SM Unit 1

SYLLABUS
II B.Com PA - STRATEGIC MANAGEMENT
UNIT I: Business Environment: General Environment – Demographic, Socio- cultural, Macro – economic,
Legal / political, Technological and Global Competitive Environment. Business Policy and Strategic
Management: Meaning and nature; Strategic management imperative; Vision, Mission and Objectives; Strategic
levels in organizations
UNIT II: Strategic Analyses: Situational Analysis – SWOT Analysis, TOWS Matrix, Portfolio Analysis
– BCG Matrix. Strategic Planning: Meaning, stages, alternatives, strategy formulation.
UNIT III: Formulation of Functional Strategy: Marketing strategy, financial strategy, Production strategy,
Logistics strategy, Human resource strategy
UNIT IV: Strategy Implementation and Control: Organizational structures; establishing strategic business units;
Establishing profit centre’s by business, product or service, market segment or customer; Leadership and
behavioral challenges.
UNIT V: Reaching Strategic Edge: Business Process Reengineering, Benchmarking, Total Quality Management,
Six Sigma Contemporary Strategic Issues.
BOOKS FOR REFERENCE:
Book Name Author Name Publisher Year & Edition
Business Policy and Himalaya

P. Subbha Rao Reprt 2003
Strategic Management Publishing House
Strategic Management VSP Rao &

Excel Books 1st edition 2003
Text and Cases V.Harikrishna
Howard S. Gitlow, Tata McGrow Hill
Quality Management Alan J. Oppenheim Publishing co Ltd 3rd edition 2009
Rosa David M.Levine

Unit I
Business Environment: General Environment – Demographic, Socio- cultural, Macro – economic,

Legal / political, Technological and Global Competitive Environment. Business Policy and Strategic
Management: Meaning and nature; Strategic management imperative; Vision, Mission and Objectives;
Strategic levels in organizations
STRATEGIC MANAGEMENT
Strategic management is not a box of tricks or a bundle of techniques. It is analytical thinking and
commitment of resources to action. Peter Drucker
Definition:
“The on-going process of formulating, implementing and controlling broad plans guide the organizational
in achieving the strategic goods given its internal and external environment”.
Alfred D Chandler (1962)
Chandler defined strategy as: “The determination of the basic long-term goals and objectives of an
enterprise and the adoption of the courses of action and the allocation of resources necessary for carrying out
these goals.” Note that Chandler refers to three aspects
FEATURES OF STRATEGIC MANAGEMENT
1. On-going process:
Strategic management is a on-going process which is in existence through out the life of organization.
2. Shaping broad plans:
First, it is an on-going process in which broad plans are firstly formulated than implementing and
finally controlled.
3. Strategic goals:
Strategic goals are those which are set by top management. The broad plans are made in achieving the goals.
2 II BCOM PA Kaamadhenu Arts and Science College,

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EVOLUTION OF STRATEGIC MANAGEMENT
His extensive work in the field, Bruce Henderson of the Boston Consulting Group concluded that
intuitive strategies cannot be continued successfully if
The corporation becomes large,
The layers of management increase, or
The environment changes substantially.
Phase 1
Basic financial planning: Seek better operational control by trying to meet budgets.
Phase 2
Fore-cast based planning: Seeking more effective planning for growth by trying to predict the future
beyond next year.
Phase 3
Externally oriented planning (strategic planning): Seeking increasing responsiveness to markets and
competition by trying to think strategically.
Phase 4
Strategic management: Seeking a competitive advantage and a successful future by managing all
resources. Phase 4 in the evolution of the strategic management includes a consideration of strategy
implementation and evaluation and control, in addition to the emphasis on the strategic planning in Phase 3.
General Electric, one of the pioneers of the strategic planning, led the transition from the strategic
planning to strategic management during the 1980s. By the 1990s, most corporations around the world had also
begun the conversion to strategic management.
In general, a corporate strategy has the following characteristics:
 It is generally long-range in nature, though it is valid for short-range situations also and has short-
range implications.
 It is action oriented and is more specific than objectives.
 It is multipronged and integrated
 It is flexible and dynamic.
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 It is formulated at the top management level, though middle and lower level managers are associated
in their formulation and in designing sub-strategies.
 It is generally meant to cope with a competitive and complex setting.
 It flows out of the goals and objectives of the enterprise and is meant to translate them into realities.
 It is concerned with perceiving opportunities and threats and seizing initiatives to cope with them. It
is also concerned with deployment of limited organizational resources in the best possible manner.
 It provides unified criteria for managers in function of decision making.
FRAMEWORK
The basic framework of strategic process can be described in a sequence of five stages as shown in the
figure - Framework of strategic management:
The five stages are as follows:
Stage one:
This is the starting point of strategic planning and consists of doing a situational analysis of the firm in the
environmental context. Here the firm must find out its relative market position, corporate image, its strength and
weakness and also environmental threats and opportunities. This is also known as SWOT (Strength, Weakness,
Opportunity, Threat) analysis. You may refer third chapter for a detailed discussion on SWOT analysis.
Stage two:
This is a process of goal setting for the organization after it has finalised its vision and mission. A
strategic vision is a roadmap of the company’s future – providing specifics about technology and customer focus,
the geographic and product markets to be pursued, the capabilities it plans to develop, and the kind of company
that management is trying to create. An organization’s Mission states what customers it serves, what need it
satisfies, and what type of product it offers.
Stage three:
Here the organization deals with the various strategic alternatives it has.
Stage four:
Out of all the alternatives generated in the earlier stage the organization selects the best suitable
alternative in line with its SWOT analysis.

