NMIMS STRATEGIC MANAGEMENT COURSE DESIGN COMMITTEE TOC Reviewer Content Reviewer Mr. Girish Sonawane Mr. Akinet Bais Visiting Faculty, NMIMS Global Access - Visiting Faculty, NMIMS Global Access - School for Continuing Education. School for Continuing Education. Specialization: Human Resources Specialization: International Business Author : V S P Rao Reviewed By : Mr. Akinet Bais NMIMS Copyright: 2015 Publisher ISBN: 978-81-8323-120-6 Address: A-45, Naraina, Phase-I, New Delhi – 110 028 Only for NMIMS Global Access – School for Continuing Education School Address V. L. Mehta Road, Vile Parle (W), Mumbai – 400 056, India. NMIMS Global Access – School for Continuing Education NMIMS Global Access – School for Continuing Education iii CONTENTS CHAPTER NO. CHAPTER NAME PAGE NO. 1 Introduction to Strategic Management 01 2 Models of Strategic Management 39 3 Strategic Management in Global Environment 65 4 Competitive Analysis 85 5 Industry Analysis 111 6 Strategic Management Process 161 7 Formulating Corporate Level Strategy 185 8 Formulating Business Level Strategy 231 9 Analysing Resources and Capabilities 261 10 FormulatingNMIMS Functional Level Strategy 295 11 Corporate Goals and Strategic Gap 331 12 Managing Internal Organisation for Strategy 351 Implementation 13 Case Studies 387 NMIMS Global Access – School for Continuing Education NMIMS Global Access – School for Continuing Education iv STRATEGIC MANAGEMENT CURRICULUM Introduction to Strategic Management: Definition of Strategic Management, Nature of Strategic Management, Dimensions of Strategic Management, Need for Strategic Management, Strategic Management – Process, Vision, Mission and Business Definition Models of Strategic Management: Mintzberg, Ansoff, Porter, Prahalad and Gary Hammel, McKinsey’s 7’S Framework: A Tool to Evaluate and Control an Organisation Strategic Management in Global Environment: Need for Globalization, Different Types of International Companies, Development of a Global Corporation, Complexity of Global Environment, International Culture, Implementing Global Strategies Competitive Analysis: Competitor Analysis Framework, Rivalry Analysis, Competitive Dynamics, Competitive Rivalry Industry Analysis: Formulation of Strategy, Five Competitive Forces that Shape Strategy, PESTLE Analysis, Competition and Value, Industry Structure, Technology Lifecycle, Industry Analysis in Practice, Defining the Relevant Industry Strategic Management Process: Purposes of Strategic Management Process, Steps involved in the Strategic Management Process, Strategic Management Process, Strategy Formulation, Constraints and Strategic Choice, StrategyNMIMS Implementation, Strategic Control and Assessment Formulating Corporate-Level Strategy: Balanced Score Card: A Balanced Approach, Grand Strategies: Strategic Alternatives, Growth/Expansion Strategy, Diversification Strategy, Stability Strategy, Retrenchment Strategy, Turnaround Strategies, Combination Strategies Formulating Business Level Strategy: Porter’s Competitive Strategies, Competitive Advantage, Competitive Advantage Factors, How to Build or Acquire Competitive Advantage? Acquiring Core Competence, Low Cost Strategies, Differentiation Strategies, Focus Strategies Analyzing Resources and Capabilities: Factors affecting the Internal Environment, Resources and Capabilities as Sources of Profit, Resources of the Firm, Organizational Capabilities, Appraising Resources and Capabilities, Putting Resource and Capability Analysis to Work, Developing Resources and Capabilities NMIMS Global Access – School for Continuing Education NMIMS Global Access – School for Continuing Education v Formulating Functional Level Strategy: Putting Strategy into Action, Structural Design, Information and Control System, Human Resources Corporate Goals and Strategic Gap: Corporate Goals, Strategic Gap, Porter’s Generic Strategies Managing Internal Organization for Strategy Implementation: Issues in Strategy Implementation, Strategy–Structure Relationship, Divisionalisation: Product and Geographic Forms, Diversification, Strategic Business Units (SBUs), Project Organisation, Matrix Organisation Structure, New Design Options, Factors Influencing Organisation Structure, Structure and Strategy Implementation NMIMS NMIMS Global Access – School for Continuing Education NMIMS Global Access – School for Continuing Education NMIMS 1 CHAPTER INTRODUCTION TO STRATEGIC MANAGEMENT CONTENTS 1.1 Introduction 1.2 Definitions of Strategic Management 1.3 Nature of Strategic Management 1.4 Dimensions of Strategic Management 1.5 Need for Strategic Management 1.6 Strategic Management Process 1.6.1 Strategy Levels 1.6.2 Typologies and Methods of Strategy 1.7 Vision 1.7.1 Defining Vision 1.7.2 Nature of Vision 1.7.3 Characteristics of Vision Statements 