Professional Documents
Culture Documents
Qu. 1 Is there any distinction between business policy and Strategic Management? Discuss the
comprehensive model of strategic management process.
Ans A distinction between policy and strategic management is made on following basis :
(a) Guidelines Vs Direction : Policy is a guide line to the thinking and action of those whose finally take
decision. While the strategic concerns with the direction in which human and physical resources are
deployed and applied in order to maximize the chances of achieving organizational objectives in the face
of environmental variables.
(b) Directions and Rules for taking Decisions ; Ausff makes differences between policy and strategy by
arguing that policy is contingent decision whereas strategy is a rule for taking decisions. A contingent
event is repetitive but at the time of its stipulated occurrence cannot be specified. It is not worthwhile to
decide every time what to do when such contingencies arises. It is better to decide in advance what will
be done in such contingent events.
(c) Delegation Vs Implementations : Another distinction between policy and strategy is made on basis of
delegation and implementation. Since the policy provides guidelines for decision, it can be delegated
downwards in the organisation. In fact, the policy id prescribed for the people what they are expected to
do in certain cases. Thus its implementation is through subordinate managers. Strategy can not be
delegated downwards since it may require last minute executive decision.
Comprehensive model of Strategic Management : The process of strategic management is depicted
through model, which consist of different phases, each having a number of elements. Our purpose in
giving a working model, devoid of complexity observed in the comprehensive model is to assist you in
remembering and recalling it with ease. Various elements in strategic management process are as
under:
(a) The Hierarchy Of Strategic Intent: It lays foundation for the strategic management of any
organisation. In this hierarchy, the vision business definition, mission and objectives are established. The
strategic intent makes clear what an organisation stand for. The element of vision in hierarchy of
strategic serves the purpose of stating what an organisation wishes to achieve in the long run. The
objectives of an organisation state what is to be achieved in a given time period. These objectives serve
as yardsticks and benchmark for measuring oranisational performance
(b) Environmental and Organisational appraisal: It helps to find out the opportunities and threats
operating in the environment and the strength and weaknesses of an organisation in order to create a
match between them. In such a manner opportunities could be availed of and the impact of threats
neturalised to capitalize on the organisation strength and minimise the weaknesses.
(c) Strategic Alternatives and Choice: These are required for evolving alternative strategies out of many
possible options and choosing the most appropriate strategy or strategies in the light of environmental
opportunities, threats, corporate strength and weaknesses. Strategies are chosen at corporate and
business level.
(d) Strategic Plan : For implementation of a strategy, the strategic plan is put into action through six sub
process such as:
(i) Project Implementation: It deals with setting up the organisation.
(ii) Procedural Implementation: It deals with different aspects of regulatory framework within
which Indian organisations have to operate.
(iii) Resources Allocation: It relates to the procurement and commitment of resources for
implementation.
(iv) Structural Implementation: It deals with the designing of appropriate organizational structures and
systems and reorganizing to match the structure to the needs of the strategy.
(v) Behavioral: It is considered as the leadership style for implementation strategies and other issues
like corporate culture, politics and use of power impersonal values, business ethics and social
responsibilities.
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(vi) Functional and Operational: This aspect relates to the policies to be formulated in different
functional areas. The operational aspect deals with the productivity, process, people and ace of
implementing the strategies.
(e) Strategic Evaluation: It appraises the implementation of strategies and measures organizational
performance. The feedback from strategic management evaluation is meant to exercise
strategic control over the strategic management process.
Qu. 2 Why do firms have objectives? Elaborate how mission and objectives are
formulated?
Ans. Objectives : The objectives of a business firm are as under:
(a) Business Concepts: The learners of business policies have to understand the various concepts
involved. Many of these concepts, like strategy, policies, plans and programmes are encountered in the
functional are courses too. It is imperative to understand these concepts especially in the context of
business policy.
(b) Environmental Knowledge: A knowledge of external and internal environment and how it affects
functioning of business is vital. Through the tools of analysis and diagnosis a lerner can understand the
environment in which a firm operates.
(c) Implementation of Strategy: It is a complex issue and is invariably the most difficult part of strategic
management. Through the knowledge gained from business policy, the lerner would able to visualize
how the implementation of strategic management can take place.
(d) Generalised Approach: The problem in real business life is unique and so are the solution is an
enlightened experience. The knowledge component of such experience stress the general approach to
adapt in problem solving and decision making.
(e) Information: The information about environment helps in determination of the mission, objectives
and strategies of a firm.
(f) Research: To learn about the research taking place in the field of business policy is also an important
knowledge objective.
Mission and Objectives Formulation: The mission and objectives are formulated by the corporate level
strategists. But these executives do not make choices in vacuum. Their choices are affected by several
factors such as;
(a) External Environment and Power Relationship: The realities, and past strategy and development of
the enterprise. The stockholder with whom the organisation has an exchange relationship will present
demand or claims.
Suppose a manager want to choose sales maximization as an objective. He may have to modified
these objectives because of governmental regulations regarding excess profit, consumer labeling and so
on. Trade union may require higher wages than market, which leads to higher costs. Competitors may
sell their products at low price and spend excessive amount on advertisements. Suppliers may become
monopolized and charge outrageous prices. If the organisation is more dependent on suppliers than any
other stakeholder the operational objectives may be limited by the availability and cost of supplies.
(b) Enterprise Resources and Internal Power Relationship: The second factor affecting the formulation of
mission and objectives is the realities of the enterprise resources and internal power relationship. Larger
and more profitable firms have more resources with which to respond to forces in environment than do
smaller or poorer firms. Mission and objectives are also affected by the power relationship among
strategies either as individual or representations of units within the organisation. Thus if there is a
difference of opinion on which objectives to seek or the trade offs among them power relationship may
help settle the difference.
(c) Goal of the Top Executives: The value system of top executives affects the formulation of mission
and objectives. Enterprises with strong value system or ideologies will attract and regain managers
whose values are similar. These values are essentially a set of attitudes about what is good or bad,
desirable or undesirable.
The information about environment helps in determination of the mission, objectives and
strategies of a firm.
The implementation of strategy is a complex issue and is invariably the most difficult part of
strategic management
To survey the literature and learn about the research taking place in the field of business policy is
also an important knowledge objective.
Skills:
The study of business policy should enable a student to develop analytical ability and use it to
understand the situation in a given case or incident.
The study of business policy should lead to the skill of identifying the factors relevant in decision
making. The analysis of strengths and weakness of an organisation, the threats and
opportunities present in the environment.
The above objectives in terms of skill increase the mental ability of the lerners and enable them to
link theory with practice.
As a part of business policy study case analysis leads to the development of oral as well as
written communication skills.
Attitudes:
The attainment of the knowledge and skill objectives should lead to the inculcation of an
appropriate attitude among the learners.
By acting in an comprehensive manner, a generalist is able to function under conditions of partial
ignorance by using his or her judgment and intuition.
