Corporate Learnings

Business Strategies
Business Strategy focus on improving the competitive position of the company or business unit’s products/ services within the specific industry or market segment that the company/ SBU serves.
Business strategy can be:
Ø Competitive
Ø Cooperative

Porter’s Competitive Strategies: Competitive strategies raise following questions:
Ø Competitive Advantage (Generic strategies): Should we compete on basis of low cost or differentiation (quality/ services).
Ø Competitive scope: Should we compete on most sought after share of market (entire) or niche.

A tactic is a specific operating plan detailing how a strategy is to be implemented in terms of :

Ø Timing tactics- When to compete
v First Movers (Pioneer)
v Late Movers (Laggards)

Ø Market location tactics- Where to compete
v Offensive Tactics: Takes place in established competitors market location. It can take place in following forms:
• Frontal assault: e.g. Nirma Vs HUL
• Flanking maneuver: e.g. Cyrix (math’s coprocessor) Vs Intel
• Bypass attack: e.g. Fruit drinks Vs Soft drinks
• Encirclement: e.g. Microsoft Vs Netscape
• Guerrilla Warfare: e.g. Ganga Vs Bisleri
v Defensive Tactics: Takes place in firm’s own market current market location as a defense against possible attack of a rival. According to Porter, defensive tactics deliberately reduce short term profitability to ensure long term profitability.

• Raise structural barriers: offer full line; enter agreement with suppliers; encourage government to raise barriers

• Increase expected retaliation: Defend territory by drastic cut in prices, sales discount, coupons; new versions

• Lower inducement for attack: Reduce challenger’s expectation of future sales/ profits.


Cooperative strategies are applied to gain competitive advantage within an industry by working with other firms. The two general types of cooperative strategies are :
Ø Collusion: It is an active cooperation of firms within an industry to reduce output and raise prices in order to get around the normal economic law of supply and demand. Collusion can be:
• Explicit: Archer Daniels Midland (lysine)-US, Japan, S. Korea
• Tacit:

Ø Strategic Alliances: It is a partnership of two or more corporation/ SBUs to achieve strategically significant objectives that are mutually beneficial. Corporations form alliances for :
ü Obtaining technology/ manufacturing capabilities: Intel-HP-Pentium micro processor
ü Obtaining access to specific markets:P&G
ü Reducing financial/ political risks: IOC-Ceylon Petroleum Corporation
ü Achieve/ insure competitive advantage: GM-Toyota

Strategic alliances can range from:
• Mutual service consortia (weak & distant): IBM- Toshiba- Siemen-Computer chips
• JV/ Licensing arrangement:
• Value Chain partnership (strong & close)

Definition:
Ø According to Fred R David,” Strategic management is the art and science of formulating, implementing and evaluating cross-functional decisions that enable an organization to achieve its objectives”.

Ø According to Wheelen & Hunger,” Strategic Management is the set of managerial decisions and actions that determine the long run performance of a corporation. It includes environmental scanning, strategic formulation, strategy implementation, evaluation and control.”

Key attributes of strategic management
Ø Analysis & Diagnosis- environment for O/T; S/W
Ø Choice- generating alternative solutions
Ø Implementation- building structure, team
Ø Evaluation- reviewing results and future possibilities.
e.g. Maytag Corporation: To improve the quality of home life by designing, building, marketing, and servicing the best appliances in the world.

Ø Mission: It is the reason or the purpose for the organization’s existence. It tells what the company is providing to the society. It can be narrow or broad. A well conceived mission statement defines the unique purpose that sets a company apart from other firms.
e.g. Google: Organize the world's information and make it universally accessible and useful.

v Mission Vs Vision: Inspiring statement of what the organization intends to become in future.
e.g.Microsoft: To enable people and businesses throughout the world to realize their full potentials.
"Vision without action is a daydream. Action without vision is a nightmare."
– Japanese proverb

Ø Objectives:They are the intended end result of the planned activity. They state what is to be accomplished by when and should be qualified, if possible. They are the closed ended statements that are quite specific (SMART).
e.g. To achieve 10% annual growth in earnings per share for the next 3 years.
v Objectives Vs Goals: While objectives are the closed ended statements that are quite specific, goals are open ended attributes that are general. Goals are general intentions; objectives are precise.
e.g. To be a market leader in premium-car segment.

Ø Strategies: The word derives from the Greek word stratēgos, which derives from two words: stratos (army) and ago (for leading). A strategy of a corporation forms a comprehensive master plan stating how the corporation will achieve its missions and objectives. It is a plan an organization formulates to maximize competitive advantage or to minimize competitive disadvantage.
e.g .Corporate strategies, business strategies, functional strategies

Ø Policy: A policy is a broad guideline for decision-making that links the formulation of strategy with its implementation. Policy statements indicates the specific regulations, requirements, or modifications to organizational behavior to support strategy and facilitate achievement of objectives.
e.g. Intel: cannibalize your product line with better products before a competitor does it to you.
e.g. GE: GE must be number one or two wherever it competes
e.g. promotion policy,

Ø Programs: A program is the statement of the activities or steps needed to accomplish a single – use plan. It makes strategy action oriented.
e.g. R&D program for continuous growth strategy
e.g. T&D (HMM) program to improve ASK in employees.
e.g. Cost Cutting Program to achieve Low cost strategy

Ø Budgets: A budget is the statement of corporation’s programs in monetary terms (rupee). Used in planning and control, a budget lists the detailed cost of each program.

Ø Procedures: Procedure, sometime termed Standard Operating Procedure (SOP), are a system of sequential steps or techniques that describe in detail how a particular task or job is to be done.
e.g. Under cost cutting program

Ø Performance: It is the end result of an activity. In organizations it is normally stated in terms of competitive advantage and above average returns.