Strategy

• Strategy is a tactical course of action which is designed

to achieve long term objectives. It is an art and science of
planning and marshalling resources for their most
efficient and effective use in a changing environment.

• Strategy of a business enterprise consists of what

management decides about the future direction and scope
of the business. It entails managerial choice among
alternative action programmes, competitive moves and
different business approaches to achieve enterprise
objectives.

• Strategy once formulated has long term implications. It is

framed by top management in an organization. In short, it
may be called as the ‘game plan of management’.
 Definition of Strategy

Strategy is unified, comprehensive and integrated plan relating

the strategic advantages of the firm to the challenges of the
environment. It is designed to ensure that the basic objectives of
the enterprise are achieved. - Glueck

Strategy is “The determination of basic long-term goals and

objectives of an enterprise and the adoption of the courses of
action and the allocation of resources necessary for carrying out
these goals.” - Alfred D. Chandler
 Features of Strategy

✓ Top management responsibility

✓ Allocation of large amount of resources
✓ Impact on long term prosperity of the firm
✓ Future oriented
✓ Consideration of factors in the external environment
 Different Levels of Strategy:

Corporate
level

Business level

Operational or functional
level
 Corporate Level:
• Top management’s overall plan for the
entire organization and its strategic
business units.
• Corporate level strategy occupies the
heights level of DECISION
MAKING.
• the nature of the decisions tends to be
value oriented, conceptual than the
Business level, and Operational or
Functional level.
 Types of Corporate Strategies:

Growth: expansion into new products and markets.

Stability: maintenance of the status of the

organization.

Renewal: redirection of the firm into new markets.

 CORPORATE LEVEL STRATERGY

• Growth Strategy
– Seeking to increase the organization’s business by
expansion into new products and markets.
• Types of Growth Strategies
– Concentration
– Vertical integration
– Horizontal integration
– Diversification
 GROWTH STRATERGIES:
• Concentration: Focusing on a primary line of business and
increasing the number of products offered or markets served.

• Vertical Integration: 1). Backward vertical

integration.
2). Forward vertical
integration.

• Horizontal Integration: Combining operations with another

competitor in the same industry to increase competitive
strengths.
• Stability Strategy: A strategy that seeks to maintain the
status with the uncertainty of the environment, when the
industry is experiencing slow- or no-growth conditions.

• Renewal Strategy: Developing strategies to counter

organization weaknesses that are leading to performance
declines.
 Business-Level Strategy

• Business-level strategy is more likely related to a unit within

the whole. It is concerned with competition in a market.
• The concerns are about what products or services should be
developed and offered to which markets in order to meet
customer needs and organizational objectives.
• At this level, multifunctional strategies developed at corporate
level are formulated and implemented for specific product
market in which the business operates. Thus, managers at this
level translate general directions and intent into concrete
functional objectives.
• Decisions at this level include policies involving new
product development, marketing mix, research &
development, personnel, etc.
 Business-Level Strategies(cont’d)

• Cost leadership: Attaining, then using the lowest total cost

basis as a competitive advantage.

• Differentiation: Using product features or services to

distinguish the firm’s offerings from its competitors.

• Market focus: Concentrating competitively on

a specific market segment.
 Functional/Operational-Level Strategy
• Functional strategy involves decision-making with respect to
specific functional areas- production, marketing, personnel, finance
etc.
• While corporate and business level strategies are concerned with
“Doing the right things”, functional strategies stress on “Doing
things right”.
• Operating level strategy is concerned with strategic approaches for
managing frontline operating units(like plants, sales, etc) and for
handling day to day tasks of strategic significance(like
advertising campaign, purchasing materials, inventory control,
maintenance, etc.). Thus, it focuses on how the different functions
of the enterprise contribute to the other levels of strategy.
• Thus, functional level strategic management is the management of
relatively narrow areas of activity, which are of vital, pervasive or
continuing importance to the total organization.
Example-
Growth
a. Nirma Ltd. started from a very small company and today it is a
famous detergent powder.
b. Reliance Industry Ltd. started from textile products to petroleum
industry, telecommunication, Reliance media work and various other
fields.
c. TISCO establish in 1907 is still the leader in steel sector.
Stability
a. Steel Authority of India has adopted stability strategy because of
overcapacity in steel sector. Instead it has concentrated on increasing
operational efficiency of its various plants rather than going for
expansion.
b. NTPC and ONGC have also adopted stability strategy instead of
expansion.
c. Bata also comes under stable strategy following company.
Retrenchment
✓ Vijay Mallya-promoted Kingfisher Airlines slashed salaries of
its 50 trainee co-pilots as it charted ways to overcome the
ongoing financial turbulence in the aviation industry.
✓ Cutting down around 15000 employes by Air India is an
example of retrenchment strategy.

