Strategic Management - Meaning and Important Concepts

Strategic Management - An Introduction

Strategic Management is all about identification and description of the strategies

that managers can carry so as to achieve better performance and a competitive
advantage for their organization. An organization is said to have competitive
advantage if its profitability is higher than the average profitability for all
companies in its industry.
Strategic management can also be defined as a bundle of decisions and acts
which a manager undertakes and which decides the result of the firm’s
performance. The manager must have a thorough knowledge and analysis of the
general and competitive organizational environment so as to take right
decisions. They should conduct a SWOT Analysis (Strengths, Weaknesses,
Opportunities, and Threats), i.e., they should make best possible utilization of
strengths, minimize the organizational weaknesses, make use of arising
opportunities from the business environment and shouldn’t ignore the threats.
Strategic management is nothing but planning for both predictable as well as
unfeasible contingencies. It is applicable to both small as well as large
organizations as even the smallest organization face competition and, by
formulating and implementing appropriate strategies, they can attain sustainable
competitive advantage.
It is a way in which strategists set the objectives and proceed about attaining
them. It deals with making and implementing decisions about future direction of
an organization. It helps us to identify the direction in which an organization is
moving.
Strategic management is a continuous process that evaluates and controls the
business and the industries in which an organization is involved; evaluates its
competitors and sets goals and strategies to meet all existing and potential
competitors; and then reevaluates strategies on a regular basis to determine how
it has been implemented and whether it was successful or does it needs
replacement.
Strategic Management gives a broader perspective to the employees of an
organization and they can better understand how their job fits into the entire
organizational plan and how it is co-related to other organizational members. It
is nothing but the art of managing employees in a manner which maximizes the
ability of achieving business objectives. The employees become more
trustworthy, more committed and more satisfied as they can co-relate
themselves very well with each organizational task. They can understand the
reaction of environmental changes on the organization and the probable
response of the organization with the help of strategic management. Thus the
employees can judge the impact of such changes on their own job and can
effectively face the changes. The managers and employees must do appropriate
things in appropriate manner. They need to be both effective as well as efficient.
One of the major role of strategic management is to incorporate various
functional areas of the organization completely, as well as, to ensure these
functional areas harmonize and get together well. Another role of strategic
management is to keep a continuous eye on the goals and objectives of the
organization.
Following are the important concepts of Strategic Management:

Strategy - Definition and Features

Components of a Strategy Statement

Strategic Management Process

Environmental Scanning

Strategy Formulation

Strategy Implementation

Strategy Formulation vs Implementation

Strategy Evaluation

Strategic Decisions

Business Policy

BCG Matrix

SWOT Analysis

Competitor Analysis

Porter’s Five Forces Model

 Strategic Leadership

Corporate Governance

Business Ethics

Core Competencies

Importance of Vision and Mission Statements

One of the first things that any observer of management thought and practice
asks is whether a particular organization has a vision and mission statement. In
addition, one of the first things that one learns in a business school is the
importance of vision and mission statements.
This article is intended to elucidate on the reasons why vision and mission
statements are important and the benefits that such statements provide to the
organizations. It has been found in studies that organizations that have lucid,
coherent, and meaningful vision and mission statements return more than
double the numbers in shareholder benefits when compared to the organizations
that do not have vision and mission statements. Indeed, the importance of vision
and mission statements is such that it is the first thing that is discussed in
management textbooks on strategy.
Some of the benefits of having a vision and mission statement are discussed
below:

 Above everything else, vision and mission statements provide unanimity

of purpose to organizations and imbue the employees with a sense of
belonging and identity. Indeed, vision and mission statements are
embodiments of organizational identity and carry the organizations creed
and motto. For this purpose, they are also called as statements of creed.
 Vision and mission statements spell out the context in which the
organization operates and provides the employees with a tone that is to be
followed in the organizational climate. Since they define the reason for
existence of the organization, they are indicators of the direction in which
the organization must move to actualize the goals in the vision and
mission statements.
 The vision and mission statements serve as focal points for individuals to
identify themselves with the organizational processes and to give them a
 sense of direction while at the same time deterring those who do not wish
to follow them from participating in the organization’s activities.
 The vision and mission statements help to translate the objectives of the
organization into work structures and to assign tasks to the elements in
the organization that are responsible for actualizing them in practice.
 To specify the core structure on which the organizational edifice stands
and to help in the translation of objectives into actionable cost,
performance, and time related measures.
 Finally, vision and mission statements provide a philosophy of existence
to the employees, which is very crucial because as humans, we need
meaning from the work to do and the vision and mission statements
provide the necessary meaning for working in a particular organization.

As can be seen from the above, articulate, coherent, and meaningful vision and
mission statements go a long way in setting the base performance and
actionable parameters and embody the spirit of the organization. In other words,
vision and mission statements are as important as the various identities that
individuals have in their everyday lives.
It is for this reason that organizations spend a lot of time in defining their vision
and mission statements and ensure that they come up with the statements that
provide meaning instead of being mere sentences that are devoid of any
meaning.
Strategic Management Process - Meaning, Steps and Components
The strategic management process means defining the organization’s strategy. It
is also defined as the process by which managers make a choice of a set of
strategies for the organization that will enable it to achieve better performance.
Strategic management is a continuous process that appraises the business and
industries in which the organization is involved; appraises its competitors; and
fixes goals to meet the entire present and future competitor’s and then
reassesses each strategy.

Strategic management process has following four steps:

1. Environmental Scanning- Environmental scanning refers to a process of

collecting, scrutinizing and providing information for strategic purposes.
It helps in analyzing the internal and external factors influencing an
organization. After executing the environmental analysis process,
management should evaluate it on a continuous basis and strive to
improve it.
 2. Strategy Formulation- Strategy formulation is the process of deciding
best course of action for accomplishing organizational objectives and
hence achieving organizational purpose. After conducting environment
scanning, managers formulate corporate, business and functional
strategies.
3. Strategy Implementation- Strategy implementation implies making the
strategy work as intended or putting the organization’s chosen strategy
into action. Strategy implementation includes designing the
organization’s structure, distributing resources, developing decision
making process, and managing human resources.
4. Strategy Evaluation- Strategy evaluation is the final step of strategy
management process. The key strategy evaluation activities are:
appraising internal and external factors that are the root of present
strategies, measuring performance, and taking remedial / corrective
actions. Evaluation makes sure that the organizational strategy as well as
it’s implementation meets the organizational objectives.

These components are steps that are carried, in chronological order, when
creating a new strategic management plan. Present businesses that have already
created a strategic management plan will revert to these steps as per the
situation’s requirement, so as to make essential changes.

Components of Strategic Management Process

Strategic management is an ongoing process. Therefore, it must be realized that
each component interacts with the other components and that this interaction
often happens in chorus.

Environmental Scanning - Internal & External Analysis of Environment

Organizational environment consists of both external and internal factors.
Environment must be scanned so as to determine development and forecasts of
factors that will influence organizational success. Environmental scanning refers
to possession and utilization of information about occasions, patterns, trends,
and relationships within an organization’s internal and external environment. It
helps the managers to decide the future path of the organization. Scanning must
identify the threats and opportunities existing in the environment. While
strategy formulation, an organization must take advantage of the opportunities
and minimize the threats. A threat for one organization may be an opportunity
for another.
Internal analysis of the environment is the first step of environment scanning.
Organizations should observe the internal organizational environment. This
includes employee interaction with other employees, employee interaction with
management, manager interaction with other managers, and management
interaction with shareholders, access to natural resources, brand awareness,
organizational structure, main staff, operational potential, etc. Also, discussions,
interviews, and surveys can be used to assess the internal environment. Analysis
of internal environment helps in identifying strengths and weaknesses of an
organization.
As business becomes more competitive, and there are rapid changes in the
external environment, information from external environment adds crucial
elements to the effectiveness of long-term plans. As environment is dynamic, it
becomes essential to identify competitors’ moves and actions. Organizations
have also to update the core competencies and internal environment as per
external environment. Environmental factors are infinite, hence, organization
should be agile and vigile to accept and adjust to the environmental changes.
For instance - Monitoring might indicate that an original forecast of the prices
of the raw materials that are involved in the product are no more credible, which
could imply the requirement for more focused scanning, forecasting and
analysis to create a more trustworthy prediction about the input costs. In a
similar manner, there can be changes in factors such as competitor’s activities,
technology, market tastes and preferences.
While in external analysis, three correlated environment should be studied and
analyzed :-

 immediate / industry environment

 national environment
 broader socio-economic environment / macro-environment

Examining the industry environment needs an appraisal of the competitive

structure of the organization’s industry, including the competitive position of a
particular organization and its main rivals. Also, an assessment of the nature,
stage, dynamics and history of the industry is essential. It also implies
evaluating the effect of globalization on competition within the industry.
Analyzing the national environment needs an appraisal of whether the national
framework helps in achieving competitive advantage in the globalized
environment. Analysis of macro-environment includes exploring macro-
economic, social, government, legal, technological and international factors that
may influence the environment. The analysis of organization’s external
environment reveals opportunities and threats for an organization.
Strategic managers must not only recognize the present state of the environment
and their industry but also be able to predict its future positions.
Steps in Strategy Formulation Process
Strategy formulation refers to the process of choosing the most appropriate
course of action for the realization of organizational goals and objectives and
thereby achieving the organizational vision. The process of strategy formulation
basically involves six main steps. Though these steps do not follow a rigid
chronological order, however they are very rational and can be easily followed
in this order.

1. Setting Organizations’ objectives - The key component of any strategy

statement is to set the long-term objectives of the organization. It is
known that strategy is generally a medium for realization of
organizational objectives. Objectives stress the state of being there
whereas Strategy stresses upon the process of reaching there. Strategy
includes both the fixation of objectives as well the medium to be used to
realize those objectives. Thus, strategy is a wider term which believes in
the manner of deployment of resources so as to achieve the objectives.