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Stage five:
This is a implementation and control stage of a suitable strategy. Here again the organization
continuously does situational analysis and repeats the stages again.
IMPORTANCE OF STRATEGIC MANAGEMENT
Strategic management provides the framework for all the major business decisions of an enterprise such
as decisions on businesses, products and markets, manufacturing facilities, investments and organizational
structure.
In a successful corporation, strategic planning works as the pathfinder to various business opportunities;
simultaneously, it also serves as a corporate defense mechanism, helping the firm avoid costly mistakes in product
market choices or investments. Strategic management has the ultimate burden of providing a business
organization with certain core competencies and competitive advantages in its fight for survival and growth.
It seeks to prepare the corporation to face the future and even shape the future in its favor. Its ultimate
burden is influencing the environmental forces in its favor, working into the environs and shaping it, instead of
getting carried away by its turbulence or uncertainties.
BUSINESS ENVIRONMENT
Introduction
The term business environment refers to all external forces or factors which have a direct or indirect
bearing on the functioning of business. We will discuss how economic, social, political factors etc. influence
decisions of business organizations. Moreover, we will discuss some economic problems like, regional imbalance,
industrial sickness, and existence of parallel economy etc.
The term regional imbalance refers to the inequalities or disparities among the various regions of a
country. That is, some regions are developed and some other regions are underdeveloped of the same
country. The term trade deficit refers to a situation in which the amount of imports is more than the amount of
exports of a country.

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MEANING OF BUSINESS ENVIRONMENT
Business is an important condition of an economy in present times. In the initial stage of human
settlement in this globe, most of the people usually produced commodities of different types for self consumption.
During those days, markets were non-existent and no meaningful transactions were conducted. However, with the
passage of time, social organizations, needs and situations underwent a series of changes.
Business enterprises are functioning in an environment, which is characterized by change. The business
environment comprises of a number of factors which can be classified as internal and external factors.
Definition
The combination of internal and external factors that influence a company's operating situation. The
business environment can include factors such as: clients and suppliers; its competition and owners;
improvements in technology; laws and government activities; and market, social and economic trends.
COMPONENTS OF BUSINESS ENVIRONMENT
After discussing the meaning of business environment, now we will discuss the various components of business
environment. The various components of business environment are-

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External environment consists of those factors that affect a business enterprise from outside. External
environment includes shareholders, competitors, customers, society, government laws and regulations, policies
and technology. External environment is generally classified into micro environment and macro environment.
The micro environment consists of factors in the company's immediate environment that affects the performance
of the company. These include the suppliers, marketing intermediaries, competitors, customers and the public.
On the other hand, macro external environment includes larger factors such as economic, demographic,
technological, political, natural and cultural factors. We will explain below micro and macro types of external
environment of business. Different players in the micro environment normally do not affect all the companies of a
particular industry in a similar way. However, sometimes micro environment of the various firms of an industry
remains almost same.
I. EXTERNAL MICRO- ENVIRONMENT
Micro environment includes those players whose decisions and actions have a direct impact on the
company. Production and selling of commodities are the two important aspects of modern business. Accordingly,
the micro environment of business can be divided. The various constituents of micro environment are as under:
1. Suppliers of inputs: An important factor in the external micro environment of a firm is the supplier of its
inputs such as raw materials and components. Normally, most firms do not depend on a single supplier of inputs.
To reduce risk and uncertainty business firms prefer to keep multiple suppliers of inputs.
2. Customers: The people who buy and use a firm’s product and services are an important part of external micro
environment. Since sales of a product or service is critical for a firm's survival and growth, it is necessary to keep
the customers satisfied. A concern for customers’ satisfaction is essential for the success of a business firms.
Besides, a business firm has to compete with rival firms to attract customers and thereby increase the demand and
market for its product.
3. Marketing intermediaries: In the firm's external micro environment, marketing intermediaries play an
essential role of selling and distributing its products to the final customers. Marketing provides an important link
between a business firm and its ultimate customers.
4. Competitors: Different firms in an industry compete with each other for sale of their products. This
competition may be on the basis of pricing of their products and also non- price competition through competitive
advertising such as sponsoring some events to promote the sale of different varieties and models of their products.
As a consequence of liberalization and globalization of the Indian economy since the adoption of economic
reforms there has been a significant increase in the competitive environment of business firms.

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5. Publics: Finally, publics are an important force in external micro environment. Environmentalists, media
groups, women’s associations, consumer protection groups, local groups, Citizens Association are some important
examples of publics which have an important bearing on the business decisions of the firm. The existence of
various types of publics influences the working of business firms and compels them to be socially responsible.
II. EXTERNAL MACRO ENVIRONMENT
Apart from micro environment, business firms face large external environmental forces. An important
fact about external macro environmental forces is that they are uncontrollable by the management. Because of the
uncontrollable nature of macro forces a firm has to adjust or adapt it to these external forces. These factors are:
1. Economic Environment: Economic environment includes all those forces which have an economic impact on
business. Accordingly, total economic environment consists of agriculture, industrial production, infrastructure,
planning, basic economic philosophy, stages of economic development, trade cycles, national income, per capita
income, savings, money supply, price level and population. Business and economic environment is closely
related. Business usually collect all its required inputs from the economic environment available and also absorbs
the output of business units.
2. Political-legal Environment: Business firms are closely related to the government. The political- legal
environment includes the activities of three political institutions, namely, legislature, executive and judiciary
which usually play a useful role in shaping, directing, developing and controlling business activities. The
legislature takes decisions on a particular course of action, the executive implements those decisions through
government agencies and the judiciary serves as a watch-dog for ensuring public interest in all the activities of
legislature and executive. In order to attain a meaningful business growth, a stable and dynamic political-legal
environment is very important.
3. Technological Environment: Technological environment is exercising considerable influence on business.