✓ The Times Company sold about 92 percent of its stake in

TheStreet.com, the financial news and analysis site, for $3.2
million.

✓ Companies like General Motors, Bajaj Auto Mahindra and

Mahindra have pursued retrenchment strategy.
1.2 Introduction to Strategic Management
 Strategic Management
• Strategic management is a set of management decisions and actions that
determines the long-run performance of a corporation. It includes
environmental scanning, strategy formulation, strategy implementation and
evaluation and control to achieve the objectives of an organization.
• The study of strategic management emphasizes the monitoring and
evaluating of external opportunities and threats in light of a corporation’s
strengths and weaknesses.
• As per Fred R. David, strategic management is an art and science of
formulating, implementing and evaluating cross functional decisions that
enable an organization to achieve its objectives.
• As per Channon, strategic management is defined as that set of decisions
and actions that result in formulating of strategy an its implementation to
achieve the objectives of the corporation.
Characteristics of Strategic Management

✓ Strategic issues require top-management decisions

✓ Strategic decisions overarch several areas of a firm’s
operations
✓ Usually only top management has the perspective needed
to understand their broad implications
✓ Usually only top managers have the power to authorize
necessary resource allocations
 Strategic issues require large amounts of the firm’s
resources
 They involve substantial allocations of people, physical
assets, and money
 Strategic decisions commit the firm to actions over an
extended period
 In highly competitive firms, achieving and maintaining
customer satisfaction frequently involves commitment from
every facet of the firm
 Strategic issues often affect the firm’s long-term
prosperity
 Strategic decisions commit the firm for a long time,
typically 5 years; however the impact lasts much longer
 Once a firm has committed itself to a strategy, its image and
competitive advantages are usually tied to that strategy
 Firms become known for what they do and where they
compete.
 Strategic issues are future-oriented
 They are based on what managers forecast, rather than what
they know
 Emphasis is on the development of solid projections that
will enable a firm to seek the most promising strategic
options
 A firm will succeed only if it takes a proactive (anticipatory)
stance toward change
 Strategic issues usually have multifunctional or multi-
business consequences.
 Strategic decisions have complex implications for most
areas of the firm
 Decisions about customer mix, competitive emphasis, or
organizational structure involve a number of the firm’s
divisions, or program units.
• Strategic issues require considering the firm’s
external environment
– All businesses exist in an open system. They affect and are
affected by external conditions that are largely beyond their
control
– Successful positioning requires that strategic managers
look beyond operations and consider what relevant others
are likely to do
 Question # 1
Stability strategy is a _________ Strategy
a) Corporate
b) Business
c) Functional

Answer: Corporate
 Question # 2
Marketing Strategy is _________ Strategy
a) Corporate
b) Business
c) Functional

Answer: Functional
 Question#3
A group of managers is considering pricing strategy
and differentiation. At which level of strategy are the
managers most likely to be working?
a) Corporate level
b) Business level
c) Mission and vision

Answer: Business Level

 Question # 4
Face book acquisition of instagram
a) Vertical Integration
b) Horizontal Integration

Answer: Horizontal Integration

 Question # 5
Nirma follow which strategy
a) Low Cost
b) Retrenchment
c) Diversification

Answer : Low Cost

Strategic Management Vs Operational Management
Strategic Management:
❑ Long Range planning for a period possibly 3 or more years
❑ Top management responsibility
❑ Decisions Under uncertain and complex conditions
❑ Organisation wide Implication
❑ Increased Risk factor
❑ Example: Plant Expansion, Diversification etc.

Operational Management:
❑ Short Range planning for a period less than 1years
❑ These are daily routine affairs tackled by the Middle Management
❑ Functional Level Implications
❑ Risk factor is segregated in different functions like HR, Marketing
etc.
❑ Example: Ad Campaign, Production Planning, Recruitment Plan etc.
1.3 Four Phases in Strategic
Management Process
Four Phases in Strategic Management Process

Identifying / Defining Business Strategic Intent

Mission, Purpose & Objective.

Environmental Analysis
Strategy
Formulation
Revise Organizational Direction

Alternative Strategic Choice.

Strategy Implementation

Strategic Evaluation & Control

 Step 1: Strategic Intent
Vision- Vision is the statement that expresses organization’s ultimate
long-run objectives. It is what the firm ultimately like to become.
Vision once formulated is for forever and long lasting for years to
come. Vision is closely related with strategic intent and is a forward
thinking process. Eg- Microsoft- ’A computer software on every
desk and in every home’.

