How Corporate Strategy influence Strategic Marketing

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Published Date:16-07-2017
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Unit I 1 Concept of Corporate Strategy LESSON OUTLINE  Introduction  What is strategy?  Why corporate strategy?  Levels of strategy  Crafting a strategy  An ongoing process  Summary  Self assessment questions  Activities  References LEARNING OBJECTIVES After reading this lesson you should be able to  Define and understand the concept of corporate strategy  Identify the different levels of corporate strategy  Examine the reasons for developing strategies  See corporate strategy as an on going process LESSON st Organizations are facing exciting and dynamic challenges in the 21 century. In the gloabalized business, companies require strategic thinking and only by evolving good corporate strategies can they become strategically competitive. A sustained or sustainable competitive advantage occurs when firm implements a value – creating strategy of which other companies are unable to duplicate the benefits or find it too costly to initiate. Corporate strategy includes the commitments, decisions and actions required for a firm to achieve strategic competitiveness and earn above average returns. The goals of corporate strategy are challenging not only for large firms like Microsoft but also for small local computer retail outlets or even dry cleaners. Table 1.1 lists the top ten strategists in India in 2005.. TABLE 1.1 - INDIA’S TOP TEN STRATEGISTS Position in the Name of the company industry Infosys Technologies 1 Reliance Industries 2 Wipro 3 Hindustan Lever 4 Maruti Udyog 5 Dr. Reddy’s Laboratories 6 HDFC Bank 7 Jet Airways 8 ICICI Bank 9 Ranbaxy Laboratories 10 Source - Internet What is strategy? Strategy”, narrowly defined, means “the art of the general” (the Greek stratos, meaning ‘field, spread out as in ‘structure’; and agos, meaning ‘leader’). The term first gained currency th at the end of the 18 century, and had to do with stratagems by which a general sought to deceive an enemy, with plans the general made for a campaign, and with the way the general moved and disposed his forces in war. Also was the first to focus on the fact that strategy of war was a means to enforce policy and not an end in itself. Strategy is a set of key decisions made to meet objectives. A strategy of a business organization is a comprehensive master plan stating how the organization will achieve its mission and objectives. I keep six honest serving men. They taught me all I know. Their names are What, Why, When, How, Where and Who. - Rudyard Kipling Here are some definitions of strategy. Chandler(1962)Strategy is the determinator of the basic long-term goals of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals; Mintzberg (1979) Strategy is a mediating force between the organization and its environment: consistent patterns in streams of organizational decisions to deal with the environment. Prahlad (1993) Strategy is more then just fit and allocation of resources. It is stretch and leveraging of resources Porter (1996) Strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value Mintzberg has identified the 5 P’s of strategy. Strategy could be a plan, a pattern, a position, a ploy, or a perspective. 1. A plan, a “how do I get there” 2. A pattern, in consistent actions over time 3. A position that is, it reflects the decision of the firm to offer particular products or services in particular markets. 4. A ploy, a maneuver intended to outwit a competitor 5. A perspective that is, a vision and direction, a view of what the company or organization is to become. Why Corporate Strategy? Strategic management is basically needed for every organization and it offers several benefits. 1.Universal Strategy refers to a complex web of thoughts, ideas, insights, experiences, goals, expertise, memories, perceptions, and expectations that provides general guidance for specific actions in pursuit of particular ends. Nations have, in the management of their national policies, found it necessary to evolve strategies that adjust and correlate political, economic, technological, and psychological factors, along with military elements. Be it management of national polices, international relations, or even of a game on the playfield, it provides us with the preferred path that we should take for the journey that we actually make. 2. Keeping pace with changing environment The present day environment is so dynamic and fast changing thus making it very difficult for any modern business enterprise to operate. Because of uncertainties, threats and constraints, the business corporation are under great pressure and are trying to find out the ways and means for their healthy survival. Under such circumstances, the only last resort is to make the best use of strategic management which can help the corporate management to explore the possible opportunities and at the same time to achieve an optimum level of efficiency by minimizing the expected threats. 3. Minimizes competitive disadvantage It minimizes competitive disadvantage and adds up to competitive advantage. For example, a company like Hindustan Lever Ltd., realized that merely by merging with companies like Lakme, Milk food, Ponds, Brooke bond, Lipton etc which make fast moving consumer goods alone will not make it market leader but venturing into retailing will help it reap heavy profits. Then emerged its retail giant “Margin Free’ which is the market leader in states like Kerala. Similarly, the R.P. Goenka Group and the Muruguppa group realized that mere takeovers do not help and there is a need to reposition their products and reengineer their brands. The strategy worked. 