While fixing the organizational objectives, it is essential that the factors

which influence the selection of objectives must be analyzed before the
selection of objectives. Once the objectives and the factors influencing
strategic decisions have been determined, it is easy to take strategic
decisions.

2. Evaluating the Organizational Environment - The next step is to

evaluate the general economic and industrial environment in which the
organization operates. This includes a review of the organizations
competitive position. It is essential to conduct a qualitative and
quantitative review of an organizations existing product line. The purpose
of such a review is to make sure that the factors important for competitive
success in the market can be discovered so that the management can
identify their own strengths and weaknesses as well as their competitors’
strengths and weaknesses.

After identifying its strengths and weaknesses, an organization must keep

a track of competitors’ moves and actions so as to discover probable
opportunities of threats to its market or supply sources.
 3. Setting Quantitative Targets - In this step, an organization must
practically fix the quantitative target values for some of the organizational
objectives. The idea behind this is to compare with long term customers,
so as to evaluate the contribution that might be made by various product
zones or operating departments.
4. Aiming in context with the divisional plans - In this step, the
contributions made by each department or division or product category
within the organization is identified and accordingly strategic planning is
done for each sub-unit. This requires a careful analysis of macroeconomic
trends.
5. Performance Analysis - Performance analysis includes discovering and
analyzing the gap between the planned or desired performance. A critical
evaluation of the organizations past performance, present condition and
the desired future conditions must be done by the organization. This
critical evaluation identifies the degree of gap that persists between the
actual reality and the long-term aspirations of the organization. An
attempt is made by the organization to estimate its probable future
condition if the current trends persist.
6. Choice of Strategy - This is the ultimate step in Strategy Formulation.
The best course of action is actually chosen after considering
organizational goals, organizational strengths, potential and limitations as
well as the external opportunities.

Strategy Implementation - Meaning and Steps in Implementing a Strategy

Strategy implementation is the translation of chosen strategy into organizational
action so as to achieve strategic goals and objectives. Strategy implementation
is also defined as the manner in which an organization should develop, utilize,
and amalgamate organizational structure, control systems, and culture to follow
strategies that lead to competitive advantage and a better performance.
Organizational structure allocates special value developing tasks and roles to the
employees and states how these tasks and roles can be correlated so as
maximize efficiency, quality, and customer satisfaction-the pillars of
competitive advantage. But, organizational structure is not sufficient in itself to
motivate the employees.
An organizational control system is also required. This control system equips
managers with motivational incentives for employees as well as feedback on
employees and organizational performance. Organizational culture refers to the
specialized collection of values, attitudes, norms and beliefs shared by
organizational members and groups.
Following are the main steps in implementing a strategy:
 Developing an organization having potential of carrying out strategy
successfully.

Disbursement of abundant resources to strategy-essential activities.

Creating strategy-encouraging policies.

Employing best policies and programs for constant improvement.

Linking reward structure to accomplishment of results.

Making use of strategic leadership.

Excellently formulated strategies will fail if they are not properly implemented.
Also, it is essential to note that strategy implementation is not possible unless
there is stability between strategy and each organizational dimension such as
organizational structure, reward structure, resource-allocation process, etc.
Strategy implementation poses a threat to many managers and employees in an
organization. New power relationships are predicted and achieved. New groups
(formal as well as informal) are formed whose values, attitudes, beliefs and
concerns may not be known. With the change in power and status roles, the
managers and employees may employ confrontation behavior.

Strategy Formulation vs Strategy Implementation

Strategy Formulation Strategy Implementation

Strategy Formulation includes planning Strategy Implementation involves all

and decision-making involved in those means related to executing the
developing organization’s strategic strategic plans.
goals and plans.

In short, Strategy Formulation In short, Strategy Implementation

is placing the Forces before the action. is managing forces during the action.

Strategy Formulation is Strategic Implementation is mainly

an Entrepreneurial Activity based on an Administrative Task based on
strategic decision-making. strategic and operational decisions.

Strategy Formulation emphasizes Strategy Implementation emphasizes

on effectiveness. on efficiency.

Strategy Formulation is a rational Strategy Implementation is basically

process. an operational process.

Strategy Formulation requires co- Strategy Implementation requires co-

ordination among few individuals. ordination among many individuals.

Strategy Formulation requires a great Strategy Implementation requires

deal of initiative and logical skills. specific motivational and leadership
traits.

Strategic Formulation precedes Strategy Implementation follows

Strategy Implementation. Strategy Formulation.

Following are the main differences between Strategy Formulation and

Strategy Implementation-
Strategy Evaluation Process and its Significance
Strategy Evaluation is as significant as strategy formulation because it
throws light on the efficiency and effectiveness of the comprehensive plans in
achieving the desired results. The managers can also assess the appropriateness
of the current strategy in today’s dynamic world with socio-economic, political
and technological innovations. Strategic Evaluation is the final phase
of strategic management.
The significance of strategy evaluation lies in its capacity to co-ordinate the task
performed by managers, groups, departments etc, through control of
performance. Strategic Evaluation is significant because of various factors such
as - developing inputs for new strategic planning, the urge for feedback,
appraisal and reward, development of the strategic management process,
judging the validity of strategic choice etc.
The process of Strategy Evaluation consists of following steps-

1. Fixing benchmark of performance - While fixing the benchmark,

strategists encounter questions such as - what benchmarks to set, how to
set them and how to express them. In order to determine the benchmark
 performance to be set, it is essential to discover the special requirements
for performing the main task. The performance indicator that best identify
and express the special requirements might then be determined to be used
for evaluation. The organization can use both quantitative and qualitative
criteria for comprehensive assessment of performance. Quantitative
criteria include determination of net profit, ROI, earning per share, cost of
production, rate of employee turnover etc. Among the Qualitative factors
are subjective evaluation of factors such as - skills and competencies, risk
taking potential, flexibility etc.
2. Measurement of performance - The standard performance is a bench
mark with which the actual performance is to be compared. The reporting
and communication system help in measuring the performance. If
appropriate means are available for measuring the performance and if the
standards are set in the right manner, strategy evaluation becomes easier.
But various factors such as managers contribution are difficult to
measure. Similarly divisional performance is sometimes difficult to
measure as compared to individual performance. Thus, variable
objectives must be created against which measurement of performance
can be done. The measurement must be done at right time else evaluation
will not meet its purpose. For measuring the performance, financial
statements like - balance sheet, profit and loss account must be prepared
on an annual basis.
3. Analyzing Variance - While measuring the actual performance and
comparing it with standard performance there may be variances which
must be analyzed. The strategists must mention the degree of tolerance
limits between which the variance between actual and standard
performance may be accepted. The positive deviation indicates a better
performance but it is quite unusual exceeding the target always. The
negative deviation is an issue of concern because it indicates a shortfall in
performance. Thus in this case the strategists must discover the causes of
deviation and must take corrective action to overcome it.
4. Taking Corrective Action - Once the deviation in performance is
identified, it is essential to plan for a corrective action. If the performance
is consistently less than the desired performance, the strategists must
carry a detailed analysis of the factors responsible for such performance.
If the strategists discover that the organizational potential does not match
with the performance requirements, then the standards must be lowered.
Another rare and drastic corrective action is reformulating the strategy
which requires going back to the process of strategic management,
reframing of plans according to new resource allocation trend and
consequent means going to the beginning point of strategic management
process.
Business Policy - Definition and Features
Definition of Business Policy

Business Policy defines the scope or spheres within which decisions can be
taken by the subordinates in an organization. It permits the lower level
management to deal with the problems and issues without consulting top level
management every time for decisions.
Business policies are the guidelines developed by an organization to govern its
actions. They define the limits within which decisions must be made. Business
policy also deals with acquisition of resources with which organizational goals
can be achieved. Business policy is the study of the roles and responsibilities of
top level management, the significant issues affecting organizational success
and the decisions affecting organization in long-run.
Features of Business Policy

An effective business policy must have following features-

1. Specific- Policy should be specific/definite. If it is uncertain, then the

implementation will become difficult.
2. Clear- Policy must be unambiguous. It should avoid use of jargons and
connotations. There should be no misunderstandings in following the
policy.
3. Reliable/Uniform- Policy must be uniform enough so that it can be
efficiently followed by the subordinates.
4. Appropriate- Policy should be appropriate to the present organizational
goal.
5. Simple- A policy should be simple and easily understood by all in the
organization.
6. Inclusive/Comprehensive- In order to have a wide scope, a policy must
be comprehensive.
7. Flexible- Policy should be flexible in operation/application. This does not
imply that a policy should be altered always, but it should be wide in
scope so as to ensure that the line managers use them in repetitive/routine
scenarios.
8. Stable- Policy should be stable else it will lead to indecisiveness and
uncertainty in minds of those who look into it for guidance.
Difference between Policy and Strategy

The term “policy” should not be considered as synonymous to the term

“strategy”. The difference between policy and strategy can be summarized as
follows-

1. Policy is a blueprint of the organizational activities which are repetitive/

routine in nature. While strategy is concerned with those organizational
decisions which have not been dealt/faced before in same form.
2. Policy formulation is responsibility of top level management. While
strategy formulation is basically done by middle level management.
3. Policy deals with routine/daily activities essential for effective and
efficient running of an organization. While strategy deals with strategic
decisions.
4. Policy is concerned with both thought and actions. While strategy is
concerned mostly with action.
5. A policy is what is, or what is not done. While a strategy is the
methodology used to achieve a target as prescribed by a policy.

BCG Matrix
Boston Consulting Group (BCG) Matrix is a four celled matrix (a 2 * 2
matrix) developed by BCG, USA. It is the most renowned corporate portfolio
analysis tool. It provides a graphic representation for an organization to examine
different businesses in it’s portfolio on the basis of their related market share
and industry growth rates. It is a two dimensional analysis on management of
SBU’s (Strategic Business Units). In other words, it is a comparative analysis of
business potential and the evaluation of environment.
According to this matrix, business could be classified as high or low according
to their industry growth rate and relative market share.
Relative Market Share = SBU Sales this year leading competitors sales this
year.

