31 Unit-I

Business policy as a field of study; nature and objectives of business policy; strategic management process-vision, mission, establishment of organisational direction, corporate strategy, strategic activation.
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.

(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.

Qu 3. Define objectives of business policy?
Ans The objectives of business policy have been stated by various authors in terms of knowledge, skill and attitudes. These objectives could be derived from purpose of business policy: Knowledge: • Knowledge of external and internal environment is vital to understanding of business policy.

• • • Skills: •

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.

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.

Unit-II Top management : Constituents.board of directors. 4 What do you understand by SWOT analysis? How this technique is used in the formation of corporate strategies? Ans. For example. (b) Business Level Strategy: For many companies that are dealing in number of product mix. Environmental factors internal to the firm usually can be classified as strength (S) or weakness (W). product-lines. responsibilities and skills of top management. Such an analysis of the strategic environment is referred to as a SWOT analysis. divisions. depth and coverage. customer groups and technology etc. principles and rules of corporate strategy : strategic excellence positions Qu. 3 Explain the various level at which strategy is formulated? Ans. 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. evaluating multinational environment. Qu. sub-committee. a seprate strategy is required. dealing with different types of buyers and types of markets. offers us a glimpses of the complexity involved in understanding this daunting yet interesting and challenging concept. SWOT analysis. Corporate level strategy represents the pattern of interest in different business. each of the following may be considered weaknesses: • Lack of patent protection • A weak brand name • Poor reputation among customers • High cost structure . identifying corporate competence and resources. chief executive officer. and those external to the firm can be classified as opportunities (O) or threats (T). The definition of strategy varied in nature. The need is for multiple strategies at different levels. task. The different levels at which strategy can be formulated are as under: (a) Corporate Level strategy: Strategy at corporate level is designated as corporate strategy. Unit-III Formation of strategy : Nature of company’s environment and its analysis. for them a single strategy is not only inadequate but also inappropriate. In order to segregate different units or segments each performing a separate function. • 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. 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. mix and emphasis of various activities and how the resources should be allocated over the different priorities of the corporation. Corporate strategy emphasizes upon the fact that how one should manage the scope. It is the top management plan to direct and run the enterprises as a whole. A scan of the internal and external environment is an important part of the strategic planning process.

Lack of access to best natural resources Lack of access to key distribution channels in some cases. Differences in managerial • • . Opportunities(O): The external environmental analysis may revel certain new opportunities for profit and growth. found its position threatened in the mid 90s by competitors. one may call it remedial strategy. 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. a weakness may be the flip side of the strength. indeed the dimension of internal capabilities have relevance in so far they relate to the environmental conditions. If strengths are used to repair weaknesses. 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. 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. While this capacity may be considered a strength that competitors do not share. Take the case in which a firm has a large amount of manufacturing capacity. 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. Thus strategies which are based on the matching of strengths and weaknesses may be regarded as exploitative or developmental strategy. Hence the analysis of comparative strengths and weaknesses require linking competencies with characteristic of external environment. SWOT analysis may provide the basis of a comprehensive approach to strategy. An organisation that had pioneered computer education and training in India in the early 80s. 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.

Learning the course It seeks to integrate the knowledge and experience gained in various functional areas of management. the continuous definition of what needs to be done. business policy helps to create an understanding of how policies are formulated. 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. When they become capable of relating environmental changes to policy changes within an organization managers feel themselves to be a part of a greater design. political science. sociology. For Understanding the Organization . it is the study of the function and responsibilities of senior management. and so on. (c) A business may have several opportunities but also face some serious threats in the environment.perceptions of threats and opportunities. To highlight the importance of business policy. it is also concerned with the mobilization of resources. psychology. It deals with the constraints and complexities of real-life businesses. 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. The problem of policy in business. 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. (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. resulting from a simplification of the complex overall tasks and responsibilities of the management. It makes the study and practice of management more meaningful as one can view business decision-making in its proper perspective. In contrast. like economics. the functional area courses are based on a structured. managers become more receptive to the ideas and suggestions of the senior management. weakness and strength lead to different assessment reflecting intra organisational power relations and differing factual perspectives. In so doing. the crucial problems that affect success in the total enterprise. By gaining an understanding of the business environment. It may have likewise several weaknesses along with one or two major strengths. like those of policy in public affairs. and the mobilization of resources for the attainment of goals in the face of competition or adverse circumstances. and the decision that determine the direction of the organization and shape its future. business policy cuts across the narrow functional boundaries and draws upon a variety of sources-other courses in the management curriculum and a wide variety of disciplines. For Understanding the Business Environment Regardless of the level of management a person belongs to. business policy offers a very broad perspective to its students. It enables the learner to understand and make sense of the complex interaction that takes place between different functional areas. we shall consider four areas where this course proves to be beneficial. This helps in creating an appr6ciation of the complexities of the environment that the senior management faces in policy formulation. which will help the organization to achieve its goals BUSINESS POLICY AS A FIELD OF STUDY/ IMPORTANCE OF BUSINESS POLICY Business Policy is important as a course in the management curriculum and as a component of executive development programmes for middle-level managers who are preparing to move up to the senior management level. specialized and well-developed body of knowledge. the moulding of organizational identity and character. A study of business policy fulfills the needs of management students as well as those of middle-level managers. Such an attitude on the part of the management makes the task of policy implementation simpler. have to do with the choice of purposes.

the learner will be able to visualize how the implementation of strategic management can take place. Such an understanding can help considerably in career planning and development. enables a person to make preparations for handling general management responsibilities. Many of these concepts. Such ability is important in managerial decision-making where a large number of factors have to be considered at once to suggest appropriate action. To learn that the problems in real-life business are unique and so are the solutions is an enlightening experience for the learners. As a part of business policy study. The implementation of strategy is a complex issue and is invariably the most difficult part of strategic management. in terms of skills.Business policy presents a basic framework for understanding strategic decision making while a person is at the middle level of management. It is imperative to understand these concepts specifically in the context of business policy. Business policy. . Through the knowledge gained from business policy. With a generalized approach. and also for the avoidance of inter-departmental conflicts. 5. 3. Apart from the intangible benefits. public administration. The above objectives. 6. like most other areas of management. It can be applied to organizations like. objectives and strategies of a firm. 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. The knowledge component of such an experience stresses the general approach to be adopted in problem solving and decision-making. The learners of business policy have to understand the various concepts involved. and programmes are encountered in the functional area courses too. 4. 9. Information about the environment helps in the determination of the mission. increase the mental ability of the learners and enable them to link theory with practice. policies. In fact. and too many other areas. An understanding of business policy may also lead to an improvement in job performance. As a middle-level manager. case analysis leads to the development of oral as well as written communication skills. The development of this approach is an important objective to be achieved in terms of knowledge. it is possible to deal with a wide variety of situations. combined with the experience gained while working in a specialized functional area. educational institutions. strategy. Through the tools of analysis and diagnosis a learner can understand the environment in which a firm operates. an executive gains an understanding of the business environment and the organization he or she works in. government. The importance of business policy stems from the fact that it offers advantages to an executive from multiple sources. 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. services. The learner appreciates the manner in which strategy is formulated. Further. The analysis of the strengths and weaknesses of an organization. 10. 8. 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. Case study-which is the most common pedagogical tool in business policy-provides illustrations of real-life business strategy formulation and implementation. 2. NATURE AND OBJECTIVE OF BUSINESS POLICY These objectives could be derived from the purpose of business policy. 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 applicability of this model is not limited to businesses alone. and by an analysis of the business events taking place around us. 11. the threats and opportunities present in the environment. family. like. brings the benefit of years of distilled experience in strategic decision-making to the organization and also to its managers. Such an application can take place by an analysis of case studies and their interpretation. To survey the literature and learn about the research taking place in the field of business policy is also an important knowledge objective In Terms of Skills 7. and the suggestion of appropriate strategies and policies form the core content of general management decision-making. In Terms of Knowledge 1. plans. Knowledge of the external and internal environment and how it affects the functioning of an organization is vital to an understanding of business policy. the study of business policy should lead to the skill of identifying the factors relevant in decision-making. The attainment of knowledge should lead to the development of skills so as to be able to apply that which has been learnt. For Personal Development Business policy offers a unique perspective to executives to understand the senior management's viewpoint. Such a framework. An interesting by-product of the business policy course is the theoretical framework provided in the form of the strategic management model. This has far-reaching implications for managerial functions like coordination and communication.