Technology implies systematic application of scientific or other organized knowledge to practical tasks or
activities. Business makes it possible for technology to reach the people in proper format. As technology is
changing fast, businessmen should keep a close look on those technological changes for its adaptation in their
business activities.

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4. Global or International Environment : Global environment plays an important role in shaping business
activity. With the liberalization and globalization of the economy, business environment of an economy has
become totally different wherein it has to bear all shocks and benefits arising out of global environment.
5. Socio-cultural Environment : Social and cultural environment also influences the business environment
indirectly. These includes people’s attitude to work and wealth, ethical issues, role of family, marriage, religion
and education and also social responsiveness of business. The social and cultural environment also influences the
demand for a variety of goods and the type of employees the industry require. Moreover, the obligation of
business to society also depends on the cultural milieu in which the firm is operating.
6. Demographic Environment: The demographic environment includes the size and growth of population, life
expectancy of the people, rural-urban distribution of population, the technological skills and educational levels of
labour force. All these demographic features have an important bearing on the functioning of business firms. The
labour force in the country is always changing. This will cause changes in the work force of a firm. The business
firms have to adjust to the requirement of their employees. They have to provide child care services, labour
welfare programmes etc. The demographic environment affects both the supply and demand sides of business
organizations. The technological and educational skills of the workers of a firm are determined by the human
resources available in the economy which are part of the demographic environment.
7. Natural Environment: Natural environment influences business in diverse ways. Business in modern times is
dictated by nature. The natural environment is the ultimate source of many inputs such as raw materials and
energy, which firms use in their productive activity. In fact, the availability of natural resources in the region or
country is the basic factor in determining business activity in it. The natural environment which includes
geographical and ecological factors such as minerals and oil reserves, water and forest resources, weather and
climatic conditions are all highly significant for various business activities. For example, steel producing
industries are set up near the coalmines to save cost of transporting coal to distant locations.
8. Ecological Environment: Due to the efforts of environmentalists and international organizations such as the
World Bank the people have now become conscious of the adverse effects of depletion of exhaustible natural
resources and pollution of environment by business activity. Accordingly, laws have been passed for conservation
of natural resources and prevention of environment pollution. These laws have imposed additional responsibilities
and costs for business firms. But it is socially desirable that these costs are borne by business firms if we want
sustainable economic growth and also healthy environment for human beings.

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INTERNAL ENVIRONMENT
The factors in internal environment of business are to a certain extent controllable because the firm can
change or modify these factors to improve its efficiency. However, the firm may not be able to change all the
factors.
The various internal factors are:
1. Value system : The value system of an organization means the ethical beliefs that guide the organization in
achieving its mission and objectives. It is a widely acknowledged fact that the extent to which the value system is
shared by all in the organization is an important factor contributing to its success.
2. Mission and objectives : The business domain of the company, direction of development, business philosophy,
business policy etc are guided by the mission and objectives of the company. The objective of all firms is
assumed to be maximization of profit. Mission is defined as the overall purpose or reason for its existence which
guides and influences its business decision and economic activities.
3. Organization structure: The organizational structure, the composition of the board of directors, the
professionalism of management etc are important factors influencing business decisions. The nature of the
organizational structure has a significant influence over the decision making process in an organization. An
efficient working of a business organization requires that the organization structure should be conducive for quick
decision-making.
4. Corporate culture: Corporate culture is an important factor for determining the internal environment of any
company. In a closed and threatening type of corporate culture the business decisions are taken by top level
managers while the middle level and lower level managers have no say in business decision-making. This leads
to lack of trust and confidence among subordinate officials of the company and secrecy pervades throughout the
organization. This results in a sense of alienation among the lower level managers and workers of the company.
In an open and participating culture, business decisions are taken by the lower level managers and top
management has a high degree of confidence in the subordinates. In this type of culture, participation of workers
in managerial tasks is encouraged. Development of work culture and the growing involvement of the workers or