Market Growth Rate = Industry sales this year - Industry Sales last year.
The analysis requires that both measures be calculated for each SBU. The
dimension of business strength, relative market share, will measure comparative
advantage indicated by market dominance. The key theory underlying this is
existence of an experience curve and that market share is achieved due to
overall cost leadership.
BCG matrix has four cells, with the horizontal axis representing relative market
share and the vertical axis denoting market growth rate. The mid-point of
relative market share is set at 1.0. if all the SBU’s are in same industry, the
average growth rate of the industry is used. While, if all the SBU’s are located
in different industries, then the mid-point is set at the growth rate for the
economy.
Resources are allocated to the business units according to their situation on the
grid. The four cells of this matrix have been called as stars, cash cows, question
marks and dogs. Each of these cells represents a particular type of business.

10 x 1x 0.1 x

Figure: BCG Matrix

1. Stars- Stars represent business units having large market share in a fast
growing industry. They may generate cash but because of fast growing
market, stars require huge investments to maintain their lead. Net cash
flow is usually modest. SBU’s located in this cell are attractive as they
are located in a robust industry and these business units are highly
competitive in the industry. If successful, a star will become a cash cow
when the industry matures.
2. Cash Cows- Cash Cows represents business units having a large market
share in a mature, slow growing industry. Cash cows require little
investment and generate cash that can be utilized for investment in other
business units. These SBU’s are the corporation’s key source of cash, and
are specifically the core business. They are the base of an organization.
These businesses usually follow stability strategies. When cash cows
loose their appeal and move towards deterioration, then a retrenchment
policy may be pursued.
3. Question Marks- Question marks represent business units having low
relative market share and located in a high growth industry. They require
huge amount of cash to maintain or gain market share. They require
attention to determine if the venture can be viable. Question marks are
 generally new goods and services which have a good commercial
prospective. There is no specific strategy which can be adopted. If the
firm thinks it has dominant market share, then it can adopt expansion
strategy, else retrenchment strategy can be adopted. Most businesses start
as question marks as the company tries to enter a high growth market in
which there is already a market-share. If ignored, then question marks
may become dogs, while if huge investment is made, then they have
potential of becoming stars.
4. Dogs- Dogs represent businesses having weak market shares in low-
growth markets. They neither generate cash nor require huge amount of
cash. Due to low market share, these business units face cost
disadvantages. Generally retrenchment strategies are adopted because
these firms can gain market share only at the expense of
competitor’s/rival firms. These business firms have weak market share
because of high costs, poor quality, ineffective marketing, etc. Unless a
dog has some other strategic aim, it should be liquidated if there is fewer
prospects for it to gain market share. Number of dogs should be avoided
and minimized in an organization.

Limitations of BCG Matrix

The BCG Matrix produces a framework for allocating resources among

different business units and makes it possible to compare many business units at
a glance. But BCG Matrix is not free from limitations, such as-

1. BCG matrix classifies businesses as low and high, but generally

businesses can be medium also. Thus, the true nature of business may not
be reflected.
2. Market is not clearly defined in this model.
3. High market share does not always leads to high profits. There are high
costs also involved with high market share.
4. Growth rate and relative market share are not the only indicators of
profitability. This model ignores and overlooks other indicators of
profitability.
5. At times, dogs may help other businesses in gaining competitive
advantage. They can earn even more than cash cows sometimes.
6. This four-celled approach is considered as to be too simplistic.

SWOT Analysis - Definition, Advantages and Limitations

SWOT is an acronym for Strengths, Weaknesses, Opportunities and
Threats. By definition, Strengths (S) and Weaknesses (W) are considered to be
internal factors over which you have some measure of control. Also, by
definition, Opportunities (O) and Threats (T) are considered to be external
factors over which you have essentially no control.
SWOT Analysis is the most renowned tool for audit and analysis of the overall
strategic position of the business and its environment. Its key purpose is to
identify the strategies that will create a firm specific business model that will
best align an organization’s resources and capabilities to the requirements of the
environment in which the firm operates.
In other words, it is the foundation for evaluating the internal potential and
limitations and the probable/likely opportunities and threats from the external
environment. It views all positive and negative factors inside and outside the
firm that affect the success. A consistent study of the environment in which the
firm operates helps in forecasting/predicting the changing trends and also helps
in including them in the decision-making process of the organization.
An overview of the four factors (Strengths, Weaknesses, Opportunities and
Threats) is given below-

1. Strengths - Strengths are the qualities that enable us to accomplish the

organization’s mission. These are the basis on which continued success
can be made and continued/sustained.

Strengths can be either tangible or intangible. These are what you are
well-versed in or what you have expertise in, the traits and qualities your
employees possess (individually and as a team) and the distinct features
that give your organization its consistency.
Strengths are the beneficial aspects of the organization or the capabilities
of an organization, which includes human competencies, process
capabilities, financial resources, products and services, customer goodwill
and brand loyalty. Examples of organizational strengths are huge
financial resources, broad product line, no debt, committed employees,
etc.

2. Weaknesses - Weaknesses are the qualities that prevent us from

accomplishing our mission and achieving our full potential. These
weaknesses deteriorate influences on the organizational success and
growth. Weaknesses are the factors which do not meet the standards we
feel they should meet.

Weaknesses in an organization may be depreciating machinery,

insufficient research and development facilities, narrow product range,
poor decision-making, etc. Weaknesses are controllable. They must be
minimized and eliminated. For instance - to overcome obsolete
 machinery, new machinery can be purchased. Other examples of
organizational weaknesses are huge debts, high employee turnover,
complex decision making process, narrow product range, large wastage
of raw materials, etc.

3. Opportunities - Opportunities are presented by the environment within

which our organization operates. These arise when an organization can
take benefit of conditions in its environment to plan and execute
strategies that enable it to become more profitable. Organizations can
gain competitive advantage by making use of opportunities.

Organization should be careful and recognize the opportunities and grasp

them whenever they arise. Selecting the targets that will best serve the
clients while getting desired results is a difficult task. Opportunities may
arise from market, competition, industry/government and technology.
Increasing demand for telecommunications accompanied by deregulation
is a great opportunity for new firms to enter telecom sector and compete
with existing firms for revenue.

4. Threats - Threats arise when conditions in external environment

jeopardize the reliability and profitability of the organization’s business.
They compound the vulnerability when they relate to the weaknesses.
Threats are uncontrollable. When a threat comes, the stability and
survival can be at stake. Examples of threats are - unrest among
employees; ever changing technology; increasing competition leading to
excess capacity, price wars and reducing industry profits; etc.

Advantages of SWOT Analysis

SWOT Analysis is instrumental in strategy formulation and selection. It is a

strong tool, but it involves a great subjective element. It is best when used as a
guide, and not as a prescription. Successful businesses build on their strengths,
correct their weakness and protect against internal weaknesses and external
threats. They also keep a watch on their overall business environment and
recognize and exploit new opportunities faster than its competitors.
SWOT Analysis helps in strategic planning in following manner-

a. It is a source of information for strategic planning.

b. Builds organization’s strengths.
c. Reverse its weaknesses.
d. Maximize its response to opportunities.
e. Overcome organization’s threats.
f. It helps in identifying core competencies of the firm.
 g. It helps in setting of objectives for strategic planning.
h. It helps in knowing past, present and future so that by using past and
current data, future plans can be chalked out.

SWOT Analysis provide information that helps in synchronizing the firm’s

resources and capabilities with the competitive environment in which the firm
operates.
SWOT ANALYSIS FRAMEWORK

Limitations of SWOT Analysis

SWOT Analysis is not free from its limitations. It may cause organizations to
view circumstances as very simple because of which the organizations might
overlook certain key strategic contact which may occur. Moreover, categorizing
aspects as strengths, weaknesses, opportunities and threats might be very
subjective as there is great degree of uncertainty in market. SWOT Analysis
does stress upon the significance of these four aspects, but it does not tell how
an organization can identify these aspects for itself.
There are certain limitations of SWOT Analysis which are not in control of
management. These include-

a. Price increase;
b. Inputs/raw materials;
c. Government legislation;
d. Economic environment;
e. Searching a new market for the product which is not having overseas
market due to import restrictions; etc.

Internal limitations may include-

a. Insufficient research and development facilities;

 b. Faulty products due to poor quality control;
c. Poor industrial relations;
d. Lack of skilled and efficient labour.etc.

Competitor Analysis - Meaning, Objectives and Significance

Organizations must operate within a competitive industry environment. They do
not exist in vacuum. Analyzing organization’s competitors helps an
organization to discover its weaknesses, to identify opportunities for and threats
to the organization from the industrial environment. While formulating an
organization’s strategy, managers must consider the strategies of organization’s
competitors. Competitor analysis is a driver of an organization’s strategy and
effects on how firms act or react in their sectors. The organization does a
competitor analysis to measure / assess its standing amongst the competitors.
Competitor analysis begins with identifying present as well as potential
competitors. It portrays an essential appendage to conduct an industry analysis.
An industry analysis gives information regarding probable sources of
competition (including all the possible strategic actions and reactions and
effects on profitability for all the organizations competing in the industry).
However, a well-thought competitor analysis permits an organization to
concentrate on those organizations with which it will be in direct competition,
and it is especially important when an organization faces a few potential
competitors.
Michael Porter in Porter’s Five Forces Model has assumed that the
competitive environment within an industry depends on five forces- Threat of
new potential entrants, Threat of substitute product/services, bargaining power
of suppliers, bargaining power of buyers, Rivalry among current competitors.
These five forces should be used as a conceptual background for identifying an
organization’s competitive strengths and weaknesses and threats to and
opportunities for the organization from it’s competitive environment.
The main objectives of doing competitor analysis can be summarized as
follows:

To study the market;

To predict and forecast organization’s demand and supply;

To formulate strategy;

To increase the market share;

 To study the market trend and pattern;

To develop strategy for organizational growth;

When the organization is planning for the diversification and expansion plan;

To study forthcoming trends in the industry;

Understanding the current strategy strengths and weaknesses of a competitor

can suggest opportunities and threats that will merit a response;

Insight into future competitor strategies may help in predicting upcoming

threats and opportunities.