philosophy and goals • External environment analysis of the company in terms of both competitive and contextual factors • Corporate appraisal and developing a company profile that reflects internal conditions and capabilities • Analysis of possible strategic options available in light of company mission • Evaluation of possible strategic alternatives and exercising strategic choice of a particular set of long term objectives and grand strategies needed to achieve the desired options • Determining the strategic objectives of the organization on the basis of mission formulated by the corporation and compatible with grand strategy • Implementing strategic choice decision based on budgeted resource allocation and emphasizing the matching of tasks. structure.In Terms of Attitude 12. all inclusive and forward thinking –it is what the firm ultimately like to become – aspiration of future without specifying the means to achieve those desire ends – Mangers. a new economic environment. new competitors. and implementation and evaluation process. STRATEGIC MANAGEMENT PROCESS-VISION. It is important to have the attitude to 'go beyond and think' when faced with a problematic situation. a general manager can act like a professional manager. frame work for analysis. regularly] to determine how it has been implemented and whether it has succeeded or needs replacement by a new strategy to meet changed circumstances. • Vision: see things which are invisible to others – SM. mission and objectives of the organization. The attainment of the knowledge and skill objectives should lead to the inculcation of an appropriate attitude among the learners. a generalist is able to function under conditions partial ignorance by using his or her judgment and intuition. The generalist attitude enables the learners to approach and assess a situation from all possible angles. assesses its competitors and sets goals and strategies to meet all existing and potential competitors. including broad statements about its purpose. choice. new technology. what will our business be. technologies and reward system • Review and evaluation of the success of the strategic process to serve as a basic for control and as an input for future decision making. In this way. These questions help in defining the nature of the business. that are broad. or political environment. 15. SM is defined as the set of decisions and actions resulting in formulation and implementation of strategic designer to achieve the objectives of an organization. and then reassesses each strategy annually or quarterly [i.e. people. The strategies management determines strategic objectives and makes strategic decisions. or a new social. The most important attitude developed through this course is that of a generalist. STRATEGIC MANAGEMENT PROCESS Establishment of Strategic Intent: it refers to the purpose of the organization and ends it pursues. Developing a creative and innovative attitude is the hallmark of a general manager who refuses to be bound by precedents and stereotyped decisions.” Gluekc “it is a stream of decisions and actions which leads to the development of an effective strategy or strategies to help achieve corporate objectives. 13. 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 decisionmaking for problem-solving. usually performed by an organization's Chief Executive Officer (CEO) and executive team. It focuses on the following critical areas: • Determining the mission of the company. what should out business be. financial. By acting in a comprehensive manner. 1984 “Strategic management is an ongoing process that assesses the business and the industries in which the company is involved. Answer to these questions require and careful consideration of vision. Strategic management provides overall direction to the enterprise.” SM is that set of managerial decisions and actions that determine the long run performance of a corporation. and allocating resources to implement the policies and plans to achieve the organization's objectives. Strategic management is the process of specifying an organization's objectives. MISSION Accd to Lamb. 14. Peter F Ducker in mid 90’s: what is our business.. they usually refers to mental image of some desired future state . developing policies and plans to achieve these objectives. Vision refers to the category of intention. It is the highest level of managerial activity.

efficiency. • Concurrent with this assessment. market leadership (share). technology support) Establishing a chain of command or some alternative structure (such as cross functional teams) Assigning responsibility of specific tasks or processes to specific individuals or groups It also involves managing the process. evaluating the efficacy and efficiency of the process. Mission statement should answer the following questions: what is our reason for being? What is our basic purpose? – What are the obligations to various stakeholders? – what is the relative emphasis we will place on meeting the needs of different stakeholders – what is unique or distinctive about our organization – what is likely to be difficult about our business 5 to 7 years in the future – who are. but objectives details in more precise terms what need to be accomplished in order to reach goals. overall corporate objectives (both financial and strategic). our principal customers or key market segments – what are the principal goods and services present and future – what are or should have our principal economic concerns – what are the basic beliefs values aspiration. indicates the principal product or service area and primary customer need the company will attempt to satisfy. . Some of the areas in which the organization must establish goals and objectives are: Profitability. • Objectives: objective are the end results of planned activity. This three-step strategy formulation process is sometimes referred to as determining where you are now. precise. or who should be. implies the image of the company and seeks to project and reflects the firms self concept. time. feasible. strategic business unit objectives (both financial and strategic). The achievement of corporate objectives should result in the fulfillment of corporate mission. The plan provides the details of how to achieve these objectives. controlling for variances.• Mission: vision is more tangible than mission. and making adjustments to the process as necessary. Imp elements of mission statement: customer & market. social responsibility (communication welfare & rural development) Strategy Formulation involves: • Doing a situation analysis. personnel. company’s philosophy. A mission statement should be clear. self-evaluation and competitor analysis: both internal and external. and indicates the major components of strategy in order to attain the established objectives. goals describes in fairy general terms what he organization hopes to accomplish. geographic domain. and then determining how to get there. growth (sales and assets). welfare and development). comparing to benchmarks and best practices. and philosophical priorities of the firm • Goals: as mission statement makes vision specific. Strategy implementation involves: • • • • Allocation of sufficient resources (financial. distinctive. objectives are set. and tactical objectives. both microenvironmental and macro-environmental. in the light of the situation analysis. These three questions are the essence of strategic planning. suggest a strategic plan. determining where you want to go. Goals denote what an organization hopes to accomplish in future period of time. mission statements (the role that the organization gives itself in society). it is the fundamental unique purpose that sets it apart from other firms of its type and identifies the scope of its operations in product and market terms – it is a genera enduring statement of company’s intent – it embodies the business philosophy of strategic decision makers. A broad category of financial and non-financial issues is addressed in goals. technology. self concepts. This involves crafting vision statements (long term view of a possible future). product & service. employees (industrial relations. • These objectives should. This includes monitoring results. goals attempt to improve organization performance by making mission statement more concrete. concern for public image. concern for survival. motivating.

constitute offensive strategies. 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”. Executives formulate different policies and plans as guidelines not only for themselves but for their subordinates as well. institution or organization. production and other crisis. this involves acquiring the requisite resources. Strategies include related decisions and actions meant for implementation of company objectives and plans. 1. documentation. 7. 2. To improve employee morale. it is essential to have further overall planning. process testing. they are also called “Crisis Strategies”. 5. as a general rule has its own aims and objectives and it is one of the foremost duties of the management to fulfill them. 4. Based on the final performance management was need to make adjustment in the strategy formulation. . to make the business more effective 5. strategy can be classified into three types. How to implement both policies and plans effectively. Strategy for Survival: Sometimes the corporation may find it desperate to win the competition. It means the strategy of any enterprise. 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. 6.• When implementing specific programs.” Corporate strategy means strategy of corporate bodies. They are calculated to counter act actions of opponents. Strategies are grown out of policies and plans and thus they direct the activities in the most appropriate manner. 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. They must provide monitoring and controlling methods to ensure that their strategic plan is followed. Generally strategy is inferred as external to the organization. 3. CORPORATE STRATEGY Every business concern.g. During such times the measures undertaken for the very survival of the corporation constitute survival strategies. Strategy based on purpose or objective: Based on purpose or objective. To capture. 4. in implementation or in both. Strategy based on the nature: Based on nature. They mainly aim at expansion or capturing new markets. and integration with (and/or conversion from) legacy processes. Offensive Strategies: Steps taken by the corporation in launching a new venture. They are special plans that deal with opponents. For e. advertisement campaign etc. a new produce. 3. 6. strategy can be classified into five types. Managers at all levels use the resulting information to take corrective action and resolve processing. To provide all employees with clear goals and directions to the future of the enterprise. 2. the strategy followed may be for the purpose of retaining the market by restricting the competitors from capturing the market. 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. Strategies are deliberate attempts made by the management to win over its opponents. Characteristics of Strategies 1. on the nature or on time. training. Types of Strategy: Strategy may be classified based on the purpose or objective. 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. Therefore. retain and win markets. To anticipate future problems and opportunities. Vary fast change of business conditions. Strategies are overall plans that help management to implement general policies and plans effectively. developing the process. Survival strategies not only aim at strengthening the competition to withstand competition but are undertaken during periods of financial. 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. Defensive Strategies: Defensive strategies are followed by corporations as defense against external forces. 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.

