EHRMA

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EHRMA

• Strategic Management
• By
• Dr. Harold D. Harlow

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Strategic Management

• Defined
• Set of managerial decisions and actions that
  determines the long-run performance of a firm.
• Set of managerial actions and decision,separate
  from operations, that determines the future
  profitability/success of the firm.

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Managers Two Primary Responsibilities

• Operational Work
• Actions and plans less than one year.
• Daily and weekly activities to get the work of
  the business done well
• Strategic Work
• More than one year future orientation.
• Often crowded out by operational work.
• The most important work is strategic. Although
  not usually urgent in most environments,
  essential to the future profit making potential
  of the firm.

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Business Policy

• Defined
• General management orientation that looks inward
  for properly integrating the firms functional
  activities.

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Four Phases ofStrategic Management

• Basic financial planning
• Forecast-based planning
• Externally-oriented planning (strategic)
• Strategic management(Choose functional strategies
  to support firm and SBU strategies)

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Strategic Management

• Benefits
• Clearer sense of strategic vision for the firm
• Sharper focus on what is strategically important
• Improved understanding of a rapidly changing
  environment

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Strategic Management

• Not always a formal process can be ad hoc
• Where is the organization now? (Not where do we
  hope it is!)
• If no changes are made, where will the
  organization be in 1 year, 2 years, 5 years, 10
  years?
• What specific actions should management
  undertake? What are the risks and payoffs
  involved?

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Global Stategic Issues

• European Union (EU)
• Economic integration of 15 member countries
• North American Free Trade Agreement (NAFTA)
• Improved trade among 3 member countries
• Mercosur
• Free-trade area among Argentina, Brazil, Uruguay,
  and Paraguay
• Association of South East Asian Nations (ASEAN)
• Attempting to link members into a borderless
  economic zone

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E-Commerce

• 7 Trends
• Internet forcing companies to transform
  themselves
• Market access and branding are changing, causing
  disintermediation of traditional distribution
  channels
• Balance of power shifting to the consumer
• Competition is changing

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7 Trends (continued)

• Pace of business increasing drastically
• Internet purchasing corporations out of their
  traditional boundaries
• Knowledge becoming a key asset and source of
  competitive advantage

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Adaptation to Changing Environmental Conditions

• Strategic flexibility
• Demands a long-term commitment to the development
  and nurturing of critical resources
• Demands that the firm become a learning
  organization

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Learning Organizations

• Defined
• An organization skilled at creating, acquiring,
  and transferring knowledge and at modifying its
  behavior to reflect new knowledge and insights.

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Learning Organizations

• Four Main Activities
• Solving problems systematically
• Experimenting with new approaches
• Learning from their won experiences and that of
  others
• Transferring knowledge quickly and efficiently
  throughout the organization

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Strategic Management Model
Environmental
Evaluation and Control




Evaluation and Control
Strategy
Strategy
and Control
Formulation
Implementation
Scanning
Mission
External
Reason for

Societal

existence
Objectives
Environment

General Forces
What results

to

Strategies
Task

accomplish

Environment

by when
Plan to

Industry Analysis
achieve the

Policies
mission

Internal
objectives
Broad

guidelines for

Programs

Structure

Process
decision


Chain of Command
to monitor
making
Activities

performance
needed to

Budgets

Culture

and take
accomplish


Beliefs, Expectations,

corrective
a plan
Cost of the

action
Values
programs
Procedures
Resources

Sequence

Assets, Skills

of steps

Competencies,

needed to

Knowledge
do the job
Performance
Feedback/Learning
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Basic Model of Strategic Management

• Four Basic Elements

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Environmental Scanning

• Defined
• The monitoring, evaluating, and disseminating of
  information from the external and internal
  environments to key people within the firm.

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Environmental Scanning
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Environmental Scanning

• Identify strategic factors
• SWOT Analysis
• Strengths, Weaknesses
• Opportunities, Threats
• Internal Environment
• Strengths Weaknesses
• Within the organization but not subject to
  short-run control of management
• External Environment
• Opportunities Threats
• External to the organization but not subject to
  short-run control of management

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Strategy Formulation

• Defined
• Development of long-range plans for the
  effective management of environmental
  opportunities and threats in light of corporate
  strengths and weaknesses.