For a general manager information and suggestions are important to pose a liberal attitude and
be receptive to new ideas.
It is important to have the attitudes to go beyond and think when faced with a problematic
situation. Developing a creative attitude is the hallmark of general manager who refuses to be
board by precedents and stereo typed decision.
Characteristics of business policy: The following are the main features of business policies:
(a) Policies are always in writing: The policies in general are written procedures which specify limits or
guidelines for perfection of work to be undertaken in future.
(b) Directions towards goal achievements: A policy is formulated in context of organisational objectives.
Therefore, the policy tries to contribute towards the achievements of organisational achievements by
specifying limits.
(c) Persuasive Function: Formulation of policy is a function of all managers whether manager of
marketing, personnel, finance department etc.
(d) Policy Differs from Strategy: A layman may think, there is no difference between policy and strategy,
so at times people use these words interchangeably. Policies are identified as guides to thinking in
decision making while strategies devote a general program of action and a commitment of emphasis and
resources towards the attainment of comprehensive objectives.
(e) Expressed in Qualitative and General Way: Policies are generally expressed in a qualitative,
conditional and general way. The verbs most often used in setting up policies are to maintain to continue,
to follow, to adhere, to provide, to assist, to assure, to employ etc.
(f) It Involves Choice of Purpose: Policies involves a choice of purpose and defining what needs to be
done in order to mould the character and identify of organisation.
(g) Policies Must be Long Range: In general a policy is a written decision by top management for
achieving certain results.
(h) Clarity of Thought: A policy should be clear and self explanatory thus there will be no change for
wrongdoing.
(j) Policies are reflection of management philosophy: a policy is a written and effective expression of
management thought and action.
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UTU-MBA
Unit-II
Unit-III
Formation of strategy : Nature of company’s environment and its analysis; SWOT analysis;
evaluating multinational environment; identifying corporate competence and resources;
principles and rules of corporate strategy : strategic excellence positions
Qu. 4 What do you understand by SWOT analysis? How this technique is used in
the formation of corporate strategies?
Ans. A scan of the internal and external environment is an important part of the strategic planning
process. Environmental factors internal to the firm usually can be classified as strength (S) or weakness
(W), and those external to the firm can be classified as opportunities (O) or threats (T). Such an analysis
of the strategic environment is referred to as a SWOT analysis. The SWOT analysis provides information
that is helpful in matching the firm’s resources and capabilities to the competitive environmental in
strategy formulation and selection. The following shows how SWOT analysis fits into environmental scan:
Strengths (S): A firm’s strength are its resources and capabilities that can be used as a basis for
developing its competitive advantage profile.
Patents
Strong brand names
Good reputation among customer
Cost advantages from proprietary know how
Exclusive access to high grade natural resources
Favourable access to distribution network
Weaknesses (W): The absence of certain strengths may be viewed as a weakness. For example, each
of the following may be considered weaknesses:
Lack of patent protection
A weak brand name
Poor reputation among customers
High cost structure
Lack of access to best natural resources
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Lack of access to key distribution channels in some cases, a weakness may be the flip side of the
strength. Take the case in which a firm has a large amount of manufacturing capacity. While this
capacity may be considered a strength that competitors do not share, it may be also considered
as a weakness if the large investment in manufacturing capacity prevents the firm from reacting
quickly to change in the strategic environment.
Opportunities(O): The external environmental analysis may revel certain new opportunities for profit and
growth. Some examples of such opportunities includes:
An unfulfilled customer need
Arrival of new technologies
Loosening of regulations
Removal of international trade barriers
Threats (T): Changes in external environment also may present threats to the firm. Some examples of
such threats are:
Shift in consumer tastes away from firm’s products
Emergence of substitutes products
New regulations
Increased trade barriers
The basic objectives of SWOT analysis is to provide a frame work to reflect on the firm’s ability to
overcome barriers and avail of opportunities emerging in the environment, indeed the dimension of
internal capabilities have relevance in so far they relate to the environmental conditions. Hence the
analysis of comparative strengths and weaknesses require linking competencies with characteristic of
external environment.
An organisation that had pioneered computer education and training in India in the early 80s, found its
position threatened in the mid 90s by competitors. Analysis of changing environment and its own
weakness led to the outlining of organization’s SWOT as follows:
Strengths:
Value for money programmes
Pool of trained faculty
Wide choice of courses offering
Nationals network of well-equipped training centuries
Weaknesses:
Not aggressive in selling
Course differentials not sharp
Counselors enthusiasm inadequate
Customer services not focused enough
Opportunities:
Growing demand for computer education
Computer library becoming necessity
Growth of niche training needs
Needs for customisied training modules
Threats:
Rise in competitors
High rate of technological obsolescence
Commodities of training
Undercutting of fees
Matching strengths and weakness with opportunities and threats requires that a firm should direct its
strength towards exploiting opportunities and blocking threats while minimizing exposure of its
weaknesses at the same time. Thus strategies which are based on the matching of strengths and
weaknesses may be regarded as exploitative or developmental strategy. If strengths are used to repair
weaknesses, one may call it remedial strategy. SWOT analysis may provide the basis of a
comprehensive approach to strategy.
Uses of SWOT Analysis: It can be used formulation of corporate strategy in many ways:
(a) To provide a logical framework to be used for systematic discussion of various issue bearing on the
business situation alternatives strategies and finally the choice of strategy. Differences in managerial
perceptions of threats and opportunities, weakness and strength lead to different assessment reflecting
intra organisational power relations and differing factual perspectives.
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(b) Another uses of SWOT analysis is the structured approach where key external threats and
opportunities may be systematically compared with internal strengths and weakness. Thus the firm
internal and external situations can be matched so as to form distinct pattern and the strategy chosen on
the basis of the situation reflected in pattern.
(c) A business may have several opportunities but also face some serious threats in the environment. It
may have likewise several weaknesses along with one or two major strengths. In such situations the
SWOT analysis guides the strategist to visualize the overall position of firm and helps to identify the major
UNIT I
BUSINESS POLICY
Christensen and others, it is the study of the function and responsibilities of senior management, the crucial
problems that affect success in the total enterprise, and the decision that determine the direction of the organization
and shape its future. The problem of policy in business, like those of policy in public affairs, have to do with the
choice of purposes, the moulding of organizational identity and character, the continuous definition of what needs to
be done, and the mobilization of resources for the attainment of goals in the face of competition or adverse
circumstances.
This comprehensive definition covers many aspects:
it considered as the study of the functions and responsibilities of the senior management related to those
organizational problems which affects the success of the enterprise
it deals with the determination of future course of action that an organization has to adopt
it involves a choosing the purpose and defining what needs to be done in order to mould the character and identity
of an organization
lastly, it is also concerned with the mobilization of resources, which will help the organization to achieve its goals
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UTU-MBA
Business policy, like most other areas of management, brings the benefit of years of distilled experience in strategic
decision-making to the organization and also to its managers. Case study-which is the most common pedagogical
tool in business policy-provides illustrations of real-life business strategy formulation and implementation.