Mission- It tells who we are and what we do as well as what we’d like
to become. Mission of a business is the fundamental, unique purpose
that sets it apart from other firms of its kind and identifies the scope of
its operations in product and market terms. Eg- Microsoft- ‘Empower
every person and every organization on the planet to achieve
more’.

Objectives- These are the end results of planned activity that state
what is to be accomplished by when and should be quantified if
possible and their achievement should result in the fulfillment of a
corporation’s mission. Objectives state specifically how the goals shall
be achieved. Following are the areas for setting objectives- profit
objective, marketing objective, production objective, etc.
 Strategy Formulation
Strategy formulation refers to the process of choosing the most appropriate
course of action for the realization of organizational goals and objectives and
thereby achieving the organizational vision. For choosing most appropriate
course of action, appraisal of organization and environmental is done with the
help of SWOT analysis.
• Environmental Appraisal- The environment of any organization is "the
aggregate of all conditions, events and influences that surround and affect
it". It is dynamic and consists of External & Internal Environment . The
external environment includes all the factors outside the organization which
provide opportunities or pose threats to the organization. The internal
environment refers to all the factors within an organization which impart
strengths or cause weaknesses of a strategic nature.
• Organizational Appraisal- It is the process of observing an
organizational internal environment to identify the strengths and
weaknesses that may influence the organization's ability to achieve
goals. The analysis of corporate capabilities and weaknesses becomes a
pre-requisite for successful formulation and reformulation of corporate
strategies. This analysis can be done at various levels: functional, divisional
and corporate.
 Strategy Implementation
Strategy implementation is the action stage of strategic management. It
refers to decisions that are made to install new strategy or reinforce
existing strategy.
• Designing structure, process & system- Strategy implementation
includes the making of decisions with regard to organizational
structure, developing budgets, programs and procedures in order to
accomplish certain activities.
• Functional Implementation- Functional implementation is
carried out through functional plan and policies in
five different areas- marketing, finance, operation, personnel and
Information management.
• Behavioral Implementation- It denotes mobilizing employees and
managers to put and formulate strategies into action and require
personal discipline, commitment and sacrifice. It depends upon
manager’s ability to motivate employees.
• Operationalizing strategy- It includes establishing annual
objectives, policies, and allocating resources.
 Strategy Evaluation & Control
• Strategy evaluation- It is the primary means to know when
and why particular strategies are not working well. It is the
process in which corporate activities and performance results
are monitored so that actual performance can be compared
with desired performance. Thus strategic evaluation activities
include reviewing external and internal factors that are the
basis for current strategies.
• Strategic control- In this step, organizations Determine what
to control i.e., which objectives the organization hopes to
accomplish, set control standards, measure performance,
Compare the actual with the standard, determine the reasons
for the deviations and finally taking corrective actions and
review the policies and activities if needed.
Stakeholders in business and their Roles in Strategic
Management
“Stake Holder is a person with an Interest or concern in
something.” – Bisset

A Stake holder in an Organisation is any group or Individual

who can affect or is affected by the achievement of the
Organisation’s Objective.
– R. Edward Freeman
Classification of Stakeholders:
❑ Capital Market Stakeholder ( Shareholders)
❑ Product Market Stakeholder (Customers, Suppliers,
Dealers)
❑ Organisational Stakeholders (Owner, Employees)
• Owners
A business may be owned by a single individual (a sole trader), partners or by a
group of shareholders forming a company.
• Role of Owners
They must provide the resources that are required for the business to operate
efficiently. These include the employment of workers, identifying suitable premise
and procuring machinery, equipment and raw materials. They must make timely
decisions to ensure that the business remains profitable. They must motivate
employees to perform well.

• Employees
They are employed to carry out assigned tasks to achieve the company’s
objectives.
• Role of Employees
Employees must work efficiently to accomplish tasks
assigned. Accomplishing tasks may require teamwork and therefore
employees must have good interpersonal skills. Employees must adhere to the
rules and relations of the company
• Customers
They are the supporters of businesses in the economy. They purchase goods
and services to satisfy their needs and wants.
• Role of Customers
They assist businesses in identifying the goods and services to be produced
based on their demands. They also help business to identify changing trends in
the market and so prepare business operators for future demands.

