Unit 1-Part 3Unit 1-Part 3

Strategic Management of Strategic Management of Business Business

What is Corporate PlanningWhat is Corporate Planning ? ?

A Planning is a predefined action to be A Planning is a predefined action to be taken in the future. taken in the future. This document of planning mainly consists This document of planning mainly consists of details of how those actions will be of details of how those actions will be performed in future time. performed in future time. Planning needs deep thinking over the Planning needs deep thinking over the events, which are likely to happen in total events, which are likely to happen in total business.business.Planning is deciding what to do before you Planning is deciding what to do before you do it. Most of us would agree planning is do it. Most of us would agree planning is an important ingredient of success an important ingredient of success

Long-range and short-range Long-range and short-range PlanningPlanning

Long-Range planning can be for the period of five Long-Range planning can be for the period of five years or some times more than that. This consists years or some times more than that. This consists of whole business and deals with the growth rate, of whole business and deals with the growth rate, directions of the business, shares and so on. directions of the business, shares and so on. However, many organizations have a continual However, many organizations have a continual planning process that reviews and modifies their planning process that reviews and modifies their long-range plans on a regular basis, such as every long-range plans on a regular basis, such as every six months to a year.six months to a year.Short-Range planning can be for the period one Short-Range planning can be for the period one year. This type of planning mainly concerns the year. This type of planning mainly concerns the business results for that year. Typical examples are business results for that year. Typical examples are the development of financial and operating the development of financial and operating budgets, production scheduling, and planning for budgets, production scheduling, and planning for the development and implementation of projects.the development and implementation of projects.

Dimensions of PlanningDimensions of Planning

1. Time1. Time

2. Entity2. Entity

3. Organization3. Organization

4. Elements4. Elements

5. Characteristics5. Characteristics

TimeTime

The plan may either be long-range or The plan may either be long-range or short-range, but the execution of the plan short-range, but the execution of the plan is, year after year. The plan is made on a is, year after year. The plan is made on a rolling basis where every year it is rolling basis where every year it is extended by one year, keeping the plan extended by one year, keeping the plan period as the next five years. period as the next five years.

The rolling plan provides an opportunity to The rolling plan provides an opportunity to correct or revise the plan in the light of correct or revise the plan in the light of any new information the planner may any new information the planner may receive.receive.

EntityEntity

The plan entity is the thing on which the The plan entity is the thing on which the plan is focused.plan is focused.The entity could be the production in The entity could be the production in terms of quantity or it could be a new terms of quantity or it could be a new product. It could be about the finance, the product. It could be about the finance, the marketing, the capacity, the manpower or marketing, the capacity, the manpower or the research and development.the research and development.The goals, and the objectives would be The goals, and the objectives would be stated in terms of these entities. A stated in terms of these entities. A corporate plan may have several entities.corporate plan may have several entities.

OrganizationOrganization

The corporate plan would deal with the The corporate plan would deal with the company as a whole, but it has to be company as a whole, but it has to be broken down for its subsidiaries, if any, broken down for its subsidiaries, if any, such as the functional groups, the divisions, such as the functional groups, the divisions, the product groups and the projects.the product groups and the projects.The breaking of the corporate business The breaking of the corporate business plan into smaller organizational units helps plan into smaller organizational units helps to fix the responsibility for execution.to fix the responsibility for execution.The corporate plan, therefore, would be a The corporate plan, therefore, would be a master plan and it would comprise several master plan and it would comprise several subsidiary plans.subsidiary plans.

ElementsElements

The plan is made out of several The plan is made out of several elements, the plan begins with the elements, the plan begins with the mission and goal, which the mission and goal, which the organization would like to achieve.organization would like to achieve.

It may provide a vision statement for It may provide a vision statement for all to understand as also the all to understand as also the purpose; focus and direction the purpose; focus and direction the organization would like to move organization would like to move towards.towards.

CharacteristicsCharacteristics

The characteristics of a corporate plan are not The characteristics of a corporate plan are not definite. The choice of characteristics is a matter of definite. The choice of characteristics is a matter of convenience helping to communicate to everybody convenience helping to communicate to everybody concerned in the organization and for an easy concerned in the organization and for an easy understanding in execution. The features of a plan understanding in execution. The features of a plan could be several and could have several parts.could be several and could have several parts.The plan is a confidential written document subject The plan is a confidential written document subject to change, and known to a limited few in the to change, and known to a limited few in the organization.organization.Plan is described in the quantitative and Plan is described in the quantitative and qualitative terms.qualitative terms.The long-term plan is normally flexible while the The long-term plan is normally flexible while the short term one is generally not.short term one is generally not.