An understanding of business policy may also lead to an improvement in job performance. As a middle-level
manager, a person is enabled to understand the linkage between the different subunits of an organization and how a
particular subunit fits into the overall picture. This has far-reaching implications for managerial functions like
coordination and communication, and also for the avoidance of inter-departmental conflicts.
For Personal Development
Business policy offers a unique perspective to executives to understand the senior management's viewpoint. With
such an understanding the chances that a proposal made by or an action taken by an executive will be appreciated by
senior managers is decidedly better.
An interesting by-product of the business policy course is the theoretical framework provided in the form of the
strategic management model. The applicability of this model is not limited to businesses alone. It can be applied to
organizations like, services, educational institutions, family, government, public administration, and too many other
areas. In fact, the model provides powerful insights for dealing with policy-making at the macro level as well as at
an individual level through self analysis.
The importance of business policy stems from the fact that it offers advantages to an executive from multiple
sources. Apart from the intangible benefits, an executive gains an understanding of the business environment and the
organization he or she works in. Such an understanding can help considerably in career planning and development.
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12. The attainment of the knowledge and skill objectives should lead to the inculcation of an appropriate attitude
among the learners. The most important attitude developed through this course is that of a generalist. The
generalist attitude enables the learners to approach and assess a situation from all possible angles.
13. By acting in a comprehensive manner, a generalist is able to function under conditions partial ignorance by
using his or her judgment and intuition.
14. For a general manager information and suggestions are important to possess a liberal attitude and be receptive
to new ideas. Dogmatism with regard to techniques should to be replaced with a practical approach to decision-
making for problem-solving. In this way, a general manager can act like a professional manager.
15. It is important to have the attitude to 'go beyond and think' when faced with a problematic situation. Developing
a creative and innovative attitude is the hallmark of a general manager who refuses to be bound by precedents and
stereotyped decisions.
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UTU-MBA
Evaluation and Control: it is the process in which corporate activities and performance results
are monitored so that actual performance can be compared with the desired standards. Managers
at all levels use the resulting information to take corrective action and resolve processing. They
must provide monitoring and controlling methods to ensure that their strategic plan is followed.
Based on the final performance management was need to make adjustment in the strategy
formulation, in implementation or in both.
CORPORATE STRATEGY
Every business concern, as a general rule has its own aims and objectives and it is one of the foremost duties of the
management to fulfill them. Executives formulate different policies and plans as guidelines not only for themselves
but for their subordinates as well. How to implement both policies and plans effectively, it is essential to have
further overall planning.
Definition of Strategy:
Glueck defines a strategy as “unified comprehensive and integrated plan designed to assure that the basic objectives
of the enterprise are achieved”.
McNichols defines strategy as “the science and art of employing the skills and resources of an enterprise to attain its
basic objectives under the most advantageous conditions.”
Corporate strategy means strategy of corporate bodies. It means the strategy of any enterprise, institution or
organization. Generally strategy is inferred as external to the organization.
Need for Corporate Strategy
All corporate bodies have their corporation can survive without a strategy for itself. The need for corporate strategy
arises for the following reasons.
1. Vary fast change of business conditions.
2. To anticipate future problems and opportunities.
3. To provide all employees with clear goals and directions to the future of the enterprise.
4. to make the business more effective
5. To improve employee morale.
6. To capture, retain and win markets.
Characteristics of Strategies
1. Strategies are deliberate attempts made by the management to win over its opponents. They are calculated
to counter act actions of opponents.
2. They are special plans that deal with opponents.
3. Strategies are overall plans that help management to implement general policies and plans effectively.
4. Strategies are grown out of policies and plans and thus they direct the activities in the most appropriate
manner.
5. Strategies include related decisions and actions meant for implementation of company objectives and plans.
6. Strategies are devices to reduce business risk and insecurity that are expected an account of complexity of
business operations and other social and political contingencies.
7. Strategies are determined sufficiently in advance having considered company’s policies and objective so
that tactful decisions and actions can be taken to accomplish them.
Types of Strategy:
Strategy may be classified based on the purpose or objective; on the nature or on time.
Strategy based on purpose or objective: Based on purpose or objective, strategy can be classified into three types.
Defensive Strategies: Defensive strategies are followed by corporations as defense against external forces. For e.g.
the strategy followed may be for the purpose of retaining the market by restricting the competitors from capturing
the market.
Offensive Strategies: Steps taken by the corporation in launching a new venture, a new produce, advertisement
campaign etc. constitute offensive strategies. They mainly aim at expansion or capturing new markets.
Strategy for Survival: Sometimes the corporation may find it desperate to win the competition. During such times
the measures undertaken for the very survival of the corporation constitute survival strategies. Survival strategies not
only aim at strengthening the competition to withstand competition but are undertaken during periods of financial,
production and other crisis. Therefore, they are also called “Crisis Strategies”.
Strategy based on the nature: Based on nature, strategy can be classified into five types.
Root Strategy: Root strategy aims at providing basic guidelines in terms of nature and scope of its business
commitment and the context of its skill and resource development and allocation.
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Operation Strategy: Operation strategy flows from the root strategy and guides the enterprise in its action
commitment in the market place. The blueprint for market penetration, coping with environmental changes and
directing day to day operations are part of a firms operating strategy.
Organization Strategy: At the implementation phase the management has a decision choice of alternative
organizational strategies to provide the guidelines, framework and communication network to complete and put into
effect the operating strategy.
Control Strategy: In order to determine the effectiveness of the organizations performance in relation to the
predetermined objectives developed in the formation and implementation phases.
Recovery Strategy: Recovery strategy is developed for reformulating and recycling the policy making process with
the help of the data obtained through the control strategy.
Strategy based on Time element: Based on the time, strategy may be classified into two types.
Short term Strategy: Short term strategy concerns itself with the immediate goals.
Long Term Strategy: Long term strategy generally involves foresight on the expansion and development of the
organization.
Levels of Strategies:
The levels of strategy offer you a glimpse of the complexity about different levels at which
strategy is formulated. The business strategy must contain well coordinated action programs
aimed at securing a long-term competitive edge and which the company should sustain. Lets take
an example of Hindustan Levers, a multinational subsidiary, is in several businesses such as
animal seeds, beverages, oils and dairy fat , soaps and detergents. Three types of level are
depicted in the exhibit. The first level is the corporate strategy which is an overarching plan of
action covering the various functions performed by different SBU’S
Corporate Level
Take an example of any organization, there are basically three levels. The top level of the
organization consists of chief executive office of the company, the board of directors, and
administrative officers. The responsibility of the top management is to keep the organization
healthy. Their responsibility is to achieve the planned financial performance of the company in
addition to meeting the non-financial goals viz. social responsibility and the organizational
image. The issues pertaining to business ethics, integrity, and social commitment are dealt with,
at this level of strategic decisions. The corporate level strategies translates the orientation of the
stakeholders and the society into the forms of strategies for functional or business levels.