The corporate level strategies translates the orientation of the stakeholders and the society into the forms of strategies for functional or business levels. The issues pertaining to business ethics. These divisions are known as profit centers or strategic business units. Three types of level are depicted in the exhibit. and administrative officers. Their responsibility is to achieve the planned financial performance of the company in addition to meeting the non-financial goals viz. The business strategy must contain well coordinated action programs aimed at securing a long-term competitive edge and which the company should sustain. Exhibit shows typical levels of strategy making in an organization. This is the level where vision statement of the companies emerges. social responsibility and the organizational image. encompassing all business and functional lines of authority in a company are dealt with at this level of strategy formulation. soaps and detergents. Lets take an example of Hindustan Levers. oils and dairy fat . beliefs.Operation Strategy: Operation strategy flows from the root strategy and guides the enterprise in its action commitment in the market place. beverages. 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. coping with environmental changes and directing day to day operations are part of a firms operating strategy. and administrative systems that link strategic and operational decision making level at all the levels of hierarchy. . and accepted forms of behaviour must be congruent with the organizational culture and at this level. The responsibility of the top management is to keep the organization healthy. and social commitment are dealt with. the board of directors. 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. coordination between them for optimal contribution to the achievement to the achievement of corporate level objectives. The managers identify the most profitable market segment. Organization Strategy: At the implementation phase the management has a decision choice of alternative organizational strategies to provide the guidelines. organizational responsibilities. The managerial style. a multinational subsidiary. The top level of the organization consists of chief executive office of the company. framework and communication network to complete and put into effect the operating strategy. Long Term Strategy: Long term strategy generally involves foresight on the expansion and development of the organization. ethics. Strategy based on Time element: Based on the time. The managers at this level translate the general statements of direction and intent churned out at corporate level. Business strategy is a comprehensive plan providing objectives for SBU’S. keeping in focus the vision of the company. there are basically three levels. 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 may be classified into two types. allocation of resources among functional areas. where they can excel. integrity. 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. values. Levels of Strategies: The levels of strategy offer you a glimpse of the complexity about different levels at which strategy is formulated. Short term Strategy: Short term strategy concerns itself with the immediate goals. In the given exhibit you will see that various companies are organized on the basis of operating divisions. at this level of strategic decisions. is in several businesses such as animal seeds. 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. managerial capabilities. The blueprint for market penetration. The corporate values.

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. information management. among various members of the company and specifically at operational level. and these systems should find adaptability with the culture of the organization. The managers at this level of product. For this to happen. marketing and human relations etc. communication. geographic. Further. . management control. rewards etc. and functional areas develop annual objective and shortterm strategies. It is also vital that all these systems are supported by organizational structure that defines various authority and responsibility relationships. motivation. The strategies are designed in each area of research and development. Thus Exhibit shows the interaction of various functions for deciding strategies at the operational level. finance and accounting.these aspects are diligently taken care of by strategic managers. put down at least five reasons how business strategy serves the need of Management students. The culture of the organization should be accounted for. the planning should be carefully dovetailed and integrated with significant administrative systems viz. Middle-level executives. 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.

selecting its Chairman. including planning its composition. as part of its annual strategic planning process. the Corporation’s plans and management performance. It has the statutory authority and obligation to protect and enhance the assets of the Corporation in the interest of all of its shareholders. and determining Board compensation. RETENTION AND SUCCESSION • Subject to the Articles and By-Laws of the Corporation. acting upon the advice of the CEO. the Board shall review recent developments. 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.UNIT II BOARD OF DIRECTORS In relation to a company. The Board shall. nominating candidates for election to the Board. conduct a review of human. and for ensuring that adequate provision has been made for management succession. the amount of power exercised by the board varies with the type of company. and thus there is no real division of power. Its principal duties fall into seven (7) categories. Sometimes the board will appoint one of its members to be the chair of the board of directors. technological and capital resources required to implement the Corporation’s growth strategy and of the regulatory. director. to management and reserving certain powers to itself. MONITORING AND ACTING • The Board has responsibility to monitor the Corporation’s progress towards its goals. STRATEGY DETERMINATION • The Board has the responsibility to participate directly or through its committees. • The Board has responsibility to ensure congruence between shareholders’ expectations. and the shareholders in general meeting. In large public companies. who shall not be the CEO. The Board of Directors is responsible for supervising the management of the Corporation’s business and its affairs. The Board shall. . or independent. the opportunities and risks of the Corporation’s business. its objectives and goals. the Board manages its own affairs. for monitoring CEO performance. RISK EVALUATION • The Board has the responsibility to identify the principal risks of the Corporation’s business and ensure the implementation of appropriate systems to manage such risks. The directors collectively are referred to as a board of directors. the directors and the shareholders will normally be the same people. In small private companies. and the strategy for their achievement. • The Board has the responsibility to review the Corporation’s annual strategic plan with senior management prior to the commencement of each year and approve the plan. and to revise and alter its direction in light of changing circumstances. MANAGEMENT SELECTION. that impact upon the Corporation’s growth strategy. The Board operates by delegating certain of its responsibilities and authority. someone who works for the company) charged with the conduct and management of its affairs. among other assessment processes. cultural or governmental constraints on the Corporation’s business. • The Board shall provide an orientation and induction program for new Directors and shall encourage and provide opportunities for all Directors to continually update their skills as well as their knowledge of the Corporation. The control of a company is divided between two bodies: the board of directors. The plan shall take into account. a director is an officer (that is. • The Board has responsibility for the appointment and replacement of the CEO. evaluate management’s analysis of the strategies of the Corporation’s competitors or of companies of a scale similar to that of the Corporation. if any. In practice. establishing the terms of reference and duties of its committees. appointing the members of its committees. its business and its senior management. At every regularly scheduled meeting. including spending authorization. in developing and approving the mission of the Corporation’s business. A director may be an inside director (a director who is also an officer) or an outside. among other things. and for determining CEO compensation. The Board has responsibility for approving the appointment and remuneration of all corporate officers. the board tends to exercise more of a supervisory role.

DISCLOSURE TO SHAREHOLDERS AND OTHERS • The Board has responsibility for ensuring that the performance of the Corporation is adequately reported to its shareholders. The chief executive officer reports to the board of directors. and to take action when performance falls short of its goals or other special circumstances warrant. 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. This is a great list for both taking on a new CEO position and getting up to speed. securities. amendment or repeal of ByLaws of the Corporation. or may reasonably be expected to result in. • To act honestly and in good faith with a view to the best interests of the Corporation. The declaration of dividends. In particular. shall report to the Health. environmental and other relevant legislation and the Corporation’s Articles and By-Laws. which have been established by management. 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. such as “The Board is responsible to hire or appoint the CEO”. The purchase. GENERAL LEGAL OBLIGATIONS • To supervise the management of the business and affairs of the Corporation. redemption or any other form of acquisition of shares issued by the Corporation. the investment community. The approval of any take-over bid circular or Directors’ circular. as well as to develop a proactive development and learning program for any CEO or senior executive wishing to improve their executive management skills. • 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 approval of the annual financial statements of the Corporation. The filling of a vacancy among the Directors. General Operations . • To exercise the care.” Much of the current writings around non-profit governance and board roles refer to the chief staff officer as CEO. including the circumstances and rationale for granting the waiver. its other security holders. • The Board has responsibility for monitoring compliance with the Corporation’s written Code of Ethics. diligence and skill that a reasonably prudent person would exercise in comparable circumstances. The CEO reports directly to the Board of Directors [and] appoints other managers…to assist in carrying out the responsibilities of the organization. however it also no doubt reflects current trends in practice and governance models. including the Corporation’s Environmental Policy and its Occupational Health and Safety Policy. Safety and Environment Committee of the Board of Directors on their respective activities once a year. a significant change in the value or market price of the Corporation’s listed securities. POLICIES AND PROCEDURES • The Board has responsibility to approve and monitor compliance with all significant policies and procedures by which the Corporation is operated. • 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 Environmental Committee and the Occupational Health and Safety Committee. The approval of a management proxy circular. 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. and ethical and moral standards. The Board has responsibility for ensuring that timely disclosure is made by press release of any development that results in. the relevant regulators and the public on a timely and regular basis. The manner and the terms of the issuance of securities.• The Board has responsibility to provide advice and counsel to the CEO. That usage can be attributed somewhat to consistency (gets beyond the variety of titles in use) and expediency (quick and easy). or The adoption. • To act in accordance with the Canada Business Corporations Act. • The Board has particular responsibility to ensure that the Corporation operates at all times within applicable laws and regulations. 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.