Essentiality of Strategic PlanningEssentiality of Strategic Planning

The purpose of strategic planning is to develop The purpose of strategic planning is to develop strategies by which an organization will be able to strategies by which an organization will be able to achieve its objectives. The following reasons achieve its objectives. The following reasons make planning an essential management make planning an essential management processes to keep the business in a good shape processes to keep the business in a good shape and condition.and condition.1.1. Market forceMarket force2.2. Technology changeTechnology change3.3. Complex diversity of businessComplex diversity of business4.4. CompetitionCompetition5.5. Environment (Threats, Challenges & Environment (Threats, Challenges & Opportunities)Opportunities)

DEVELOPMENT OF BUSINESS DEVELOPMENT OF BUSINESS STRATEGIESSTRATEGIES

Long-Range Strategic PlanningLong-Range Strategic PlanningIn the 1970's, many large firms adopted a formalized top-In the 1970's, many large firms adopted a formalized top-down strategic planning model. down strategic planning model. Under this model, strategic planning became a deliberate Under this model, strategic planning became a deliberate process in which top executives periodically would process in which top executives periodically would formulate the firm's strategy, then communicate it down formulate the firm's strategy, then communicate it down the organization for implementation. the organization for implementation. The concept of strategy has been borrowed from the The concept of strategy has been borrowed from the military and adapted for use in business. Strategy is a term military and adapted for use in business. Strategy is a term that comes from the Greek strategia, meaning that comes from the Greek strategia, meaning "generalship." In the military, strategy often refers to "generalship." In the military, strategy often refers to maneuvering troops into position before the enemy is maneuvering troops into position before the enemy is actually engaged. actually engaged. In this sense, strategy refers to the deployment of troops. In this sense, strategy refers to the deployment of troops. Once the enemy has been engaged, attention shifts to Once the enemy has been engaged, attention shifts to tactics. tactics.

Strategy According to Henry Strategy According to Henry Mintzberg Mintzberg

Strategy is a plan, a "how", a means of Strategy is a plan, a "how", a means of getting from here to there. getting from here to there. Strategy is a pattern in actions over time; Strategy is a pattern in actions over time; for example, a company that regularly for example, a company that regularly markets very expensive products is using markets very expensive products is using a "high end" strategy. a "high end" strategy. Strategy is position; that is, it reflects Strategy is position; that is, it reflects decisions to offer particular products or decisions to offer particular products or services in particular markets. services in particular markets. Strategy is perspective, that is, vision Strategy is perspective, that is, vision and direction. and direction.

Pure Strategy :Pure Strategy :If a strategy single considers a single point If a strategy single considers a single point of attack by a specified method then it is of attack by a specified method then it is called as pure strategy. When a called as pure strategy. When a management decides to fight the external management decides to fight the external forces of a single area by choice, it forces of a single area by choice, it becomes a pure strategy.becomes a pure strategy.Mixed Strategy :Mixed Strategy :If a strategy acts on many fronts by If a strategy acts on many fronts by different means, then it is a mixed different means, then it is a mixed strategy, i.e. if it is operating on different strategy, i.e. if it is operating on different areas., then it becomes mixed strategy.areas., then it becomes mixed strategy.

Classification of Strategies Classification of Strategies

Pure or mixed strategies can be Pure or mixed strategies can be classified into four broad categories. classified into four broad categories.

These strategies are applicable to all These strategies are applicable to all types of businesses and industries.types of businesses and industries.

Overall company strategyOverall company strategy

Growth strategyGrowth strategy

Product strategyProduct strategy

Marketing strategyMarketing strategy

Overall Company Strategy Overall Company Strategy

This type of strategy deals with the overall This type of strategy deals with the overall strength of the company. This strategy will strength of the company. This strategy will consider a very long-term business perceptive. If consider a very long-term business perceptive. If this strategy is chosen properly and implemented this strategy is chosen properly and implemented then it is the most productive strategy. Examples then it is the most productive strategy. Examples of overall company strategies are as under :of overall company strategies are as under :Due to rapid change in the technology, a Due to rapid change in the technology, a computer manufacturing industry will have a computer manufacturing industry will have a strategy of introducing new range of product strategy of introducing new range of product every two or three years.every two or three years.A new company designing shirt and trousers may A new company designing shirt and trousers may have strategy of remaining in the low price range. have strategy of remaining in the low price range. Few company may want to grow very fast as Few company may want to grow very fast as their strategytheir strategy

