Strategy

➢ An action a company takes to attain superior performance

➢ Anything that a firm does especially well compared to rival firms
➢ Means by which long-term objectives are achieved
➢ A comprehensive action plan that identifies long-term direction for an
organization and guides resource utilization to accomplish organizational
goals with sustainable competitive advantage.
➢ Competitive advantage — operating with an attribute or set of attributes
that allows an organization to outperform its rivals.
Levels of strategy
Three levels of strategy
Strategic Business Unit (SBU)
Corporate strategy

➢ A corporate strategy is a long-term plan that outlines clear goals for a

company
➢ While the objective of each goal may differ, the ultimate purpose of a
corporate strategy is to improve the company
➢ Designed with an objective to gain a competitive advantage over other
market participants while delivering both on customer/client and stakeholder
promises (i.e. shareholder value).
Focus of corporate strategy

➢ Overall development of vision and mission

➢ Firm’s growth/expansion strategy
➢ Vertical growth (Forward and Backward integration)
➢ Horizontal growth (Related and Unrelated diversification)
➢ Firm’s retrenchment strategy
➢ Turnaround
➢ Divestment
➢ Liquidation
➢ Firm’s portfolio analysis
➢ Profitable SBU’s are retained and poor SBU’s are retrenched
Vision : To become the world’s most loved, most flown, and most
profitable airline

Mission : The mission of Southwest Airlines is dedication to the

highest quality of customer service delivered with a sense of
warmth, friendliness, individual pride, and company spirit.

Company Profile: by Bikash Shrestha

Vision: To be the undisputed leader in world travel for the next
millennium.
Mission: To ensure our customers fly confidently that together,
we are acting responsibly (arriving and departing at scheduled
time) to take care of the world we live in

Company Profile: by Bikash Shrestha

Company Profile: by Bikash Shrestha
The company's mission is to manage the concerned air transport
service inside or outside the Kingdom of Nepal in a safe, efficient,
well-managed, economical and proper manner.

Company Profile: by Bikash Shrestha

 Vision
Vision of Nepal Telecom is to remain a
dominant player in telecommunication
sector in the country while also extending
reliable and cost-effective services to all.

Mission
Nepal Telecom, as a progressive,
customer-spirited and consumer-
responsive entity, is committed to provide
nationwide reliable telecommunication
service to serve as an impetus to the
social, political and economic
development of the country.

Company Profile: by Bikash Shrestha

Vision: Why do we do?

➢ A vision statement is a short description of an organization’s

aspirations and the wider impact it aims to create
➢ A Vision Statement describes the desired future position of the
company
➢ What are visionary organizations?
➢ Similar to designing & building a home
➢ Begin with the end in mind

Company Profile: by Bikash Shrestha

Mission: what and how do we do?

➢ A mission statement is a short summary of an organization’s

core purpose, focus, and aims.
➢ A mission statement defines the company's business, its
objectives and its approach to reach those objectives
➢ More specific than vision
➢ Communicates public image, who we are; what we do; what
we aspire to?

Company Profile: by Bikash Shrestha

Vision vs. Mission

Vision Mission
A business mission focuses
A strategic vision concerns a
on current business
firm's future business path.
activities.

The kind of company it is Business or company is as of

trying to become. now.

Customer’s needs to be Customer needs currently

satisfied in the future. being served.
Firm’s growth

➢ Firm growth occurs when firms increase their size, usually measured in terms
of market, product, penetration, sales, employment, profits etc.
➢ Firm growth may involve replication or diversification into new markets, and
can occur through internal or external expansion
Firm’s growth

➢ Firms grow in order to achieve their objectives, including increasing sales,

maximizing profits or increasing market share through
➢ Internal expansion (Organic growth): To grow organically through new
product and service development through company’s own initiation
➢ External expansion (Inorganic growth): Firms integrate through mergers,
where there is a mutual agreement, or through acquisitions, where one firm
purchases shares in another firm, with or without agreement or through
strategic alliances
External growth
Growth integration
 Growth integration
➢ Vertical integration is an expansion strategy where a company takes control over one
or more stages in the production or distribution of its products through either internal
or external expansion
➢ Horizontal integration is an expansion strategy that involves the acquisition of
another company in the same business line either through internal or external
expansion
Retrenchment strategy

