Download Strategy

Strategy
1
Strategy

Current set of plans,decisions & objectives that have
been adopted to achieve the organizational goals
Organizational Purpose

Organizations are created for a purpose called the overall goal
or mission
Mission





Called official goal
Mission is organization’s reason for existence
Describes organization’s vision, values & beliefs
It communicates current & prospective stakeholders
what the organization stands for & what it is trying to
achieve
It gives legitimacy to organizational purpose
Vision


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."
Values






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".
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"
JET AIRWAYS "the joy of flying “
BPL's "believe in the best".
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
Operative Goals





Describe the ends sought through actual operating
procedures
Describe specific measurable outcomes
Are often concerned with short term result
Operative vs. official goals represent actual vs. stated
goals
Operative goals are directions for day to day
decisions and activities within departments
Operative Goals (contd..)




Operative goals are concerned with
Overall performance or profitability reflected as ROI,
earnings per share
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
Operative Goals (contd..)



Employee development e.g. T&D, MDP, employee
safety and stress mgt.
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
Goal Type, Their Purpose &
Importance
Type of Goals
Purpose of Goals
Official Goals, mission:
Legitimacy
Operative goals:
Employee direction and motivation
Decision guidelines
Standard of performance
Thinking Strategically
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

Strategy


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)
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 Unit
Chemicals Unit
Auto Parts Unit
Functional-Level Strategy:
How do we support the business-level strategy?
Finance
R&D
Manufacturing
Marketing
Chandler


1.
2.
3.
Studied American firms from 1909-1959
Concluded
Changes in the strategy preceded changes in
structure
All organizations began as centralized
structures and later adopted different
structures (simple, functional, divisional)
Concept of forward and backward integration
strategic
Limitations of Chandler’s Work




1.
2.
3.
4.



Studied only very large and powerful organizations
Small, medium organizations and public sector were ignored
He was more concerned about growth than profitability (strategystructure fit leading to growth )
Wrigley used the same paradigm and differentiated organizations in to
the following
Single business (no diversification)
Dominant business (70-90% of sales coming from one business or
vertically integrated chain)
Related business (diversified in related areas with no one business
accounting for more than 70% of sales)
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.
No single structure was found consistently in the dominant business
category
Thus strategy does influence structure
Porter’s Competitive Strategy

1.
2.
3.
Use one of the three which gives you
competitive advantage
Cost
Differentiation
Focus
Porter’s Competitive Strategy: Cost






Requires the organization to be the cost leader
and not merely one of the contenders for the
position
It includes efficiency of operations
Economies of scale
Technological innovation
Low cost labor
Preferential access to raw material
Porter’s Competitive Strategy:
Differentiation






Emphasizes high quality
Extraordinary service
Innovative design
Technological capability
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
Porter’s Competitive Strategy: Focus

This approach aims at a competitive advantage
in a narrow segment
Porter’s Competitive Strategies
Competitive
Scope
Broad
Broad
Narrow
Narrow
Competitive
Advantage
Low Cost
Strategy
Example
Low-Cost
Leadership
Dell Computer/
low cost airlines/
Big Bazaar (Future
Gp.)detergent/telecom
services
Uniqueness
Differentiation
Low Cost
Focused Low-Cost
Leadership
Uniqueness
Focused
Differentiation
Starbucks Coffee
Co./Café Coffee
Day/Mocha/
Pantaloon(Future Gp.)
EnterpriseRent-aCar/car for the
common people
fashion & jewellery
industry/luxury cars
Structural Implications of Porter’s
Model




Cost Leadership
Structure high in complexity (specialization,
departmentalization, tall structure), high
formalization and centralization
Differentiation Strategy
Structure low in complexity, low formalization,
decentralized decision making.
Miles and Snow’s
Strategy Typology

Prospector





Values creativity, risk-taking, and innovation
Learning orientation; flexible, fluid, decentralized structure
Strong capability in research
IT sector E.g. Microsoft, Google
Defender




Emphasis on production efficiency, low overhead
Efficiency orientation; centralized authority and tight cost control
Close supervision; little employee empowerment
A manufacturing/assembling plant (Chinese industries)
Miles and Snow’s
Strategy Typology (cont’d)

Analyzer
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
 FMCG sector
Reactor
 No clear organizational approach; design characteristics
may shift abruptly depending on current needs
 A temporary approach Eg. Xerox in 1970-80s


Organization Design outcomes of
strategy


Strategy:Differentiation
Org. design:Learning Orientation, flexibility,
strong horizontal coordination,emphasis on
R&D,customer intimacy, risk taking
Organization Design outcomes of
strategy


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
Miller
1.
2.
3.
4.


Innovation:
Market differentiation: Miles& Snow’s prospector
strategy
Breadth: product diversification of Chandler
Cost control: Porter’s cost leadership
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
Strategy-Structure Relationship

Structure follows strategy as changing structure
is a slow process