Growth Strategy Growth Strategy

Every organization would like to grow their business Every organization would like to grow their business sooner.An organization may grow in two different sooner.An organization may grow in two different ways :ways :Growth of the existing business turnover, year Growth of the existing business turnover, year after year. Simple example of Scooter Company. after year. Simple example of Scooter Company. Initially started with a Scooter, then introduced Initially started with a Scooter, then introduced moped and then bikes. Company then moped and then bikes. Company then manufacturing these two-wheelers at different manufacturing these two-wheelers at different parts of the nation. This is nothing but growth in parts of the nation. This is nothing but growth in existing business. existing business. Expansion and diversification of the business. This Expansion and diversification of the business. This type of growth starts with one or two product and type of growth starts with one or two product and then manufactures variety of products and sells then manufactures variety of products and sells them in variety of markets. them in variety of markets.

Product Strategy Product Strategy

Product strategy is nothing but a growth Product strategy is nothing but a growth strategy, where the company chooses a strategy, where the company chooses a certain product with particular certain product with particular characteristics. characteristics.

A home appliances market may start their A home appliances market may start their product manufacturing with cookers. product manufacturing with cookers.

Then they can expand their business by Then they can expand their business by launching products like ovens, mixtures and launching products like ovens, mixtures and other appliances which is related to home. other appliances which is related to home.

Marketing Strategy Marketing Strategy

The product and market strategies are closely The product and market strategies are closely related to each other. The marketing related to each other. The marketing strategies deal with the distribution, services, strategies deal with the distribution, services, market research, pricing and advertising.market research, pricing and advertising.For example : A company may offer a financial For example : A company may offer a financial loan to purchase a particular product.loan to purchase a particular product.The marketing strategies act as an expediting The marketing strategies act as an expediting and activating force for the product and the and activating force for the product and the growth strategy as the force, which growth strategy as the force, which accelerates business development.accelerates business development.

MIS : BUSINESS PLANNING MIS : BUSINESS PLANNING

Business environment is prone to changes and this Business environment is prone to changes and this factor makes business planning very complex. Some factor makes business planning very complex. Some factors such as the market forces, technological factors such as the market forces, technological changes, complex diversity of business and changes, complex diversity of business and competitions have a significant impact on any competitions have a significant impact on any business prospects.business prospects.MIS is designed to assess and monitor these factors.MIS is designed to assess and monitor these factors.The MIS design is supposed to provide some insight The MIS design is supposed to provide some insight into these factors enabling the management to into these factors enabling the management to evolve some strategy to deal with them.evolve some strategy to deal with them.Since these factors are a part of the environment, Since these factors are a part of the environment, MIS design is required to keep a watch on MIS design is required to keep a watch on environment factors and provide information to the environment factors and provide information to the management for a strategy formulation.management for a strategy formulation.

MIS : BUSINESS PLANNINGMIS : BUSINESS PLANNING

There are various business strategies There are various business strategies such as :such as :

1.1. Overall company growth,Overall company growth,

2.2. Product,Product,

3.3. Market,Market,

4.4. Financing and so on.Financing and so on.

MIS : BUSINESS PLANNINGMIS : BUSINESS PLANNING

MIS should provide the relevant information that would help MIS should provide the relevant information that would help the management in deciding the types of strategies the the management in deciding the types of strategies the business needs. Every business may not require all the business needs. Every business may not require all the strategies all the time.strategies all the time.

oo The type of strategy is directly related to the current status The type of strategy is directly related to the current status of business and the goals it withes to achieve.of business and the goals it withes to achieve.

oo The MIS is supposed to provide current information on the The MIS is supposed to provide current information on the status of the business vis-a-vis the goals.status of the business vis-a-vis the goals.

oo MIS is supposed to give a status to regard whatever the MIS is supposed to give a status to regard whatever the business in on growth path or is stagnant or is likely to business in on growth path or is stagnant or is likely to decline, and the reasons thereof.decline, and the reasons thereof.

oo If the status of the business shows a declining tend, the If the status of the business shows a declining tend, the strategy should be of growth. If business is loosing in a strategy should be of growth. If business is loosing in a particular market segment, there the strategy should be a particular market segment, there the strategy should be a market or a product strategy.market or a product strategy.