Competitors should be analyzed along various dimensions such as their size,

growth and profitability, reputation, objectives, culture, cost structure, strengths
and weaknesses, business strategies, exit barriers, etc.

What is Competitive Advantage in the Field of Strategic

Management?
What is Competitive Advantage ?

It is a truism that strategic management is all about gaining and maintaining

competitive advantage. The term can be defined to mean “anything that a firm
does especially well when compared with rival firms”. Note the emphasis on
comparison with rival firms as competitive advantage is all about how best to
best the rivals and stay competitive in the market.
Competitive advantage accrues to a firm when it does something that the
rivals cannot do or owns something that the rival firms desire. For instance,
for some firms, competitive advantage in these recessionary times can mean a
hoard of cash where it can buy out struggling firms and increase its strategic
position. In other cases, competitive advantage can mean that a firm has lesser-
fixed assets when compared to rival firms, which is again a plus in an economic
downturn.
What is Sustained Competitive Advantage ?

We have defined what competitive advantage is as it relates to strategic

management and the sources of competitive advantage differing from firm to
firm. However, a firm can have a source of competitive advantage for only a
certain period because the rival firms imitate and copy the successful firms’
strategies leading to the original firm losing its source of competitive advantage
over the longer term. Hence, it is imperative for firms to develop and nurture
sustained competitive advantage.
This can be done by:

 Continually adapting to the changing external business landscape and

matching internal strengths and capabilities by channeling resources and
competencies in a fluid manner.
 By formulating, implementing, and evaluating strategies in an effective
manner which make use of the factors described above.

The fact that firms lose their sources of competitive advantage over the longer
term is borne out by statistics that show that the top three broadcast networks in
the United States had over 90 percent market share in 1978 which has now
come down to less than 50 percent.
The Advent of the Internet and Competitive Advantage

With the advent of the internet, competitive advantage and the gaining of it has
become easier as firms directly sell to the consumers and interlink the suppliers,
customers, creditors, and other stakeholders into its value chain. Because of the
removal of intermediaries, firms can reduce costs and improve profitability.
Essentially, the internet has changed the rules of the game and hence sources of
competitive advantage in this digital era are now about how well firms utilize
the digital platform and social media to gain advantage over their rivals.
Closing Thoughts

Finally, competitive advantage has to be earned, gained, and defended as the

preceding discussion shows. Hence, those firms that are agile and responsive to
changing market conditions and whose internal capabilities are aligned with the
external opportunities are those who would survive in the brutal business
landscape of the 21st century. As can be seen from the characterization of
competitive advantage, it is ethereal and subject to change and hence firms must
always been on the lookout for newer sources of competitive advantage and be
alert for competitors’ moves.

Human, Social, and Intellectual Capital as a Means of

Competitive Advantage
Introduction: Why Should Firms and Nations Invest in Human, Social, and
Intellectual Capital

We often hear economists and management experts exhorting nations and firms
to invest in human, social, and intellectual capital. these calls range from asking
governments to set aside substantial amounts of money to educate and skill the
workforce as well as asking the firms and governments to create a web of social
relationships in addition to moving up the value curve by investing in research
and development. Before we launch into a discussion about how these measures
would benefit nations and firms, we should first define what is meant by human,
social, and intellectual capital.
In the same manner in which financial capital and physical infrastructure are the
factors of production, a skilled workforce is a vital component and determinant
of a firm’s success. This means that firms need workers who are educated and
skilled and are employable and efficient. Economists and management experts
talk about this human capital. In the same manner in which an educated and
skilled workforce raises the productivity of firms, nations also benefit from
having a ready pool of workers who are skilled and capable. Just as firms need
to hire these workers, it is upon the nation to provide them the basic education
and skills both through subsidized education and through the provision of skills
through vocational training or teaming up with the private sector in a PPP
(Public Private Partnership) model to impart education to the workers.
Next, social capital is what is the result of the networks of relationship between
individuals, communities, and the ties that bind them in the broader society.
You might ask as to why it is important for firms and nations to have social
capital in addition to human capital. The answer is that just as the firms need
educated and skilled workers, the broader society to be healthy and well
functioning needs workers and individuals to be tightly knit into the fabric of
society. This social capital leads to less crime, more productivity, more
efficiency, and the formation of communities that are self-sustaining and which
are incubators of physically, mentally, and emotionally healthy and intelligent
individuals.
Third, just as human capital and social capital lead to better productivity and a
workforce that is efficient, the next evolutionary step for firms and nations once
they have actualized human and social capital is through moving up the value
chain by filing patents, encouraging research, and innovating as well as leading
to the creation of an economy that is characterized by these aspects. Therefore,
it is important to note that in addition to human and social capital, intellectual
capital is also needed for firms and nations to forge ahead in the race to deliver
and actualize superior economic value.
As can be seen from the fact that human capital leads to higher productivity and
efficiency and social capital leads to emotionally intelligent workers,
intellectual capital leads economies and nations into the orbit where they can be
challenged only by those competitors who have mastered all the three aspects of
evolutionary value creation. Indeed, one of the reasons (as we shall discuss in
detail in the next section) for the relative ascendance of the west over the east
and which continue s to this day is that the former have successfully invested in
these forms of capital whereas the latter are playing catch-up and are now trying
to emulate them in their quest for economic growth.
Trajectories of Firms and Nations That Have Invested in These Capital
Aspects

Why do Google and Microsoft in addition to AT&T, 3M, and Apple remain so
profitable and competitive? Why are some firms such as these more successful
in generating patents and innovating better than the rest of the competition?
Further, why does Facebook generate such valuations and is considered as one
of the greatest ideas apart from the Smartphones and Search Engines and the
invention of the Personal Computer? The answers to all these questions lies in
the fact that these firms were able to first invest in their workforce or the
formation and incubation of human capital, next, they were able to leverage the
college like atmosphere and the free flowing ideas generated by their workforce
which is the social capital and third, these firms were able to move up the curve
and indeed, continue moving up the curve to reap the benefits of intellectual
capital that follows from the first two forms of capital.
Similarly, why is the United States such a dominant force in the global economy
whereas even China and India that have large populations of educated workers
still are unable to challenge its dominance? The reason for this is that the United
States and largely, Europe have substantially invested in educating and training
apart from skilling their populations over the last century and half and hence,
are now reaping the benefits of such investments. Moreover, by creating a
system that encourages creativity and innovation instead of stifling them, these
countries have managed to move up the value curve and stay there. In addition,
whenever they felt that their economic dominance is under threat, these nations
have always found better ideas to become more efficient as can be seen from the
Offshoring of manufacturing to China and back office work to India. In this
manner, they have retained their focus on value creation using the three forms
of capital in a way in which the rest of the world is unable to do so even now.
As individuals, we too can ensure that we do our bit to accelerate the formation
of these forms of capital and this is through investing in oneself, forming
networks with our peers, coworkers, families, and communities so that we
become more emotionally intelligent, and then by continuously improving and
leaving nothing to chance or becoming complacent thereby being in a creative
mode where ideas flow freely. Further, we can all become wiling partners in the
development of these forms of capital by making conscious choices that lead us
to better outcomes for everyone concerned.
Catch-Up and Moving up the Curve

Having considered the successes of firms that invest in these forms of capital,
we now turn to how competitors and countries in the developing world can
catch up the dominant firms and countries. The first step is to provide universal
education without discriminating based on class, gender, or race, as well as
through substantially revamping the education system so that instead of rote
learning, innovation and creativity are encouraged. Next, instead of forming
clan based and class based relationships alone, there must be an emphasis on
forming networks where class barriers, gender differences, and ethnic and racial
factors are nonexistent meaning that social capital must be incubated that is free
from the narrow constraints imposed by these elements. Third, governments
must invest in research and development and encourage highly skilled scientists
and researchers to continue their pioneering work instead of discouraging and
frustrating them, which as often happens, in Asian countries, leads to these
individuals seeking employment and greener pastures in the West.
Though this section sounds like an idealist rant, some of these measures have
already been put in place in China, South East Asia, and to a lesser extent in
Latin America. Therefore, it is indeed the case that the firms and the economies
of these nations are emerging as challengers to the Western dominance, which is
not surprising considering the trajectory of value creation. Further, some Indian
companies have also succeeded in actualizing these forms of capital though the
overall record leaves much to be desired. Indeed, it is the case that when India
starts building these assets, it can emerge as a potent force to be reckoned with.
Conclusion

Finally, human, social, and intellectual capital differ from physical and financial
capital in the sense that they can be incubated even by those with less of the
latter as hard work, determination, and a culture of openness can all lead to
value creation. Therefore, the clear conclusion is that we do not need Billions of
Dollars in investment and just by making use of the available resources, firms
and nations can indeed prosper in the same manner in which the Western
countries and their peoples have enjoyed a higher standard of living.