Business strategy is a comprehensive plan providing objectives for SBU’S, allocation of
resources among functional areas, coordination between them for optimal contribution to the
achievement to the achievement of corporate level objectives. This is the level where vision
statement of the companies emerges. Exhibit shows typical levels of strategy making in an
organization. In the given exhibit you will see that various companies are organized on the basis
of operating divisions. These divisions are known as profit centers or strategic business units.
Generally SBUs are involved in a single line of business
Business Level
This level consists of primarily the business managers or managers of Strategic Business units.
Here strategies are about how to meet the competition in a particular product market and
strategies have to be related to a unit within an organization. The managers at this level translate
the general statements of direction and intent churned out at corporate level. The managers
identify the most profitable market segment, where they can excel, keeping in focus the vision of
the company. The corporate values, managerial capabilities, organizational responsibilities, and
administrative systems that link strategic and operational decision making level at all the levels
of hierarchy, encompassing all business and functional lines of authority in a company are dealt
with at this level of strategy formulation. The managerial style, beliefs, values, ethics, and
accepted forms of behaviour must be congruent with the organizational culture and at this level,
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these aspects are diligently taken care of by strategic managers. Just think for a while how does
business strategy make the study and practice of management more meaningful?
Operational Level
Planning alone cannot create massive mobilization of resources and people and can never
generate high quality of strategic thinking required in complex organizational context. For this to
happen, the planning should be carefully dovetailed and integrated with significant
administrative systems viz. management control, communication, information management,
motivation, rewards etc. It is also vital that all these systems are supported by organizational
structure that defines various authority and responsibility relationships, among various members
of the company and specifically at operational level. The culture of the organization should be
accounted for, and these systems should find adaptability with the culture of the organization.
Further, put down at least five reasons how business strategy serves the need of Management
students, Middle-level executives.
The managers at this level of product, geographic, and functional areas develop annual objective
and shortterm strategies. The strategies are designed in each area of research and development,
finance and accounting, marketing and human relations etc. The responsibilities also include
integrating among administrative systems and organizational structure and strategic and
operational modes and seek for congruency between managerial infrastructure and the corporate
culture. Thus Exhibit shows the interaction of various functions for deciding strategies at the
operational level.
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UTU-MBA
UNIT II
BOARD OF DIRECTORS
In relation to a company, a director is an officer (that is, someone who works for the company)
charged with the conduct and management of its affairs. A director may be an inside director (a
director who is also an officer) or an outside, or independent, director. The directors collectively
are referred to as a board of directors. Sometimes the board will appoint one of its members to be
the chair of the board of directors.
The control of a company is divided between two bodies: the board of directors, and the
shareholders in general meeting. In practice, the amount of power exercised by the board varies
with the type of company. In small private companies, the directors and the shareholders will
normally be the same people, and thus there is no real division of power. In large public
companies, the board tends to exercise more of a supervisory role, and individual responsibility
and management tends to be delegated downward to individual professional executive directors
(such as a finance director or a marketing director) who deal with particular areas of the
company's affairs.
The Board of Directors is responsible for supervising the management of the Corporation’s business and its affairs.
It has the statutory authority and obligation to protect and enhance the assets of the Corporation in the interest of all
of its shareholders.
The Board operates by delegating certain of its responsibilities and authority, including spending authorization, to
management and reserving certain powers to itself. Its principal duties fall into seven (7) categories.
The Board has responsibility to provide advice and counsel to the CEO, and to take action when performance falls
short of its goals or other special circumstances warrant.
POLICIES AND PROCEDURES
The Board has responsibility to approve and monitor compliance with all significant policies and procedures by
which the Corporation is operated, including the Corporation’s Environmental Policy and its Occupational Health
and Safety Policy. In particular, the Environmental Committee and the Occupational Health and Safety
Committee, which have been established by management, shall report to the Health, Safety and Environment
Committee of the Board of Directors on their respective activities once a year.
The Board has particular responsibility to ensure that the Corporation operates at all times within applicable laws
and regulations, and ethical and moral standards.
The Board has responsibility for monitoring compliance with the Corporation’s written Code of Ethics, granting
any waivers from compliance for Directors and officers and causing disclosure of any such waivers to be made in
the Corporation’s next quarterly report, including the circumstances and rationale for granting the waiver.
DISCLOSURE TO SHAREHOLDERS AND OTHERS
The Board has responsibility for ensuring that the performance of the Corporation is adequately reported to its
shareholders, its other security holders, the investment community, the relevant regulators and the public on a
timely and regular basis.
The Board has responsibility for (i) reviewing and approving the Corporation’s un-audited quarterly financial
statements and accompanying notes and the related Management’s Discussion and Analysis and press release (ii)
ensuring that the Corporation’s audited annual financial statements are presented fairly and in accordance with
generally accepted accounting standards and reviewing and approving such financial statements and
accompanying notes and the related
Management’s Discussion and Analysis and press release (iii) reviewing and approving the Corporation’s
Management Proxy Circular and (iv) reviewing and approving the Corporation’s Annual Information Forms.
The Board has responsibility for ensuring that timely disclosure is made by press release of any development that
results in, or may reasonably be expected to result in, a significant change in the value or market price of the
Corporation’s listed securities.
GENERAL LEGAL OBLIGATIONS
To supervise the management of the business and affairs of the Corporation.
To act honestly and in good faith with a view to the best interests of the Corporation.
To exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable
circumstances.
To act in accordance with the Canada Business Corporations Act, securities, environmental and other relevant
legislation and the Corporation’s Articles and By-Laws.
To consider as the full Board and not delegate to a committee:
Any submission to the shareholders of a question or matter requiring the approval of the shareholders; The filling
of a vacancy among the Directors; The manner and the terms of the issuance of securities; The declaration of
dividends; The purchase, redemption or any other form of acquisition of shares issued by the Corporation;
The approval of a management proxy circular; The approval of any take-over bid circular or Directors’ circular;
The approval of the annual financial statements of the Corporation; or The adoption, amendment or repeal of By-
Laws of the Corporation.
CEO RESPONSIBILITIES
The CEO is the singular organizational position that is primarily responsible to carry out the strategic plans and
policies as established by the board of directors. The chief executive officer reports to the board of directors.
The Dictionary of Business Terms defines it as follows: “The Chief Executive Officer (CEO) is the officer who has
ultimate management responsibility for an organization. The CEO reports directly to the Board of Directors [and]
appoints other managers…to assist in carrying out the responsibilities of the organization.”
Much of the current writings around non-profit governance and board roles refer to the chief staff officer as CEO,
such as “The Board is responsible to hire or appoint the CEO”. That usage can be attributed somewhat to
consistency (gets beyond the variety of titles in use) and expediency (quick and easy), however it also no doubt
reflects current trends in practice and governance models.