The Strategic Planning ProcessThe Strategic Planning Process

This process is most applicable to strategic This process is most applicable to strategic management at the business unit level of the management at the business unit level of the organization. organization. For large corporations, strategy at the corporate For large corporations, strategy at the corporate level is more concerned with managing a portfolio of level is more concerned with managing a portfolio of businesses. businesses. For example, corporate level strategy involves For example, corporate level strategy involves decisions about which business units to grow, decisions about which business units to grow, resource allocation among the business units, taking resource allocation among the business units, taking advantage of synergies among the business units, advantage of synergies among the business units, and mergers and acquisitions.and mergers and acquisitions.In the process outlined here, "company" or "firm" will In the process outlined here, "company" or "firm" will be used to denote a single-business firm or a single be used to denote a single-business firm or a single business unit of a diversified firm business unit of a diversified firm

Mission Mission

A company's mission is its A company's mission is its reason for being. The mission often is reason for being. The mission often is expressed in the form of a mission expressed in the form of a mission statement, which conveys a sense of statement, which conveys a sense of purpose to employees and projects a purpose to employees and projects a company image to customers. In the company image to customers. In the strategy formulation process, the strategy formulation process, the mission statement sets the mood of mission statement sets the mood of where the company should go.where the company should go.

Objectives Objectives

Objectives are concrete goals Objectives are concrete goals that the organization seeks to reach, that the organization seeks to reach, for example, an earnings growth for example, an earnings growth target. The objectives should be target. The objectives should be challenging but achievable. They also challenging but achievable. They also should be measurable so that the should be measurable so that the company can monitor its progress company can monitor its progress and make corrections as needed.and make corrections as needed.

Situation Analysis Situation Analysis

Once the firm has specified its objectives, it Once the firm has specified its objectives, it begins with its current situation to devise a begins with its current situation to devise a strategic plan to reach those objectives. Changes strategic plan to reach those objectives. Changes in the external environment often present new in the external environment often present new opportunities and new ways to reach the opportunities and new ways to reach the objectives. objectives. An environmental scan is performed to identify An environmental scan is performed to identify the available opportunities. The firm also must the available opportunities. The firm also must know its own capabilities and limitations in order know its own capabilities and limitations in order to select the opportunities that it can pursue with to select the opportunities that it can pursue with a higher probability of success. The situation a higher probability of success. The situation analysis therefore involves an analysis of both the analysis therefore involves an analysis of both the external and internal environment.external and internal environment.

The internal analysis considers the situation within the The internal analysis considers the situation within the firm itself, such as:firm itself, such as:Company culture Company culture Company image Company image Organizational structure Organizational structure Key staff Key staff Access to natural resources Access to natural resources Position on the experience curve Position on the experience curve Operational efficiency Operational efficiency Operational capacity Operational capacity Brand awareness Brand awareness Market share Market share Financial resources Financial resources Exclusive contracts Exclusive contracts Patents and trade secrets Patents and trade secrets

INTEGRATING TECHNOLOGY INTEGRATING TECHNOLOGY WITH THE BUSINESS WITH THE BUSINESS

ENVIRONMENTENVIRONMENT Today it is much easier to built IT-Today it is much easier to built IT-based systems than it ever has been, based systems than it ever has been, but the task is still difficult.but the task is still difficult.The fact that IT still has a long way to The fact that IT still has a long way to go illustrated by the enormous go illustrated by the enormous efforts that went into the Year 2000 efforts that went into the Year 2000 (Y2K) problem, which was related to (Y2K) problem, which was related to the way many information system the way many information system use just two digits to identify the use just two digits to identify the year portion of a date. year portion of a date.

Integrating business and technology is a challenge to the Integrating business and technology is a challenge to the management. Now manager has to keep in mind that, management. Now manager has to keep in mind that, how their decision about technology affects the business how their decision about technology affects the business Initially manager searches for any new technology Initially manager searches for any new technology launched in the market which support their business so launched in the market which support their business so that they create new business opportunities. that they create new business opportunities. These new business opportunities, alongwith the These new business opportunities, alongwith the technology will lead them to development of new technology will lead them to development of new product. product. Any new technology will have its own constraints. Any new technology will have its own constraints. Manager has to think about these technology constraints Manager has to think about these technology constraints before stepping forward. These activities will help in before stepping forward. These activities will help in decision-making process.decision-making process.Business is successful if manager can integrate their Business is successful if manager can integrate their knowledge about the Information Technology and knowledge about the Information Technology and business.business.