4. Clear sense of strategic vision and sharper focus on goals and objectives Every firm competing in an industry has a strategy, because strategy refers to how a given objective will be achieved. ‘Strategy’ defines what it is we want to achieve and charts our course in the market place; it is the basis for the establishment of a business firm; and it is a basic requirement for a firm to survive and to sustain itself in today’s changing environment by providing vision and encouraging to define mission. 5.Motivating employees One should note that the labor efficiency and loyalty towards management can be expected only in an organization that operates under strategic management. Every guidance as to what to do, when and how to do and by whom etc, is given to every employee. This makes them more confident and free to perform their tasks without any hesitation. Labor efficiency and their loyalty which results into industrial peace and good returns are the results of broad-based policies adopted by the strategic management 6. Strengthening Decision-Making Under strategic management, the first step to be taken is to identify the objectives of the business concern. Hence a corporation organized under the basic principles of strategic management will find a smooth sailing due to effective decision-making. This points out the need for strategic management. 7. Efficient and effective way of implementing actions for results Strategy provides a clear understanding of purpose, objectives and standards of performance to employees at all levels and in all functional areas. Thereby it makes implementation very smooth allowing for maximum harmony and synchrony. As a result, the expected results are obtained more efficiently and economically. 8. Improved understanding of internal and external environments of business Strategy formulation requires continuous observation and understanding of environmental variables and classifying them as opportunities and threats. It also involves knowing whether the threats are serious or casual and opportunities are worthy or marginal. As such strategy provides for a better understanding of environment. Levels of strategy A typical business firm should consider three types of strategies, which form a hierarchy as shown in Figure 1.1 Corporate strategy – Which describes a company’s overall direction towards growth by managing business and product lines? These include stability, growth and retrenchment. For example, Coco cola, Inc., has followed the growth strategy by acquisition. It has acquired local bottling units to emerge as the market leader. Business strategy - Usually occurs at business unit or product level emphasizing the improvement of competitive position of a firm’s products or services in an industry or market segment served by that business unit. Business strategy falls in the in the realm of corporate strategy. For example, Apple Computers uses a differentiation competitive strategy that emphasizes innovative product with creative design. In contrast, ANZ Grindlays merged with Standard Chartered Bank to emerge competitively. Functional strategy – It is the approach taken by a functional area to achieve corporate and business unit objectives and strategies by maximizing resource productivity. It is concerned with developing and nurturing a distinctive competence to provide the firm with a competitive advantage. For example, Procter and Gamble spends huge amounts on advertising to create customer demand. Operating strategy - These are concerned with how the component parts of an organization deliver effectively the corporate, business and functional -level strategies in terms of resources, processes and people. They are at departmental level and set periodic short-term targets for accomplishment. Figure 1.1 Hierarchy of strategy Responsibility of corporate-level managers Responsibility of business –level general managers Responsibility of heads of major functional activities within a business unit or division Responsibility of plant managers, geographic unit managers, and Crafting a strategy lower-level supervisors Companies and strategists craft strategies in different ways. In extreme cases it is only the Chairman cum Managing Director who crafts the strategy. But in firms, which have participative management style of functioning, it is a group or team exercise involving key personnel and all functional executives in the organization. There are basically four approaches to crafting a strategy 1. The Chief Architect approach A single person – the owner or CEO –assumes the role of chief strategist and chief entrepreneur, single handedly shaping most or all of the major pieces of strategy. This does not mean that one person is the originator of all the ideas underlying the resulting strategy or does all the background data gathering and analysis: there may be much brainstorming with subordinates and considerable analysis by specific departments. The chief architect approach to strategy formation is characteristic of companies that have been founded by the company’s present CEO. Michael Dell at Dell Computer, Steve Case at America Online, Bill Gates at Microsoft, and Howard Schultz at Starbucks are prominent examples of corporate CEOs who exert a heavy hand in shaping their company’s strategy. 