Strategic Management
Strategic Management
Strategic Management
1. Concept of strategy
2. 5 boxes framework
3. PESTEL analysis
4. How strategy is formulated
5. How is strategy formulated (using elements of strategy)
6. 5Ps of strategy
7. Understanding Capital controlling and managerial stake. Concept of FOBH (Family owned
business houses). Problems and positive aspects
Book will not be recommended. Handout will be given. Short notes will be given.
Introduction to Strategy
10 statements on what is strategy:
1. Strategy is competitive planning
2. Strategy is industry, company, function specific
3. Strategy is situational.
4. Strategy is all about various objectives and goals (hierarchy- dreams, vision, mission,
goals, objectives and targets)
5. Strategy is as good as it is executed
6. Strategy is about swot analysis (planning) tows (strategising)
7. Strategy formulation depends upon business, product, brand and consumer buying
lifecycle
8. Strategy is all about leadership
9. Strategy is time bound (concept of long, medium and short term) (perceptions have
changed)
10. It evolves around change. (Creation of new generation strategy)
Terms in SM
1. Inorganic growth: Growth which is not natural
2. Blended workspace: work for some days in office n some days in home
3. Garden leave: protection mechanism used in HR policy.
Garden leave describes the practice whereby an employee leaving a job—having
resigned or otherwise had their employment terminated—is instructed to stay away
from work during the notice period, while still remaining on the payroll
From <https://en.wikipedia.org/wiki/Garden_leave>
https://simsedu.sharepoint.com/sites/SCSMinorSr.BCE2022/Shared%
20Documents/General/Recordings/SCS%20-%20Ops%20minor%20only-20210709_155010-
Meeting%20Recording.mp4?web=1
Functions of management
1. Forecasting and planning This functions of management is
2. Organizing and staffing applied to all disciplines of mgmt
3. Directing 1. Marketing
4. Controlling 2. HR
5. Coordinating 3. Finance. Eg. Zomato's IPO
6. Leadership objectives
7. Communication 4. Operations
8. Motivation 5. IT/Technology
9. Morale. Eg. Townhall meetings
These functions and disciplines are Functions disciplines and sectors follow strategies
adopted across the sectors listed below for competitive advantage and
1. FMCG excellence. (SM syllabus)
2. Consumer durable 1. Core competence
3. Banking and finance 2. Diversification
4. Telecom 3. Take over and acquisitions
5. Insurance 4. Mergers and amalgamations
6. Healthcare 5. Vertical integrations (backward and forward)
7. Hospitality 6. Horizontal integration
8. Automobile 7. Disinvestment
9. Retail 8. Turnaround as a strategy
10. pharmaceutical 9. Harvesting
Eg.1: Jeff bezos visiting Kirana 10. Blue ocean strategy
stores. 11. Red ocean strategy
Eg.2: Different companies 12. Asset light business model
venturing into production of Eg. Ola Uber do not own their cars
sanitizers Eg2. AirBnB , makemytrip ect do not own the
residential areas
PESTEL analysis
Today we will understand PESTEL analysis by seeing its application in corporate life.
Jacob. 2nd largest textile manufacturer Kitex. Based in Kerala. But is now moving investments
to Telangana as he said Kerala is now "witch hunting".
Mr. Jacob who is promoter of Kitex said that he is moving out of Kerala. Total 11 raids in the
factory which came from Labor, health, factory, pollution control besides the police and
collector within 1 month in June and the state levelled 73 charges against the company.
Corporate examples:
Introduction:
Any strategy execution depends upon political, economic, social, technical, environmental and
legal factors popularly called as PESTEL analysis. They are also referred as VUCA environment
such as Volatility, Uncertainty, Complexity and Ambiguity.
There are a lot of overlap into influencing factors. We have grouped these factors as follows
and corporate cases/examples are as per the groups created. These factors have both positive
as well as negative impact.
VUCA->
volatility, uncertainty, complexity, and ambiguity
Triple Bottom Balance Sheet (Typical HR relaed concept. We need both qualitative and quantitative
parameters are required to know a person. We also need attitudes and attributes of the person is
also important. All companies publish theor financial statements. Profit, People and Planet are the
three most important P's formulated by CK Prahlad.
Triple bottom balance sheet: People, Planet and Profit.