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employees in company affairs and the sympathetic attitude of the management towards its employees are all
equally responsible for maintaining a healthy internal environment in the business.
5. Quality of human resources: Quality of employees that is of human resources of a firm is an important factor
of internal environment of a firm. The characteristics of the human resources like skill, quality, capabilities,
attitude and commitment of its employees etc could contribute to the strength and weaknesses of an organization.
Some organizations find it difficult to carry out restructuring or modernization plans because of resistance by its
employees. Due to the importance of human resources for the success of the company, now-a-days there are
special courses for managers so as to be able to select and manage efficiently the human resources of a company.
6. Labour unions: Labour unions collectively bargains with the managers for better wages and better working
conditions of the different categories of workers. For the smooth working of a business firm good relations
between management and labour unions is required.
7. Physical resources and technological capabilities: Physical resources such as, plant and equipment and
technological capabilities of a firm determine its competitive strength which is an important factor for
determining its efficiency and unit cost of production. Research and development capabilities of a company
determine its ability to introduce innovations which enhances productivity of workers. It is, however, important to
note that the rapid technological growth and the growth of information technology in recent years have increased
the relative importance of intellectual capital and human resources as compared to physical resources of a
company. The growth of Bill Gates’ Microsoft Company and Murthy’s Infosys technologies is mostly due to the
quality of human resources and intellectual capital than to any superior physical resources.
IMPORTANT CHARACTERISTICS OF BUSINESS ENVIRONMENT
Following are the chief characteristics of the business environment:
(1) Totality of External Forces:
Business environment is the sum totals of all those factors/forces which are available outside the business and
over which the business has no control. It is the group of many such forces that is why, its nature is of totality.
(2) Specific and General Forces:
The forces present outside the business can be divided into two parts – specific and general.
(i) Specific:These forces affect the firms of an industry separately, e.g., customers, suppliers, competitive
firms, investors, etc.

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(ii) General:These forces affect all the firms of an industry equally, e.g., social, political, legal and
technical situations.
(3) Interrelatedness:
The different factors of business environment are co-related. For example, let us suppose that there is a change in
the import-export policy with the coming of a new government.
In this case, the coming of new government to power and change in the import-export policy are political and
economic changes respectively. Thus, a change in one factor affects the other factor.
(4) Dynamic Nature:
As is clear that environment is a mixture of many factors and changes in some or the other factors continue to take
place. Therefore, it is said that business environment is dynamic.
(5) Uncertainty:
Nothing can be said with any amount of certainty about the factors of the business environment because they
continue to change quickly. The professional people who determine the business strategy take into consideration
the likely changes beforehand.
But this is a risky job. For example, technical changes are very rapid. Nobody can anticipate the possibility of
these swift technical changes. Anything can happen, anytime. The same is the situation of fashion.
(6) Complexity:
Environment comprises of many factors. All these factors are related to each other. Therefore, their individual
effect on the business cannot be recognised. This is perhaps the reason which makes it difficult for the business to
face them.
(7) Relativity:
Business environment is related to the local conditions and this is the reason as to why the business environment
happens to be different in different countries and different even in the same country at different places.
IMPORTANCE OF BUSINESS ENVIRONMENT
There is a close and continuous interaction between the business and its environment. This interaction
helps in strengthening the business firm and using its resources more effectively.
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As stated above, the business environment is multifaceted, complex, and dynamic in nature and has a far-reaching
impact on the survival and growth of the business. To be more specific, proper understanding of the social,
political, legal and economic environment helps the business in the following ways:
Determining Opportunities and Threats: The interaction between the business

and its environment would identify opportunities for and threats to the business. It
helps the business enterprises for meeting the challenges successfully.
Giving Direction for Growth: The interaction with the environment leads to opening up new frontiers of growth
for the business firms. It enables the business to identify the areas for growth and expansion of their activities.
Continuous Learning: Environmental analysis makes the task of managers easier in
dealing with business challenges. The managers are motivated to continuously update
their knowledge, understanding and skills to meet the predicted changes in realm of
business.
Image Building: Environmental understanding helps the business organizations in
improving their image by showing their sensitivity to the environment within which they are working. For
example, in view of the shortage of power, many companies have
set up Captive Power Plants (CPP) in their factories to meet their own requirement of power.
Meeting Competition: It helps the firms to analysis the competitors’ strategies and formulate their own strategies
accordingly.
Identifying Firm’s Strength and Weakness: Business environment helps to identify
the individual strengths and weaknesses in view of the technological and global
developments.
TYPES OF BUSINESS ENVIRONMENT:
Confining business environment to uncontrollable external factors, it may be classified as
I. Economic environment; and
II. Non-economic environment.
The economic environment includes economic conditions, economic policies and economic system of the
country.
Non-economic environment comprises social, political, legal, technological, demographic and natural

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environment. All these have a bearing on the strategies adopted by the firms and any change in these areas is
likely to have a far-reaching impact on their operations. Let us have a brief idea about each of these areas of
business environment.
I. ECONOMIC ENVIRONMENT
The survival and success of each and every business enterprise depend fully on its economic environment. The
main factors that affect the economic environment are:
(a) Economic Conditions: The economic conditions of a nation refer to a set of economic factors that have great
influence on business organizations and their operations. These include gross domestic product, per capita
income, markets for goods and services, availability of capital, foreign exchange reserve, growth of foreign trade,
strength of capital market etc. All these help in improving the pace of economic growth.
(b) Economic Policies: All business activities and operations are directly influenced by the economic policies
framed by the government from time to time. Some of the important economic policies are:
 Industrial policy
 Fiscal policy
 Monetary policy
 Foreign investment policy
 Export –Import policy (Exim policy)
The government keeps on changing these policies from time to time in view of the developments taking
place in the economic scenario, political expediency and the changing requirement. Every business firm has to
function strictly within the policy framework and respond to the changes therein.
c) Economic System: The world economy is primarily governed by three types of
economic systems, viz.,
 Capitalist economy;
 Socialist economy; and
 Mixed economy. India has adopted the mixed economy system which implies co-existence
of public sector and private sector.

