 Mckinsey's 7S Fram ewo rk . 1074.12 Strategic Ch oic e ' . 108

4.12.1 Com petitive strategies an d com petitive adv antag e 1084.12.2 Prod uct-m arke t strategies ' 1144.12.3 Institutional strategies an d m etho ds of grow th 116

4.13 Co ntem pora ry Strategic Th oug ht Co nce pts an d Analysis .. 1164.13.1 Blue ocea n and red oce an strategies 1184.13.2 Re gen eratin g strategies 1194.13.3 Con frontation strategies . . . 120

Case Study: Call for Analyst to Help with ToolsSachin's Dilemma 1245 . C O R P O R A T E S T R A T E G Y 1 2 8

Case Study: India Expansion Strategies of Various Firms Turn! Brands, Hyatt HotelsCorporation, Ambuja Cements Limited, and Maruti Suzuki India 128

5.1 Imp ortanc e of Co rpora te Strategy 1305.2 Four Levels of Co rpo rate Strategy 1315.2.1 Fun ctional-lev el strategy 1315.2.2 Business-level stra tegy ' - 1435.2.3 Globa l-level strategy 1485.2.4 Corp orate-leve l strategy 152

5.3 Perform ance Strategy . . 161Case Study: External Pressure and Internal Quality ChallengesUnique:Industries 166

6 . F U S I O N O F S T R A T E G I C O P T I O N S 1 71Case Study: Joint Venture with a Chilean FirmCoromandel International Limited 171 .6.1 Co rpor ate Parenting 172

6.1.1 Parenting ma trix 1746.1.2 Business units an d co rpo rate structure 175

6.2 Co rpo rate Restructuring 1766.2.1 Mo tives for restruc turing 17 7

6.3 Business Process Re eng inee ring . 1806.3.1 B PR a nd process im provem ents . . 1 8 16.3.2 BP R and inter-disciplinary linkages 1826.3.3 Key characteristics of BP R 183

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6.3.4 BP R methodology 1836.3.5 Criticisms of B PR 185

6.4 Jo int Ventures 1866.4.1 M otives of join t ventu res/strate gic alliances . 1866.4.2 Ra tionale of join t ventures 1876.4.3 Re ason s for failure of jo in t ven tures 1886.5 Strategic Alliances 1886.5.1 Form s of strategic alliances 189

6.6 Ou tsourc ing 1906.6.1 Ne ed for outsourc ing 1926.6.2 Problem s in outsourcin g 1926.6.3 Ch ang ing perspective towards outsourcing 193

6.7 M ergers and Acquisitions 1936.7.1 M ergers 1956.7.2 Acq uisition ' 1986.7.3 Causes for m erg er/ta keo ver failures 203

6.8 Dem ergers and Divestitures 2046.9 New Business M odels with Techno logy and Digitalization ' 206

6.9.1 E-business m odels 2106.9.2 Pure technology applications in business 2116.9.3 People-led new business mode ls 2136.9.4 Challenges and learn ing process 213

Case Study: Successful Inorganic GrowthOracle Corporation 21 7Annexure I: Company Valuation and Models 225Annexure II: Indicative Areas and Checklist or Due Diligence Processes 225

7 . S T R A TE G Y F O R M U L A T I O N : C H O I C E A N D A N AL YS IS 2 3 2Case Study: India PlansStarwood Hotels and Resorts Worldwide Inc.' 2327.1 Introd uction 2347.2 Steps for M akin g Strategic Cho ices 236

7.2.1 Relating intent to mission an d vision 2367.2.2 Ge nera tion of available options - 2387.2.3 Strateg ic assessm ent . 2387.2.4 Selection of strategic optio n 239

7.3 Strategy Form ulation an d Cho ice 2407.4 Tools an d Techn iques 246

7.4.1 SW O T analysis and T O W S matrix 2467.4.2 Pr od uc t life cycle ' 2477.4.3 Portfolio, ma rket, and prod uct strategies 247

7.5 Dec ision Stages 2497.6 Subjective Factors in Strate gic Ch oice 249

-7.6 .1 Cultural aspects ^ 250

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7.6.2 Political chara cteristics in strateg y form ulation 2517.6.3 Role of directors an d C EO s 2537.6.4 Role of the chief executive office/m anag ing direc tor ' 255

7.7 Challenges Faced du ring Strate gy Fo rm ulatio n 2577.8 Strategy Formu lation for Differen t Businesses ' 259Case Study: Strategy FormulationEasy Run 263