2. The Delegation Approach: Here the manager in charge delegates big chunks of the strategy-making task to trusted subordinates, down-the-line managers in charge of key business units and departments, a high-level task force of knowledgeable and talented people from many parts of the company, self-directed work teams with authority over a particular process or function, or, more rarely, a team of consultants brought in specifically to help develop new strategic initiatives. 3. The Collaborative or Team Approach: This is a middle approach when by a manager with strategy-making responsibility enlists the assistance and advice of key peers and subordinates in hammering out a consensus strategy. Strategy teams often include line and staff managers from different disciplines and departmental units, a few handpicked junior staffers known for their ability to think creatively, and near-retirement veterans noted for being keen observers, telling it like it is, and giving sage advice. Electronic Data Systems conducted a year-long strategy review involving 2,500 of its 55,000 employees and coordinated by a core of 150 managers and staffers from all over the world. Nokia Group, a Finland-based global leader in wireless telecommunications, involved 250 employees in a strategy review of how different communications technologies were converging, how this would affect the company’s business, and what strategic responses were needed. 4. The Corporate Intrapreneur Approach: In the corporate intrapreneur approach, top management encourages individuals and teams to develop and champion proposals for new product lines and new business ventures. The idea is to unleash the talents and energies of promising corporate intrapreneurs, letting them try out business ideas and pursue new strategic initiatives. Executives serve as judges of which proposals merit support, give company intrapreneurs the needed organizational and budgetary support, and let them run with the ball. W.L. Gore & Associates, a privately owned company famous for its Gore-Tex waterproofing film, is an avid and highly successful practitioner of the corporate intrapreneur approach to strategy making. Gore expects all employees to initiate improvements and to display innovativeness. As on going process Corporate strategy is a continuous on going process and extends company wide over a diversified company’s business. It is a boundary spanning planning activity considering all the elements of the micro and macro environments of a firm. The following are the key tasks of the process of developing and implementing a corporate strategy.  Exploring and determining the vision of the company in the form of a vision statement.  Developing a mission statement of the company that should include statement of methodology for achieving the objectives, purposes, and the philosophy of the organization adequately reflected in the vision statement.  Defining the company profile that includes the internal analysis of culture, strengths and capabilities of an organization.  Making external environmental analysis to identify factors as threats, opportunities etc.  Finding out ways by which a company profile can be matched with its environment to be able to accomplish mission statement  Deciding on the most desirable courses of actions for accomplishing the mission of an organization  Selecting a set of long-term objectives and also the corresponding strategies to be adopted in line with vision statement.  Evolving short-term and annual objectives and defining the corresponding strategies that would be compatible with the mission and vision statement.  Implementing the chosen strategies in a planned way based on budgets and allocation of resource, outlining the action programs and tasks.  Installation of a continuous comparable review system to create a controlling mechanism and also generate data for selecting future course of action The over all corporate strategy of a diversified company is depicted in Figure 1.2 Figure 1.2 Strategy of a diversified company. Whether diversification is based narrowly in a few industries or broadly Whether the businesses in many industries the company has Approach to allocating diversified into are investment capital and related, unrelated, or a resources across mixture of both business units Whether the scope of company Corporate strategy Efforts to capture operations is (The action plan cross-business mostly for managing a domestic, strategic fits diversified increasingly multinational, company) or global Moves to divest Moves to weak or strengthen unattractive positions in Source : Thompson & Strickland (2003), Strategic Management, Tata McGraw Hill, New Delhi. The process of developing corporate strategy or the overall managerial plan for involves the following processes. a. Making the moves to establish in different businesses and achieve diversification. b. Initiating actions to boost the combined performance of the businesses the firm has diversified into. c. Pursuing ways to capture valuable cross-business strategic fits and turn them into competitive advantage. d. Establishing investment priorities and steering corporate resources into the most attractive business units Summary In the globalized business, companies require strategic thinking and only by evolving good corporate strategies can they become strategically competitive. A strategy of a business organization is a comprehensive master plan stating how the organization will achieve its mission and objectives. Strategy is significant because it is universal. It helps corporate to keep pace with changing environs, provides better understanding of external environment, minimizes competitive