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II. NON-ECONOMIC ENVIRONMENT
The various elements of non-economic environment are as follow:

(a)Social Environment:-
The social environment of business includes social factors like customs, traditions, values, beliefs, poverty,
literacy, life expectancy rate etc. The social structure and the values that a society cherishes have a considerable
influence on the functioning of business firms. For example, during festive seasons there is an increase in the
demand for new clothes, sweets, fruits, flower, etc. Due to increase in literacy rate the consumers are becoming
more conscious of the quality of the products.. It may be noted that the consumption patterns, the dressing and
living styles of people belonging to different social structures and culture vary significantly.
(b) Political Environment:-
This includes the political system, the government policies and attitude towards the business community and the
unionism. All these aspects have a bearing on the strategies adopted by the business firms. The stability of the
government also influences business and related activities to a great extent. It sends a signal of strength,
confidence to various interest groups and investors. Further, ideology of the political party also influences the
business organization and its operations. You may be aware that Coca-Cola, a cold drink widely used even now,
had to wind up operations in India in late seventies. Again the trade union activities also influence the operation
of business enterprises. Most of the labour unions inIndia are affiliated to various political parties. Strikes,
lockouts and labour disputes etc. also adversely affect the business operations. However, with the competitive
business environment, trade unions are now showing great maturity and started contributing positively to the
success of the business organization and its operations through workers participation in management.
(c) Legal Environment:-
This refers to set of laws, regulations, which influence the business organizations and their operations. Every
business organization has to obey, and work within the framework of the law. The important legislations that
concern the business enterprises include:
 Companies Act, 1956

 Foreign Exchange Management Act, 1999
 The Factories Act, 1948
 Industrial Disputes Act, 1972
 Payment of Gratuity Act, 1972
 Industries (Development and Regulation) Act, 1951
 Prevention of Food Adulteration Act, 1954
 Essential Commodities Act, 2002

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 The Standards of Weights and Measures Act, 1956
 Monopolies and Restrictive Trade Practices Act, 1969
 Trade Marks Act, 1999
 Bureau of Indian Standards Act, 1986
 Consumer Protection Act, 1986
 Environment Protection Act
 Competition Act, 2002
Besides, the above legislations, the following are also form part of the legal environment of business.
Provisions of the Constitution: The provisions of the Articles of the Indian
Constitution, particularly directive principles, rights and duties of citizens, legislative powers of the central and
state government also influence the operation of business enterprises.
Judicial Decisions: The judiciary has to ensure that the legislature and the government function in the interest of
the public and act within the boundaries of the constitution.The various judgments given by the court in different
matters relating to trade and industry also influence the business activities.
(d) Technological Environment:-
Technological environment include the methods, techniques and approaches adopted for production of
goods and services and its distribution. The varying technological environments of different countries affect the
designing of products. For example, in USA and many other countries electrical appliances are designed for 110
volts. But when these are made for India, they have to be of 220 volts. In the modern competitive age, the pace of
technological changes is very fast. Hence, in order to survive and grow in the market, a business has to adopt the
technological changes from time to time. It may be noted that scientific research for improvement and innovation
in products and services is a regular activity in most of the big industrial organizations. Now a day’s infact, no
firm can afford to persist with the outdated technologies.
(e) Demographic Environment:-
This refers to the size, density, distribution and growth rate of population. All these factors have a direct
bearing on the demand for various goods and services. For example a country where population rate is high and
children constitute a large section of population, then there is more demand for baby products. Similarly the
demand of the people of cities and towns are different than the people of rural areas. The high rise of population
indicates the easy availability of labour. These encourage the business enterprises to use labour intensive
techniques of production. Moreover, availability of skill labour in certain areas motivates the firms to set up their
units in such area. For example, the business units fromAmerica, Canada, Australia, Germany, UK, are coming to
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India due to easy availability of skilled manpower. Thus, a firm that keeps a watch on the changes on the
demographic front and reads them accurately will find opportunities knocking at its doorsteps.
(f) Natural Environment:-
The natural environment includes geographical and ecological factors that influence the business
operations. These factors include the availability of natural resources, weather and climatic condition, location
aspect, topographical factors, etc. Business is greatly influenced by the nature of natural environment. For
example, sugar factories are set up only at those places where sugarcane can be grown. It is always considered
better to establish manufacturing unit near the sources of input. Further, government’s policies to maintain
ecological balance, conservation of natural resources etc. put additional responsibility on the business sector.
Four phases of a business cycle
 Peak
 Recession
 Trough
 Recovery
 What is a peak?
The phase of the business cycle during which real GDP reaches its maximum after rising during a
recovery.
 What is a recession?
A downturn in the business cycle during which real GDP declines.
 What is a trough?
The phase of the business cycle in which real GDP reaches its minimum after falling during a recession.
 What is a recovery?
An upturn in the business cycle during which real GDP rises.
ENVIRONMENTAL ANALYSIS

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1. Scanning: - Scanning is a process of analyzing the environment for the identification of the factors, which
impact on or have implications for the business. Prospective mode scanning focuses on identifying precursors or
indicators of potential environmental changes and issues.
2. Monitoring:- Monitoring brings about perspective follow up and a more in depth analysis of the relevant
environmental trends identified at the scanning stage.
3. Forecasting:- Anticipating the future is essential for identifying the future threats and opportunities and for
formulating strategic plans.
4. Assessment:- The purpose of environmental analysis is to assess the impact of the environmental factors on the
organization’s business or their implications for the organization.
SOCIAL ENVIRONMENT:
Social environment of business means all factors which affects business socially. Every business works in
a society, so societies different factors like family, educational institutions and religion affects business.
a society, so societies different factors like family, educational institutions and religion affects business .It
includes the culture that the individual was educated or lives in, and the people with whom they interact.
a society, so societies different factors like family, educational institutions and religion affects business.It includes
the culture that the individual was educated or lives in, and the people with whom they interact.
The cultural factors like buying and consumption habit of the people, customs and traditions, tastes and
preferences, languages etc. are the factors that affect the strategy of the business.
CULTURAL ENVIRONMENT

