The strategic management process is concerned with a long-run perspective. The time horizon involved often is at least 3 years and normally may be 5 or 10 years into the future. However, in certain extremely dynamic industries, the strategic management process could be concerned with much shorter time frames.
Strategic management involves the system of corporate values, the corporate culture, and all managerial process of change, such as leadership, planning, control, and human resources management.
Hence, strategic management can be viewed as a series of steps in which top management should accomplish at least five tasks that C. West Churchman suggested in The Systems Approach (1968):
1. Identify the business's fundamental values and the goals and objectives that arise from them.
2. Assess the business's environment - forces outside the business itself that may be opportunities or threats.
3. Assess the business' resources and capabilities - those things within the control of the business, such as people, machinery, facilities, contracts, image, and goodwill - that can be allocated to achieve goals and objectives.
4. Identify or form the organization's component's (a) internal units that receive allocated resources and carry out the business's work and (b) an organizational structure that includes the units themselves and the relationships of authority, responsibility, and communication that they have with one another.
5. Develop the management and decision-making structure: the process used to allocate the business's resources to its components so as to realize goals and sustain values within constraints of environment.
At the centre of the model is embedded Churchman's first imperative: to identify the organization's values. Without knowledge of its values, an organization cannot develop a mission, goals, and objectives. Churchman's remaining four imperatives can be found within the four boxes in the circle. There is an important interdependency among the four factors of strategic management: strategic planning, resource requirements, organizational structure, and strategic control.
Strategic planning is the key link between strategic management and the organization's external environment. Resource requirement is the factor that links strategic management to the organization’s resources, including finances, facilities and equipment, land, access to information, goodwill, and personnel.
Strategic control relates to the implementation of a strategy.
Organizational structure links strategic management to organizational realities.
According to this model, environmental demands are met through a strategic planning process, involving the formulation of missions, goals, and objectives.
Strategic management can thus be seen as a "total" system perspective and not merely as the process of choosing from among alternative long-range plans. It reflects the organization's "strategic capability" to balance the demands imposed by external and internal forces and to integrate the overall functioning of the organization so as to allocate resources in a manner best designed to meet goals and objectives.
Today's manager is faced with an accelerating rate of change in technical, social, political, and economic forces. As a result of these changing forces, the management process has become more difficult, requiring greater skills in planning, analysis, and control. Thus, the concept of strategic management is still involving and will continue to undergo change.
Swaten Tiwari (Lean Six Sigma Consultant - Trainee)
- Increase understanding of a process
- Analyze how a process could be improved
- Show others how a process is done
- Improve communications between individual’s engaged in the same process
- Provide process documentation
- Ensure that you are working with the people who are actually doing the work. Managers will often want to be involved in process work and their support is critical.
- Ensure team members feel safe in sharing and understand that this isn’t a fault finding mission. Their description of the process as it is, is critical, good, bad or otherwise.
- Decision symbols are appropriate when those working in the process make a decision that will affect how the process will proceed. For example, when the outcome of the decision or question is YES, the person would follow one set of steps, and if the outcome is NO, the person would do another set of steps. Be sure the text in the decision symbol would generate a YES or NO response, so that the flow of the diagram is logical.
- In deciding how much detail to put in the flowchart (i.e., how much to break down each general step), remember the purpose of the flowchart. For example, a flowchart to better understand the problem of long waiting times would need to break down in detail only those steps that could have an effect on waiting times. Steps that do not affect waiting times can be left without much detail.
Gopi Krishna Dontha (ISO and Lean Six Sigma Consultant)
History of Pareto.
A Pareto diagram is a simple bar chart that ranks related measures in decreasing order of occurrence. The principle was developed by Vilfredo Pareto, an Italian economist and sociologist who conducted a study in Europe in the early 1900s on wealth and poverty. He found that wealth was concentrated in the hands of the few and poverty in the hands of the many. The principle is based on the unequal distribution of things in the universe. It is the law of the "significant few versus the trivial many." The significant few things will generally make up 80% of the whole, while the trivial many will make up about 20%.
Purpose of Pareto Chart.
The purpose of a Pareto diagram is to separate the significant aspects of a problem from the trivial ones. By graphically separating the aspects of a problem, a team will know where to direct its improvement efforts. Reducing the largest bars identified in the diagram will do more for overall improvement than reducing the smaller ones.