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Strategy Formulation

• Mission Statement
• Purpose or reason for the organizations
  existence
• Promotes shared expectations among employees
• Communicates public image important to
  stakeholders
• Who we are, what we do, what wed like to become

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Strategy Formulation

• Maytag Corporation
• Mission Statement
• To improve the quality of home life by
  designing, building, marketing, and servicing the
  best appliances in the world.

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Strategy Formulation

• Objectives
• The end results of planned activity
• What is to be accomplished
• Time in which to accomplish it
• Quantified when possible

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Strategy Formulation

• Goals vs. Objectives
• A goal is an open-ended statement of what one
  wants to accomplish with no quantification of
  what is to be achieved and no time criteria for
  completion.

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Goals Objectives

• Corporate goals and objectives include
• Profitability (net profits)
• Growth (increase in total assets, etc.)
• Utilization of resources (ROE or ROI)
• Market leadership (market share)

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Strategies

• Defined
• A strategy of a corporation forms a
  comprehensive master plan stating how the
  corporation will achieve its mission and
  objectives. It maximizes competitive advantage
  and minimizes competitive disadvantage.

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Strategies

• 3 Types of Strategy
• Corporate strategy
• Business strategy
• Functional strategy

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Strategies

• Corporate Strategy
• Stability
• Growth
• Retrenchment

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Strategies

• Business Strategy
• Competitive strategies
• Cooperative strategies

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Strategies

• Functional Strategy
• Technological leadership
• Technological followership

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Hierarchy of Strategy
Corporate Strategy
Business (Division Level) Strategy
Functional Strategy
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Policies

• Defined
• Broad guidelines for decision making that link
  the formulation of strategy with its
  implementation.

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Strategy Implementation
Programs
Strategy Implementation
Budgets
Procedures
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Initiation of Strategy

• New CEO
• External intervention
• Threat of change in
• ownership
• Performance gap
• Strategic inflection point

Stimulus for change in strategy
Triggering event
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Strategic Decision Making

• Strategic Decisions
• Rare
• Consequential
• Directive

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Strategic Decision Making
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Strategic Decision Making
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StrategyBasic Concepts
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Who Makes Strategy?

• General Management Function.
• Top level managers develop strategy of the firm.
• Not operations activity
• Must be allowed adequate time and resources to be
  successful.
• Key point Operational work tends to crowd out
  strategic management work.

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What is Strategy?

• Strategy has three levels
• Firm level
• Business level or Strategic Business Unit Level
• Functional or departmental level.
• Directional goals to guide future decision making
• Formal planning sessions may occur

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Strategy Questions

• What is the current strategy, implicit or
  explicit?
• What assumptions have to hold for the current
  strategy to be viable?
• What is happening in the larger, social and
  educational environments?
• What are our growth, size, and profitability
  goals?
• In which markets will we compete?
• In which businesses?
• In which geographic areas?

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Strategy Questions-Continued

• To what customers or users?
• How will the selling/buying decisions be made?
• How will we distribute our products and services?
  
• What technologies will we employ?
• What capabilities and capacities will we require?
  
• Which ones are core?
• What are our management capabilities and
  capacities?
• Is our corporate culture supportive of our
  strategy?
• What will we make, what will we buy, and what
  will we acquire through alliance?
• What are our options?
• On what basis will we compete

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Why

• Proven significant gains in performance from
  explicit strategy development
• Different functional areas may have different
  strategies.
• Dysfunctional suboptimal decisions dependent on
  functional manager professional orientation.
• What is needed is a guiding strategic hand for
  each business function.

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Where strategy comes from?

• Formal planning
• Ad hoc by consensus of firm managers
• External-Reaction to environment
• Internal-Firm Resources available

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When is ( New) Strategy Needed?

• When firm performance does not meet expectations.
• When firm is changed in some significant way.
• New managers
• Firm is sold or merged with another firm.
• When paradigmic changes occur in business model.

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Firm Level Strategies

• Growth
• Mergers and Acquisitions
• Organic (Depends on Industry Life cycle and
  competitiveness)
• Vertical or Horizontal Integration
• Economies of Scale or Scope
• Disinvestment / Retrenchment

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Mission

• Rationale for the firm Its reason for existance.
• Needed to drive the firm to the intermediate
  goals and objectives
• Specific within a certain time period.
• Specific about competition and markets to be
  captured.