This is a great list for both taking on a new CEO position and getting up to speed, as well as to develop a proactive
development and learning program for any CEO or senior executive wishing to improve their executive management
skills. It lays out well all the thing you need to juggle when you have both the privilege and responsibilities of the
top spot in any organization.
General Operations
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1. Establish primary goals of the Board -- maintenance of status quo, evaluation and recommendations or take
charge through implementation of new game plan.
2. Meet all first-reports, introduce game plan and initiate implementation of action items on this list.
3. Have all first-reports complete the Agenda for the Future.
4. Discuss the dozen biggest problems and opportunities from perspective of all first-reports.
5. If survival mode is required, cut costs immediately where necessary and prudent and in accordance with the
Board's short and intermediate term goals.
6. Identify and implement top six action items that could measurably increase short term revenues.
7. In addition to this action list, formulate short-term game plan for company, get board approval and
communicate plan to key personnel, suppliers, lenders, etc.
8. Prioritize top ten action items for the whole company and begin implementation.
9. Identify top goals for the company for the current month, quarter and year.
Financial Issues
10. Within the first week, get current detailed financial statements, itemized payroll, payables and receivables list.
11. Review budgets of all departments or divisions for reasonableness of assumptions, quality of projections and
relevancy in light of recent corporate changes and goals.
12. Evaluate obvious, and not so obvious, problems and strengths revealed by the financial statements.
13. Do realistic cash forecast for the next 90 and 180 day periods.
14. Evaluate asset utilization and re-deploy if appropriate and prudent in the short term.
Liabilities / Risks / Time Bombs
15. Deal with the six largest crises within the first three weeks.
16. Review banking and debt obligations for next 90, 180 and 365 day periods and ensure no technical or major
defaults, if possible. If in default, develop game plan and/or negotiate workout.
17. Determine which critical suppliers have suspended support due to lack of payment, or other problems.
18. Identify and take steps to immediately defuse all visible, or suspected, ticking time bombs.
Regulatory / Legal / Litigation
19. Ensure all payroll taxes are paid and properly reported.
20. Determine what, if any, problems exist with the IRS and state agencies.
21. Ensure the company is in compliance with all required regulatory and licensing agencies, etc. and if not, take
action to resolve these issues.
22. Identity all outstanding legal issues and litigation risks along with probable, and possible, associated costs.
23. Ensure no securities law violations have occurred -- and if they have, take immediate steps to remedy them, or
mitigate their impact.
24. Ensure any patents, trade secrets, trademarks and copyrights are properly filed and appropriate protections are
in place.
Product lines / Marketing / Sales / Distribution
25. Analyze product delivery schedules and takes steps to improve meeting commitment dates.
26. Evaluate product development timetables, budget forecasts and quality of project management systems,
procedures and controls.
27. Evaluate sales, marketing, distribution, forecasts and trend lines for improvement opportunities in all areas, so
as to generate more cash in the short-term.
28. Identify both the best customers and the most unhappy customers, as well as the company's image in the
marketplace.
29. Complete competitive analysis for each product line.
30. Evaluate pricing models for each product line and adjust accordingly.
31. Identify product line strengths and weaknesses and develop short-term action plan to solve the most glaring
problems.
32. Identify potential products -- 6, 12 and 24 months into the future -- and their possible impact on revenue and
expenses.
33. Establish / update / expand web presence.
34. Evaluate expenditures and effectiveness of marketing and advertising for media, trade shows, market research,
focus groups and public relations and adjust accordingly.
35. Evaluate sales force, sales-related incentives, sales targets, sales personnel training, special offers, dealerships,
telemarketing and sales support.
36. Evaluate and optimize short-term inventory.
37. Evaluate customer / technical support, warranties, guarantees and after-sales service.
Personnel Issues
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38. Upon arrival, candidly communicate with all company personnel for introduction and conveyance of immediate
game plan.
39. Set up suggestion boxes, and invite anonymous email, to gain insight into less obvious underlying problems.
40. Review major Human Resource department aspects of company for legal compliance, competitiveness of
benefits package, diversity, clarity of policies and potential costs savings.
41. Evaluate strengths and weaknesses of all first reports.
42. Develop 30/60/90 day performance plans for all first reports.
43. Evaluate organizational structure and effectiveness -- and reorganize if appropriate, adjusting total payroll if
necessary.
44. Identify best and worst five percent of employees in the company -- probably replacing worst five percent and
ensuring the best five percent are motivated enough to stay.
45. Analyze employee turnover rates to identify fundamental problem areas.
46. Identify key personnel and unfilled job functions, define criteria and initiate search, within budget constraints.
47. Identify personality issues / company policies that may be creating negative impact on company morale and
productivity.
48. Review / modify written delegation of authority for all first reports.
49. Review all employment contracts or agreements, oral or written, including any severance or termination
compensation agreements with salaried, hourly, or collective bargaining employees.
50. Review all bonus, deferred compensation, stock option, profit sharing, retirement programs or plans covering
salaried, hourly, or collective bargaining employees.
IPO / Merger / Acquisition / Disposition / Dissolution
51. Identify which mergers, acquisitions, dispositions and investments make the most sense for the company.
52. Identify the growth issues regarding acquisitions, spin offs, expansion, downsizing, establishing new, and/or
closing existing branches and stores.
53. If decision is to sell the company, establish price and terms, subject to Board approval, prepare sales summary
and develop game plan and methodology for sale.
54. Complete three year pro forma, based on realistic assumptions, to determine future valuation potential of
company and likelihood of IPO or merger/acquisition potential.
55. If Board decision is to dissolve company, develop game plan for liquidation of assets and/or follow up on
bankruptcy filing.
General / Administrative
56. Evaluate and control travel, entertainment and all discretionary expenditures and implement new written
policies for these issues.
57. Review facilities and real estate issues, including a review of current lease requirements.
58. Review all equipment leases for cost cutting / improved technology opportunities.
59. Create / update business plan for current internal clarity and banking or capital formation needs.
60. "Manage by roaming around" -- gaining insights into attitudes and problem areas from within all levels of the
organization.
61. Evaluate in-place systems and procedures and streamline where appropriate.
62. Evaluate technology implementation and optimize within budget constraints.
63. Visit all branch offices and evaluate their needs, performance, personnel and cost-effectiveness.
Stockholder Status / Investor Relations
64. Evaluate investor and stockholder relations and communication status and initiate appropriate action.
65. Generate updated lists of all current shareholders and percentage ownership of each.
66. Review stock options or purchase plans and agreements, as well as lists of outstanding warrants and options,
including date of grant, exercise price, number of shares subject to option, and date of exercise.
The Next Steps
67. Report to the Board: the objective status, evaluation, recommended modifications to the short-term game plan
and any cash needs.
68. Pick up sword again, and implement updated and approved game plan.
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ENVIRONMENT:
Layman: Surrounding, influences, circumstances, forces and external objects which affects someone under which
something exists
Org: conditions, variables, factors, events, influences that surround and affect it.