➢ Profitable and growing SBUs or firms are invested for growth

➢ Non profitable and poor performing SBUs or firms are retrenched
➢ Typically retrenchment strategy involves withdrawing from certain markets or
the discontinuation of selling certain products or service
➢ This strategy is often used in order to cut expenses with the goal of becoming
a more financial stable business
Retrenchment strategy
Divestment strategy

➢ The divestment is the opposite of investment; wherein the firm sells the
portion of the business or a major division or SBU to realize cash and pay off
its debt and allocate its resources to a more profitable one
Liquidation strategy

➢ A strategy of closing down a company and selling all of a company’s assets

for their tangible worth to pay their creditors
➢ Also known as the strategy of bankruptcy
Outcome of liquidation/bankruptcy
➢ The business closes its door
➢ Investors loose their money
➢ Employees loose their jobs
➢ Managers loose their credibility
➢ E.g. Annapurna hotel, TATA recently liquidated its Nano car Plant
Turnaround strategy

➢ Before divestment and/or liquidation, Company tries to turn around such non
profitable or poor performing SBUs or firms
➢ Turnaround strategy means to convert, change or transform a loss-making
company into a profit-making company
➢ If a turnaround strategy is not applied to a sick company, it will close down
➢ It is a remedy for curing industrial sickness
Turnaround strategy: Example

➢ FedEx was founded in 1971 by Frederick Smith with $4 million of inheritance

money
➢ Smith first proposed the idea behind FedEx at Yale University, for which he
earned a C.
➢ During the first two years in business, the company accumulated enormous
amounts of debt due to rising fuel prices and was at the edge of bankruptcy
➢ By 1974, Smith had only $5,000
➢ However Smith managed to raise $11 million debt
➢ By 1976 FedEx had produced its first profit of $3.6 million
➢ Seven years later FedEx became the first U.S. company to reach revenues of
$1 billion within 10 years of the startup with no merger or acquisition and has
been thriving ever since
Business/Competitive strategy

➢ SBU’s emphasize on improving the competitive position of a firm’s strategic

business units (SBU’s).
➢ SBU’s base their strategies on the basis of corporate strategy i.e., to support
corporate strategy
➢ For formulating business/competitive strategy, SBU’s perform SWOT/TOWS
analysis after doing external and internal environment analysis
External and internal analysis output

SWOT/TOWS analysis is basically analysing a company’s

:

STRENGTH WEAKNESS

OPPORTUNITIESS THREATS

A SWOT analysis is a planning and environment scanning tool used to

understand the Strengths, Weaknesses, Opportunities, and Threats involved in
a project or in a business.
SWOT/TOWS analysis

POSITIVE/ HELPFUL NEGATIVE/ HARMFUL

to achieving the goal to achieving the goal

INTERNAL Origin Strengths

Weaknesses
facts/ factors of the Things that are good
Things that are bad
organization now, maintain them,
now, remedy, change
build on them and
or stop them.
use as leverage

EXTERNAL Origin Opportunities Threats

facts/ factors of the Things that are good for Things that are bad for
environment in the future, prioritize the future, put in
which the them, capture them, plans to manage
organization build on them and them or counter
operates optimize them
SBU’s continuously does the internal audit or analysis by
analyzing its resources and competencies
Internal audit/analysis

Same as of Better than those of

competitors/Easy to copy competitors/Difficult to copy

Necessary Unique
Competencies Resources

Resources Resources
Resource
Analysis
Threshold Core
Competencies Competencies
Resources and Competences

Resources Competences
Intangible (Innovation,
Tangible (Man, money,
adaptability, learning,
machine, materials etc.)
management etc.)
Measureble Mostly difficult to measure
You can acquire by learning and
You can buy and sell
doing

➢Unique resources
➢Critically underpin competitive advantage and cannot be imitated or
obtained by others
➢Core competences
➢Activities and processes through which resources are deployed such as
to achieve competitive advantages in ways which others cannot imitate or
obtain
Porters competitive strategies for competition