• Society
Businesses must be aware of the society as a whole, how its activities affect it
and not only those who are customers.
• Role of Society
The production process may cause air pollution and discharge of harmful
waste into rivers and seas. The society keeps businesses in check by making
them aware of their impact on society. They write letters to the company and
the media and speak on talk shows
• Government
They are the managers of the economy within which the business operates.
• Role of Government
Regulate business activities to protect consumers. Government agencies ensure
product standards as well as that various legislations are adhered to ensure the
protection of consumers’ rights.
1.4 Hierarchy of Strategic Intent
 Evolution of concept
Some sixteen years ago Grey Hamel & C.K. Prahalad at London
Business School wrote the concept of “Strategic Intent” referring
to context that how western companies operates differently than
their Japanese counterparts

The strategic intent notion helps managers focus on creating new

capabilities to exploit future opportunities. It is more internally
focused than the fit notion.
“A long term goal that captures employees’
imaginations and clarifies criteria for
success.”
 Strategic Intent
• It refers to purpose for what organization strives for.
Organization must define “what they want to do” ,
“why they want to do”.
• This “why they want to do” underlines the end result
and in management terms it is known as strategic intent

• Strategic Intent has a hierarchy: Vision, Mission,

Goals and Objectives
 Attributes
• Sense of Direction includes an understanding about the long-term
market or competitive position that a firm aims to build over the
next decade. Your sense of direction should be a view of the future
that conveys a unifying and personalizing sense of direction.

• Sense of Discovery. Your strategic intent should retain a sense of

discovery and excitement about the future. This helps create a
competitively unique outlook and gives employees the opportunity
to explore new competitive territory.

• Sense of Destiny. Strategic intent has an emotional edge to it and it

should be a goal that both you and your employees perceive as
inherently worthwhile
• Strategic intent is a high-level statement of the means by
which your organization will achieve its vision. It is a
statement of design for creating a desirable future (stated in
present terms). Simply, a strategic intent is a company's vision
of what it wants to achieve in the long term.

• “An ambitious and compelling dream which provides

emotional and intellectual energy for the company and defines
the journey to the future.”( Gary Hamel)
Strategic Management Process consist of ____
phases
a) 5
b) 4
c) 3
d) 6
What are the attribute of Strategic Intent
a) Sense of Direction
b) Sense of Discovery
c) Sense of Destiny
d) All
Who gave the concept of strategic intent

a) Grey Hamel & C.K. Prahalad

b) Abell
c) Mc Kinsey
d) Mintzberg
Choose the correct sequence of strategic intent
a) Vision, Mission, Plan, Objective, Goal
b) Vision, Mission, Goal, Plan, Objective
c) Vision, Mission, Goal, Objective, Plan
A computer software on every desk and in every
home’ is vision statement of which organization
a) IBM
b) Microsoft
c) HP
Strategic Vision

Vision: The starting

point of creating
value

72
Vision statement provides direction and inspiration for
organizational goal setting.

Vision is where you see your self at the end of the horizon OR
milestone therein. It is a single statement dream OR aspiration.
Typically a vision has the flavors of 'Being Most admired',
'Among the top league', 'Being known for innovation', 'being
largest and greatest' and so on.
Vision Examples

To be India’s foremost tea based

beverage company ( TATA Tea)

We help people around the world

meet everyday needs for
nutrition, hygiene and wellbeing,
with brands that help people look
good, feel good and get more out
of life. (HUL)
 Vision (contd.)

McDonald's vision is to be the world's best

quick service restaurant experience. Being the
best means providing outstanding quality,
service, cleanliness, and value, so that we make
every customer in every restaurant smile.

“Our vision is to be earth’s most customer

centric company; to build a place where people
can come to find and discover anything they
might want to buy online.”( Amazon)
 Vision (contd.)

Develop into a top rate, nimble footed banking

institution committed to excellence in services
to its customers, enhancing stakeholder’s value
though care and competence and fulfilling
obligations to the community at large. (SBI)
 Features of good vision
• It should be idealistic( should be realistic)
• Good vision clarifies the direction
• Good vision encourages the org. members commitment from
them
• Good vision reflects uniqueness of org. ,its distinct competence,
what it stands for and what it is able to achieve.
• Good vision is consistent with org values and culture
• Good vision is easily understood by those who are responsible
to convert it into reality
 A concise, internally focused statement of the reason for
the organization’s existence, the basic purpose towards its
activities are directed, and the value that guides
employee’s activities
 Precise description of what an organization does
 Describe “why” the organization exists currently
 Characteristics of a Mission Statement
 Identifies the boundaries of the current business
and highlights
◦ Present products and services
◦ Types of customers served
◦ Geographic coverage
 Conveys
◦ Who we are,
◦ What we do, and
◦ Why we are here