maintenance of status quo. Discuss the dozen biggest problems and opportunities from perspective of all first-reports. procedures and controls. cut costs immediately where necessary and prudent and in accordance with the Board's short and intermediate term goals. 29. Identify and take steps to immediately defuse all visible. and if not. sales personnel training. 3. Product lines / Marketing / Sales / Distribution 25. or other problems. budget forecasts and quality of project management systems. Analyze product delivery schedules and takes steps to improve meeting commitment dates. 23. If survival mode is required. Evaluate customer / technical support. Review budgets of all departments or divisions for reasonableness of assumptions. introduce game plan and initiate implementation of action items on this list. 18.1. Evaluate pricing models for each product line and adjust accordingly. if possible. or mitigate their impact. Prioritize top ten action items for the whole company and begin implementation. Determine what. problems exist with the IRS and state agencies. quarter and year. Evaluate product development timetables. 37. Personnel Issues . marketing. Identify potential products -. Deal with the six largest crises within the first three weeks. Ensure the company is in compliance with all required regulatory and licensing agencies. Evaluate sales. trade shows. focus groups and public relations and adjust accordingly. 31. guarantees and after-sales service. Regulatory / Legal / Litigation 19. formulate short-term game plan for company. lenders. etc. 11. Evaluate obvious. sales targets. if any. develop game plan and/or negotiate workout. get board approval and communicate plan to key personnel. 21. 12 and 24 months into the future -. Identity all outstanding legal issues and litigation risks along with probable. get current detailed financial statements. or suspected. Ensure all payroll taxes are paid and properly reported. 16.6. itemized payroll. so as to generate more cash in the short-term. ticking time bombs. 22. forecasts and trend lines for improvement opportunities in all areas. suppliers. special offers. If in default. dealerships. 34. Meet all first-reports. Do realistic cash forecast for the next 90 and 180 day periods. 5. Within the first week. warranties. 180 and 365 day periods and ensure no technical or major defaults. Evaluate asset utilization and re-deploy if appropriate and prudent in the short term. Ensure any patents. Have all first-reports complete the Agenda for the Future. 14. 13. evaluation and recommendations or take charge through implementation of new game plan. sales-related incentives. Ensure no securities law violations have occurred -.and their possible impact on revenue and expenses. Liabilities / Risks / Time Bombs 15. 12. Identify both the best customers and the most unhappy customers. 9. 32. Establish primary goals of the Board -. 7. 8. market research. as well as the company's image in the marketplace. 26. trademarks and copyrights are properly filed and appropriate protections are in place. telemarketing and sales support. etc. Evaluate and optimize short-term inventory. and not so obvious. distribution. trade secrets. payables and receivables list. 2. take action to resolve these issues. associated costs. Financial Issues 10. 35. 33. 17. 36. Identify product line strengths and weaknesses and develop short-term action plan to solve the most glaring problems. Identify and implement top six action items that could measurably increase short term revenues. quality of projections and relevancy in light of recent corporate changes and goals. 28. Evaluate sales force. 27. 20. and possible. 30. 6. Determine which critical suppliers have suspended support due to lack of payment.and if they have. Review banking and debt obligations for next 90. Complete competitive analysis for each product line. Establish / update / expand web presence. Evaluate expenditures and effectiveness of marketing and advertising for media. 4. 24. take immediate steps to remedy them. problems and strengths revealed by the financial statements. In addition to this action list. Identify top goals for the company for the current month.

deferred compensation. Identify personality issues / company policies that may be creating negative impact on company morale and productivity. 54. 62. Generate updated lists of all current shareholders and percentage ownership of each. hourly. Evaluate and control travel. Complete three year pro forma. 46. Identify which mergers. within budget constraints. to gain insight into less obvious underlying problems. Evaluate in-place systems and procedures and streamline where appropriate. Review stock options or purchase plans and agreements. candidly communicate with all company personnel for introduction and conveyance of immediate game plan. spin offs. Review major Human Resource department aspects of company for legal compliance.38. Analyze employee turnover rates to identify fundamental problem areas. develop game plan for liquidation of assets and/or follow up on bankruptcy filing. Review all bonus. Evaluate technology implementation and optimize within budget constraints. Report to the Board: the objective status. 65. recommended modifications to the short-term game plan and any cash needs. Stockholder Status / Investor Relations 64. or collective bargaining employees. Upon arrival. Identify best and worst five percent of employees in the company -. expansion. 41. adjusting total payroll if necessary. 55. define criteria and initiate search. Develop 30/60/90 day performance plans for all first reports. acquisitions. and implement updated and approved game plan. prepare sales summary and develop game plan and methodology for sale. 61. dispositions and investments make the most sense for the company. 53. stock option. retirement programs or plans covering salaried. including a review of current lease requirements. based on realistic assumptions. number of shares subject to option. entertainment and all discretionary expenditures and implement new written policies for these issues. IPO / Merger / Acquisition / Disposition / Dissolution 51. and/or closing existing branches and stores. Set up suggestion boxes. as well as lists of outstanding warrants and options. performance. Review all employment contracts or agreements. oral or written. 42. or collective bargaining employees. personnel and cost-effectiveness. exercise price. 50. 39. 43. Review facilities and real estate issues. hourly. Pick up sword again. Visit all branch offices and evaluate their needs. Identify key personnel and unfilled job functions. 63. 45. establishing new. evaluation. downsizing. 58. 59. clarity of policies and potential costs savings.probably replacing worst five percent and ensuring the best five percent are motivated enough to stay. including date of grant. Create / update business plan for current internal clarity and banking or capital formation needs. . 48. 60. 66. 68. The Next Steps 67. establish price and terms. including any severance or termination compensation agreements with salaried. Evaluate strengths and weaknesses of all first reports. If Board decision is to dissolve company. Identify the growth issues regarding acquisitions. Review all equipment leases for cost cutting / improved technology opportunities. General / Administrative 56. 52.and reorganize if appropriate. and invite anonymous email. 49.gaining insights into attitudes and problem areas from within all levels of the organization. 40. profit sharing. Evaluate organizational structure and effectiveness -. Evaluate investor and stockholder relations and communication status and initiate appropriate action. If decision is to sell the company. 44. to determine future valuation potential of company and likelihood of IPO or merger/acquisition potential. subject to Board approval. "Manage by roaming around" -. 47. Review / modify written delegation of authority for all first reports. 57. diversity. competitiveness of benefits package. and date of exercise.

political structure. money supply. which give shape and form to the development of economic activities and may include factors like nature of economic system. Stability of the government. are. variables. Foreign Trade Regulations Intellectual Property Rights Anti trust legislations. Level of government subsidies. wage/ price control. has followed a strict poling with regard to multinationals. devaluation and revaluation. Environment uncertainty. anti-trust laws. is multi dimensional. degree of complexity and degree of change existing in an organization external environment. Economic Environment: it refers to the nature and direction f the economy in which a business organization operates. Size of government budget taking an example of 1977 the Janta govt. labour legislation. forces and external objects which affects someone under which something exists Org: conditions. From analytical point of view. political system. the understanding of economic environment is of crucial importance to strategic management. often managers concentrate more on economic factors. a business organization is an economic unit of operation. is dynamic. political processed. factors. • As a source of information: it views it as a source of information. 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. unemployment trends. tax rate. Location and severity of terrorist activities. Economic environment is by far the most important environmental factor which the business organizations take into account. Special Incentives. As a result Coca-Cola and IBM were forced to move out of India causing a farreaching impact on the business environment of the country. As such. . Organization becomes aware about the information and the level of uncertainness associated with the various information. Interest rates. 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. environmental protection laws and many other actions aimed at protecting the consumer and environment. Since the measurement of organizational performance is mostly in the form of financial terms. shift to service economy. programs. inflation rate. The important factors which determine the political/legal environment. Key economic Variables: GDP trends. 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. It is crucial to mange and control effectively and efficiently and also it is necessary to understand environment before making efforts to impact it. Foreign Exchange Laws. Thus the more complex and dynamic the environment the more uncertain it is. is having a far reachable impact. Political/legal forces that allocate power and provide constraining and protecting laws and regulations. role of the government in business and government attitude towards business and foreign investment etc. unemployment level. 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. is complex. influences that surround and affect it. and various production factors. Attitude towards foreign companies. money market rates. 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. monetary fiscal policy. various economic policies. The following are the nature of environment Influences the availability of resources. In fact. Technological Environment: it is key driver of the new competitive landscape technologies.ENVIRONMENT: Layman: Surrounding. Level of defense expenditures. Economic environment covers those factors. circumstances. is multi faceted. Environmental Protection Laws Tax Laws. Some of the important variables are given below: Governing regulations or deregulations. general economic conditions. events. There is a competing situation in the industry to obtain and control their resources. As the market becomes global the complexity and unpredictability increases and number of factors a firm considers increases. provides opportunities and holding threats. government philosophy. influences. Political constraints are places in each company through fair trade decision.