Company is evaluated on CSR (People), Planet parameters/ environmental parameters, financial
/profit parameters.
ESG compliance ranking is part of the latest international ranking requirement. (Environment, Social,
Governance Parameter)
- Stay relevant (not to mono rqmt of our life bt to multiple rqmts of our life)
- Stay connected with the customer
- Accept the change
- Tech is the biggest power today to unnderstand market dynamics
- Respond to change posiyively
- It is not abt size of company, size of plants bt uts abt ur capacity to retain n create customer
base
- Don’t stay in the past, u hv to look forward
- Mission and vision is all about not only understanding today's customer but also tomorrow's
customer.
- Mortality rate is very high when you are arrogant, complacent, myopic, inconsistent and
greedy.
- Business models keep changing and understand new revenue creating streams.
Understanding Capital controlling and managerial stake. Concept of FOBH (Family owned business
houses). Problems and positive aspects
1. Capital Stake
a. Stake (Right) in the capital of company represented by face value of shares, multiplied
by number of shares purchased
2. Market capitalisation
a. Value of that capital stake as on today as per share price of the company on a particular
day
3. Controlling stake:
a. That part of capital stake with the help of which individual promoter or a group can
prove their majority (theoritically 51%) in AGM which Is the highest decision making
body in the corporate sector.
4. Mangerial stake:
a. Those who have the right to control have the right to manage either on thir own or by
appointing an outsider to run the show
Write 10 more
11. Goenka Group (Harsh Goenka and Sanjay Goenka) (CEAT, Calcutta electrics)
12. Shiv nadar
13. Dalmia
14. Murugappa group
15. Hinduja (ashok leyland)
16. Anantharamakrishnan (TAFE)
17. Munjals (Hero cycles)
18. Shapoorji Palonji (Forbes Marshall, Eureka)
19. MDH
20. Damani (D mart)
21. Jindal (JSW Steel)
22. Mittal
23. Cyrus Poonavala
24. Azim Premji (WIPRO)
25. Wadia (Britannia, go air, bombay dyeing)
Promoters of FOBH use a strategy of buy back of sharesin order to raise their capital stake in the
company
Eg. Total capital rs 100. Family's stake Rs.40 (40% capital stake in the company) 20 Rs are called back
(buyback of shares) as company may not require 100 rs as capital to run the business
New equation, post buy back capital Rs 80 , family's stake is Rs.40 (Now it is 50%)
Business family increases theor control by this strategy
Sweat equity-> Many times, other than capital contribution many business associates can contribute
in kind (employees throuhgh their dedication and commitment, some suppliers thriugh their logistic
and supply chain. Sometimes partners in the form o tech exchange or patent sell) all these are
examples of sweat contribution and in return of that when start up structure takes a form of private
and public limited compnay they get shares as a compensation for their contribution in kind.
Pledging of shares
Pledging of shares by promoters and its link with controlling stake.
Promoters can deposit (Pledge) their shares (certain % of capital stake) to borrow money. Funds
maybe required for expansion of business.
Eg. Promoter for a business family having 40% controlling stake have pledged 30% with banks . In
case borrowed money is not paid, banks cans sell those shares to recover their loan.
In other words promoters are left with only 10% of capital stake and they lose control of the
company.
Submission: 23rd
5-7 pages not more than that (excluding front page)
No photo/illustration/graph
Origin of the company till date all strategies
It can be related like Amul and Britannia, and unrelated like reliance and reymond
It is wrong to say every related diversification succeed and unrelated failed as we have succeess
and failure stories from both what is important is to find out and analyze why companies
diversified.
It can be related like Amul and Britannia, and unrelated like reliance and reymond
It is wrong to say every related diversification succeed and unrelated failed as we have succeess
and failure stories from both what is important is to find out and analyze why companies
diversified.
Crafting and Executing strategy by Thompson Strckland, gamble n jain published by tata mcgrawhill
5 dimensions of diversification:
1. Diversifact
2. Diversifiction
3. Diversifriction
4. Diversifame
5. Diversifad
Surrogate advertising
5) Diversifad
Profit, expansion, growth, diversification, sun riase industry, govt. policies r not the reasons u shud
be mentioning.
If everyone is thinking alike, then somebody isn’t thinking. -George S. Patton Jr.
herd mentality, or mob mentality, describes how people are influenced by their peers to adopt
certain behaviors, follow trends, and/or purchase items.