1.8 Mission NMIMS 1.8.1 Defining Mission 1.8.2 Importance of Mission Statement 1.8.3 Characteristics of a Mission Statement 1.8.4 Components of a Mission Statement 1.8.5 Formulation of Mission Statement 1.8.6 Evaluating Mission Statement 1.9 Business Definition 1.10 Summary 1.11 Descriptive Questions 1.12 Answers and Hints 1.13 Suggested Readings for Reference NMIMS Global Access – School for Continuing Education NMIMS Global Access – School for Continuing Education 2 STRATEGIC MANAGEMENT INTRODUCTORY CASELET NOTES RISE AND DOWNFALL OF KODAK Eastman Kodak revolutionised the photography industry by recording images on a film (as against the traditional glass plates) through a novel product called portable camera, in early 1901. The camera was a major hit with millions of customers. The name – Kodak – became the most respected brand of photographic films almost instantaneously. Continuous innovations (especially the colour film – those yellow little boxes of film) and the absence of competition took Eastman Kodak Company to dizzying heights over the years. It became a giant corporation registering sales of over $20 billion by 1990 – powered by contributions from a vast army of over 1 lakh employees. The ad campaign: “You press the button; we do the rest” – made Kodak a household name all over the globe. Meanwhile, Fuji Photo Film Company of Japan entered the fray with a little green box of film that challenged Kodak’s dominance for over a century. Using latest manufacturing technologies, Fuji cut the price down aggressively without, of course, sacrificing quality. For the customers, both were equally good. But the big price differential between product prices brought Kodak down and the company lost the title of “official film of the 1984 Summer Olympics to Fuji. From then onwards, Fuji gained market share steadily as customers came to realise that Fuji is a legitimate alternative to Kodak and is not just a low price brand. The introduction of digital imaging technologies at around the same time from the likes of Sony, Cannon, Motorola, Casio and Hewlett-Packard changed the rules of the game, more or less, permanently. In the interim, a bad acquisition (a pharma company) and some failed innovations (entering office copier business, introducing a 35mm camera; a disposable camera – in a belated manner — and some heavy investments in Kodak Advantix system running to overNMIMS $200 million) have had a telling effect on the brand image. When the mobile phone technology took off and the home computer market exploded in a big way, it was all over for Kodak (2008 reported revenues just $442 million). The lethargic response to tumultuous changes in the industry environment, according to experts, brought the company down. As Trout commented, ‘if you are known for one thing, the market will not give you another thing’. Kodak is a film in the minds of the marketplace and not camera (Nikon fits such a description). As it turned out, Kodak could not find a rewarding space in the marketplace beyond the realm of conventional photography. When you fail to make intelligent moves – proactively and in sync with market expectations and remain stuck with a well-entrenched position and fail miserably in exploiting emerging opportunities, you get punished and pushed aside. Before hiding its head in the sand, Kodak did try a trick or two to cover the lost ground by embracing the digital imaging technology. However, it was too late for it to make any difference. Contd... NMIMS Global Access – School for Continuing Education NMIMS Global Access – School for Continuing Education INTRODUCTION TO STRATEGIC MANAGEMENT 3 NOTES Adding salt to its injuries, due to fierce competition, the digital camera business got commoditised and the Kodak brand did not offer any value for money. In 2006, the company had to close the business and show the door to over 27,000 people. The most respected brand for over 100 years in photographic films had been decimated beyond belief within a span of just 10 years! NMIMS NMIMS Global Access – School for Continuing Education NMIMS Global Access – School for Continuing Education 4 STRATEGIC MANAGEMENT NOTES After studying this chapter, you should be able to: Appreciate the meaning and definition of strategic management Identify the nature and dimensions of strategic management Evaluate the need and significance of strategic management Describe the process of strategic management Discuss the vision in strategic management Explain the mission in strategic management Know about the business definitions of strategic management 1.1 INTRODUCTION The firm’s strategy process is how its managers envision a possible future and guide the firm toward it. This ‘possible future’ is a moving target. The firm and the environment change