There are two ways to analyze Pareto data depending on what you want to know:
Counts Pareto: Use this type of Pareto analysis to learn which category occurs most often, you will need to do a counts Pareto diagram. To create a counts Pareto, you will need to know the categories and how often each occurred.
Cost Pareto: Use this type of Pareto analysis if you want to know which category of problem is the most expensive in terms of some cost. A cost Pareto provides more details about the impact of a specific category, than a count Pareto can.
When to Use a Pareto Chart
- When analyzing data about the frequency of problems or causes in a process.
- When there are many problems or causes and you want to focus on the most significant.
- When analyzing broad causes by looking at their specific components.
Remember that the purpose of the Pareto diagram is to distinguish the "vital few from the trivial many." Therefore, we would like only a few bars on the left side of the Pareto that account for most, say 80%, of the problems. Then it is clear which areas we should address. We can also look at the cumulative line to tell us if our Pareto is working well. The cumulative line should be steep, with a lot of arch to it, implying that the first few problem areas rapidly add to a high percentage of the total problems. If the cumulative line is straight, it is telling us that the contribution from each successive bar (after the first) is about even. These bars, then, should be about the same height. This says that no problems stand out as being more bothersome than the rest, which does not help much for problem solving.
What Questions the Pareto Chart Answers
- What are the largest issues facing our team or business?
- What 20 percent of sources are causing 80 percent of the problems (80/20 Rule)?
- Where should we focus our efforts to achieve the greatest improvements?
Aditya Tiwari (Lean Six Sigma Consultant)
As the world experiences economic slowdown, with industrial production and services getting adversely impacted, most of the companies have embarked upon cost cutting measures. A knee-jerk reaction sometimes leads to reduction of staff, which is a bad strategy showing lack of faith in the future. Today Lean and Six Sigma professionals can play an important role in reducing costs for the organizations and that is just one of the reasons why they are so important in today’s economic scenario.
A certification as a Black Belt in lean and six sigma ensures that you possess the skills required to execute improvement projects which can lead to huge cost reduction for the organization. Apart from reducing costs, a lean and six sigma project also helps to improve quality, increase customer satisfaction and employee satisfaction. What else can an organization ask for?
By just completing around 10 days of classroom coaching and doing an improvement project under a qualified Master Black Belt, mostly within a period of 6 months, any professional with around 2-3 years of experience in the industry can start contributing to the corporate world. For this basic qualifications do not matter. You might be a finance professional or a techie from IT, or an engineer from manufacturing or a healthcare professional, the doors of lean six sigma certifications are open to all. A Black Belt certification adds value to your credentials, and enables you to contribute more towards your organization.
And if you find this field interesting, then welcome to the world of excellent opportunities as a lean and six sigma professional! Just 3-4 years of experience as lean six sigma practitioner can make you a valuable resource for your organization and you can carve a niche for yourself coupled with faster progress with or without changing your domain.
I have been a lean and six sigma professional for the last 20 years and can vouch for this profession as I have completely changed my domain from being a chemical engineer 20 years ago to a hard core full time lean and six sigma professional. And I find it immensely rewarding. For the first 12 years, it helped me to act like an internal consultant to my organizations where I worked for. Later I joined Anexas, which is a group of lean six sigma professionals virtually working independently as a team on process improvement assignments, in various locations around the world.
From my experience I can say that this profession gives you independence, sense of fulfillment and an opportunity to make this world a better place. So, what are you waiting for? Just join in!
Amitabh Saxena is CEO, Anexas Europe, a lean and sigma training and consulting organization with presence in Middle East, Europe and Asia.
During the last half of the twentieth century, many barriers to international trade fell and a wave of firms began pursuing global strategies to gain a competitive advantage. However, some industries benefit more from globalization than do others, and some nations have a comparative advantage over other nations in certain industries. To create a successful global strategy, managers first must understand the nature of global industries and the dynamics of global competition.
An international strategy means that internationally scattered subsidiaries act independently and operate as if they were local companies, with minimum coordination from the parent company. Global strategy leads to a wide variety of business strategies, and a high level of adaptation to the local business environment. The challenge here is to develop one single strategy that can be applied throughout the world while at the same time maintaining the flexibility to adapt that strategy to the local business environment when necessary. A global strategy involves a carefully crafted single strategy for the entire network of subsidiaries and partners, encompassing many countries simultaneously and leveraging synergies across many countries.