8. STRATEGY IMP LEM ENT AT ION 266Case Study: Responses to Counter Environmental ChangesITC Limited 2668.1 Nature of Strategy Im plem enta tion 2678.2 Models of Strategic Im plem entatio n 2688.3 Procedural Imp leme ntation 270

8.3.1 Imp leme nting formu lated strategy 2708.3.2 Structural imp lem entation 272

8.4 Business Process Re eng inee ring 2748.5 Business Process M an ag em en t 2758.5.1 Futur e of BP M 279

8.6 Bench mark ing 28 48.6.1 Process of ben chm ark ing 285

8.7 Reverse En ginee ring 2918.8 Adopting Intern ationa l Certifications 2938.9 Implemen ting Kaize n 294

8.9.1 Ten grou nd rules of Ka izen 2948.10 Strategy Imp lem entation in Projects . 2958.11 Resource Allocation 2968.12 Feedback Co ntro l System . 299Case Study: Achieving Excellence in QualitySundaram Clayton 302

9. ETHICS, SOCIAL RESPON SIBILITY, AN D CO RPO RA TE GOV ERN ANC E 30 4Case Study: Lapses in GovernanceSubhiksha Trading Services 3049.1 Business Eth ics 307

9.1.1 Ethics in hum an resource m ana gem ent 3109.1.2 Ethics of finance 3119.1.3 Ethics of sales an d mar ketin g > 3159.1.4 Ethics of pro du ctio n . ' 3169.1.5 Ethics of property, pro per ty rights, an d intellectual prop erty rights ' 3179.1.6 Ethics in inte rna tion al business ' 319

9.2 Cor pora te Social Respo nsibility 3209.2.1 uefinition of C SR ; 3209.2.2 CS R imple me ntation process and benefits ' 3279.2.3 Challeng es to C S R initiatives in In dia 328

9.3 Corporate Go vern anc e ' " 3299.3.1 Principles of corp ora te gove rnanc e ' -330

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9.3.2. Business history and evolution of corp orate governan ce 3329.3.3 Dev elopm ent of corp orate govern ance in Indi a 3339.3.4 Critical appraisal of corp orate govern ance in Indi a 3439.3.5 Co rpo rate governan ce mode ls across the world 343

Case Study: Arguing or a Social Cause and Seeking FundsAlliswell Healthcare Ltd 3481 0. E V AL U AT IO N A N D C O N T R O L 3 5 1

Case Study: Strategy ChangesReliance Natural Resources Limited 35110.1 Na ture and Imp ortance of Evaluation and Co ntrol 35310.2 Barriers to Evaluation 35510.3 M easu ring Performa nce, Strategic Inform ation, an d Systems 35710.4 Types of Co ntrol 35910.5 Tools Used for Evaluation and Co ntrol 363

10.5.1 Balanced scorecard 36410.5.2 Budgets an d bud getary controls 36510.5.3 Econ om ic value add ed 36610.5.4 Ra tio analysis 368

Case Study: Structure, Control, and StrategyAsian Hotels 37 511 . A P P L I C A T IO N S O F S T R A T E G I C C O S T M A N A G E M E N T 3 7 7

Case Study: Developing Integrated Companies across the Value ChainAlok Industries Limited 37711.1 Na ture and Imp ortance of Strategic Cost M ana gem ent 37911.2 Steps in Strategic Cost M ana gem ent Prog ram me 37911.3 Critical Success Factors for Strategic Cost M ana ge m en t 38011.4 Alignm ent of Strategic Cost M an ag em en t to Business Strategy 381

11.4.1 Total app roac h conc ept 38111.4.2 Pro du ct strategy 38111.4.3 Pricing strategies - 38211.4.4 H um an resources strategy 38311.4.5 Business cycles an d strategic cost m ana ge m ent 38411.4.6 Value cha in strategy . 38511.4.7 Value reference m od el . . 388

11.5 Tools of Strategic Cost M an age m ent 38911.5.1 Life cycle cos ting . 38911.5.2 Ta rget costing . 39211.5.3 Pricin g strategies 39511.5.4 Kaizen costing x 39 611.5.5 H alf life m ode l 397Tl75:6"Activity-based ma nage me nt/activity-b ased costing 39911.5.7 Total cost ma nagem ent/enterprise cost ma nage me nt 40411.5.8 Cost reduction prog ram me ' " 40911.6 Tim e Value of M one y 41011.6.1 N et presen t value m eth od . " 410