A well-conceived mission statement distinguishes a company’s business

makeup from that of other profit-seeking enterprises in language specific
enough to give the company its own identify!
 Strategic Vision vs. Mission
• A strategic vision concerns • The mission statement
a firm’s future business of a firm focuses on its
path - “where present business purpose
we are going” - “who we are and what
– Markets to be pursued we do”
– Future product/market/ – Current product and
customer/technology focus service offerings
– Kind of company – Customer needs being
management is served
trying to create – Technological
and business
capabilities
 Key Elements of a Mission Statement
• Three factors need to be identified
for completeness
– Customer needs being met
What is being satisfied
– Customer groups or markets being served
Who is being satisfied
– What the organization does (in terms of business
approaches, technologies used, and activities performed)
to satisfy the target needs of the target customer groups
How customer needs are satisfied

A company’s mission is not to make a profit! Its true mission is its

answer to “What will we do to make a profit?” Making is profit is
an objective or intended outcome!
(a) Achieve market and thought
leadership for branded tea in India
(b) Be recognized as the foremost
innovator in tea and tea based beverage
solutions
(c) Drive long-term profitable Growth
(d) Co-create enhanced value for all
stakeholder
(e) Make Tata Tea a great place to work (
TATA Tea)
(a) Be the best employer for our people in each community around the
world,
(b) Deliver operational excellence to our customers in each of our
restaurants; and
(c) Achieve enduring profitable growth by expanding the brand and
leveraging the strengths of the McDonald's system through innovation
and technology.(McDonald)
(a) Attain high standards of efficiency and professionalism and
core institutional values comparable to the best in the field.
(b) Possess world-class standards of efficiency and
professionalism rooted in the core institutional values of the
State Bank Group.
(c) To be a committed, caring and responsible corporate citizen
(d) To provide a satisfying work environment with opportunities
for learning, self-development and self-actualization. (SBI)

The mission of The Walt Disney Company is to

be one of the world's leading producers and
providers of entertainment and information.
Using our portfolio of brands to differentiate
our content, services and consumer products,
we seek to develop the most creative,
innovative and profitable entertainment
experiences and related products in the world.
Vision is the starting point of creating value
a) True
b) False
Mission Identifies the ______of the current
business.
What are the Elements of a Mission
Statement
a) What is being satisfied
b) Who is being satisfied
c) How customer needs are satisfied
d) All
e) None
 Business Definition:
Business Definition is a part of Mission statement. It is a
description of the products, Activities or functions & markets that
the firm presently pursues.
Following considerations are required while defining a
Business:
✓Customer Needs or What is being satisfied
✓Customer groups or who is being satisfied
✓The technologies used & Functions performed – How
customers needs are satisfied.

Broad and Narrow Business Definitions:

Broad Business Definitions Narrow Business Definitions

1. Beverages 1. Soft Drinks

2. Footwear 2. Women Footwear
3. Furniture 3. Office Furniture
Business Definition using Abell’s three
dimensions:
• Derek Abell, in a path breaking analysis, suggests
defining a business along the three dimensions of
– customer group,
• Customer groups relate to ‘who’ is being satisfied
– customer function,
• customer needs describe ‘what’ is being satisfied
– alternative technologies.
• alternative technology means ‘how’ the need is being satisfied.
 Abells’ three Dimension for Defining the
business of a watch company
Customer Function:
Utility/ Ornamental

Alternative Technologies
Mechanical/ Quartz
technology

Customer Groups
Children , men or
women
 Unit 1 Cont…

Definition:
Objectives and Goals:
Goals denote what an organisation hopes to accomplish in a
future period of time. Objectives are the ends that states
specifically that how goals shall be achieved.
Characteristics of Objectives:
✓Understandable
✓Concrete and Specific
✓Related to Time Frame
✓Measurable and Controllable
✓Challenging
✓Different objectives should correlate with each
other.
✓Objectives should be set within constraints.
Examples of goals/objectives
Hierarchy of objectives
 Objectives
Objectives can be classified on the basis of time and level
1. Strategic objectives are achievable in the long-term, and
involve sizeable capital costs. They are not easily reversible
2. Tactical objectives involve a medium-range time frame
EX.6–18 months
3. Operational objectives are those which relate more to the
day-to-day operations of a firm
4. Individual performance targets are derived from
operational tasks. EX. process or a person in an operation
CRITICAL SUCCESS FACTOR
 Critical Success Factor (CSF) analysis

Critical success factors are the limited number of

areas in which satisfactory results will ensure
competitive performance for the individual,
department or organisation.