The three key differences between Global and International strategy are,
- The first relates to the degree of involvement and coordination from the centre. Coordination of strategic activities is the extent to which a firm’s strategic activities in different country locations are planned and executed interdependently on a global scale to exploit the synergies that exist across different countries. An international strategy does not require strong coordination from the centre. A global strategy, on the other hand, requires significant coordination between the activities of the centre and those of subsidiaries.
- The second difference relates to the degree of product standardization and responsiveness to local business environment. Product standardization is the degree to which a product, service, or process is standardized across countries. An international strategy assumes that the subsidiary should respond to local business needs unless there is a good reason for not doing so. In contrast, the global strategy assumes that the centre should standardize its operations and products in all the different countries, unless there is a compelling reason for not doing so.
- The third difference has to do with strategy integration and competitive moves. ‘Integration’ and ‘competitive move’ refer to the extent to which a firm’s competitive moves in major markets are interdependent. For example, a multinational firm subsidizes operations or subsidiaries in countries where the market is growing with resources gained from other subsidiaries where the market is declining, or responds to competitive moves by rivals in one market by counter-attacking in others.
The international strategy gives subsidiaries the independence to plan and execute competitive moves independently—that is, competitive moves are based solely on the analysis of local rivals. In contrast, the global strategy plans and executes competitive battles on a global scale. Firms adopting a global strategy, however, compete as a collection of a globally integrated single firms. An international strategy treats competition in each country on a ‘stand-alone basis’, while a global strategy takes ‘an integrated approach’ across different countries.
Reasons for going international might be many but the typical goal is company growth or expansion. When a company hires international employees or searches for new markets abroad, an international strategy can help diversify and expand a business.
Economic globalization is the process during which businesses rapidly expand their markets to include global clients. Such expansion is possible in part because technological breakthroughs throughout the 20th century rendered global communication easier. Air travel and email networks mean it is possible to manage a business from a remote location. Now businesses often have the option of going global, they assess a range of considerations before beginning such expansion.
Overseas operations are often attractive to executives seeking to reduce their budgets in order to increase profit. For example, it is possible to cut business overhead costs in countries with relatively deflated currencies and lower costs of living. U.S.-based businesses can further reduce overhead by operating in countries that have free trade arrangements with the United States. It is often cheaper to employ a workforce in these countries since the cost of living is lower. When companies experience financial crises, executives sometimes attempt to save what remains of the company by reformulating the budget and moving overseas.
Expanded markets entice many executives into going global. William Edwards of All Business explains that going global can reduce a company's reliance on local and national markets. That is, downturns in consumer demand at home are offset by upturns in consumer demand in international markets. Larger markets also mean the potential for greater profit, so companies go global to seek new business opportunities and even to expand the range of goods and services that they offer. Sometimes businesses expand to under-exploited regions to gain market dominance before an industry competitor expands into the region.
Change is an ever present facet of business development. Businesses transfer ownership, for example, and end up reformulating their entire business structures. Companies hire outside consultants to advise restructuring during financial crises. Sometimes the fact that businesses go global is the product of the inevitable ebb and flow of commerce. An overseas buyer may transfer operations to the home country. The majority of an industry's business may shift overseas, making global expansion all the more desirable. Competition may develop in regions such that it is unwise for your company not to follow.
Entry Strategies for going international
Foreign market entry strategies differ in degree of risk they present, the control and commitment of resources they require and the return on investment they promise. There are two major types of entry modes:
1) Non-equity mode, which includes export and contractual agreements,
2) Equity mode, which includes joint venture and wholly owned subsidiaries.
The market-entry technique that offers the lowest level of risk and the least market control is export and import. The highest risk, but also the highest market control and expected return on investment are connected with direct investments that can be made as an acquisition (sometimes called Brownfield) and Greenfield investments.
Exporting and importing
The first and the most common strategy to be an international company is: import and export of goods, materials and services. Exporting is the process of selling goods or services produced in one country to other countries. There are two types of exporting: direct and indirect. Indirect export means that products are carried abroad by other agents and the firm doesn’t have special activity connected with international market, because the sale abroad is treated like the domestic one. For these reasons it is difficult to say that it is an internationalization strategy. In the case of direct exporting, the firm becomes directly involved in marketing its products in foreign markets.