Porter’s Five Forces Model of Competition

Michael Porter (Harvard Business School Management Researcher) designed
various vital frameworks for developing an organization’s strategy. One of the
most renowned among managers making strategic decisions is the five
competitive forces model that determines industry structure. According to
Porter, the nature of competition in any industry is personified in the following
five forces:

i. Threat of new potential entrants

ii. Threat of substitute product/services
iii. Bargaining power of suppliers
iv. Bargaining power of buyers
v. Rivalry among current competitors

FIGURE: Porter’s Five Forces model

The five forces mentioned above are very significant from point of view of
strategy formulation. The potential of these forces differs from industry to
industry. These forces jointly determine the profitability of industry because
they shape the prices which can be charged, the costs which can be borne, and
the investment required to compete in the industry. Before making strategic
decisions, the managers should use the five forces framework to determine the
competitive structure of industry.
Let’s discuss the five factors of Porter’s model in detail:

1. Risk of entry by potential competitors: Potential competitors refer to

the firms which are not currently competing in the industry but have the
potential to do so if given a choice. Entry of new players increases the
industry capacity, begins a competition for market share and lowers the
current costs. The threat of entry by potential competitors is partially a
function of extent of barriers to entry. The various barriers to entry are-
  Economies of scale
 Brand loyalty
 Government Regulation
 Customer Switching Costs
 Absolute Cost Advantage
 Ease in distribution
 Strong Capital base
2. Rivalry among current competitors: Rivalry refers to the competitive
struggle for market share between firms in an industry. Extreme rivalry
among established firms poses a strong threat to profitability. The
strength of rivalry among established firms within an industry is a
function of following factors:
 Extent of exit barriers
 Amount of fixed cost
 Competitive structure of industry
 Presence of global customers
 Absence of switching costs
 Growth Rate of industry
 Demand conditions
3. Bargaining Power of Buyers: Buyers refer to the customers who finally
consume the product or the firms who distribute the industry’s product to
the final consumers. Bargaining power of buyers refer to the potential of
buyers to bargain down the prices charged by the firms in the industry or
to increase the firms cost in the industry by demanding better quality and
service of product. Strong buyers can extract profits out of an industry by
lowering the prices and increasing the costs. They purchase in large
quantities. They have full information about the product and the market.
They emphasize upon quality products. They pose credible threat of
backward integration. In this way, they are regarded as a threat.
4. Bargaining Power of Suppliers: Suppliers refer to the firms that provide
inputs to the industry. Bargaining power of the suppliers refer to the
potential of the suppliers to increase the prices of inputs( labour, raw
materials, services, etc) or the costs of industry in other ways. Strong
suppliers can extract profits out of an industry by increasing costs of
firms in the industry. Suppliers products have a few substitutes. Strong
suppliers’ products are unique. They have high switching cost. Their
product is an important input to buyer’s product. They pose credible
threat of forward integration. Buyers are not significant to strong
suppliers. In this way, they are regarded as a threat.
5. Threat of Substitute products: Substitute products refer to the products
having ability of satisfying customers needs effectively. Substitutes pose
a ceiling (upper limit) on the potential returns of an industry by putting a
setting a limit on the price that firms can charge for their product in an
 industry. Lesser the number of close substitutes a product has, greater is
the opportunity for the firms in industry to raise their product prices and
earn greater profits (other things being equal).

The power of Porter’s five forces varies from industry to industry. Whatever be
the industry, these five forces influence the profitability as they affect the prices,
the costs, and the capital investment essential for survival and competition in
industry. This five forces model also help in making strategic decisions as it is
used by the managers to determine industry’s competitive structure.
Porter ignored, however, a sixth significant factor- complementaries. This term
refers to the reliance that develops between the companies whose products work
is in combination with each other. Strong complementary might have a strong
positive effect on the industry. Also, the five forces model overlooks the role of
innovation as well as the significance of individual firm differences. It presents
a stagnant view of competition.

Blue Ocean Strategy and its Implications for Businesses

Introduction

Blue Ocean Strategy is a concept that has been pioneered by INSEAD

Professors, W. Chan Kim, and Renee Mauborgne. This strategy, which is based
on extensive research of hundreds of companies spanning across decades and
including several industries, proclaims that instead of battling competitors,
companies can create new markets for themselves. In other words, as opposed
to Red Oceans that are saturated markets where differentiation or cost
competition is prevalent, companies can instead create Blue Oceans or entirely
new markets for themselves through value innovation, which would create value
for its entire stakeholder chain including employees, customers, and suppliers.
The key premise of the Blue Ocean strategy is that companies must unlock new
demand and make the competition irrelevant instead of going down the beaten
track and focusing on saturated markets.
Blue Ocean vs. Red Ocean

If we compare the Blue Ocean with the Red Ocean we find that whereas the
former denotes all the industries not in existence now and hence, are potential
opportunities for companies to enter and unlock demand, the latter denotes the
existing industries and the known market space, which is characterized by
reduced profits and growth because of saturation. This results in the
Commodification of products, which means that the intense and cutthroat
competition in the existing markets turns them bloody, or makes the ocean red.
On the other hand, Blue Oceans represent many opportunities for growth and
where the irrelevance of competition is the norm because the markets are yet to
be saturated.
Further, Blue Oceans represent markets where demand is large and unmet
and where growth and profits can be actualized through value innovation,
which is the simultaneous pursuit of low differentiation and low cost.
Indeed, the cornerstone of the Blue Ocean Strategy is the creation of new
playing fields and which entails opening up entirely new markets as opposed to
the Red Ocean where the existing market conditions are such that companies
must pursue either differentiation or low cost strategies. In other words, Blue
Ocean strategy represents a game changing idea of creating new markets and
unlocking the inherent demand in these markets. Whereas Red Oceans are all
about battling the competition, Blue Oceans are all about making the
competition irrelevant.
Examples of Blue Ocean Strategy in Practice

The authors of the Blue Ocean concept insist that their strategy is different from
Porter’s Five Forces, which they reckon is all about battling the sharks in the red
oceans. Further, they point to the fact that Red Ocean competition is
characterized by merciless competition whereas Blue Ocean represents the
redefinition of the terms of competition where one can have the ocean all to
oneself and therefore, the waters are blue.
For instance, the authors provide the example of the Canadian Circus Company,
Cirque du Soleil which came up with a game changing business model in the
1980s and which resulted in the altering of the dynamics of the circus industry.
The Five Forces model when applied to the circus industry predicted that it was
doomed to failure because of high power of suppliers, and the increase in the
alternative forms of entertainment that were eating into the market share of the
circus industry. Further, concerns and pressure from animal rights groups and
increased awareness of the customers about the consequences of conventional
circuses were beginning to spell trouble for the circus industry. Therefore, the
Five Forces model of Porter when applied to this industry predicted a slow
death for it.
However, Cirque du Soleil followed what can be called a Blue Ocean strategy
wherein it replaced the animals and reduced the importance of individual stars
and created an entirely new business model based on a combination of music,
dance, and athletic shows to innovate and create value for itself. In other words,
what this means is that instead of tweaking the existing strategies, Cirque du
Soleil went in for an entirely new strategy of creating a new market altogether
by redefining its core competencies and taking “Four Actions” which would be
described in the next section.
Blue Ocean Strategy Formulation and Execution

The Four Actions that Cirque du Soleil followed were the following:

 Eliminating the factors that the industry takes for granted which in the
case of Cirque du Soleil was to eliminate the animals, the three separate
rings, and the star performers.
 Reducing the factors below the industry standard, which meant that the
company ensured that much of the danger and thrill that characterizes
conventional circuses was reduced and this resulted in the company
creating a new market for itself that was different from the conventional
market for circuses.
 Increasing the factors which should be raised well above the industry
standard meant that Cirque du Soleil pioneered original and unique
approaches such as developing its own tents and by moving out of the
confines of existing venues which meant that it was able to create demand
for its product from scratch.
 Finally, by introducing aspects of novelty such as dramatic themes, music
and dance combined with artistic renditions, and an environment that was
geared to be more upscale and niche meant that Cirque du Soleil ensured
that it combined differentiation with value creation.

Conclusion

The example of the Blue Ocean strategy described above is clearly indicates
that Cirque du Soleil did not try to battle the competition but instead, created an
entirely new market for itself. In short, this is the essence of the Blue Ocean
Strategy that hinges on creating value and taking it to the next level by a game
changing approach to competition. In conclusion, once a company actualizes the
Blue Ocean Strategy, it usually results in opening up new markets instead of
stagnating in the existing markets.

Strategic Leadership - Definition and Qualities of a Strategic

Leader
Strategic leadership refers to a manager’s potential to express a strategic
vision for the organization, or a part of the organization, and to motivate
and persuade others to acquire that vision. Strategic leadership can also be
defined as utilizing strategy in the management of employees. It is the potential
to influence organizational members and to execute organizational change.
Strategic leaders create organizational structure, allocate resources and express
strategic vision. Strategic leaders work in an ambiguous environment on very
difficult issues that influence and are influenced by occasions and organizations
external to their own.
The main objective of strategic leadership is strategic productivity. Another aim
of strategic leadership is to develop an environment in which employees
forecast the organization’s needs in context of their own job. Strategic leaders
encourage the employees in an organization to follow their own ideas. Strategic
leaders make greater use of reward and incentive system for encouraging
productive and quality employees to show much better performance for their
organization. Functional strategic leadership is about inventiveness, perception,
and planning to assist an individual in realizing his objectives and goals.
Strategic leadership requires the potential to foresee and comprehend the work
environment. It requires objectivity and potential to look at the broader picture.
A few main traits / characteristics / features / qualities of effective strategic
leaders that do lead to superior performance are as follows:

Loyalty- Powerful and effective leaders demonstrate their loyalty to their

vision by their words and actions.

Keeping them updated- Efficient and effective leaders keep themselves

updated about what is happening within their organization. They have
various formal and informal sources of information in the organization.

Judicious use of power- Strategic leaders makes a very wise use of their
power. They must play the power game skillfully and try to develop consent
for their ideas rather than forcing their ideas upon others. They must push
their ideas gradually.

Have wider perspective/outlook- Strategic leaders just don’t have skills in

their narrow specialty but they have a little knowledge about a lot of things.

Motivation- Strategic leaders must have a zeal for work that goes beyond
money and power and also they should have an inclination to achieve goals
with energy and determination.

Compassion- Strategic leaders must understand the views and feelings of

their subordinates, and make decisions after considering them.

Self-control- Strategic leaders must have the potential to control

distracting/disturbing moods and desires, i.e., they must think before acting.
 Social skills- Strategic leaders must be friendly and social.