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The cultural environment mean a environment which affect the basic values, behaviors, and preferences
of the society-all of which have an effect on consumer marketing decisions. The cultural environment mean
a environment which affect the basic values, behaviors, and preferences of the society-all of which have an effect
on consumer marketing decisions. Socio-cultural environment
A set of beliefs, customs, practices and behaviour that exists within population.International companies
often include an examination of the socio-cultural environment prior to entering their target markets.
Factors which effect social and cultural environment
 Attitude of people.
 Technological Factor.
 Demographic Factor.
 Income & Life Style.
 Religion
 Health & Safety Factor.
 Social Responsibility.
 Taste & Preference.
 Education.
 Family.
 Natural Factor.
Main elements of Societies and its effect on Business
Family Family is basic part of society from the birth of a person and up to death.
 He lives in family so personal decision of buying and selling of goods are affects from family.
 In the culture of a family, it may happen that parent does not allow to use any product, then sale of
such product will decrease.
 So businessman must analyze different families’ needs.
Many occasion of family like marriage of any family member, can increase the demand of goods .
Educational institutions:
 Educational institutions are also main part of societies.

 They provide good knowledge, education, awareness, thinking, what should students buy or not to buy.
 Suppose if a student is habitual to drink the tea and if his teacher advice him that this is harmful to his
health after his guidance students can avoid drinking tea after this the sale of tea will decrease.

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Educational institutions are also main part of societies.
They provide good knowledge, education, awareness, thinking, what should students buy or not to buy.
Suppose if a student is habitual to drink the tea and if his teacher advice him that this is harmful to his
health after his guidance students can avoid drinking tea after this the sale of tea will decrease.
Religion
 Religion is also effects the business socially.

 Religion means the system in which group of persons trust in God.
 Different religions have different principles , rules and regulations in which they sacrifice to use some
products and to eat some food , In Hindu religion, they never use leather products. They affect
the sale of leather industries. So, businessman must analyze the targeted audience and after listening
their religious thoughts, he should produce the goods.
Social Culture Adopted by Indians
 Language.
 Dressing.
 Taste & Preference (Eating Habit).
 Life style.
BUSINESS POLICY AND STRATEGIC MANAGEMENT
“Without Business Policy and Strategy, an organization is like a ship without rudder, going around in
circles. It’s like a tramp; who has no place to go”- Joel Ross and Michael Kami
Business Policy definition by Christensen:
“Business Policy is the study of the function and responsibilities of Senior Management, the crucial
problems that affect success in the total enterprise, and the decisions that determine the directions of the
organization and shape of its future.”
Objectives of Business Policy:
 Understand various concepts, like. Strategy, policies, plans, programmes.

 Knowledge of internal and external environment and how it affects the functioning of the organization.
 Application of generalized approach to deal with wide variety of situations.
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 Development of analytical ability to understand situation.
 Identify factors relevant to decision making.
 Analyze strength, weakness, opportunities and threats to organization.
 Development of attitude of generalist and asses a situation from all angles.
Business policy as a discipline
The origins of business policy can be traced back to 1911, when Harvard Business School introduced an
integrative course in management aimed at the creation of general management capability. This course was based
on interactive case studies which had been in use at the school for instructional purposes since 1908. The course
was intended to enhance general managerial capability of students. However, the introduction of business policy
in the curriculum of business schools / management institutes came much later. In 1969, the American Assembly
of Collegiate Schools of Business, a regulatory body for business schools, made the course of business policy, a
mandatory requirement for the purpose of recognition. During the next few decades, business policy as a course
spread to different management institutes across different nations and become an integral part of management
curriculum. Basically, business policy is considered as a capstone, integrative course offered to students who have
previously been through a set of core functional area courses. The term 'Business Policy' has been traditionally
used though new titles for the course have begun to be introduced in recent years.
According to William F Glueck, development in business policy arose from the developments in the use
of planning techniques by managers. Starting from day-to-day planning in earlier times, managers tried to
anticipate the future through preparation of budgets and using control systems like capital budgeting and
management by objectives.
MEANING AND THE NATURE OF MANAGEMENT
To understand strategic management to be studied later, we need to have a basic understanding of the
term management. The term ‘management’ can be used in two major contexts.
(a) It is used with reference to a key group in an organisation in-charge of its affairs. In relation to an
organisation, management is the chief organ entrusted with the task of making it a purposeful and productive
entity, by undertaking the task of bringing together and integrating the disorganised resources of manpower,
money, materials, and technology into a functioning whole.
An organisation becomes a unified functioning system when management systematically mobilises and
utilises the diverse resources. The survival and success of an organisation depend to a large extent on the