In business, when you’re trying to differentiate, when you’re trying to win and keep customers and
employees, this mentality quickly commoditizes your business/product and, well, doesn’t really
excite your customers or your employees. Employees can move in and out of employment from your
company to your competitors, or customers can purchase your products or the next guy’s – and
never feel or experience a difference. Suddenly, it doesn’t matter where they work or where they
shop: one is the same as the next as the next – and so on.
Researchers at Leeds University, led by Prof Jens Krause, performed a series of experiments where
volunteers were told to randomly walk around a large hall without talking to each other. A select
few were then given more detailed instructions on where to walk. The scientists discovered that
people end up blindly following one or two people who appear to know where they’re going.
The published results showed that it only takes 5% of what the scientists called “informed
individuals” to influence the direction of a crowd of around 200 people. The remaining 95% follow
without even realizing it.
2. Looking out for new opportunities due to failure/ want to earn more money: Oneplus .
Onida's foray into smartphone business after its failure n revamp in home electronics
3. Need of diversification/expansion: News houses have diversified into podcasts, news channels
and radio channels all at the same time. It was a conscious decision to diversify into the field of
information broadcast to retain their market cap.
4. Harvesting strategy: To cash out by passing on the Baton.
In general, the term harvesting strategy is nothing but well-planned discontinuation of the
entire product line when it becomes difficult to extract profit from. Also not just the product
line but sometimes the entire sector of any companies can be terminated for once and for all if
it feels like it is not generating profit for the company anymore.
L&T hiving off its cement business to ultratech in 2013 is a classic example of harvesting
strategy. Another xample is discontinuation of ipods and other music storage devices. At one
point almost every electronics manufacturer came out with its own version of a portable
music player that also has a storage capability but eventually as smartphones market boomed,
the entire line of product was discontinued/ cashed out by all of these companies.
Potato reasons:
Profit, expansion, growth, diversification, sun riase industry, govt. policies r not the reasons u
shud be mentioning.
Impact
Creates Bubbles: The end result of herd mentality is an asset bubble. An asset bubble is
nothing but the propagation of a false trend by the entire market. The problem with herd
mentality is that no one is checking the facts for themselves. Instead, everyone is assuming
that the entire group knows the facts. The meteoric rise in prices and the catastrophic drop
are not possible as long as the crowd does not behave irrationally because of herd mentality.
Creates Volatility: Most of the time, herds do not keep on making irrational decisions till their
actions are completely out of sync with reality. In most cases, irrational decisions are corrected
sooner. However, the market sees a series of over and under reactions spread over a time
frame. This herd mentality is the reason that volatility is created in the asset markets.
Ironically, this volatility is what reinforces the herd behavior. The herd behavior becomes like a
self-fulfilling prophecy.
Presentation
Have slides prepre a word doc by giving explanation. 8th sep to submit
Takeover topic
Takeover: Anything can be taken over or acquired for a price. It can eb cash, debt, equity, trade-off
and concept of earnout .
Types of takeover:
1. Brand can be taken over
2. Capital stake can be taken over
3. Managerial stake can be taken over
4. Controlling stake can be taken over
5. Part of the tangible assets are taken over (factories)
6. Rights (distribution, franchising, licensing)
7. Complete takeover
8. Takeover because of banking insolvency code resolution
9. Friendly takeover
10. Hostile takeover
Because Amazon acquired wholefoods in 2017 in US, Walmart was keen on acquiring a
company in India to enter into Amazon's turf.
Hostile takeover
Demerger
Develop a case study and give a title to it
b. Write a summary of Michel Porter's Competitive Forces and Value Chain analysis, VRIO
framework and mckenzie's 7 S framework (10 marks)
i. Page limit 2 pages
2. Section 2 - Attempt any 2 questions.
Note: Answer to be supported by reference case study. Page limit 2 pages per question.
a. What is takeover, what are the objectives of takeover and comment on hostile takeover
and words associated with takeover ?
b. Write an essay on PESTEL analysis and corresponding corporate example.
c. Why Joint Ventures are formed and why many joint ventures have failed in India
d. What are the 5 dimensions of diversification. Explain with corporate example
(Diversifad, fiction etc..)
e. Explain the concept of merger and de-merger with corporate examples.
Group 3