CSFs include issues vital to an organisation’s

current operating activities and to its future success.

96
 CSF
• Critical Success Factor (CSF) is the term for an
element that is necessary for an organization or
project to achieve its mission

• It is a critical factor or activity required for

ensuring the success of your business.

• The term was initially used in the world of data

analysis, and business analysis.

• For example, a CSF for a successful IT project

is user involvement.

97
 Following CSF should be considered
• Intellectual capital: Create assets from the
tools you make to run your business.
• Strategic relationships: New sources of
business, products and outside revenue.
• Employee attraction and retention: Your
ability to find, train, and keep employees and
to let go employees that are not a good fit.
• Sustainability: Your personal ability to keep
it all going.

98
Critical success factor analysis

99
Hierarchical nature of CSF’s

100
Key Performance Indicators
 KPI
'Key Performance Indicators - KPI‘

• A set of quantifiable measures that a company

or industry uses to gauge or compare
performance in terms of meeting their
strategic and operational goals.
• KPIs vary between companies and industries,
depending on their priorities or performance
criteria. Also referred to as "key success
indicators (KSI)".
 • KPIs are directly linked to the overall goals of
the company.

• KPIs are measurements that define and track

specific business goals and objectives.

Key Success Key Performance

Business
Factors (KSFs) Indicators (KPIs)
Objectives Tracked by.
Determine.
• The larger or smaller organizational strategies
require monitoring, improvement, and
evaluation.

• Once an organization has analyzed its mission,

identified all its stakeholders, and defined its
goals, it needs a way to measure progress
toward those goals.

• KPIs are utilized to track or measure actual

performance against key success factors.
• Key Success Factors (KSFs) only change if
there is a fundamental shift in business
objectives.

• Key Performance Indicators (KPIs) change as

objectives are met, or management focus shifts.
 Why Use KPI’s

• Performance effectiveness.

• For the accuracy, actual reflection of the

process, efficacy in delivering the outcome.

• The effects of a change can be monitored

reliably, repeatedly and accurately by KPI.
• A KPI can be used to closely monitor the
results of actions.

• Detect potential problems and it can drive

improvement.

• It is reasonable to use the KPI as a tool to

improve ongoing process performance.
 How to design KPI’s
• KPIs should be clearly linked to the strategy, i.e. the
things that matter the most.

• KPIs have to provide the answers to our most

important questions.

• KPIs should be primarily designed to empower

employees and provide them with the relevant
information to learn.
• Finance performance
– Maintenance cost/unit
– Return on investment (ROI)(in maintenance term)
• Process perspective
– Overall equipment effectiveness (OEE)
• Customer satisfaction
– Number of complaints
– Customer satisfaction (Value for money- feedback etc.)
• Innovation and development
– Number of new ideas generated
– Skill and Competency development/training
• Concern for employee and society
– Number of accidents/casualty
– Number of health, safety and environment (HSE) complaints
received or raised by regulating authority
– Employee complaints
KRA
 WHAT IS KRA ?

“Key Result Areas” or KRAs refer to general areas of

outputs or outcomes for which the department’s role is
responsible.

Key Result Area in simple Terms may be defined as

Primary responsibilities of an Individual, the core area
which each person is accountable for.

Key Results Areas enables you to take ownership of your job

and to accept responsibility for those areas in which achieving
results are your responsibility.
 'Key Result Areas' are an institution's general topic of
action in its strategic plan; within each Key Result
Area, there are 'objectives'—the specific areas of
action—and 'strategies'—the detailed activities that
implement those areas of action"
Importance of KRAs.

• Set goals and objectives

• Prioritize their activities, and therefore improve their time/work

management

• Clarify roles of department or individual

• Focus on results rather than activities

• Align their roles to the organization’s business or strategic plan

• Promote an environment of self-management.

 Thank You

Thank You
1
1
4
Analyzing Company’s External
Environment
 Analysing Company’s External Environment

Environment:
Environment literally means the surroundings, external objects, influences or
circumstances under which someone or something exists. The environment of any
organisation is “the aggregate of all conditions, events and influences that surround
and affect it”.

Characteristics of Environment:

✓ Environment is complex
✓ Environment is Dynamic
✓ Environment is multifaceted
✓ Environment has a far reaching impact

Components of Environment:

✓ External Factors
✓ Internal Factors
External & Internal Environment
The external environment includes all the factors outside the
organisation which provide opportunities or pose threats to the organisation.

Internal Environment refers to all the factors within an organisation

which impart strengths or cause weaknesses of strategic nature.