Licensing is another way to enter a foreign market with a limited degree of risk. The international licensing firm gives the licensee patent rights, trademark rights, copyrights or know-how on products and processes. In return, the licensee will: produce the licensor’s products, market these products in his assigned territory and pay the licensor fees and royalties usually related to the sales volume of the products. This type of agreement is generally welcomed by foreign public authorities because it brings technology into the country.
Franchising is similar to licensing except that the franchising organisation tends to be more directly involved in the development and control of the marketing programme.
The franchising system can be defined as a system in which semi-independent business owners
(Franchisees) pay fees and royalties to a parent company (franchiser) in return for the right to become identified with its trademark, to sell its products or services, and often to use its business format and system. Compared to licensing, franchising agreements tends to be longer and the franchisor offers a broader package of rights and resources which usually includes: equipment’s, managerial systems, operation manual, initial trainings, site approval and all the support necessary for the franchisee to run its business in the same way it is done by the franchisor. In addition to that, while a licensing agreement involves things such as intellectual property, trade secrets and others in franchising it is limited to trademarks and operating know-how of the business.
Advantages of the international franchising mode are as follows:
- low political risk
- low cost
- allows simultaneous expansion into different regions of the world
- well selected partners bring financial investment as well as managerial capabilities to the operation.
There are also disadvantages of the international franchising mode:
- franchisees may turn into future competitors
- demand of franchisees may be scarce when starting to franchise a company, which can lead to making agreements with the wrong candidates.
- a wrong franchisee may ruin the company’s name and reputation in the market
- comparing to other modes such as exporting and even licensing, international franchising requires a greater financial investment to attract prospects and support and manage franchisees.
Foreign joint ventures have much in common with licensing. The major difference is that in joint ventures, the international firm has an equity position and a management voice in the foreign firm. A partnership between host- and home-country firms is formed, usually resulting in the creation of a third firm.
This type of agreement gives the international firm better control over operations and also access to local market knowledge. The international firm has access to the network of relationships of the franchisee and is less exposed to the risk expropriation thanks to the partnership with the local firm
This type of agreement is very popular in international management. Its popularity stems from the fact that it permits the avoidance of control problems of the other types of foreign market entry strategies.
In addition, the presence of the local firm facilitates the integration of the international firm in a foreign environment
A strategic alliance is a term used to describe a variety of cooperative agreements between different firms, such as shared research, formal joint ventures, or minority equity participation. The modern form of strategic alliances is becoming increasingly popular and has three distinguishing characteristics:
- they are usually between firms in high - industrialized nations
- the focus is often on creating new products and technologies rather than distributing existing ones
- they are often only created for short term durations.
Technology exchange - this is a major objective for many strategic alliances. The reason for this is that technological innovations are based on interdisciplinary advances and it is difficult for a single firm to possess the necessary resources or capabilities to conduct its own effective R&D efforts. This is also supported by shorter product life cycles and the need for many companies to stay competitive through innovation.
The greatest disadvantage of strategic alliances is the risk of competitive collaboration – some strategic alliances involve firms that are in fierce competition outside the specific scope of the alliance.
This creates the risk that one or both partners will try to use the alliance to create an advantage over the other.
In this arrangement, the international firm makes a direct investment in a production unit in a foreign market. It is the greatest commitment since there is a 100% ownership. There are two primary ways for direct investments: firms can make a direct acquisition in the host market or they can develop its own facilities from the ground up and this form is called Greenfield investment. Acquisition has become a popular mode of entering foreign markets mainly due to its quick access. Acquisition is lower risk than Greenfield investment because the outcomes of an acquisition can be estimated more easily and precisely. Greenfield investment is the establishment of a new wholly owned subsidiary. It is often complex and potentially costly, but it is able to full control to the firm and has the most potential to provide above average return. Greenfield investment is high risk due to the costs of establishing a new business in a new country. This entry strategy takes much time due to the need of establishing new operations, distribution networks, and the necessity to learn and implement appropriate marketing strategies to compete with rivals in a new market.