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11.6.2 Benefit cost rat io 41111.6.3 Intern al rate of retu rn 411

11.7 Mo ney Value of T im e 41211.8 Value Eng ineer ing 41411.9 Value Analysis 417Case Study: Improving Sales Realization through Application of Money Value of Time ASMTextile Company 421

12 . RISK MANAGEMENT: PER SPEC TIVES AN D ISSUES 423Case Study: Risk Assessment Preparedness2004 Asian Tsunami 42312.1 Introdu ction 42 512.2 Impact of Un certain ty and Risk 42512.3 Identification an d Classification of Different Typ es of Risk 427

12.3.1 Physical risk 42 712.3.2 Co un try risk 42912.3.3 Business risk 43112.3.4 Finan cial risk 43 2

12.4 Assessing and M ea sur ing Risk 43 312.4.1 Sensitivity analysis 43 312.4.2 Sce nario analysis 43512.4.3 Decision trees 43512.4.4 M onte Car lo simulation 43512.4.5 Cer tainty equivalent 43712.4.6 Risk adjusted discount rate m etho d 43812.4.7 Asset liability m an ag em en t mo del 43812.4.8 Beta analysis 44 012.4.9 Proba bility analysis " 44012.4.10 Value at risk ' - 44 112.4.11 Black Scholes m od el 44212.4.12 H AZ O P ha za rd and operabili ty study 44312.4.13 Prob ability of ruin . 44 3

12.5 Identifying Various Risk M an ag em en t Tec hnique s 444Case Study: Risk Management in PracticeHealth Risk Assessment in China 454

13 . CORPORATE RISK MANAGEMENT . 4 5 7Case Study: Management of Strategic Operational RisksTata Chemicals Limited 45713.1 Relationship betwe en Risk an d Strategy 45913.2 Types of Corporate Risk - 464

13.2.1 Ind ustry risk 46 413.2.2 Tra nsition risk 46513.2.3 Stag natio n risk 46613.2.4 U niqu e com petitor risk 46613.2.5 Br and risk 467

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13.2.6 Project risk 46913.2.7 O per atio nal risk 470

13.3 Relating Co rpora te Risk to M ana gem ent Principles 47113.3.1 Ind ustr y risk 47213.3.2 Tran sition risk 47213.3.3 Stagnation risk 47413.3.4 U niqu e com petitor risk 47413.3.5 Br an d risk 47513.3.6 Project risk 47513.3.7 O per atio nal risk 47 8

Case Study: Mismanagement and CollapseLehman Brothers 48114 . CASE ANALYSIS 4 84

14.1 A Gu ide to Case Analysis 48414.2 Significance of Case M eth od 48414.3 Case Desc ription 48514.4 Proce dure for Analysing Cases 48 614.5 Ap proac hes to Different Form ats of Case Study Analysis 48614.6 Fina ncia l Analysis in a Ca se Study 487

14.6.1 Financ ial stateme nts 48714.6.2 Ra tio analysis 489

14.7 Key Aspects for Design ing Solutions to a Strategy Case 492Case Study 1: In Quest of ExcellenceASAP Management Consultants Private Ltd 494Case Study 2: Issues and PerspectivesIndia's Castings and Forging Industry 503Case Study 3: Evaluating Strategic Investment OptionsThe Chennai Venus Hotel 513Case Study 4: Ramp-up of SubsidiaryCore Life Science Technology Ltd 534Case Study 5: Challenges in Building a Professional Service FirmAquatherm

Engineering Consultants 543Case Study 6: Passion and RiskCore Value Staffing Services 55 3Case Study 7: Outbound Transportation ChallengesGujarat Engineering Company Ltd 559Case Study 8: Oriental Bank of Commerce's Merger with Global Trust Bank

The Role Played by RBI 566Case Study 9: Managing Expectations and Challenges during Execution

Oracle's Acquisition of Sun 573Case Study 10: Building a Global Brand through Envisioning and Nurturing

Ranbaxy Laboratories Limited 578Case Study 11: Breaking the Mould in a Traditional IndustryShree Renuka Sugars Limited 586Case Study 12: CSR Initiatives to Help the Less PrivilegedSakthi Masala Pot. Ltd 598Case Study 13: Chief Architect's Vision and LeadershipSambandam Spinning M ills Ltd 603Case Study 14: Strategic Options and Value Chain ManagementAn Independent Tourist Operator 61

Index 616