on a service.developments are fast and have far reaching impact on the firm’s strategy. providing strategy with access to richer resources of information. You can then work towards overcoming those shortcomings and minimizing their effects. it is not easy to predict the timing of their changes. analyze. Access to internet. patent protection. total industry spending for R&D. A firm must be aware about the technological changes that might influence the industry. as developed from their cultures. regional shift in population. SWOT Analysis is a very effective way of identifying strengths and weaknesses. In India. birth rate. cost and delivery system SWOT ANALYSIS SWOT is an acronym that stands for Strengths. Opportunities. enable large number of employees to work from home. 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. ecological. Done properly. new development in technology transfer from lab to market place. This knowledge is then used to develop a plan of action. opinions and life styles of those in a firm’s external environment. business to business transactions. the growth of IT sector has acted as a catalyst in this direction. telecommunication infrastructure. Socio-Cultural Environment: this segment involves beliefs. and Threats. the most profound social changes in recent years is the emergence of middle class as a major and important element of total population. on line shopping through internet and WWW. of competitor’s entry and exit barriers. SWOT analysis is a basic. changes in consumer and employees interest. educational and ethnic conditioning. Weaknesses. straightforward model that provides direction and serves as a basis for the development and management of self. organization. In fact technology has changed the way in which business in conducted. and evaluate information and identify strategic options facing a community. career expectations. and it can also be done for self. life expectancies. quality of life issues etc. 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. Purpose The purpose of SWOT analysis is to gather. e. consumer activism. The analysis can be performed on a product. internet availability. SWOT Analysis is generally considered a Marketing tool but although it has its origins in Marketing field and is predominantly used by Marketing people. changes of distribution logistic. Key technology factors: total govt spending for R&D. a company or even on an 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. Carrying out an analysis using the SWOT framework helps to focus activities into areas where one is strong and where the greatest opportunities lie. Your strengths will tell you the jobs and the kind of work you are best for hence making it . 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. increase in the number of women entering in the labour market. attitudes. level of education The Micro Environment: the micro environment has a substantial impact on the organization’s current business. 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. and of examining the opportunities and threats one tends to face. productivity improvement though automation. rate of family formation.g. SWOT Analysis is a tool which guides one to see where one stand in terms of job prospects and career growth. It constitutes the following: Competitors: no. The strategic implications of technological changes accd to Boris Petrov are three: -. SWOT will give the big picture of the most important factors that influence survival and prosperity as well as a plan to act on. growth rate of population. focus of technological efforts. Strengths and weaknesses are internal while opportunities and threats are external. values. The technology segment includes institutions and activities involved with creating new knowledge and translating the knowledge into new output. age distribution of population. middlemen. Key social cultural variables: Life style change. Socio cultural changes occur gradually unlike technological changes. It will also show you your negative character traits that can hinder your chances of getting a good job. or individual at a given time. new products. religion. new product and process and materials. demographic.

competitive position. 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. Show competitive factors .easier to avail the right opportunities. Follow these rules when developing a SWOT analysis 1. Having the facts to back up an argument gives it credibility. courses and training you need in order to remain competitive. 2. but every organization competes for dollars so competition should not be dismissed. 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). It may also be created by a proactive approach by the management in moulding the environment to its own benefit. 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. 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. Weaknesses make the organization vulnerable to competitive pressures. 3. Such an opportunity may be the result of a favourable change in any one or more of the elements that constitute the external environment. 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. Weaknesses require a close scrutiny because some of them can prove to be fatal. Prioritize and weigh the factors in the lists 5.Perhaps you don't have a direct competitor in your category. 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 . Threats will show you the skills. Opportunities and Threats An “opportunity” is considered as a favourable circumstance which can be utilised for beneficial purposes.Confusing or obscure language may complicate your ability to execute the strategy. A “weakness” is a condition or a characteristic which puts the company at disadvantage. These are competitive liabilities and strategic managers must evaluate their impact on the organization’s strategic position when formulating strategic policies and plans. Use language that is clear and relevant to the task . 4.One person's idea of strength may be another's idea of a weakness. it is offered by outside environment and the management can decide as to how to make the best use of it. Keep lists short . Opinions must be supported with facts .10 items per list ensures only important factors are considered.

Management should anticipate such possible threats and prepare its strategies in such a manner that any such threat is neutralized. Such analysis is an essential component of thinking strategically about a company’s situation. . Some of the elements that can pose a threat are: • Entry of lower cost foreign competitors Cheaper technology adopted by rivals • Rising sales of substitute products • Shortages of resources • Changing buyer needs and preferences • Recession in economy • Adverse shifts in trade policies of foreign governments • Adverse demographic changes SWOT analysis involves evaluating a company’s internal environment in terms Of strengths and weaknesses and the external environment in terms of opportunities and threats and formulating strategies that take advantage of all these factors.• Falling trade barriers in attractive foreign markets A “threat” is a characteristic of the external environment which is hostile to the organization.

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. As a particular industry matures and its growth slows. then after perhaps years of cash consumption it will degenerate into a dog when the market growth declines.-matrix. These units typically generate cash in excess of the amount of cash needed to maintain the business.G. from an accounting point of view such a unit is worthless. • Cash cows are units with high market share in a slow-growing industry. generating barely enough cash to maintain the business's market share. B. 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. used by many investors to judge how well a company is being managed. but because they have low market shares they do not generate much cash. If the question mark does not succeed in becoming the market leader. This helps the company allocate resources and is used as an analytical tool in brand marketing. They depress a profitable company's return on assets ratio. in a "mature" market. Sustaining the business unit's market leadership may require extra cash.C. all business units become either cash cows or dogs. analysts plot a scatter graph to rank the business units (or products) on the basis of their relative market shares and growth rates. strategic management and portfolio-analysis. The overall goal of this ranking was to help corporate analysts decide which of their business units to fund.UNIT IV STRATEGIC ANALYSIS AND CHOICE BCG MATRIX Growth-share matrix The BOSTON matrix (aka B.G. and how much. • Dogs. but this is worthwhile if that's what it takes for the unit to remain a leader. or more charitably called pets. possibly. When growth slows. are units with low market share in a mature. Question marks must be analyzed carefully in order to determine whether they are worth the investment required to grow market share. • Question marks are growing rapidly and thus consume large amounts of cash. The result is a large net cash consumption. slow-growing industry. should be sold off. 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. analysis. • cash cows that supply funds for that future growth. To use the chart. and every corporation would be thrilled to own as many as possible. since such investment would be wasted in an industry with low growth. The balanced portfolio has: • stars whose high share and high growth assure the future. These units typically "break even". Though owning a break-even unit provides the social benefit of providing jobs and possible synergies that assist other business units. A question mark (also known as a "problem child") has the potential to gain market share and become a star. product management. The hope is that stars become the next cash cows. the question marks. and which units to sell. . and eventually a cash cow when the market growth slows. and • question marks to be converted into stars with the added funds. or they move from brief stardom to dogdom. They are to be "milked" continuously with as little investment as possible.C. not generating cash for the company. They are regarded as staid and boring. it is thought. stars become cash cows if they have been able to maintain their category leadership. • Stars are units with a high market share in a fast-growing industry. Dogs.