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Vision

• An overriding very long range view of the firm
  and where it might be in 10-20 years.

Corporate vision is a short, succinct, and
inspiring statement of what the organization
intends to become and to achieve at some point
in the future, often stated in competitive terms.
Vision refers to the category of intentions
that are broad, all-inclusive and
forward-thinking.  It is the image that a
business must have of its goals before it sets
out to reach them. It describes aspirations for
the future, without specifying the means that
will be used to achieve those desired ends.
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Mission and Vision Answer the Strategic Questions

• Who are we?
• What do we do?
• Why are we here?
• What kind of company are we?
• What kind of company do we want to become?
• What kind of company must we become to survive
  and prosper in our community

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Emergent Strategy

• Mintzberg
• Strategy is a plan, a "how," a means of getting
  from here to there.
• Strategy is a pattern in actions over time for
  example, a company that regularly markets very
  expensive products is using a "high end"
  strategy.
• Strategy is position that is, it reflects
  decisions to offer particular products or
  services in particular markets.
• Strategy is perspective, that is, vision and
  direction.

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EBBC Introduction to StrategyVodafone Egypt

• Ian Gray, Chairman, Vodafone Egypt
• 17 November 2007

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• If you do not know where you are going
• you will never get there!

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• Have a plan!
• Failure to plan
• Planning to fail !

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Key Drivers for Success

• Market led
• Customer focused
• Competitor aware
• Employee driven

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Strategy issues ref Vodafone Egypt Contents

• Egypt
• Vodafone Egypt
• Strategy
• Summary

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Egypt good macroeconomic environment
Demographic facts
77.5m (1.8 p.a. growth)
Population
58 of population
Literacy
50 aged 20 or less
Population distribution
US953 (US4,400 adjusted for PPP)(1)
GDP per capita
6 per annum(2)
GDP growth
Income distribution
Economic facts
US per month

• Economy steadily improving since July 2004
• Strong growth in tourism and Suez Canal revenues
• Increasing FDI and significant acceleration of
  privatisation
• Inflation rate at circa 10 stable exchange rate

397

5
A
B
6
238
-
397
B
159
-
238
17
C
28
84
-
159
D
44
lt
84
E
(1) 2005 estimates, (2) Estimate for 12 months to
June 2006 Source CIA World Fact book, 9th
Euromoney Arab Financial Forum
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Mobile continues to outgrow fixed
Egyptian telecom market overview
Fixed vs. mobile revenue

• Fast growing mobile market
• 21 penetration 27 YoY growth(1)
• 99 population coverage (8 of land mass)
• mostly prepaid SIM only with no handset
  subsidies
• low blended minute rates (lt5c)
• few mobile HVCs generating high ARPUs

• Slow growing fixed market
• 14 penetration 6 YoY growth(1)

• Only 2.5m PCs 120,000 DSL connections
• Regulator influenced by politics and must approve
  tariffs

Source Company data and analyst consensus
estimates, (1) 3 months to September 2006
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Two player market with a recently launched 3rd
entrant
Vodafone Egypt
Mobinil
Etisalat

• Joint Venture ORASCOM/ Orange
• Launched May 1998 (with early lead of 100,000
  HVCs)
• Customers 8.1m(2,3)
• Twelve months revenues LE6.0bn(3)

• UAE controlled with local partners
• Launched April 2007
• Paid LE16.7bn (US2.9bn) for 2G/3G licence (3.4
  of Egypt GDP)

• Vodafone controlled with Telecom Egypt as
  strategic partner(1)
• Launched November 1998
• Customers 7.8m(2,3)
• Twelve months revenues LE6.8bn(3)

Ownership
20
4
National Bank of Egypt 20
CIB 4
ORASCOM 31
Free Float 37
Vodafone Group 55
Telecom Egypt 45
Etisalat 66
Egypt Post 10
Orange 32
(1) Vodafone Egypt remaining free float 0.44,
(2) Active customers, (3) September 2006 Source
Vodafone Mobinil company data and Egyptian
Government data
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Promising outlook with rapid mobile market growth
Drivers for hitting the S Curve
Total mobile market penetration
Mobilepenetration ()
Reportedcustomers (m)

• Macro-economic environment
• economy improving since 2004
• Mass market appeal
• mobile moving to mass market necessity no
  longer a luxury product
• Reduced entry and usage barriers
• entry handset now around US20
• prepaid tariff reductions
• lower customer activation charges