Foreign market entry strategies are numerous and imply a varying degree of risk and of commitment from an international firm. In general, the implementation of an international development strategy is a process achieved in several steps. Indirect exporting is often used as the starting point; if the results are satisfactory, more committing agreements are made by associating local firms.
In the international competitive environment, the ability to develop a transnational organizational capability is the key factor that can help the firm adapt to the changes in the dynamic environment. As the fast rate of globalization renders the traditional ways of doing business irrelevant, it is vital for managers to have a global mind-set to be effective. Globalization of business has led to the emergence of global strategic management. A combination of strategic management and international business will result in strategies for global cooperation. However, there are obstacles to progress along the way.
The problems caused by these obstacles can be solved by cooperative ventures based on mutual advantages of the parties involved. Proper effective communication will be a key element for global strategies because what is proper and effective in one culture may be ineffective and improper in another. Marketing products globally is complex and difficult because of several factors including:
International Strategic Alliances, coordination and control of international marketing, communication, regional trade blocks, and choice of global strategy. The firm with the choice of an effective global strategy that takes into consideration its strengths and weaknesses in the face of the opportunities and threats in the environment, will survive.
Artificial Intelligence (A.I.) will soon be at the heart of every major technological system in the world including: cyber and homeland security, payments, financial markets, biotech, healthcare, marketing, natural language processing, computer vision, electrical grids, nuclear power plants, air traffic control, and Internet of Things.
While A.I. seems to have only recently captured the attention of humanity, the reality is that A.I. has been around for over 60 years as a technological discipline. In the late 1950’s, Arthur Samuel wrote a checkers playing program that could learn from its mistakes and thus, over time, became better at playing the game. MYCIN, the first rule-based expert system, was developed in the early 1970’s and was capable of diagnosing blood infections based on the results of various medical tests. The MYCIN system was able to perform better than non-specialist doctors.
While Artificial Intelligence is becoming a major staple of technology, few people understand the benefits and shortcomings of A.I. and Machine Learning technologies.
Machine learning is the science of getting computers to act without being explicitly programmed. Machine learning is applied in various fields such as computer vision, speech recognition, NLP, web search, biotech, risk management, cyber security, and many others.
The machine learning paradigm can be viewed as “programming by example”. Two types of learning are commonly used: supervised and unsupervised. In supervised learning, a collection of labeled patterns is provided, and the learning process is measured by the quality of labeling a newly encountered pattern. The labeled patterns are used to learn the descriptions of classes which in turn are used to label a new pattern. In the case of unsupervised learning, the problem is to group a given collection of unlabeled patterns into meaningful categories.
Within supervised learning, there are two different types of labels: classification and regression.
In classification learning, the goal is to categorize objects into fixed specific categories. Regression learning, on the other hand, tries to predict a real value. For instance, we may wish to predict changes in the price of a stock and both methods can be applied to derive insights. The classification method is used to determine if the stock price will rise or fall, and the regression method is used to predict how much the stock will increase or decrease.
Santosh Lahane ( Lean Six Sigma Consultant - Trainee)
Lean and Six Sigma has its broad applications and success stories in oil & gas and Petrochemical industry by using principles of enhanced productivity, safety and environment as well as process quality management in a well-defined framework. It has widely being used in Various Industries and achieved a tremendous results using its statistical tool and techniques, which has resulted a huge reduction in the variance of the process plus the increase in the profit of the organization.
Six sigma with its statistical approach and DMAIC methodology has been implemented successfully in various fields to reduce the number of defects and to bring the quality level in the organization to its expected. Over the past years, the GCC (Gulf Cooperation Council) countries have experienced considerable growth in the oil and gas industry particularly exploration and production (E&P) activities. Oil and gas companies, in the UAE, have implemented an efficient and reliable framework associated with the safety and operational excellence. With new technical advances, cheap extraction of shale oil has now become possible. Hence, it becomes a necessity more than ever, to find an optimum way to stay competitive in the market. The question raised then is: which approach is most suitable or optimum for the framework required and how could it be achieved?