the rate above which the growth is deemed to be significant (and likely to lead to extra demands on cash) is a critical requirement of the technique. If the largest competitor had a share of 60 percent. in rapidly growing markets. the market growth rate says more about the brand position than just its cashflow. Determining this cut-off point.) The matrix also overlooks other elements of industry attractiveness and competitive advantages. however. Poor definition of a business's market will lead to some dogs being misclassified as cash bulls. is that it carries more information than just cashflow. multi factoral analysis (also known as the GE McKinsey Matrix). This is outside the range normally considered in Boston Matrix work. and therefore should be retained and not sold.E. The reason for choosing relative market share. stars. if the brand had a share of 20 percent. the ratio would be 1:3. Brand leaders in this position tend to be very stable . As originally practiced by the Boston Consulting Group. and only implies actual profitability. in the reasonable expectation that a high market share will eventually turn into a sound investment in future profits. and the largest competitor had the same. are what organizations strive for. Market growth rate Rapidly growing brands. The best evidence is that the most stable position (at least in FMCG markets) is for the brand leader to have a share double that of the second brand. It was reasoned that one of the main indicators of cash generation was relative market share. is that the most typical pattern is of very low growth. and indicates where it might be likely to go in the future. later practitioners have tended to over-simplify its messages. and triple that of the third. optimistic evaluations can lead to a dot com mentality in which even the most dubious businesses are classified as "question marks" with good prospects. for graphically illustrating cashflows. as we have seen. particularly with respect to growth rates. If used with this degree of sophistication its use would still be valid. It can also be used in growth analysis. the later application of the names (problem children. implying that the brand owned was in a relatively strong position. which might be reflected in profits and cashflow. The reason for this is often because the growth is being 'bought' by the high investment. in those few situations where it could be applied. rather than just profits. The need which prompted this idea was. the penalty is that they are usually net cash users . and also of its attractiveness to future competitors. What is more. this scale is logarithmic. implying that the organization's brand was in a relatively weak position. The cut-off point is usually chosen as 10 per cent per annum. less than 1 per cent per annum. If this technique is used in practice.and profitable. since such simplistic use contains at least two major problems: . the ratio would be 4:1. which may make application of this form of analysis unworkable in many markets. the Rule of 123. and one which pointed to cash usage was that of market growth rate.and is often what most students. Relative market share This indicates likely cash generation. With this or any other such analytical tool. remember.they require investment.Practical Use of the Boston Matrix For each product or service the 'area' of the circle represents the value of its sales. the evidence. If the largest competitor only had a share of 5 percent. and practitioners. Another matrix evaluation scheme that attempts to mend these problems has been the G. enthusiastic managers may claim that cash must be thrown at these businesses immediately in order to turn them into stars. from FMCG markets at least. exactly what is a high relative share is a matter of some debate. the ratio would be 1:1. however. makes the use of the Boston Matrix problematical in some product areas. Risks and criticisms The BCG growth-share matrix ranks only market share and industry growth rate. Unless the rankings are approached with rigor and skepticism. Thus. that a higher growth rate is indicative of accompanying demands on investment. and one that. The theory behind the matrix assumes. indeed. It can also show what type of marketing activities might be expected to be effective. Where it can be applied. It shows where the brand is positioned against its main competitors. but. The exact measure is the brand's share relative to its largest competitor. However. The Boston Matrix thus offers a very useful 'map' of the organization's product (or service) strengths and weaknesses (at least in terms of current profitability) as well as the likely cashflows. that of managing cash-flow. In particular. On the other hand. because the higher the share the more cash will be generated. again. the matrix was undoubtedly a useful tool. before growth rates slow and it's too late. of its future potential (of its 'maturity' in terms of the market lifecycle). therefore. it is assumed that these earnings will grow faster the higher the share. ranking business units has a subjective element involving guesswork about the future. (It is certainly possible that a particular dog can be profitable without cash infusions required. This is unfortunate. cash cows and dogs) has tended to overshadow all else . As a result of 'economies of scale' (a basic assumption of the Boston Matrix). It is a good indicator of that market's strength. not linear. the purpose of any business.

It presumes. Stranght and weaknesses. the firm face numerous opportunities and have numerous strengths. although this appears to be the most widely used (or at least most widely taught . the objective is identification as one of four distinct patterns in the match between the firms internal and external situations. The strategies suggests building long term opportunities in other products/ market. above all.using the dimensions of `industry attractiveness' and `business strengths'. The brand leader's position is the one. since `cash cows' will inevitably decline to become `dogs'. but the same evaluation can be made for product lines or any other cash-generating entities. This situation suggests “growth oriented strategies’. This approaches some of the same issues as the Boston Matrix. This should only be attempted for real lines that have a sufficient history to allow some prediction. It focuses attention. It is a foolish vendor who diverts funds from a `cash cow' when these are needed to extend the life of that `product'. to be defended. SWOT analysis provides a means as answering this fundamental question and give direction to grand strategy. External Factors Opportunity and threats) SO Strategies: the most favourable situations. The vendor. The cashflow techniques are only applicable to a very limited number of markets (where growth is relatively high. who has most of his (or her) products in the `cash cow' quadrant. on to the `stars'. In any case. Perhaps the most important danger is. the chance of the new brands achieving similar brand leadership may be slim . but they should not be `milked' to such an extent that their position is jeopardized. the firm should maximize the strength in order to capture the available opportunities WO Strategies: The firm faces impressive market opportunities but is constrained by the several internal weaknesses. indeed. Alternatives As with most marketing techniques there are a number of alternative offerings vying with the Boston Matrix. the main message that it is intended to convey. which is a three-cell by three-cell matrix . Such brand leaders will. SWOT ANALYSIS MATRIX The TOWS matrix illustrated systematically compares the external opportunities and internal strengths. that the apparent implication of its four-quadrant form is that there should be balance of products or services across all four quadrants. should consider himself (or herself) fortunate indeed. to add some extra growth. and funding. SWOT analysis helps to resolve one fundamental concern in selecting strategy. perhaps. which the consultancy reportedly used itself. generate large cash flows. ST strategies: the firm faces unfavourable environment having key strengths. Perhaps the most practical approach is that of the Boston Consulting Group's Advantage Matrix. but from a different direction and in a more complex way (which may be why it is used less. The next most widely reported technique is that developed by McKinsey and General Electric. money must be diverted from `cash cows' to fund the `stars' of the future. Perhaps the worst implication of the later developments is that the (brand leader) cash bulls should be milked to fund new brands. Other uses The initial intent of the growth-share matrix was to evaluate business units. What will be the principle purpose of grand strategy? is it to take advantage of a strong position or to overcome a weaknesses.and then probably 'not' used). or is at least less widely taught). 'Milking cash bulls'. The reality is that it is only the `cash bulls' that are really important . and almost demands. use may give misleading results. that `cash bulls' will turn into `dogs'. of course. however. The matrix generates a series of possible strategies for the company or SBU under consideration bases on four sets of combinations given in four cells. the sample variance will be too high for this sort of analysis to be meaningful. such as that of ethical pharmaceuticals). This is not what research into the FMCG markets has shown to be the case.'Minority applicability'. although he or she might also consider creating a few stars as an insurance policy against unexpected future developments and. and that is. though it is little known amongst the wider population. (internal factors. and a definite pattern of product life-cycles can be observed. The focus of strategy for such firm is eliminating internal weaknesses to more effective pursue market opportunities WT Strategies: the most favourable situation with the firm facing major environmental threats from a position of relative weakness. There is an almost mesmeric inevitability about the whole process. 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. and an excellent marketer. not least since brands in this position will probably outperform any number of newly launched brands. if the corporation has made only a few products and called them a product line.all the other elements are supporting actors. The firm should act defensively in order to minimize weakness and avoid threat. Thus. In the majority of markets.certainly far less than the popular perception of the Boston Matrix would imply. .

the portfolio analysis is useful because it offers following benefits: • It provides and comparative analysis of market share. IS right. size and industry profitability. (FS IS 7. customer and market knowledge. Factors—Market growth. Aggressive Posture: appropriate for company enjoys a competitive advantage and belongs to an attractive industry that operates in a relatively stable environment. (FIGURE—FS up. SPACE (Strategic position and action evaluation) SPACE is an approach used to define different strategies alternative and strategic postures for a firm. cut costs. These factors are assess numerically constructed a scale from 0-7. Businessman which are classified are invest would be treated like the stars in BCG Matrix. Possible strategies—maintain & enhance competitive advantage. season ability and critical qualities. GE9 Cell Matrix The GE Company of US is widely respected for the sophistication. profit margin. turn around (FS 2 IS 6 CA 7 ES 2) Conservative posture: appropriate for a company. Industry Business strengths Attractiveness Strong Average Weak High -> Invest Invest Hold Medium -> Invest Hold Divest Low -> Hold Divest Divest In nutshell. ability to compete. improve marketing effectiveness. market growth and competitive position of each product or businesses • It aids in generating good strategies on the basis of above analysis • It promotes efficient and effective ways of resource allocation • It facilitates in clarifying and determine broad strategic interest DIRECTIONAL POLICY MATRIX . Business classified in the divest category would be managed like dogs in BCG Matrix and business classified under hold are categorized as cash cows or as question mark. CA left. economic of scale. technology and management caliber etc. it involves consideration on four dimensions: -. CA ES 2) Competitive Postures: suitable for company enjoys a competitive advantage but has limited financial strengths and belongs to an attractive industry operating unstable environment. GE expanded the matrix from four cells to nine cells. social/ environmental/ legal/ human factors identified as enhancing industry attractiveness. (FS 2 IS 4. look for acquisition possibilities. enhance market share though expansion. Possible strategies – full exploitation of resources. vertical’s competitive advantage – company’s financial strength – industry strength – environment stability SAP provides an idea about the company’s competitive advantage and financial strengths and ETOP and industry analysis gives insight regarding the environment stability and industry strengths. replacing the high low axes with high medium low axes to make finer distinction between business portfolio positions. CA 7 ES 2) Defensive posture: suitable for a company which lacks competitive advantage as well as financial strengths and belongs to an unattractive industry operating in an unstable environment. factor--Market share. The GE uses multiple factors to assess industry attractiveness and business strength rather than single measurement employed in BCG matrix. ES down) Strategic alternative postures: SPACE matrix depicts 4 possible postures.e strategic alternatives = opportunities divided strengths minus weaknesses. then average numerical score is calculated. improve productivity. concentric diversification. CA 7 ES 7) Thus SPACE provides a useful insight to different strategies alternate available to firm and guides in grand strategy selection. maturity. The matrix developed by this company for guiding resources allocation is called General Electric’s 9 Cell Matrix. The matrix shows three basic approaches –invest. Industry attractiveness: What is the attractiveness or potential of the industry. It calls for analyzing various products of the firm in terms of two issues— Business Strengths: How strong is the firm vis-à-vis its competitor. competition. concentric merger. They require resource for their growth.SWOT analysis can also be used to take a broader view of strategy though the following formula SA=O/ (S-W) i. which enjoys financial strength but has limited competitive advantage and belongs to a non-attractive industry operating in a stable environment: possible strategies—pursue stability strategies. The resources resource allocation decision is quite similar to those in BCG Matrix. hold and divest. diversification (FS 7 IS 3. With 0 reflecting the most unfavourable assessment and 7 most favourable. and quality of its planning system. competitive position. technology. improvement and differentiation. industry attractiveness.