Source Company data
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Contents

• Egypt
• Vodafone Egypt
• Strategy
• Summary

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Core Purpose

• To connect people and communities
• Accelerating the advancement
• of Egypt

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Vodafone Egypt is growing rapidly
Revenue
EBITDA
38 CAGR
44 CAGR
Revenue components H1 FY06/07(1)
YoY growth H1 FY06/07
(1) of total revenue, (2) Active customers
Source Company data, Egyptian LE (IFRS)
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Vodafone Egypt is outperforming
Customer share ()(1)
Revenue share ()
EBITDA share ()(2)
EBITDA margins ()(2)

• Active customers, (2) Both operators were
  released from liability to pay 1800 spectrum fees
  in Sep 2006 LE100m impact excl. from Mobinil
  EBITDA. LE92m impact incl. in Vodafone Egypt
  depreciation
• Source Company data

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Growth in prepaid with reduction in minute rate
Prepaid vs. contract closing customer split(1)
Outbound minute rate evolution
Contract

• Low outbound minute rate 30pt (lt4c)
• Customer growth slowing indicating maturity

Prepaid

• Growth accelerating from late 2004
• Tariff options increased and price per minute
  reduced to encourage usage

(1) Active customers, estimated prior to October
2003 Source Company data
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Driving usage through positive elasticity
Prepaid vs. contract closing customer split(1)
Outbound minute rate evolution
Prepaid outbound MOU vs. total ARPU
Contract outbound MOU vs. total ARPU
(1) Active customers, estimated prior to October
2003 Source Company data
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Vodafone Egypt outperforms on customer
satisfaction
Vodafone Egypt vs. Mobinil
Network availability
Voice quality
Call continuity
Sending/receiving SMS
Vodafone Egypt
Mobinil
11
Source Network Satisfaction Tracker (Logic
Consulting Group). October 2006
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Cost management is critical in low ARPU
environment
Cost principles
Margin breakdown H1 FY06/07
()

• Break even or better on activations
• No unprofitable tariffs
• Utilise and build on Group buying power
• Front line accountability
• Marginal cash cost per marginal customer
• Every piaster matters

Total revenue
Inter-connect costs
Other direct costs
Acquisition retention costs
Operating expenses
EBITDA
Network utilisation
()
Source Company data
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Being part of Vodafone Group offers many benefits
Benefits from Vodafone Group

• Brand
• Buying power
• Market intelligence (product innovation,
  technical support, market trends)
• Resource
• People development

and in return from Vodafone Egypt

• Australian call centre
• Professional IT services
• International help desk

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Vodafone Egypt generates healthy cash flows
Free cash flow FY05/06
Operating
flow
(1) Revenue excluding sales tax, (2) Various
charges including national training fund, telecom
fund, NTRA fees (excl. 2G licence fees) Source
Company data
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Contents

• Egypt
• Vodafone Egypt
• Strategy
• Summary

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Unrelenting focus and attention on six key areas
1
Consistency
2
Image and quality
3
Small price premium
4
Managing market competitiveness
5
Values based culture
6
Best team
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Company Vision Strategy ValuesProfitable
Growth Based on Value and Differentiation
Profitable Growth

• Grow market at appropriate cost
• Focus on value
• Grow adjacent market
• Network quality and coverage
• First to market with key products
• Excellence in customer service
• Relevant brand for the people of Egypt
• Synergies from the Group
• Cost conscious culture
• No compromise on quality
• Experienced management team
• Hiring the best
• Emphasis on training

Brand Preference

Cost Containment Synergies
Management Capabilities
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Market LeadershipOur Objective is Building a
Strong Vodafone Brand

• To delight our customers and build our market
  leadership without having to compete on pricing.
• Our brand is a global one yet with a local tone
  that keeps it close to our customers hearts.
• We have the best marketing talents from the local
  market and industry knowledge through our links
  into the Vodafone Group.
• Our tools to build that strong brand is to excel
  and communicate in the following areas
• Superior Coverage
• Better Sound Quality
• Excellent Customer Care
• Leadership in Customer Relevant Product Innovation

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From Strategy to Operational Plans
Tasks
Processes
Resourcing
Behaviour

• Market led
• Customer focused
• Competitor aware
• Employee driven

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Thank You