Self-awareness- Strategic leaders must have the potential to understand their

own moods and emotions, as well as their impact on others.

Readiness to delegate and authorize- Effective leaders are proficient at

delegation. They are well aware of the fact that delegation will avoid
overloading of responsibilities on the leaders. They also recognize the fact
that authorizing the subordinates to make decisions will motivate them a lot.

Articulacy- Strong leaders are articulate enough to communicate the

vision(vision of where the organization should head) to the organizational
members in terms that boost those members.

Constancy/ Reliability- Strategic leaders constantly convey their vision until

it becomes a component of organizational culture.

To conclude, Strategic leaders can create vision, express vision, passionately

possess vision and persistently drive it to accomplishment.

Corporate Governance - Definition, Scope and Benefits

What is Corporate Governance?

Corporate Governance refers to the way a corporation is governed. It is the

technique by which companies are directed and managed. It means carrying the
business as per the stakeholders’ desires. It is actually conducted by the board of
Directors and the concerned committees for the company’s stakeholder’s
benefit. It is all about balancing individual and societal goals, as well as,
economic and social goals.
Corporate Governance is the interaction between various participants
(shareholders, board of directors, and company’s management) in shaping
corporation’s performance and the way it is proceeding towards. The
relationship between the owners and the managers in an organization must be
healthy and there should be no conflict between the two. The owners must see
that individual’s actual performance is according to the standard performance.
These dimensions of corporate governance should not be overlooked.
Corporate Governance deals with the manner the providers of finance guarantee
themselves of getting a fair return on their investment. Corporate Governance
clearly distinguishes between the owners and the managers. The managers are
the deciding authority. In modern corporations, the functions/ tasks of owners
and managers should be clearly defined, rather, harmonizing.
Corporate Governance deals with determining ways to take effective strategic
decisions. It gives ultimate authority and complete responsibility to the Board of
Directors. In today’s market- oriented economy, the need for corporate
governance arises. Also, efficiency as well as globalization are significant
factors urging corporate governance. Corporate Governance is essential to
develop added value to the stakeholders.
Corporate Governance ensures transparency which ensures strong and balanced
economic development. This also ensures that the interests of all shareholders
(majority as well as minority shareholders) are safeguarded. It ensures that all
shareholders fully exercise their rights and that the organization fully recognizes
their rights.
Corporate Governance has a broad scope. It includes both social and
institutional aspects. Corporate Governance encourages a trustworthy, moral, as
well as ethical environment.
Benefits of Corporate Governance

1. Good corporate governance ensures corporate success and economic

growth.
2. Strong corporate governance maintains investors’ confidence, as a result
of which, company can raise capital efficiently and effectively.
3. It lowers the capital cost.
4. There is a positive impact on the share price.
5. It provides proper inducement to the owners as well as managers to
achieve objectives that are in interests of the shareholders and the
organization.
6. Good corporate governance also minimizes wastages, corruption, risks
and mismanagement.
7. It helps in brand formation and development.
8. It ensures organization in managed in a manner that fits the best interests
of all.

Business Ethics - A Successful way of conducting business

Definition of Business Ethics

Business Ethics refers to carrying business as per self-acknowledged moral

standards. It is actually a structure of moral principles and code of conduct
applicable to a business. Business ethics are applicable not only to the manner
the business relates to a customer but also to the society at large. It is the worth
of right and wrong things from business point of view.
Business ethics not only talk about the code of conduct at workplace but also
with the clients and associates. Companies which present factual information,
respect everyone and thoroughly adhere to the rules and regulations are
renowned for high ethical standards. Business ethics implies conducting
business in a manner beneficial to the societal as well as business interests.
Every strategic decision has a moral consequence. The main aim of business
ethics is to provide people with the means for dealing with the moral
complications. Ethical decisions in a business have implications such as
satisfied work force, high sales, low regulation cost, more customers and high
goodwill.
Some of ethical issues for business are relation of employees and employers,
interaction between organization and customers, interaction between
organization and shareholders, work environment, environmental issues, bribes,
employees rights protection, product safety etc.
Below is a list of some significant ethical principles to be followed for a
successful business-

1. Protect the basic rights of the employees/workers.

2. Follow health, safety and environmental standards.
3. Continuously improvise the products, operations and production facilities
to optimize the resource consumption
4. Do not replicate the packaging style so as to mislead the consumers.
5. Indulge in truthful and reliable advertising.
6. Strictly adhere to the product safety standards.
7. Accept new ideas. Encourage feedback from both employees as well as
customers.
8. Present factual information. Maintain accurate and true business records.
9. Treat everyone (employees, partners and customers) with respect and
integrity.
10.The mission and vision of the company should be very clear to it.
11.Do not get engaged in business relationships that lead to conflicts of
interest. Discourage black marketing, corruption and hoarding.
12.Meet all the commitments and obligations timely.
13.Encourage free and open competition. Do not ruin competitors’ image by
fraudulent practices.
14.The policies and procedures of the Company should be updated regularly.
15.Maintain confidentiality of personal data and proprietary records held by
the company.
16.Do not accept child labour, forced labour or any other human right
abuses.
Social Responsibilities of Managers
Social responsibility is defined as the obligation and commitment of managers
to take steps for protecting and improving society’s welfare along with
protecting their own interest. The managers must have social responsibility
because of the following reasons:

1. Organizational Resources - An organization has a diverse pool of resources

in form of men, money, competencies and functional expertise. When an
organization has these resources in hand, it is in better position to work for
societal goals.

2. Precautionary measure - if an organization lingers on dealing with the

social issues now, it would land up putting out social fires so that no time is
left for realizing its goal of producing goods and services. Practically, it is
more cost-efficient to deal with the social issues before they turn into
disaster consuming a large part if managements time.

3. Moral Obligation - The acceptance of managers’ social responsibility

has been identified as a morally appropriate position. It is the moral
responsibility of the organization to assist solving or removing the social
problems

4. Efficient and Effective Employees - Recruiting employees becomes

easier for socially responsible organization. Employees are attracted to
contribute for more socially responsible organizations. For instance -
Tobacco companies have difficulty recruiting employees with best skills
and competencies.

5. Better Organizational Environment - The organization that is most

responsive to the betterment of social quality of life will consequently
have a better society in which it can perform its business operations.
Employee hiring would be easier and employee would of a superior
quality. There would be low rate of employee turnover and absenteeism.
Because of all the social improvements, there will be low crime rate
consequently less money would be spent in form of taxes and for
protection of land. Thus, an improved society will create a better
business environment.

But, manager’s social responsibility is not free from some criticisms, such as
-

1. High Social Overhead Cost - The cost on social responsibility is a

 social cost which will not instantly benefit the organization. The cost
of social responsibility can lower the organizational efficiency and
effect to compete in the corporate world.
2. Cost to Society - The costs of social responsibility are transferred on
to the society and the society must bear with them.
3. Lack of Social Skills and Competencies - The managers are best at
managing business matters but they may not have required skills for
solving social issues.
4. Profit Maximization - The main objective of many organizations is
profit maximization. In such a scenario the managers decisions are
controlled by their desire to maximize profits for the organizations
shareholders while reasonably following the law and social custom.

Social responsibility can promote the development of groups and expand

supporting industries.
Core Competencies - An essential for Organizational Success
What is Core Competency?

Core competency is a unique skill or technology that creates distinct

customer value. For instance, core competency of Federal express (Fed Ex)
is logistics management. The organizational unique capabilities are mainly
personified in the collective knowledge of people as well as the
organizational system that influences the way the employees interact. As an
organization grows, develops and adjusts to the new environment, so do its
core competencies also adjust and change. Thus, core competencies are
flexible and developing with time. They do not remain rigid and fixed. The
organization can make maximum utilization of the given resources and relate
them to new opportunities thrown by the environment.
Resources and capabilities are the building blocks upon which an
organization create and execute value-adding strategy so that an organization
can earn reasonable returns and achieve strategic competitiveness.
 Figure: Core Competence Decision

Resources are inputs to a firm in the production process. These can be

human, financial, technological, physical or organizational. The more
unique, valuable and firm specialized the resources are, the more possibly
the firm will have core competency. Resources should be used to build on
the strengths and remove the firm’s weaknesses. Capabilities refer to
organizational skills at integrating it’s team of resources so that they can be
used more efficiently and effectively.
Organizational capabilities are generally a result of organizational system,
processes and control mechanisms. These are intangible in nature. It might
be that a firm has unique and valuable resources, but if it lacks the capability
to utilize those resources productively and effectively, then the firm cannot
create core competency. The organizational strategies may develop new
resources and capabilities or it might make stronger the existing resources
and capabilities, hence building the core competencies of the organization.
Core competencies help an organization to distinguish its products from it’s
rivals as well as to reduce its costs than its competitors and thereby attain a
competitive advantage. It helps in creating customer value. Also, core
competencies help in creating and developing new goods and services. Core
competencies decide the future of the organization. These decide the features
and structure of global competitive organization. Core competencies give
way to innovations. Using core competencies, new technologies can be
developed. They ensure delivery of quality products and services to the
clients.
Core Competency Theory of Strategy
Core Competency Theory

The core competency theory is the theory of strategy that prescribes actions
to be taken by firms to achieve competitive advantage in the marketplace.
The concept of core competency states that firms must play to their strengths
or those areas or functions in which they have competencies. In addition, the
theory also defines what forms a core competency and this is to do with it
being not easy for competitors to imitate, it can be reused across the markets
that the firm caters to and the products it makes, and it must add value to the
end user or the consumers who get benefit from it. In other
words, companies must orient their strategies to tap into the core
competencies and the core competency is the fundamental basis for the
value added by the firm.
Core Competencies and Strategy