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. customers. Determine the products or services for markets that you intend to include in the matrix. subsidiaries. Weights of the factors should equal 100. Define the market attractiveness factors .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. Divide each score into the score of the biggest competitor to obtain a relative score. Score the factor out of 10 and multiply the score by the weighting. 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). harvest or divest. Business Strengths Expert systems are used to determine the organizational strength of the organization. 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. distributors or any other unit of analysis that may be considered important by the organization. The recommendations are similar to that of the BCG Matrix. products. The following steps are an example that is based on work carried out at in a multinational firm. grow. markets. 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. The biggest competitor's position is taken as 1 and the other units are plotted accordingly CSF Weight Us Comp1 Comp2 .e. Step 1. companies. i.. 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. Weight and score the business strengths. Step 2. invest.The Directional Policy Matrix is another matrix similar to the BCG Matrix. Factors can be summarized into three headings • Growth rate • Accessible market size .The purpose for the vertical axis is to discriminate between more and less attractive markets. It measures the health of the market and the organization's strengths to pursue it to indicate the direction for future investment. segments. Divide this score by 100 and add it to the other factor scores to obtain an overall score for the unit being attractive market is not only large but is also accessible • Profit potential . regions. Define business strengths. This can be countries. Determine the scoring method and weightage criteria.

4 8 80=0.5 Service 25 7 175=1.1 6 210=2.1 10 350=3.Strategies are set to achieve the desired positions on the matrix This matrix is a good one to use if the organization wishes to assess the competitors relative to themselves.25/6.8 4 120=1. market share and business attractiveness) other factors are necessarily excluded or lose their distinctiveness in the collapsed dimensions.75 9 225=2.25 The x-axis coordinates are therefore Us = 6.3 Total 100 6. when a new SBU needs to be added or when one needs to be removed.95= 0. One has to be careful in the use of matrix analyses. If more than ten SBUs/products are plotted onto one matrix. • Diverse perspective. Matrix models are simplistic.95/6.Product 30 7 210=2. though used widely. They focus on cash flow requirements of the SBU's and help identify the different cash flow implications and requirements of different business activities. This kind of analysis can provide coverage of a wide number of strategically relevant variables.35 6.25 Image 10 4 40=0. Market share.Compl=6. They help identify strengths and weaknesses in the portfolio.95 6. like the McKinsey Matrix.2 Price 35 6 210=2.1 6 180=1.91 -. Step 7 . the gaps that need to be filled. has to limit the number of circles on the matrix Advantages & Disadvantages of Matrix Models The degree of applicability of the portfolio model depends on the relative importance and the manner in which the models are used. 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.Forecasting (an optional step). (This can be any time frame that fits in with the organizations forecast period). • Flexible comparisons..95= 1. • Market share.35/6. Set strategies .g. this concept has limits to the analysis. These models highlight certain aspects of business that are considered essential to success or failure • Cash flows. and the duplicative businesses in the portfolio.8 3 30=0.These 'x'-co-ordinates along with their corresponding market attractiveness co-ordinates must now be positioned on the matrix. are highly flexible in being able to select different factors for different industries. The factors are rescored for the products /services in three years time.95 = 0. may not be the best measure of a company's success. Step 8. The diverse activities of a multi-business company are analyzed in a systematic manner and enterprise diversity highlighted. Disadvantages of Matrix Modles • Too simple.90 Step 6 Producing the directional policy matrix . Some matrices. The circles are plotted on the same matrix as the original demonstrates the movement that will have to take place to achieve forecast. The advantages and disadvantages of using matrixes for decision making are given below: Advantages • Key areas. This helps management to carry out its resource allocation function. • Balance portfolio.0 (This IS the biggest competitor) Comp2= 6. the resultant picture can be confusing . The market size is used to determine the size of the circle and the organizations share of this market is depicted as a wedge in the circle.25 5 125=1. The important factors are reduced to only two dimensions (e. product differentiation for a particular market segment may have low . For example.

the competitive position can be summarized as follows: • Strong marker share + strong finances = strong competitive position. • Market share and cost savings mismatch. The product includes services and any form of offering. High market share in a low-growth industry does not necessarily result in large positive cash flow characteristics of a "cash cow" business. • Subjective numbers. Improper application of portfolio techniques may result in inappropriate divesting of useful synergistic holdings. This will determine the competitive position of the organization. For example. and the organization's financial strength. or access to capital. For example. • Market share and cash flow mismatch. and the market need can be any group of potential customers whether defined by their needs. Put simply. They are not projective. their performance would show them as "star" businesses. and other environmental forces. whether it is moving share but produce high success within a market segment. in the steel industry low market share companies using low share technology (mini mills) can have lower production costs than high market share companies using high share technologies (integrated mills). Synergistic effects of linked SBUs are usually not reflected in matrices. political pressure. There is a limit to the number of SBUs that can be examined. . The analyses most often provide a static picture of SBUs. subject to personal biases. static or going down. Grand Strategy Clusters Model Grand Strategy Clusters Model is an excellent framework to examine the strategies. • Conflict of interests. you first consider the industry. The axes of the diagram are products and market characteristics. While the BCG matrix would classify them as "dogs". or income bracket. the BCG would classify GM auto operations as a cash cow. otherwise the resulting analysis becomes increasingly superficial. The numerical format of some matrices may lead the user to place greater confidence in them than is warranted. When a SBU contains several different but related businesses conflicts of interest can occur between the cash flow priorities of a SBU and the priorities of the company as a whole. inclinations. Low growth industries can be very competitive and staying ahead in such environments can require major cash investments. The connection between relative market share and economies of scale may also not be a direct relationship. What is the product sector growth rate? Is it growing or· declining? You then consider the organization's competitive strengths within that sector. Competitive Strength can be assessed on two levels: the size and trend of the market share. they do not account adequately for changes due industry evolution. In this approach. specifically either cash flow from operations. The numbers from most ratings are subjectively derived. and budgetary needs. • Strong market share and weak finances = average competitive position • Low market share and strong finances = average competitive position. • Static pictures. • Inappropriate divesting. Such problems can occur when the volume exceeds 40-50 SBUs. The possible future choices about products and markets can be represented as movements within or away from this cell. • Neither strong market share nor strong finances = weak competitive position. technological change. we have covered so far. • Multiple SBUs. The classification in this model is based upon the organization's competencies and markets. but the capital investments needed to remain competitive are so substantial in the auto industry that the reverse is likely true. etc.

