Lecture 30-Aug-2021

Charting a company’s Direction

Vision

Objectives

External and internal Analysis

PESTEL and industrial analysis: - External (OT – Opportunity and Threat)

Internal Analysis: SW – Strength and Weakness.

After conducting SWOT you find various strategies. Then you select and implement one strategy.

You create an action plan emanating from the strategy and implement the action plan via a value chain.

Execution: Strategy is executed via implementing a value chain. Strategy would decide what actions
you’d take in the raw material sourcing, production, marketing and distribution to the end customer.

Problems occur in department interfaces. It is therefore important that the Departments should ensure
that the process is central instead of personal job roles.

Balanced scorecard: In the BS, information about the business has 4 elements: Learning and Growth,
Business Processes, Customer perspectives, financial data. The aim is to maximize the sum total.

What are strategic objectives: Increase in sales (is not strategic objective 20% sales growth is absolute),
Increase in market share is.

Sales, profit are all lagging indicators. What has been done in the past.

Leading indicator: Working on your leading indicators increases your lagging indicators. Advertising is a
leading indicator. Action plan is a leading indicator, organizing customer days, improving marketing
which result in more sales and profits.

Crafting a strategy is thinking about a strategy in an innovative manner. Strategy is not just logical
analysis but it requires art and innovation as well. Like making a patchwork cloth (Ralliay).

Strategy is devised both top to bottom and vice versa.

An agency exists between the principal (owner/investor) and the agent (BOD). The owner wants the
company to provide an ROI and elects the agent to accomplish that goal.

BOD appoints a management team to run the company.

The external auditor is elected by the shareholder.

The auditor performs tests on the financial statements on a sampling basis. So they have a limited role in
the audit process. He provides an observation based on the audit performed. External auditor audits
only the financial statements.

Internal audit has the entire company in its scope. Internal auditor is appointed by BOD (Audit
Committee). Chairman of the board, CEO, CFO are not part of the audit committee.
Internal audit creates a risk-impact matrix. Risk is classified as low, medium, high and impact as low,
moderate, high.

Demand fulfilment process. – Production, Sales, Distribution, Warehouse.

Demand creation process. – Marketing Research, R&D,