➢SBU’s compete with competitors either on cost or differentiation basis

Business/Competitive strategy

If the SBU’s think, they have unique resources and/or core competencies, they
will compete with competitor’s SBU on the basis of differentiation, else they will
compete on the basis of cost
 Porter’s Competitive strategies for Competition

Porter/Generic
Strategies

Cost Leadership Differentiation

• Superior profits through • Creating a product or service

lower costs. that is perceived as being
unique “throughout the
industry”
Functional/Operations strategy
➢ Functional level strategies are formulated to support the business/competitive
strategies
➢ Functional level strategies are developed at various departments of the
SBU’s such as Production & operations, marketing, finance, human resource
etc.
➢ We will discuss more on Manufacturing (Production & Operations) and
Marketing only
Operations strategy

Marketplace

Corporate Strategy

Finance Strategy Operations Strategy Marketing Strategy

Operations Management

People Plants Parts Processes

Materials & Products &
Customers Services
Planning and Control

Input Output

The Transformation/value creation Process

Competing on differentiation

➢ If firms have unique resources an/or core competencies, then SBUs will
compete on differentiation strategy and functional departments need to
support SBU’s strategy
➢ Uniqueness can go beyond both the physical characteristics and service
attributes to encompass everything that impacts customer’s perception of
value
Competing on cost

➢ If the organization does not have any unique resources or core

competencies, they will compete on cost with competitors and Operations
management should help to implement accordingly.
➢ South West airlines minimize their plane’s time on land
➢ IKEA sourcing it’s product in low wage countries and by offering a very basic level of
services
➢ McDonalds hiring inexperienced employees rather than trained
Competing on cost

➢ Operations strategies are formulated to support the business strategies in

the areas of cost leadership or differentiation
➢ Competing on cost does not imply low quality.
Operations strategic management process
Step 1: Identifying the Current
Mission, Goals, and Strategies
➢ Mission: a statement of the
purpose of an organization
• The scope of its products and
services
➢ Objectives: the foundation for
further planning
• Measurable performance targets
Business environment

Marketing
environment

External Internal
environment environment

Micro/Task Macro
environment environment
Step 2: Doing an external analysis
➢ The environmental scanning of
specific and general environments
• Focuses on identifying
opportunities and threats
External analysis output

Opportunity Threat
➢ Political stability ➢ Political instability
➢ Favourable regulation change ➢ Unfavourable regulation changes
➢ Business boom ➢ Market downfall
➢ Market growth ➢ Increase in tax
➢ Reduction in tax ➢ Increase in interest
➢ Reduction in interest rate ➢ Increased number of competitors
➢ A gap left by a failed competitor ➢ New technology development
➢ New technology development
Step 3: Doing an internal analysis
➢ Assessing organizational resources,
capabilities, and activities:
• Strengths create value for the
customer and strengthen the
competitive position of the firm.
• Weaknesses can place the firm at
a competitive disadvantage.
➢ Analyzing financial and physical
assets is fairly easy, but assessing
intangible assets (employee’s skills,
culture, corporate reputation, and so
forth) isn’t as easy.
Internal analysis: Resources

Resources are anything which are used in producing good and services for
customers
Resources can be grouped

Physical resources ➢Human resources Financial resources Intangibles

➢ Number of
➢ Equity Goodwill
employees ➢
➢ Material assets ➢ Debt Loyalty of
➢ Education ➢
➢ Machines ➢ Credibility
➢ Experience consumers
➢ Current assets ➢ Relationship with
➢ Inventory ➢ Loyalty ➢ Brand name
Suppliers Corporate
➢ location ➢ Corporate ➢
➢ Investors image
culture
Internal analysis: Competencies

➢ It shows how to link the different activities together and how to deploy
resources to sustain excellent performance
➢ How an organisation employs and deploys its resources
➢ Efficiency and effectiveness of physical, financial, human and intellectual
resources
➢ How they are managed
➢ Cooperation between people
➢ Adaptability
➢ Innovation
➢ Customer and supplier relationships
➢ Learning
Business analysis
Internal analysis output