The term core competency was coined by the leading management experts,
CK Prahalad and Gary Hamel in an article in the famous Harvard Business
Review. By providing a basis for firms to compete and achieve sustainable
competitive advantage, Prahalad and Hamel pioneered the concept and laid
the foundation for companies to follow in practice.
Some core competencies that firms might have include technical superiority,
its customer relationship management, and processes that are vastly efficient.
In other words, each firm has a specific area in which it does well relative to
its competitors, this area of excellence can be reused by the firm in other
markets and products, and finally, the area of strength adds value to the
consumer. The implications for real world practice are that core
competencies must be nurtured and the business model built around them
instead of focusing too much on areas where the firm does not have
competency. This is not to say that other competencies must be neglected or
ignored. Rather, the idea behind the concept is that firms must leverage upon
their core strengths and play to their advantages.
Some Examples

If we take the examples from real world companies and evaluate their core
competencies, we find that many firms have benefited from the application
of this theory and that they have succeeded in attaining competitive
advantage and sustainable strategic advantage. For instance, the core
competencies of Walt Disney Corporation lie in its ability to animate and
design its shows, the art of storytelling that has been perfected by the
company, and the operation of its theme parks that is done in an efficient and
productive manner. Hence, Walt Disney Corporation would be well advised
to configure its strategy around these core competencies and build a business
model that complements these competencies.
Closing Thoughts

The important aspect to be noted is that core competencies provide the

companies with a framework wherein they can identify their core
strengths and strategize accordingly. Of course, the identification and
evaluation of core competencies must be done as accurately and reliably as
possible since the divestment of non-core areas must not lead to the firm
missing key areas of operation and competitive advantage. Finally, care must
be taken when building the organizational edifice around the core
competencies to avoid the situation where many or too few of the
competencies are identified leading to redundancies or scarcity.

Ansoff Matrix
Introduction

The famous management expert, Igor Ansoff provided a roadmap for

firms to grow depending on whether they are launching new products or
entering new markets or a combination of these options. This roadmap
has been presented in the form of a Matrix that has four quadrants with the
axes of products and markets being the determinants of the strategies.
As can be seen from the figure accompanying this section, the combinations
of the two axes provide the firms with options that they can pursue in search
of market share.
The four quadrants (which are described in detail subsequently) pertain to
increasing market share through market penetration, venturing into new
markets with the existing products or market development, and launching
new products in existing markets with product development, and
finally, diversification when firms seek to enter new markets with new
products.
Market Penetration

As can be seen from the figure above, market penetration happens when the
existing products are marketed in a way to increase the market share of the
firm. This is a minimal risk strategy as all that a firm has to do is to increase
its marketing efforts and improve on its market share. In other words, the
firm has to ensure that it leverages the current capabilities, resources, and
gears towards a growth-oriented strategy. However, market penetration has
its limitations and these manifest when the market is saturated and hence,
growth diminishes for the products. Examples of market penetration would
include the Television Channels and Media Houses trying to maintain their
existing features in the existing markets and ensuring that they grow because
of the growth in the size of the market or because they have provided a value
proposition that is better than their competitors are.
Market Development

When firms seek to expand into new markets with their existing products,
market development happens. This is suitable for firms that have the
capabilities and the resources to enter new markets in pursuit of growth.
Further, the firm’s core competencies must be aligned with the products
rather than the markets and wherein the firm senses an opportunity in the
new markets for its existing products. Market development is more risky
than market penetration as the firm is entering uncharted waters and
therefore, it is in the interests of the firms to do their due diligence before
entering new markets. Examples of market development would be the
mobile telephony companies like Vodafone and Nokia entering African
markets where these markets are yet to be tapped and where these firms can
leverage their existing expertise to enter these markets.
Product Development

When firms seek to launch new products in existing markets, product

development happens. This strategy can be successful when the firms have
already established themselves in the existing markets and all that they need
to do is to launch new products, which leverage the brand image and the
brand value and meet the expectations of the customers in the existing
markets. For instance, whenever consumer giants like Unilever and Proctor
and Gamble (P&G) launch new products in existing markets, they have the
advantage of a strong brand value and top of the mind recall among the
customers about them, which would help them to garner market share. When
compared to the previous two strategies, this strategy is more risky as it is
not sure whether the transfer of customers from the existing products to the
new products would happen as seamlessly as the firms strategists believe.
Diversification

When firms launch new products in new markets, diversification happens

which entails both new products to be developed and new markets to be
tapped. This is the most risky of the four quadrant strategies in the Ansoff
Matrix as essentially the firms are not only testing the waters in uncharted
territory but they are also launching new products that may or may not be
well received by the customers. Indeed, diversification is a high-risk strategy
and is only justified when there are chances of high returns for the firms.
Examples of diversification would include companies like Reliance
venturing into mobile telephony and retail segments where they not only
have to move away from their core competencies but also have to launch
new products targeted at the new customer segment. Management experts
recommend diversification only when the firms are sitting on enough cash
and other resources, as the firms need to have deep pockets to stay the course
until the time profits are realized. Further, they also recommend firms with
existing customer loyalty and customer base as the cross migration from one
segment to the other happens only when the customers are assured of
receiving value for their money. For instance, the TATA group in India is
perceived as delivering good value and this helped them to garner market
share when they diversified into new markets and new products.
Conclusion

As can be seen from the preceding discussion, it is imperative for firms to

grow as otherwise their resources would not generate the returns needed for
the firms to make profits as well as deliver value to their shareholders.
Moreover, firms need to continually look for ways and means to increase
their market share, which would help them create value for their
stakeholders. This is the reason why the Ansoff Matrix has become so
popular because it charts the strategies that the firms must follow in each
option, which again is a combination of the firms’ current capabilities, and
the possibility of new market led growth. In conclusion, the Ansoff Matrix is
very relevant in these recessionary times as it can be applied by any firm
wishing to either expand into newer markets or leverage its existing
capabilities.

Diversification as a Viable Corporate Strategy

Introduction

Diversification is one of the strategies pursued by firms wishing to grow

in newer markets and by launching newer products. Diversification
usually entails the firms entering new markets in the industry in which they
are already present by launching newer products. Note the emphasis on new
markets and new products as diversification is not only about entering newer
markets but also with newer products. For instance, launching detergents and
other hygiene based products by firms that already have soaps and other
personal care products is one form of diversification wherein the firms
launch an entirely new product line aimed at targeting newer market
segments. Similarly, innovating and inventing newer products is another way
of diversification, which can extend beyond the existing industry in which
the firms operate. The best example of this type of diversification is
launching mobile payment systems by mobile telephony companies wherein
they tap newer market segments with newer product and service lines.
Concentric Diversification

The first type of diversification is concentric diversification wherein the

firms ensure that there is a technological similarity between its existing core
competencies and the newer product lines. Indeed, this type of
diversification is aimed at leveraging the existing competencies and
expertise and which is aligned with its resources and capabilities. In this
type of diversification, firms typically launch additions to their product lines
and at the same time target newer market segments. The idea here is to
ensure that their brand image and brand loyalty are transferred to the newer
products. Further, this type of diversification is sometimes not done strictly
to target newer market segments but ensure that the untapped market
segments are targeted. Examples of this would be launching Tablet
computers by companies like Apple and Samsung, which are already present
in the Smartphone market.
Horizontal Diversification

This type of diversification happens when firms tag on to the existing

market segments and leverage the existing customer base though the
products that they launch are aimed at sub segments in the current
market. This type of diversification is usually followed when the firms
launch newer products that have some relation to the existing products but at
the same time, the firm is entering a new business. This new business can be
related or unrelated to the current businesses in which the firm operates and
the idea here is to ensure that the existing customers transfer their loyalties to
the new product lines. Lest this sounds confusing, it needs to be noted that
horizontal diversification as the name implies is all about entering newer
market segments and launching newer products on the “same plane”
horizontally which means that there is little alignment unlike vertical
integration and concentric diversification.
Conglomerate Diversification

The third type of diversification or conglomerate diversification is

completely different from the previously discussed strategies as this type of
diversification is a strategy where conglomerates launch entirely new
product lines that have no alignment with their existing resources and
capabilities and enter completely new markets where they do not have a
presence. For instance, Reliance, which ventured into Retail and Mobile
Telephony, is an example of a conglomerate diversification. The sole
intention is to leverage the positive brand image and the existing brand
loyalty in its existing market segments as this firm has launched entirely new
products unrelated to its core competencies and entered newer market
segments where it has no presence at all. This type of diversification is the
most risky of the three types discussed in this article though if the firm is
successful, then it can aim for further diversification, which is indeed a
profitable, and growth oriented strategy.
Goals of Diversification

There are two broad goals of diversification and they are to ensure that firms
profit from diversifying when their existing products and market segments
are saturated or competitors have outwitted them, and the other goal is when
firms use the cash reserves at their disposal to become aggressive and enter
new markets and launch new products as a means of ensuring continued
success and profitability. The first type is known as defensive diversification
and the second type is known as offensive diversification. Both rationales for
diversification hinge on the pivot of the need of the firms to grow and profit
when they either are stagnant or are in an adventurous spree especially when
they have the resources to do so. Indeed, in the contemporary global
economy, firms have to diversify as the twin challenges of the death of
demand and the oversupply means that firms cannot be tied down to markets
and products for long.
Risks associated with Diversification

As mentioned in the previous section, diversification has become necessary

in the current global economic system wherein firms are forced to look for
new markets and launch new products. Having said that, it must be noted
that diversification is a risky strategy as it entails embracing uncertainty and
unfamiliarity. Further, the firms are entering into uncharted territory and
hence, they need to have a good compass of where they are headed if they
are to successfully navigate the choppy and the tricky waters of the new
markets and new products. As has been emphasized earlier, firms must
choose diversification carefully and even Igor Ansoff who proposed this
strategy in his Ansoff Matrix has pointed to diversification being the most
risky of the four types of strategies. In conclusion, firms must do their due
diligence before they diversify and not take things for granted as
diversification entails disruption and creative destruction for which they
might or might not be fully prepared.