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competence and character of its management. Management has to also facilitate organisational change and
adaptation.
(b) The term is also used with reference to a set of interrelated functions and processes, to a field of study
or discipline in social sciences and to a vocation or profession. The functions and processes of management are
wide-ranging but closely interrelated. They range all the way from design of the organisation, determination of
the goals and activities, mobilisation and acquisition of resources, allocation of tasks and resources among the
personnel and activity units. They also include adoption of certain techniques, tools and methods for carrying on
activities, through articulation of skills and efforts of organisational personnel in a unified manner and installation
of communication and control systems to ensure that what is planned is achieved. A wide range of definitions of
management exist in the literature on management. Here we shall cite the
Definitions of a few theorists:
Peter Drucker: Management is a function, a discipline, a task to be done, and managers practice
this discipline, carry out the functions and discharge these tasks.
Dalton McFarland: Management is the process by which managers create, direct, maintain and
operate purposive organizations through systematic, co-ordinate an co-operative human effort.
Management is an influence process to make things happen, to gain command over phenomena, to induce
and direct events and people in a particular manner. Influence is backed by power, competence, knowledge and
resources. Managers formulate their goals, values and strategies, to cope with, to adapt and to adjust themselves
with the behaviour and changes of the environment.
What is a Strategy?
A typical dictionary will define the word strategy as something that has to do with war and ways to win
over enemy. In business organizational context the term is not much different. Businesses have to respond to
dynamic and often hostile external forces for pursuit of their mission. The very injection of the idea of strategy
into business organizations is intended to unravel complexity and to reduce uncertainty of the environment.
Strategy seeks to relate the goals of the organization to the means of achieving them. Strategy is the game
plan management is using to take market position, conduct its operations, attract and satisfy customers, compete
successfully, and achieve organizational objectives. To the extent the term strategy is associated with unified
design and action for achieving major goals, gaining command over the situation with a long-range perspective
and securing a critically advantageous position. Its implications for corporate functioning are obvious.

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Following other definitions are also important to understand the term:
Igor H. Ansoff : The common thread among the organization's activities and product-
markets that defines the essential nature of business that the organization was or planned to be in future.
William F. Glueck : A unified, comprehensive and integrated plan designed to assure that the basic
objectives of the enterprise are achieved.
VISION, MISSION AND OBJECTIVES
The Vision
Very early in the strategy making process, a company’s senior managers must wrestle with the issue of
what directional path the company should take and what changes in the company’s product-market-customer-
technology focus would improve its current market position and future prospects. Deciding to commit the
company to one path versus another pushes managers to draw some carefully reasoned conclusions about how to
try to modify the company’s business makeup and the market position it should stake out.
The three elements of a strategic vision:
 Coming up with a mission statement that defines what business the company is presently in and conveys
the essence of “Who we are and where we are now?”
 Using the mission statement as basis for deciding on a long-term course making choices about “Where we
are going?”
 Communicating the strategic vision in clear, exciting terms that arouse organization wide commitment.
Some examples of Vision are:
 TATA Power: To be the most admired and responsible Integrated Power Company with international
footprint, delivering sustainable value to all stakeholder.
 Hindustan Unilever: Unilever products touch the lives of over 2 billion people every day – whether that's
through feeling great because they've got shiny hair and a brilliant smile, keeping their homes fresh and
clean, or by enjoying a great cup of tea, satisfying meal or healthy snack.
Mission

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According to Glueck & Jauch mission is answer to the question ‘what business are we in’ that is faced by
corporate-level strategist. Analysis shows that in actual practice many business firms fail to conceptualize and
articulate the mission and business definition with the required clarity.
Why organization should have mission?
 To ensure unanimity of purpose within the organization.

 To provide a basis for motivating the use of the organization’s resources.
 To develop a basis, or standard, for allocating organizational resources.
 To establish a general tone or organizational climate, for example, to suggest a businesslike operation.
A company’s Mission statement is typically focused on its present business scope – “who we are and what we
do”; mission statements broadly describe an organizations present capabilities, customer focus, activities, and
business makeup.
Some examples of Mission are:
Reliance Industries:
 Create value for all stakeholders

 Grow through innovation
 Lead in good governance practices
 Use sustainability to drive product development and enhance operational efficiencies
 Ensure energy security of the nation
 Foster rural prosperity
Objectives and Goals
Business organization translates their vision and mission into objectives. As such the term objectives are
synonymous with goals, however, we will make an attempt to distinguish the two. Thus the goals are more
specific and translate the objectives to short term perspective. However, this distinction is not made by several
theorists on the subject. Accordingly, we will also use the term interchangeably.

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Objectives with strategic focus relate to outcomes that strengthen an organizations overall business
position and competitive vitality. Objective to be meaningful to serve the intended role must possess following
characteristics:
Objectives should define the organization’s relationship with its environment.
 They should be facilitative towards achievement of mission and purpose.

 They should provide the basis for strategic decision-making.
 They should provide standards for performance appraisal.
 Objectives should be understandable.
 Objectives should be concrete and specific
 Objectives should be related to a time frame
 Objectives should be measurable and controllable
STRATEGIC LEVELS IN ORGANIZATIONS
For many companies, a single strategy is not enough. There is a need for multiple strategies at different
levels.
Strategy at different levels
I. Corporate Strategy
II. Business Level Strategy
III. Functional Level Strategy
I. Corporate level
Corporate level It is a plan of

action, covering the various functions performed by different SBU’s. The plan deals with the objectives of the