Nature:
As a source of resources: it views that every org depends on the environment for its resources and these resources
are scare and valued. There is a competing situation in the industry to obtain and control their resources. It is
crucial to mange and control effectively and efficiently and also it is necessary to understand environment before
making efforts to impact it.
As a source of information: it views it as a source of information. Organization becomes aware about the
information and the level of uncertainness associated with the various information. Environment uncertainty,
degree of complexity and degree of change existing in an organization external environment. Thus the more
complex and dynamic the environment the more uncertain it is. As the market becomes global the complexity and
unpredictability increases and number of factors a firm considers increases.
The following are the nature of environment
Influences the availability of resources, provides opportunities and holding threats, is complex, is dynamic, is having
a far reachable impact, is multi dimensional, is multi faceted.
COMPONENTS OF ENVIRONMENT
Multinational/ Mega Environment: is composed of elements in the border society that can be indirectly
influencing an industry and the companies within an industry. The constituents are:
Political and legal environment: the directions direction and stability of political factors is a major consideration for
managers in formulating company strategy. Political/legal forces that allocate power and provide constraining and
protecting laws and regulations. Political constraints are places in each company through fair trade decision,
programs, anti-trust laws, labour legislation, environmental protection laws and many other actions aimed at
protecting the consumer and environment. The important factors which determine the political/legal environment,
are, political system, political structure, political processed, government philosophy, role of the government in
business and government attitude towards business and foreign investment etc. Some of the important variables are
given below:
Governing regulations or deregulations, Environmental Protection Laws Tax Laws, Foreign Trade Regulations
Intellectual Property Rights Anti trust legislations, Level of government subsidies, Attitude towards foreign
companies, Foreign Exchange Laws, Stability of the government, Special Incentives, Level of defense expenditures,
Location and severity of terrorist activities, Size of government budget
taking an example of 1977 the Janta govt. has followed a strict poling with regard to
multinationals, As a result Coca-Cola and IBM were forced to move out of India causing a far-
reaching impact on the business environment of the country.
Economic Environment: it refers to the nature and direction f the economy in which a business
organization operates. Economic environment is by far the most important environmental factor
which the business organizations take into account. In fact, a business organization is an
economic unit of operation. Since the measurement of organizational performance is mostly in
the form of financial terms, often managers concentrate more on economic factors. The
economic environment is also important for non-business organizations too because such
organizations depend on the environment for their resource procurement which is greatly
determined by the economic factors. As such, the understanding of economic environment is of
crucial importance to strategic management. Economic environment covers those factors, which
give shape and form to the development of economic activities and may include factors like
nature of economic system, general economic conditions, various economic policies, and various
production factors. From analytical point of view, various economic factors can be divided into
two broad categories: general economic conditions and factor market. The discussion of these
factors will bring out the nature of total economic environment.
Key economic Variables: GDP trends, Interest rates, money supply, inflation rate, shift to
service economy, tax rate, unemployment level, wage/ price control, devaluation and
revaluation, money market rates, monetary fiscal policy, unemployment trends.
Technological Environment: it is key driver of the new competitive landscape technologies;
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developments are fast and have far reaching impact on the firm’s strategy. The technology
segment includes institutions and activities involved with creating new knowledge and
translating the knowledge into new output, new product and process and materials. A firm must
be aware about the technological changes that might influence the industry. The strategic
implications of technological changes accd to Boris Petrov are three: -- it can change relative
competitive cost of position within a business – it can create new markets and new business
segments – it can collapse or merge previously independent business by reducing or eliminating
their segment cost barriers.
In fact technology has changed the way in which business in conducted. e.g. the growth of IT
sector has acted as a catalyst in this direction. Access to internet, enable large number of
employees to work from home, providing strategy with access to richer resources of information,
business to business transactions, on line shopping through internet and WWW.
Key technology factors: total govt spending for R&D, total industry spending for R&D, focus of technological
efforts, patent protection, new products, new development in technology transfer from lab to market place,
productivity improvement though automation, internet availability, telecommunication infrastructure.
Socio-Cultural Environment: this segment involves beliefs, values, attitudes, opinions and life styles of those in a
firm’s external environment, as developed from their cultures, ecological, demographic, religion, educational and
ethnic conditioning. Socio cultural changes occur gradually unlike technological changes. it is not easy to predict the
timing of their changes. Areas where socio cultural changes may have strong implication for organization are: --
changes in life style – work force composition – changes in attitudes about the quality of work life – rate of family
formation and growth of population – age distribution – ethical standards – shift in product & service preferences.
In India, the most profound social changes in recent years is the emergence of middle class as a major and important
element of total population, increase in the number of women entering in the labour market, changes in consumer
and employees interest, quality of life issues etc. Key social cultural variables:
Life style change, career expectations, consumer activism, rate of family formation, birth rate, growth rate of
population, age distribution of population, regional shift in population, life expectancies, level of education
The Micro Environment: the micro environment has a substantial impact on the organization’s current business. It
constitutes the following:
Competitors: no. of competitor’s entry and exit barriers, nature of completion and relative strategic position of major
competitors
Suppliers: consists of factors related to cost and availability of the factors of production and service that have an
impact on business of an organization
Customers: factors such as the need and preference perceptions bargaining power buying behavior and satisfaction
level of customers
Market Intermediaries: factors such as level and quality of customer’s service, middlemen, changes of distribution
logistic, cost and delivery system
SWOT ANALYSIS
SWOT is an acronym that stands for Strengths, Weaknesses, Opportunities, and Threats. SWOT analysis is a basic,
straightforward model that provides direction and serves as a basis for the development and management of self.
Purpose The purpose of SWOT analysis is to gather, analyze, and evaluate information and identify strategic
options facing a community, organization, or individual at a given time. SWOT Analysis is a very effective way of
identifying strengths and weaknesses, and of examining the opportunities and threats one tends to face. Carrying out
an analysis using the SWOT framework helps to focus activities into areas where one is strong and where the
greatest opportunities lie. This knowledge is then used to develop a plan of action.
The analysis can be performed on a product, on a service, a company or even on an individual. Done properly,
SWOT will give the big picture of the most important factors that influence survival and prosperity as well as a plan
to act on. Strengths and weaknesses are internal while opportunities and threats are external. Strengths and
weaknesses have to be matched with the opportunities in the external environment and also to counter any threats
that might pose a danger to plans. SWOT Analysis is generally considered a Marketing tool but although it has its
origins in Marketing field and is predominantly used by Marketing people, and it can also be done for self. SWOT
Analysis is a tool which guides one to see where one stand in terms of job prospects and career growth.
You should do a personal SWOT analysis because it will tell you what are your strong points and how can you
further brush them up to exploit them to get a good job. It will also show you your negative character traits that can
hinder your chances of getting a good job. You can then work towards overcoming those shortcomings and
minimizing their effects. Your strengths will tell you the jobs and the kind of work you are best for hence making it
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easier to avail the right opportunities. Threats will show you the skills, courses and training you need in order to
remain competitive.