Mintzberg’s Five Configurations of Strategic Management

The famous management expert, Henry Mintzberg, proposed a five
configurations approach to strategic management wherein any organization
can be broken down into five core elements or parts. The interactions
between these parts determine the strategy of the organization.
The five parts according to Mintzberg are:

 The Operating Core which consists of those doing the basic work
and whose output can be directly linked to the goods and services that
the organization makes and sells. According to Mintzberg, this part is
common to all organizations since the core work must be done and
hence, the operating element has to be put in place.
 The Strategic Apex, which is composed of senior management and
the senior leadership, which provides the vision, mission, and sense of
 purpose to the organization. Indeed, it can be said that this part
consists of those men and women who shape and control the destinies
of the organization.
 The Middle Level Managers who are the “sandwich” layer between
the apex and the operating core. This element is peopled by those who
take orders from above and pass them as work to the operating core
and supervise them. In other words, they perform the essential
function of acting as a buffer between the senior management and the
rank and file employees.
 The fourth element is the Technostructure that is composed of
planners, analysts, and trainers who perform the intellectual work.
This element provides the advice for the other parts and it is to be
noted that they do not do any work but function in an advisory
capacity.
 The final element is the Support Staff who perform supporting roles
for the other units and exist as specialized functions that are
responsible for the peripheral services in the organization.

The key aspect about these configurations is that it can be used to predict the
organizational structure of any organization and used to model the strategy
that the organization follows as a result of the interaction between these
parts.
For instance, in many service sector companies, the organization structure is
very fluid and interchangeable with the result that the middle managers
perform crucial tasks and the apex gets directly involved in running the
organization.
On the other hand, in many manufacturing companies, it is common to find
the Technostructure prevailing as the organizational processes are
bureaucratic and have mechanistic characteristics which makes the
organization function like a machine. This is the configuration in many
public sector and governmental organizations as well.
Finally, the startups have a structure that is composed of the strategic apex
and the supporting staff in their initial years of operation as the organization
structure is yet to be formalized.
The key implications of Mintzberg’s configurations are that it gives us a
useful model to describe how the organizational structure affects strategy. As
many theoretical models depend on external strategy alone, this model is
preferred by those who want to understand how internal dynamics produce
strategy.
Role of Planning, Plans and Planners in Mintzberg’s Five Configurations
Role of Planning, Planners, and Plans

The previous article discussed the five configurations of organizational

structure that Mintzberg proposed as part of his theory. This article examines
the role of planning, plans, and planners in each of the configuration. To
start with planning is an important element of strategy whenever there
is excessive standardization and where the organizational structure is
mechanistic and where the technocrats are in positions of importance.
For instance, the Department of Defense or the Pentagon in the United States
relies extensively on standardized work processes and planning to carry out
its activities. This is the case with large organizations like GM (General
Motors) as well. These organizations rely on “experts” and “planners” who
form an “army of techno structural bureaucrats” who plan and who assist the
organization in carrying out its activities by formalizing plans for the future.
Some Real World Examples

On the other hand, startups in the software industry hardly plan for the
longer term when their focus is on the next year’s results. However, the role
of plans in strategy cannot be underestimated because all organizations need
longer-term plans for their survival. Indeed, as the example of the planning
commission in developing countries like India illustrates, longer-term plans
are crucial to ensure that countries and organizations do not lose track of
their sense of purpose and mission. The role of planning is crucial in the
machine bureaucracies and the professional organizations that need a vision
and mission to take them forward. As we have discussed, plans, planning,
and planners all contribute to the development of strategy.
Difference between Strategy Formulation and Strategy Implementation

Talking about strategy, there is a crucial difference in the terms strategy

formulation and strategy implementation. Mintzberg and his associates
researched extensively and found that in most cases, strategy formulation
and strategy implementation are entirely different aspects. The difference is
that whereas planners plan strategy and formulate it, managers execute
strategy and implement it. Hence, there is the aspect of two different
elements of the organizational structure that is involved in planning and
execution of strategy. Indeed, in many organizations, there exists a creative
tension between the planners and the implementers and the way in which the
organizations resolve this aspect makes the difference between
organizational transformation and organizational failure that is at the heart of
Mintzberg’s configuration model of strategy.
Closing Thoughts

Since the contemporary business environment is characterized by rapid pace

of change and unpredictable trends that take everyone by surprise, planners
and managers have to ensure that their strategies take into account these
aspects. For instance, an Army commander follows the strategy to tackle an
enemy unit but also must make changes on the fly to ensure that the situation
on the field is amenable to their strategy. Different organizations strategize
differently and it is the nature of longer term planning combined with the
adaptation to shorter-term needs that determines how well an organization
performs in the real world.
Strategic Management to the Millennial Generation
The Rise of the Millennials

The previous articles discussed the various aspects of strategy and how
businesses can use different strategic options to respond to the multifarious
needs of the 21st century business landscape. An aspect that is of crucial
importance is the rise of the millennial generation or those born between
1980 and 1995. As this generation enters the workforce and becomes a
consumer segment in itself, businesses have to strategize on ways and means
to adapt to this generation. These strategies can involve targeted marketing,
workplace adaptation, and other societal aspects of reaching out to the
Millennials.
Marketing to Millennials

If we take the first aspect, marketing to Millennials can be quite challenging

as they have attention spans in the seconds rather than the minutes that
earlier generation used to have when viewing advertisements or making up
their minds. This means that marketers have to deal with the concept of
packing in as much information as possible within the 30-second slot for ads
and ensure that the message is conveyed. This also means that marketers
have to ensure that their message is not drowned out in the information
overload that the Millennials are exposed to.
The Millennials and the Workforce

The second aspect of making changes in the workplace for the Millennials is
that they are much more tuned to technology and social media in particular
and the expertise that they have with technology means that the
organizations have to become high tech themselves if they are to
accommodate the Millennials in their midst. For instance, it is the case that
many organizations use technology largely. However, the crucial aspect here
is that organizations have to start using social media as well extensively if
the workplace is to be challenging to the Millennials. In other words, the
organizations have to move beyond Web 2.0 and mere IT and use tools like
virtual reality to ensure that they are able to attract and retain the Millennials.
The Future is More Jobs!

The third aspect relates to the extremely crucial aspect of societal forces
being more amenable to change and that too at a rapid pace. We have seen
how the millennial generation is hitting the streets in protest across the world
when they are not satisfied with a particular outcome whether it is related to
business or politics. Concentrating on business alone, we find that the
Millennials are feeling let down by the lack of job opportunities and the
prevailing gloomy economic scenario. Hence, the task before business
leaders and CEO’s is to create as many jobs as possible for this generation to
ensure that their energies are channelized in a positive manner instead of in a
negative manner.

Closing Thoughts

Finally, the Millennials are entering the workforce at a time when a

historical shift in the way business operates is happening. Hence, the
implications for businesses are that either they leverage the opportunities
presented by this fundamental transformation or let go of the chance and
waste the opportunity.
Own the Future: Insights from Recent Research into Strategizing for the
Future
This article discusses the ten qualities needed for companies to stay
ahead of the competition and win the race for the market in the next
decade. With so much of rapid change and accelerating trends, it is
important for companies to be, the biggest and the best or else they run the
risk of getting left behind and becoming also ran companies.

 Adaptable

The winners of tomorrow will be those companies that are best at

identifying and anticipating market shifts and managing complex and
 multi-company systems. The need for shorter cycles and faster
reaction time is greater as the pace of change is rapid and only those
companies that can adapt to it will succeed.

 Global

It is a fact that everybody is competing with everyone from

everywhere. This means that the future markets for growth in Asia
would take many business leaders out of their comfort zones. Hence,
what works in Munich might not work in Mumbai and therefore there
is a need to understand the fluid marketplace.

 Connected

As the world gets smaller because of greater integration and better

communications technologies, there are changes in the realm of
strategy, which the business leaders of tomorrow must embrace. This
means that the companies of tomorrow must deal with newer forms of
customer behavior and newer business models.

 Sustainable

With the ever-looming threat of climate change and environmental

catastrophe, businesses need to pursue growth strategies that are
sustainable and ensure that they use limited resources more efficiently.
These strategies lead to all round stakeholder development instead of
profits for the firms alone.

 Customer First

For companies to achieve greatness, they must develop deep and

lasting emotional bonds with their consumers. They need to transform
consumers into repeat buyers and in some cases, they need the
customers to be brand evangelists which means that the customers are
the best source of advertising for the companies.

 Fit to Win

The art of execution is one of the core drivers of competitive

advantage and the truly great companies strategize in a manner that
drives improvement in the critical areas identified for success. These
companies have flat and agile structures that speed up the flows of
information, improve decision-making, and have sophisticated pricing
 models.

 Value-Driven

It is a fact that companies must create value for all their stakeholders,
this is something that is ageless, and timeless which makes the
companies and their legacies enduring for all stakeholders. The value
that a company creates has two components, which are earnings and
growth. It is impossible to separate the two and since they work in
tandem, the value that the company creates must be both short-term
profits and longer term success.

 Trusted

Though trust does not appear on a company’s balance sheet, it is the

most valuable asset for the companies. Hard to build and harder to
sustain as well as easier to squander, trust reposed by the customers
determines how successful a company is over the longer term. The
digital revolution offers never before opportunities to expand and
accelerate reputational aspects of the companies.

 Bold

If companies do not evolve with the times, they run the risk of
becoming redundant. Hence, companies need to be forward looking
and reinvent themselves to keep pace with their competitors. These
companies would not be blindsided and outpaced by competition. This
means that companies must experiment on a continual basis and not be
afraid to embrace radical change from outside and from within.

 Inspiring

Finally, the business leaders of tomorrow are inspirational figures

much in the mold of religious and mythological figures from history.
This means that epic leadership is needed from the leaders of
tomorrow as they go about setting the agenda that their followers can
adapt and emulate, if possible that translates into an inspired
workplace as well as external respect.