disadvantage by forcing to think clearly about mission, vision and objectives of enterprise. It improves motivation of employees and strengthens decision-making. It forms the basis for implementing actions. Strategy can be classified based on hierarchy into four levels: corporate level, strategic business level, functional level and operating level. The approaches to strategy making are: the Chief Architect approach, the delegation approach, the collaborator or team approach and the corporate intrapereneur approach. Strategy making is an ongoing process involving activities like defining vision, mission and goals, analyzing organization and environment and matching them to decide suitable actions and objectives, and implementing with a review system. Self -assessment questions 1. Define the concept of strategy 2. Write two definitions of strategy and identify the key elements in them. 3. Distinguish strategy and plan. Which one is more suitable in a competitive environment? 4. What are the 5 Ps of a strategy? 5. Explain the significance of a strategy. 6. What are the different levels of strategy making? 7. Identify the people responsible for strategy making at different levels in an organization 8. Explain the different approaches to strategy making. 9. “Corporate strategy making is an on going process “ –Discuss 10. Explain the strategy of a diversified company. Activities 1. Visit a local business organization, a hospital and educational institution and interview the director or owner of these organizations to identify the mission, vision, goals of the organizations. Also identify the achievements and future plans of these organizations. 2. Refer management journals like Vikalpa of IIM-A or IIMB Management Review or Global CEO or visit websites like India and identify articles on strategy and prepare a write up on “ Strategy for modern organizations”. References 1. Lomash Sukul & Mishra P.K.(2003) Business policy and Strategic Management, Vikas Publishing House, New Delhi 2. Thomas L. Wheelen and Hunger J. David (2002) Concepts in Strategic Management and Business Policy, Pearson Education Asia, New Delhi. 3. Thompson & Strickland (2003), Strategic Management: Concepts and Cases, Tata McGraw Hill: New Delhi 4. Kachru Upendra (2005), Strategic Management- Concepts and Cases, Excel Books, New Delhi. Unit I 2 Strategic Management Process LESSON OUTLINE  Introduction  Process of Strategic Management – Basic model  Role of strategists  Mintzberg’s modes of LESSON strategic decision making  Strategic Management in India  Summary  Self assessment questions LEARNING OBJECTIVES  Activities After reading this lesson  References you should be able to  Describe the strategic LEARNING management process OBJECTIVE  Know the role of Once there were two company presidents different persons in who competed in the same industry. These two presidents an organization in strategy making decided to go on a camping trip to discuss a possible merger. They hiked deep into the woods. Suddenly,  Explain Mintzberg’s modes of executive they came upon a grizzly bear that rose up on its hind legs decision making and snarled. Instantly, the first president took off his  Appreciate the knapsack and got out a pair of jogging shoes. The second initiatives taken by president said, “Hey, you can’t outrun that bear. The first corporate in India for effective strategy president responded, ” May be I can’t outrun that bear but I management surely can outrun you” (Fred R. David, 2003,p.5) This story captures the notion of strategic management, which is to achieve and maintain competitive advantage. How do business organizations operate successfully in the changing business environment? Strategic management has evolved as a primary value in helping organization operate successfully in a dynamic, complex environment. Even the most successful Fortune 500 companies would accept that it is definitely not by following traditional ways of doing business. Most successful companies like General Electric have found internet mentors to tutor their managers to world wide web. The company has launched its financial network in the year 2000 for its consumers. Also the company advertises heavily in Olympics. Launch of Apna PC is a strategic decision. The leader in PC business HCL Info systems has launched one PC below Rs.10, 000 (its sticker price is Rs.9, 990). It has committed to manufacture one million of them every year and expand its dealer network from 800 to 3,000. This strategy is to tap the small businesses and lower income classes in urban and rural India. Even the software probably will not be from Microsoft but from smaller companies. But the company has to take of piracy and copyright the software also. BHEL for example uses strategic management to create or modify its long-range plans, which range from 5 to 20 years. Process of Strategic Management Strategic management consists of four basic elements.  Environmental scanning  Strategy formulation  Strategy implementation  Evaluation and control Figure 2. 1 shows simply how these elements interact. Figure 2 .2 expands each of these elements and serves as the model for discussion. Environment Strategy Strategy Evaluation al Scanning formulatio imple- and n mentation control Figure 2.1 Basic model External Perfor- Mission Program ___________ mance s Objectives _ Societal Programs Reason for Environment Existence What results A ctivities General To be Needs Fo rces Budget Strategies Task s Environment Achieved Budgets Industry Procedures Analysis

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