This framework must rely on efficient quality control and assurance methodologies such as Six Sigma, Lean and Kaizen to guarantee a position of being the largest global producer in the oil and gas business. While researching the prevalence of Six Sigma adoption among major oil and gas companies, we were surprised to find that a number of oil companies in the GCC such as, Abu Dhabi Company for Onshore Oil Operations, Abu Dhabi Gas Liquefaction Company, Saudi Aramco, Saudi Electricity Company, Kuwait Gulf Oil Company, Kuwait Petroleum Corporation, Maersk Oil Qatar, Medco Energy, The Bahrain Petroleum Company, etc...) have already established Lean Six Sigma practices in place which are used to address the new challenges they face. Oil and gas companies should be looking to be shielded against barriers imposed by the advent of new shale oil technologies and should also look to boosting their Lean Six Sigma operations, to ensure that full potential is reached as the energy industry is facing its future challenges head on.
Lean Six Sigma has been applied by companies in oil and gas industry to improve production, increase reliability and reduce costs while running safe operations. Too much waste, too much redundancy and lengthy turnaround times result in even the most efficient oil and gas companies failing to meet customer expectations 25-50% of the time. Lean Six Sigma can help in ensuring that customer expectations are met and potential savings of $100millions are realized. Despite some misconception that some managers have about the implementation of Lean, it will stay the most efficient methodology to apply in the oil and gas business. Success of Lean depends also on top management decisions. The application of these methodologies when applied successfully to projects can produce rewarding results.
Six Sigma, the quality improvement methodology made famous by Motorola in the 1980s, has garnered much-deserved recognition in the last few years as more and more companies swear by its effectiveness in improving their bottom lines.
Although Six Sigma methodology was made for manufacturing sector in initial days but these days Six Sigma is widely used in service industry like supply chain, hospitality, banking, IT, ITES, etc. But still there are many companies who stay away from this breakthrough methodology may be because it looks very technical and difficult from outside, but in reality it’s not like that. With the help of few trained people from within or outside the organization (consulting firms), six sigma tools can easily be used in your organization. There is no need to shy from this great methodology which can save you millions. Look at the improvement and saving part.
These days there are various options available to learn six sigma, the popular business improvement methodology, starting from free videos and books available online to the textbooks and various training organizations. But considering the importance of the course one should keep in mind that choosing the right platform for training is critically important. Most of the managers and organizations prefer getting a classroom training from a professional training organization because there you will get to learn more due to certain factors like, personal guidance, experiences of the course colleagues, demo projects, assistance in your project, etc.
From 1987 until 2007, use of Six Sigma, has saved Fortune 500 companies an estimated $427 billion, according to research published by iSixSigma and according to a Wikipedia claim world majors like Amazon, Bank of America, Boeing, CSC, Credit Suisse, Dell, Ford Motors, General Electric are the ones who have been benefited from this great and simple approach.
So, what are you waiting for now! Go and get certified in Six Sigma.
It was the same Joseph Juran who linked manufacturing and the healthcare industry; he wrote: as the health industry undertake change, it is well advised to take into account the experience of other industries in order to what worked and what has not. In the minds of many, the health industry is different. This is certainly true as to its history, technology and culture. However, the decisive factors in what works and what does not are the managerial processes, which are alike for all industries.This is the reasoning that allows the principles of lean production and management to be applied in healthcare, despite these being originally developed for application in other industries.
We mentioned that the lean philosophy calls for value creation through elimination of waste. These wastes are common in all industries and are not unique to healthcare. The following is a summary of these wasteful activities:
Producing something in excess, earlier, or faster than the next process needs it
The cost of managing a large supply inventory may not be obvious at first glance; beside consumption follow-up and space required to store, there is a need to follow expiration dates and to constantly ensure that the items in the inventory are not technologically obsolete. It was already shown that the overall cost of smaller and more frequent shipments is lower than a large-volume purchase for which a discount was provided
A lot of walking waste can arise from poor design of the working area
In healthcare this can be evident when moving patients, lab tests, information, etc.
There are times when material provided to the customers (patients) mandated by regulations can be confusing. For example, multiple insurance claim forms, including ones that are not bills, can confuse the unexperienced novice
There are many examples for these defects that can be related to poor labeling of tests, incomplete information in patients' charts or in instructions provided to referrals, etc.
There is not much need to explain why waiting a few hours in line is a wasteful activity
Under-utilizing staff :
Under-use is not only time-dependent but also involves deeper levels such as not sharing knowledge or not taking advantage of someone's skills and creativity; under-use typically shows in hierarchical structures and not using teams.
Alex Rajan ( Senior Manager - Operations and Lean six sigma consultant )