An understanding of the external environment in terms of opportunities

& threats and the internal environment in terms of strength & weaknesses is
crucial for the existence, growth and profitability of any organisation.

A systematic approach to understanding the environment is the SWOT

analysis.
An effective organisational strategy is one that capitalizes on the
opportunities through the use of strengths and neutralises the threats by
minimising the impact of weaknesses.
Internal Environment
✓ Strength
✓ Weakness

External Environment
✓ Opportunity
✓ Threat
 Environment of the Firm
Macro Environment

Industry Environment
Potential
Technology Entrants Economic

Substitute Competitive
Products Rivalry

Bargaining Power Bargaining Power

Political of Suppliers of Buyers
& Legal Demographic

Sociocultural
 Environmental Sectors
✓ Technology
✓ Demographics
✓ Socioculture
✓ Demographic
✓ Economic
 Technological Forces
Changes in technology that affect the workplace,
and the products and services consumers expect
– e.g., Information technologies, entertainment
technologies, product technologies.
 Political/Legal Forces
Tax laws, minimum wages, environmental laws,
labor laws, consumer protection, product
liability, etc.
 Sociocultural Forces
Attitudes of society towards work, careers, products,
services and consumer activism.
– e.g., concern for quality of life, birth rates, woman in the
work force, health consciousness, respect for intellectual
property.
 Demographic Forces
Characteristics of the population
– e.g., age, race, gender, sexual orientation and social classes
Domestically - falling birth rates, falling death rates,
Internationally – birth rates are increasing in some of
the poorest (and most underserved) populations of the
world.
 Economic Forces
General health/wellbeing of the local, regional, national
or global economy.
– e.g., Interest rates, unemployment rates, consumer
spending, confidence and savings, personal disposable
income.
 SWOT Analysis
✓ Evolved during 1960s at Standford Research
Institute
✓ To know internal & external environment
✓ Acronym- Strength, Weakness, opportunity &
threats
The purpose of SWOT Analysis

It is an easy-to-use tool for developing an overview

of a company’s strategic situation
– It forms a basis for matching your company’s strategy
to its situation
 Opportunities

• An OPPORTUNITY is a chance for firm growth

or progress due to a favorable juncture of
circumstances in the business environment.
• Possible Opportunities:
– Emerging customer needs
– Quality Improvements
– Expanding global markets
– Vertical Integration
 Threats

• A THREAT is a factor in your company’s external

environment that poses a danger to its well-being.
• Possible Threats:
– New entry by competitors
– Changing demographics/shifting demand
– Emergence of cheaper technologies
– Regulatory requirements
 ETOP

• Environmental threat and opportunity profile is referred as

ETOP profile.
• It identifies the relevant environmental factors.
• Such factors might be general environmental factors and task
environment factors. Thereafter, it is necessary to identify their
nature.
• Some factors are positive to the organization whereas others are
negative. Therefore, it is necessary to find out their impact to
the organization.
• Positive, neutral, and negative sign in ETOP denotes the
relevant impact of environmental factors.
 Importance of ETOP
• Preparation of ETOP provides a clear picture to the
strategist of which sectors (and the different factors in
each sectors) have a favorable impact on the
organization.
• By means of ETOP an organization can see where it
stands with respect to its environment.
• Such understanding can be of great help to the
organization in aligning its strategies.
Opportunities and Threats form a basis for
EXTERNAL analysis

• By examining opportunities, you can discover

untapped markets, and new products or
technologies, or identify potential avenues for
diversification.
• By examining threats, you can identify unfavorable
market shifts or changes in technology, and create a
defensive posture aimed at preserving your
competitive position.
PORTERS FIVE FORCES MODEL
 The purpose of Five-Forces Analysis

• The five forces are environmental forces that

impact on a company’s ability to compete in a
given market.
• The purpose of five-forces analysis is to diagnose
the principal competitive pressures in a market
and assess how strong and important each one is.
 Porter’s Five Forces
Model of Competition
Threat of
Threat
New of New
Entrants
Entrants

Bargaining Bargaining
Power of Rivalry Among Competing Power of Buyers
Suppliers Firms in Industry

Threat of
Substitute
Products
 Porter’s Five Forces
Model of Competition
Threat of
Threat
New of New
Entrants
Entrants

If new entrants move into an industry they will gain market share &
rivalry will intensify. The position of existing firms is stronger if there
are barriers to entering the market. If barriers to entry are low then the
threat of new entrants will be high, and vice versa. Barriers to entry
are, therefore, very important in determining the threat of new
entrants. An industry can have one or more barriers.
 Porter’s Five Forces
Model of Competition