SWOT analysis has two main components
• Issues those are internal to the organization (Strengths and Weaknesses)
• Issues those are external to the organization (Opportunities and Threats).
Follow these rules when developing a SWOT analysis
1. Keep lists short - 10 items per list ensures only important factors are considered.
2. Opinions must be supported with facts - One person's idea of strength may be another's idea of a weakness.
Having the facts to back up an argument gives it credibility.
3. Show competitive factors - Perhaps you don't have a direct competitor in your category, but every organization
competes for dollars so competition should not be dismissed.
4. Prioritize and weigh the factors in the lists
5. Use language that is clear and relevant to the task - Confusing or obscure language may complicate your
ability to execute the strategy.
Strengths and Weaknesses
A “strength” is a positive characteristic that gives a company an important capability. It is an important
organizational resource which enhances a company, competitive position. Some of the internal strengths of an
organization are:
Distinctive competence in key areas
Manufacturing efficiency
Skilled workforce Adequate financial resources Superior image and reputation
Economies of scale
Superior technological skills
Insulation from strong competitive pressures
Product or service differentiation
Proprietary technology.
A “weakness” is a condition or a characteristic which puts the company at disadvantage. Weaknesses make the
organization vulnerable to competitive pressures. These are competitive liabilities and strategic managers must
evaluate their impact on the organization’s strategic position when formulating strategic policies and plans.
Weaknesses require a close scrutiny because some of them can prove to be fatal. Some of the weaknesses to be
reviewed are:
No clear strategic direction
Outdated facilities
Lack of innovation is Complacency
Poor research and developmental programmes
Lack of management vision, depth and skills
Inability to raise capital
Weaker distribution network
Obsolete technology
Low employee morale
Poor track record in implementing strategy
Too narrow a product line
Poor market image
Higher overall unit costs relative to competition.
Opportunities and Threats
An “opportunity” is considered as a favourable circumstance which can be utilised for beneficial purposes. it is
offered by outside environment and the management can decide as to how to make the best use of it. Such an
opportunity may be the result of a favourable change in any one or more of the elements that constitute the external
environment. It may also be created by a proactive approach by the management in moulding the environment to its
own benefit. Some of the opportunities are:
Strong economy
Possible new markets
Emerging new technologies
Complacency among competing organizations
Vertical or horizontal integration
Expansion of product line to meet broader range of customer needs
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UNIT IV
STRATEGIC ANALYSIS AND CHOICE
BCG MATRIX
Growth-share matrix
The BOSTON matrix (aka B.C.G. analysis, B.C.G.-matrix, Boston Consulting Group analysis) is a chart that had
been created by Bruce Henderson for the Boston Consulting Group in 1970 to help corporations with analyzing their
business units or product lines. This helps the company allocate resources and is used as an analytical tool in brand
marketing, product management, strategic management and portfolio-analysis.
To use the chart, analysts plot a scatter graph to rank the business units (or products) on the basis of their relative
market shares and growth rates.
Cash cows are units with high market share in a slow-growing industry. These units typically generate cash
in excess of the amount of cash needed to maintain the business. They are regarded as staid and boring, in a
"mature" market, and every corporation would be thrilled to own as many as possible. They are to be
"milked" continuously with as little investment as possible, since such investment would be wasted in an
industry with low growth.
Dogs, or more charitably called pets, are units with low market share in a mature, slow-growing industry.
These units typically "break even", generating barely enough cash to maintain the business's market share.
Though owning a break-even unit provides the social benefit of providing jobs and possible synergies that
assist other business units, from an accounting point of view such a unit is worthless, not generating cash
for the company. They depress a profitable company's return on assets ratio, used by many investors to
judge how well a company is being managed. Dogs, it is thought, should be sold off.
Question marks are growing rapidly and thus consume large amounts of cash, but because they have low
market shares they do not generate much cash. The result is a large net cash consumption. A question
mark (also known as a "problem child") has the potential to gain market share and become a star, and
eventually a cash cow when the market growth slows. If the question mark does not succeed in becoming
the market leader, then after perhaps years of cash consumption it will degenerate into a dog when the
market growth declines. Question marks must be analyzed carefully in order to determine whether they are
worth the investment required to grow market share.
Stars are units with a high market share in a fast-growing industry. The hope is that stars become the next
cash cows. Sustaining the business unit's market leadership may require extra cash, but this is worthwhile if
that's what it takes for the unit to remain a leader. When growth slows, stars become cash cows if they have
been able to maintain their category leadership, or they move from brief stardom to dogdom.
As a particular industry matures and its growth slows, all business units become either cash cows or dogs.
The overall goal of this ranking was to help corporate analysts decide which of their business units to fund, and how
much; and which units to sell. Managers were supposed to gain perspective from this analysis that allowed them to
plan with confidence to use money generated by the cash cows to fund the stars and, possibly, the question marks.
As the BCG stated in 1970:
Only a diversified company with a balanced portfolio can use its strengths to truly capitalize
on its growth opportunities. The balanced portfolio has:
stars whose high share and high growth assure the future;
cash cows that supply funds for that future growth; and
question marks to be converted into stars with the added funds.
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'Minority applicability'. The cashflow techniques are only applicable to a very limited number of markets (where
growth is relatively high, and a definite pattern of product life-cycles can be observed, such as that of ethical
pharmaceuticals). In the majority of markets, use may give misleading results.
'Milking cash bulls'. Perhaps the worst implication of the later developments is that the (brand leader) cash bulls
should be milked to fund new brands. This is not what research into the FMCG markets has shown to be the case.
The brand leader's position is the one, above all, to be defended, not least since brands in this position will probably
outperform any number of newly launched brands. Such brand leaders will, of course, generate large cash flows; but
they should not be `milked' to such an extent that their position is jeopardized. In any case, the chance of the new
brands achieving similar brand leadership may be slim - certainly far less than the popular perception of the Boston
Matrix would imply.
Perhaps the most important danger is, however, that the apparent implication of its four-quadrant form is that there
should be balance of products or services across all four quadrants; and that is, indeed, the main message that it is
intended to convey. Thus, money must be diverted from `cash cows' to fund the `stars' of the future, since `cash
cows' will inevitably decline to become `dogs'. There is an almost mesmeric inevitability about the whole process. It
focuses attention, and funding, on to the `stars'. It presumes, and almost demands, that `cash bulls' will turn into
`dogs'.
The reality is that it is only the `cash bulls' that are really important - all the other elements are supporting actors. It
is a foolish vendor who diverts funds from a `cash cow' when these are needed to extend the life of that `product'.
Although it is necessary to recognize a `dog' when it appears (at least before it bites you) it would be foolish in the
extreme to create one in order to balance up the picture. The vendor, who has most of his (or her) products in the
`cash cow' quadrant, should consider himself (or herself) fortunate indeed, and an excellent marketer; although he or
she might also consider creating a few stars as an insurance policy against unexpected future developments and,
perhaps, to add some extra growth.