Strength Weakness
➢ Unique Resources ➢ Necessary Resources
➢ Core Competencies ➢ Threshold Competencies
➢ Superior product quality ➢ Low product Quality
➢ Lowest cost ➢ High cost
➢ Best expertise/Competent Staffs ➢ Inferior Location
➢ Location ➢ High overheads
➢ Better Management Practices ➢ Bad Management Practices
➢ Brand Name ➢ Demoralized staffs
➢ R&D Practices ➢ A lack of R&D
➢ Latest Technology
External & internal analysis output

SWOT/TOWS analysis is basically analysing a company’s

:

STRENGTH WEAKNESS

OPPORTUNITIESS THREATS

A SWOT analysis is a planning and environment scanning tool

used to understand the Strengths, Weaknesses, Opportunities,
and Threats involved in a project or in a business.
SWOT/TOWS analysis

POSITIVE/ HELPFUL NEGATIVE/ HARMFUL

to achieving the goal to achieving the goal

INTERNAL Origin Strengths

Weaknesses
facts/ factors of the Things that are good
Things that are bad
organization now, maintain them,
now, remedy, change
build on them and
or stop them.
use as leverage

EXTERNAL Origin Opportunities Threats

facts/ factors of the Things that are good for Things that are bad for
environment in the future, prioritize the future, put in
which the them, capture them, plans to manage
organization build on them and them or counter
operates optimize them
Step 4: Formulating strategies
➢ Develop and evaluate strategic
alternatives.
➢ Select appropriate strategies for all
levels in the organization that provide
relative advantage over competitors.
➢ Match organizational strengths to
environmental opportunities.
➢ Correct weaknesses and guard against
threats.
Formulating strategies
Implementing strategy

➢ Successful strategy formulation does not guarantee successful strategy

implementation
➢ Less than 10% of strategies formulated are successfully implemented.
➢ The greatest strategy is doomed if it’s implemented badly
➢ A good strategy without proper implementation is like a poor strategy or no
strategy at all.
 Step 5: Implementing strategies
➢ Having a good strategic plan is half the
battle won, and the other half is won through
effective strategy implementation
Strategy implementation

Division or
Strategists formulate Functional
Strategy Managers Implement Strategy
Formulation vs. Implementation

Strategy Formulation Strategy Implementation

➢ Formulation focuses on ➢ Implementation focuses on
effectiveness efficiency
➢ Formulation is primarily an ➢ Implementation is primarily an
intellectual process operational process
➢ Formulation requires good ➢ Implementation requires special
intuitive & analytical skills motivational & leadership skills
➢ Formulation requires ➢ Implementation requires
coordination among a few coordination among many
individuals individuals
Step 6: Evaluating results
➢ How effective have strategies
been?
➢ What adjustments, if any, are
necessary?
Evaluating strategy
Effectiveness

Pre Sales
implementation

Evaluation Productivity

Effectiveness
Post
Implementation
Sales

Productivity
Manufacturing strategy

➢ Make to stock strategy

➢ Make to order strategy
➢ Assemble to order strategy
Make to stock strategy

➢ A manufacturing strategy in which production planning and production

scheduling are based on forecasted product demand
➢ This approach is used when demand for a product is predictable and stable.
➢ This production system works best for businesses that produce a high
volume of goods
➢ Make-to-stock is considered a push-type operation i.e., raw materials and
supplier-provided components – are “pushed” through the production process
Make to order strategy

➢ A production system that produces goods only after receiving an order from a
customer
➢ Make-to-Order is a pull-type operation
➢ MTO allows customers to customize their product
➢ This production system works best for businesses that produce a low volume
of goods
Assemble to order strategy

➢ A manufacturing workflow process in which the manufacturer stocks up sub-

assembly parts and then assembling the parts into the final product when an
order is placed
➢ A hybrid of the make-to-stock and make-to-order strategies
➢ Assembly of complex products like automobiles or transportation equipment,
household appliances, and electronic goods