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company, allocation of resources and coordination of the S B U’s for optimal performance.SBU Level strategy
SBU strategies is a comprehensive plan providing objectives for SBU’s, allocation of resources among functional
areas, and coordination between them for making an optimal contribution to the achievement of corporate level
objectives.
Research
Innovation
Growth
STRATEGY
Vission
Team work
Marketing
Corporate-level strategy is developed by top-level management and the board of directors. The
Corporate-level strategy seeks to determine what businesses a corporation should be in or wants to be in. Two
popular approaches for answering the question of what business should we be in are the grand strategies
framework and the corporate portfolio matrix.
These strategies address
 What business the organization will be coordinated to strengthen the organization's competitive position.
 How the strategies of those businesses will be coordinated to strengthen the organization's competitive
position.
 How resources will be allocated among businesses
II. Business-level strategy

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Business-level strategy concentrates on the best means of competing within a particular business while
also supporting the corporate-level strategy.The distinction between corporate-level and business-level strategy
applies only to organizations with separate divisions that compete in different industries.
A strategic business unit (SBU) is a distinct business, with its own set of competitors that can be managed
reasonably independently of other businesses within the organization
III. Functional Strategies
Functional level strategies deal with a relatively restricted plan providing objectives for a specific
function, allocation of resources among different operations within that functional area, and coordination between
them for optimal contribution to the achievement of SBU and corporate level objectives.Functional-level strategy
focuses on action plans for managing a particular functional area within a business in a way that supports the
business-level strategy.
Functional areas include operations, marketing, finance, human resources management, accounting,
research and development, and engineering.Functional strategies are usually developed by functional managers
and are typically reviewed by business unit heads
Project
completion
Customers and
markets
Technology and
operations Performance and
growth
People and culture

Management and
organization

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SECTION-A
1 The term ______________refers to all external forces or factors which have a direct or indirect bearing
on the functioning of business
2 The combination of __________that influence a company's operating situation.
3 ______________includes all those forces which have an economic impact on business.
4 ________________is exercising considerable influence on business
5 How many types of business environment?
6 The economic environment includes economic conditions_________,__________&__________ of the
country.
_____________comprises social, political, legal, technological, demographic and natural environment
7 What are the four phases of a business cycle?
8 _____________of business means all factors which affects business socially.
9 What is Vision?
10 What is Mission?
SECTION-B
1 What are the features of strategic management?

2 What is business policy? What is its nature?
3 Write short notes on evolution of strategic management and mention its elements?
4 What are the four phases of a business cycle?
5 Explain vision, mission and objectives
6 Explain briefly objectives and goals
7 Explain characteristics of business environment
8 What are the modes of strategic management?
9 What are the levels in strategic organization?
10 Explain importance of the strategic management
SECTION-C
1 Explain importance of strategic management?

2 Explain evolution of strategic management
3 Describe business policy and strategic management
4 What is our mission? And what business are we in?
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5 Explain vision. What are the three elements of a strategic vision:
6 Explain environmental analysis
7 Explain importance of business environment
8 Explain various components of business environment
9 What are the factors which effect social and cultural environment?
10 Explain main elements of societies and its effect on business
11 What are the types of business environment?

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SYLLABUS

II B.Com PA - STRATEGIC MANAGEMENT

– BCG Matrix. Strategic Planning: Meaning, stages, alternatives, strategy formulation.

BOOKS FOR REFERENCE:

Book Name Author Name Publisher Year & Edition

Business Policy and Himalaya

Strategic Management VSP Rao &

Howard S. Gitlow, Tata McGrow Hill

Quality Management Alan J. Oppenheim Publishing co Ltd 3rd edition 2009

Rosa David M.Levine

Business Environment: General Environment – Demographic, Socio- cultural, Macro – economic,

Alfred D Chandler (1962)

FEATURES OF STRATEGIC MANAGEMENT

2. Shaping broad plans:

2 II BCOM PA Kaamadhenu Arts and Science College,

The corporation becomes large,

The layers of management increase, or

The environment changes substantially.

In general, a corporate strategy has the following characteristics:

The five stages are as follows:

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IMPORTANCE OF STRATEGIC MANAGEMENT

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COMPONENTS OF BUSINESS ENVIRONMENT

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I. EXTERNAL MICRO- ENVIRONMENT

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II. EXTERNAL MACRO ENVIRONMENT

3. Technological Environment: Technological environment is exercising considerable influence on business.

8 II BCOM PA Kaamadhenu Arts and Science College,

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The various internal factors are:

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IMPORTANT CHARACTERISTICS OF BUSINESS ENVIRONMENT

Following are the chief characteristics of the business environment:

(1) Totality of External Forces:

(2) Specific and General Forces:

11 II BCOM PA Kaamadhenu Arts and Science College,

(4) Dynamic Nature:

IMPORTANCE OF BUSINESS ENVIRONMENT

Determining Opportunities and Threats: The interaction between the business

TYPES OF BUSINESS ENVIRONMENT:

Confining business environment to uncontrollable external factors, it may be classified as

I. Economic environment; and

II. Non-economic environment.

13 II BCOM PA Kaamadhenu Arts and Science College,

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The various elements of non-economic environment are as follow:

(b) Political Environment:-

 Companies Act, 1956

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(d) Technological Environment:-

(e) Demographic Environment:-

(f) Natural Environment:-

Four phases of a business cycle

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Factors which effect social and cultural environment

Main elements of Societies and its effect on Business

 Educational institutions are also main part of societies.

19 II BCOM PA Kaamadhenu Arts and Science College,

 Religion is also effects the business socially.

Social Culture Adopted by Indians