Alternatives
As with most marketing techniques there are a number of alternative offerings vying with the Boston Matrix;
although this appears to be the most widely used (or at least most widely taught - and then probably 'not' used). The
next most widely reported technique is that developed by McKinsey and General Electric; which is a three-cell by
three-cell matrix - using the dimensions of `industry attractiveness' and `business strengths'. This approaches some
of the same issues as the Boston Matrix, but from a different direction and in a more complex way (which may be
why it is used less, or is at least less widely taught). Perhaps the most practical approach is that of the Boston
Consulting Group's Advantage Matrix, which the consultancy reportedly used itself; though it is little known
amongst the wider population.
Other uses
The initial intent of the growth-share matrix was to evaluate business units, but the same evaluation can be made for
product lines or any other cash-generating entities. This should only be attempted for real lines that have a sufficient
history to allow some prediction; if the corporation has made only a few products and called them a product line, the
sample variance will be too high for this sort of analysis to be meaningful.
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SWOT analysis can also be used to take a broader view of strategy though the following formula SA=O/ (S-W) i.e
strategic alternatives = opportunities divided strengths minus weaknesses.
The Directional Policy Matrix is another matrix similar to the BCG Matrix. It measures the health of the market and
the organization's strengths to pursue it to indicate the direction for future investment. The vertical axis is market
attractiveness (as opposed to business Growth rate in the BCG Matrix) and the horizontal axis is Industry
Attractiveness (as opposed to Market Share in the BCG Matrix). The recommendations are similar to that of the
BCG Matrix, i.e., invest, grow, harvest or divest.
Business Strengths
Expert systems are used to determine the organizational strength of the organization. The
position of the enterprise on the chart based upon the assessment of the following factors:
Supplier Bargaining Power
Threat of Substitutes
Reputation
Customer Loyalty
Staying Power
Experience
Threat of New Entrants
Competitive Rivalry
Buyer Bargaining Power
Product Quality
Product Value
Relative Market Share
There are eight steps involved in the analysis. The following steps are an example that is based
on work carried out at in a multinational firm.
Step 1. Determine the products or services for markets that you intend to include in the matrix. -
This can be countries, companies, subsidiaries, regions, products, markets, segments, customers,
distributors or any other unit of analysis that may be considered important by the organization.
Step 2. Define the market attractiveness factors - The purpose for the vertical axis is to
discriminate between more and less attractive markets. Factors can be summarized into three
headings
Growth rate
Accessible market size - an attractive market is not only large but is also accessible
Profit potential - this varies considerable from industry to industry (Porter's Five Forces
model can be used
to estimate the profit potential of a segment)
Step 3. Determine the scoring method and weightage criteria. Weight and score the market
attractiveness for the relevant products or services for markets (weighting out of 100 and score
out of 10 for example)
Step 4. Define business strengths. These factors are usually a combination of the organizations
strengths in relation to the competitors' strengths in connection with the customer-facing needs
or those things that the customer requires. These can be grouped into the following factors as an
example and each factor can be made up of numerous sub-factors:
Product requirements
Price requirements
Service requirements
Promotion requirements
Step 5. Weight and score the business strengths. Weights of the factors should equal 100. Score the factor out of 10
and multiply the score by the weighting. Divide this score by 100 and add it to the other factor scores to obtain an
overall score for the unit being analyzed. Divide each score into the score of the biggest competitor to obtain a
relative score. The biggest competitor's position is taken as 1 and the other units are plotted accordingly
CSF Weight Us Comp1 Comp2
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This matrix is a good one to use if the organization wishes to assess the competitors relative to themselves. The
DPM shows:
Markets categorized based on a scale of attractiveness to the organization
The organization's relative strengths in each of these markets
The relative importance of each market
It allows for a good analysis of the strengths and weaknesses of the competitors from the customer's point of view.
However, this concept has limits to the analysis. If more than ten SBUs/products are plotted onto one matrix, the
resultant picture can be confusing - one has to limit the number of circles on the matrix
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what to do, if officers to reviews limited degree questions, and leading role in
anything; no make all selected in the makes final establishing
degree of decisions. It issues that performance or decisions on and modifying
involvement votes as the officers review of mission, strategy, the mission,
officers bring to its selected key policies, and objectives,
recommend on attention decisions, objectives. Has strategy and
action issues. indicators, or active board policies. It has
programs of committees. a very active
management Performs fiscal strategy
and management committee.
audits
Highly involved boards tend to be very active. They take their tasks of monitoring,, evaluating, and influencing, plus
initiating and determining, very seriously; they provide advice when necessary and keep management alert. As
depicted in Figure ‘A’, their heavy involvement in the strategic management process places them in the active
participation or even catalyst positions. Fro example, in a survey of directors of large U.S corporations conducted by
Korn/Ferry International, more then 60% indicated that they were deeply involved in the strategy-setting process. In
the same survey, 54%of the respondents indicated that their boards participate in annual retreats or special planning
sessions to discuss company strategy. Nevertheless, only slightly more than 32% of the boards help develop the
strategy. More than two – thirds of the boards review strategy only after it has been first developed by management.
Another 1 admit playing no role at all in strategy. These and other studies suggest that most large publicly owned
corporations have boards that operate at some point between nominal and active participation. Some corporations
that have boards that operate at some point between nominal and active participation. Some corporations that have
actively participating boards are Mead Corporation, Rolm and Haas, Whirlpool, 3m, Apria Healthcare, General
Electric Pfizer, and Texas Instruments.
As a board becomes less involved in the affairs of the corporation, it moves farther to the left on the continuum
shown in Figure.. On the far left are passive phantom or rubber-stamp boards that typically do not initiate or
determine strategy (for example, Tyco ) unless a crisis occurs. In these situation, the CEO also serves as Chairman
of the Board, personally nominates all directors, and works to keep board members under this or the control by
giving them the “mushroom treatment” throw manure on them and keep them in the dark!
Generally, the smaller the corporation, the less active its board of directors. In an entrepreneurial venture, for
example, the privately held corporation may be 100% owned by the founders, who also manage the company. In this
case, there is no need for and active board to protect the interests of the owner-manger shareholders – the interests of
the owners and the managers are identical. In this instance, a board is really unnecessary and meets only to satisfy
legal requirements. If stock is sold to outsiders to finance growth, however, the board becomes more active. Key
investors want seats on the board so they can oversee their investment. To the extent that they still control most of
the stock, however, the founders dominate the board acts primarily as a rubber stamp for any proposal put forward
by the owner-managers. This cozy relationship between the board and management should change, however, when
the corporation goes public and stock is more widely dispersed. The founders, who are still acting as management,
may sometimes make decisions that conflict with the needs of the other shareholders (especially if the founders own
less than 50% of the common stock). In this instance, problems could occur if the board failed to become more
active in terms of its roles and responsibilities.
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