If a firm's suppliers have bargaining power

they will:

Bargaining Exercise that power

Power of Sell their products at a higher price
Suppliers Squeeze industry profits
If the supplier forces up the price paid for
inputs, profits will be reduced.
 Porter’s Five Forces
Model of Competition

Powerful customers are able to exert

pressure to drive down prices, or Bargaining
increase the required quality for the Power of
same price, and therefore reduce Buyers

profits in an industry.
 Threat of Substitute Products
Keys to evaluate substitute products:

Products with Products with improving

similar price/performance tradeoffs
function limit relative to present industry
the prices products
firms can
charge Example:

Electronic security systems in

place of security guards
Fax machines in place of
overnight mail delivery
 Rivalry Among Existing Competitors

Cutthroat competition is more likely to occur when:

Numerous or equally balanced competitors
Slow growth industry
High fixed costs
High storage costs
Lack of differentiation or switching costs

Diverse competitors

High exit barriers

 Competitor Analysis

The follow-up to Industry Analysis is

effective analysis of a firm’s Competitors

Industry Environment

Competitive
Environment
 Competitor Analysis
Assumptions
What assumptions do our competitors hold
about the future of industry and
themselves? Response
What will our competitors do
in the future?
Current Strategy
Does our current strategy support changes in
the competitive environment?
Where do we have a
competitive advantage?

Future Objectives
How do our goals compare to our competitors’ How will this change our
goals? relationship with our
competition?

Capabilities
How do our capabilities compare to our
competitors?
 Competitor Analysis
Future Objectives What Drives the competitor?
How do our goals compare
to our competitors’ goals?
Where will emphasis be
placed in the future?
What is the attitude
toward risk?
 Competitor Analysis
Future Objectives What is the competitor doing?
How do our goals compare What can the competitor do?
to our competitors’ goals?
Current
Where will emphasisStrategy
be
placed inHow
the future?
are we currently
What is the attitude
competing?
toward risk?
Does this strategy support
changes in the
competitive structure?
 Competitor Analysis
Future Objectives What does the competitor believe about itself
and the industry?
How do our goals compare
to our competitors’ goals?
Current
Where will emphasisStrategy
be
placed in the future?
How are we currently
What is the attitude
competing?
toward risk? Assumptions
Does thisDo
strategy support
we assume the future
changes in
willthe
be volatile?
competition
What structure?
assumptions do our
competitors hold about the
industry and themselves?
Are we assuming stable
competitive conditions?
 Competitor Analysis
Future Objectives What are the competitor’s
capabilities?
How do our goals compare
to our competitors’ goals?
Current
Where will emphasisStrategy
be
placed in the future?
How are we currently
What is the attitude
competing?
toward risk? Assumptions
Does this
Dostrategy support
we assume the future
changeswill
in the
be volatile?
competition
Whatstructure?
assumptions do our
competitorsCapabilities
hold about the
industry and themselves?
What are my competitors’
Are we operating under a
strengths and weaknesses?
status quo?
How do our capabilities
compare to our
competitors?
 Competitor Analysis
Future Objectives Response
How do our goals compare What will our competitors
to our competitors’ goals? do in the future?
Current
Where will emphasisStrategy
be Where do we have a
placed in the future? competitive advantage?
How are we currently
What is the attitude
competing? How will this change our
toward risk? Assumptions relationship with our
Does this
Dostrategy support
we assume the future competition?
changeswill
in the
be volatile?
competition
Whatstructure?
assumptions do our
competitorsCapabilities
hold about the
industry and themselves?
What are my competitors’
Are we operating under a
strengths and weaknesses?
status quo?
How do our capabilities
compare to our
competitors?
 Strategic Group Analysis
• A sets of firms that emphasize similar strategic dimensions &
use a similar strategy is called a Strategic Group. The intra
strategic group competition is more intense than is inter
strategic group.
• The extent of technological leadership, product quality, pricing
policies, distribution channels & customer services are example
of strategic dimensions that firms in a strategic group may treat
similarly.
• The notion of strategic groups can be useful for analyzing an
industry's competitive structure. Such analyses can be useful in
diagnosing competition, positioning &profitability of firm within
the industry.
Industry Analysis: Strategic Groups
• Implications
– Because firms within a group compete (offer similar
products) rivalry can be intense – the greater the rivalry
the greater the threat to each firm’s profitability
– Strengths of the 5 forces can differ across strategic groups
– The closer the strategic groups, in terms of strategy, the
greater the likelihood of rivalry

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