or sell the product line and use cash to reposition remaining assets Weak sector. backbends. strong competitive position. • Gain control over distribution . strong competitive position This is an ideal case for using the organization's dominant position in a weak market for Growth.backend strategies. 2 Sell product line 3 Sell company Rapid Market Growth Quadrant II Quadrant I Market development Market development Market penetration Market penetration Product development Product development Horizontal integration Forward integration divestiture Backward integration Quadrant III Quadrant IV Retrenchment Concentric Horizontal div Concentric diversification Conglomerate div . therefore. add-ons. include: • Market strategy to increase demand and sales for existing products and services.backend strategies. because the sector is strong. in existing and new markets. • Gain control over suppliers Acquisition. defined and profitable niche markets.backend strategies. This means that the organization is in a growing market. • Seek strategic partnerships for products/services for existing customers • Develop products and services for existing customer base . or gain new products. Take sales from distributors. and has cash with which it can man oeuvre its position. The different options are: 1 Reduce costs if you can. weak competitive position This requires the organization to retreat. • Add un-related products and services for existing customer base . or joint-ventures with competitors • Develop strategic partnerships to increase distribution.bring external sales inside. • Add new products and services for new customer base • Create joint ventures in unrelated markets Weak sector. It holds a good market position. The strategic choices. • Develop related products and services for existing customer base backend strategies. Strong sector. but the organization has relatively small market share. The choices include: • Move into small.Strong sector. As the Qrganization has cash. weak competitive position This is a difficult decision. • Get out of the business: Sell your client base to a competitor. strategic Joint ventures. • Enhance or extend existing products and services. The organization should: • Add related products and services for existing customer base . • Marketing strategy to increase market penetration for existing products and services and capture greater share. it is in a position to exploit its standing. • Focus on increasing market penetration for existing products and services and capture greater share using marketing as a strategy. merger. or reposition your existing products to appeal to new customer types. and limited or no cash.

Zook identifies and explains three key factors that differentiate strategies that succeed from those that fail: 1 strategies reaching full potential in the core business 2 strategies expanding into logical adjacent businesses surrounding that core 3 strategies preemptively redefining the core business in response to market turbulence We need to look at the strategic intent . or permit the organization to preemptively redefine the core business so as to maintain its position in the marketplace. It challenges us to think strategically. We need to go back to Chris Zook. This framework is specific to a business unit with one major industry and/or product focus. Another option could be an attempt to create strategic partnerships and joint ventures. look at the option of expanding your markets using low-cost / nocost marketing strategies. Does the strategy facilitate the organization to reach its full potential in the core business. This will not be easy as it may be difficult to attract partners to a market with poor fundamentals. keeping the requirements of competencies and the marketplace in mind. As we go through the various strategic options.of the organization and identify strategic issues.Horizontal diversification Joint venture Conglomerate diversification Liquidity If you don't want to liquidate. it helps at identifying the strategic choices. orland effectively expand into logical adjacent businesses surrounding that core. Based on his investigations. However. The model is shown in figure 9. If the business is more complex. . to confirm that the strategy we have chosen adequately addresses the issues facing the organization in these three areas. This framework provides a form to the discussion and each of the strategies that we have discussed. the process will need to be repeated for each focus sector. this may be a high risk proposition. It involves examining both the markets and competencies of the organization. An affirmative answer confirms the success of the strategy.

objectives are set. The plan provides the details of how to achieve these objectives. Strategic management provides overall direction` to the enterprise and is closely related to the field of Organization Studies. strategic business unit objectives (both financial and strategic). overall corporate objectives (both financial and strategic). and allocating resources to implement the policies and plans to achieve the organization's objectives. DESCRIBE THE ROLE OF BOARD OF DIRECTORS IN STRATEGIC MANAGEMENT PROCESS OPERATING AT ALL LEVELS. and then determining how to get there. a new economic environment. These three questions are the essence of strategic planning. and then reassesses each strategy annually or quarterly [i. assesses its competitors and sets goals and strategies to meet all existing and potential competitors. suggest a strategic plan. agree or disagree with them.e. determining where you want to go. self-evaluation and competitor analysis: both internal and external. financial. Strategic management is the process of specifying the organization's objectives. or a new social. These objectives should. and outline alternatives. SWOT Analysis: I/O Economics for the external factors and RBV for the internal factors. usually formulated by the Board of directors and performed by the organization's Chief Executive Officer (CEO) and executive team. Concurrent with this assessment. decisions.. or political environment. Only the most active boards take on this task in addition to the two previous ones. 1984:ix)[1] Strategic management is a combination of 1) strategy formulation and 2) strategy implementation. bringing to management’s attention developments it might have overlooked. Strategy formulation involves: • • Performing a situation analysis. and actions. boards can range from phantom board with no real involvement to catalyst boards with very high degrees of involvement. It is the highest level of managerial activity. mission statements (the role that the organization gives itself in society). Takes the . developing policies and plans to achieve these objectives. a board can keep abreast of developments inside and outside the corporation. give advice and offer suggestions. • This three-step strategy formulation process is sometimes referred to as determining where you are now.” (Lamb. and initiating and determining. both micro-environmental and macro-environmental. Active boards perform this task in addition to the monitoring one • Initiate and determine: A board can delineate a corporation’s mission and specify strategic options to its management. “Strategic management is an ongoing process that assesses the business and the industries in which the company is involved. and tactical objectives. • Evaluate and influence: A board can examine management’s proposals. The board of directors continuum shown in Figure ‘A’ shows the possible degree of involvements (from low to high ) in the strategic management process. evaluating and influencing. new technology. This involves crafting vision statements (long term view of a possible future). As types. new competitors. Board of Directors Continuum A board of directors is involved in strategic management to the extent that it carries out the three tasks of monitoring.EXPLAIN THE VARIOUS LEVELS AT WHICH STRATEGY IS FORMULATED. regularly] to determine how it has been implemented and whether it has succeeded or needs replacement by a new strategy to meet changed circumstances. The role of the board of directors in strategic formulation is to carry out three basic tasks: • Monitor: By acting through its committees. A board should at least carry out this task. Research suggests that active board involvement in strategic management is positively related to corporate financial performance. Figure ‘A’Board of Directors Continuum DEGREE OF INVOLVEMENT IN STRATEGIC FORMULATION Low Positive Phantom Rubber Minimal Nominal Active Catalyst Stamp Review Participation Participation Never knows Permits Formally Involved to a Approves. in the light of the situation analysis.

In this case. Rolm and Haas. Tyco ) unless a crisis occurs. the mission.what to do. It has committees. If stock is sold to outsiders to finance growth. the CEO also serves as Chairman of the Board. Some corporations that have actively participating boards are Mead Corporation. In the same survey. The founders. 54%of the respondents indicated that their boards participate in annual retreats or special planning sessions to discuss company strategy. plus initiating and determining. Key investors want seats on the board so they can oversee their investment. General Electric Pfizer. for example. and leading role in makes final establishing decisions on and modifying mission. and objectives. Apria Healthcare. Another 1 admit playing no role at all in strategy. To the extent that they still control most of the stock. In this instance. In these situation. who are still acting as management. a very active Performs fiscal strategy and management committee. 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. officers to make all decisions. their heavy involvement in the strategic management process places them in the active participation or even catalyst positions. the privately held corporation may be 100% owned by the founders. personally nominates all directors. 3m. Nevertheless. purpose of the gram strategy being considered. As depicted in Figure ‘A’. and Texas Instruments. or programs of management . Some corporations that have boards that operate at some point between nominal and active participation.S corporations conducted by Korn/Ferry International. 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). They take their tasks of monitoring. if anything. This cozy relationship between the board and management should change. however. Fro example. On the far left are passive phantom or rubber-stamp boards that typically do not initiate or determine strategy (for example. when the corporation goes public and stock is more widely dispersed. objectives. they provide advice when necessary and keep management alert. in a survey of directors of large U.. These and other studies suggest that most large publicly owned corporations have boards that operate at some point between nominal and active participation. indicators. In this instance. it moves farther to the left on the continuum shown in Figure. As a board becomes less involved in the affairs of the corporation. Has strategy and active board policies. more then 60% indicated that they were deeply involved in the strategy-setting process. strategy. however. evaluating. audits Highly involved boards tend to be very active. policies.. problems could occur if the board failed to become more active in terms of its roles and responsibilities. the less active its board of directors. the founders dominate the board acts primarily as a rubber stamp for any proposal put forward by the owner-managers. only slightly more than 32% of the boards help develop the strategy. a board is really unnecessary and meets only to satisfy legal requirements. reviews selected issues that officers bring to its attention limited degree in the performance or review of selected key decisions. the smaller the corporation. More than two – thirds of the boards review strategy only after it has been first developed by management. Whirlpool. very seriously. and influencing. It votes as the officers recommend on action issues. however. no degree of involvement questions. who also manage the company. the board becomes more active. In an entrepreneurial venture. 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.

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