NATIONAL INSTITUTE OF TECHNOLOGY SIKKIM

Ravangla Campus
Barfung Block, Ravangla Sub Division, South Sikkim-737139
Department of Mechanical Engineering
Principles of Management (HS16101)

Module: 2 Lecture No: 8

Learning Objectives

 To discuss SWOT analysis.

 To understand the elements of SWOT analysis.
 To discuss the principles of Management By Objectives (MBO).
 To understand the MBO process.
 To discuss the advantages and disadvantages of MBO management system.

Important & Relevant Questions

 What is SWOT analysis? Describe each elements of the SWOT analysis with suitable
example.
 What do you understand by Management By Objectives? Discuss the process of MBO.

Evaluation Questions

 What are the strengths, weaknesses, opportunities, and threats to an business enterprise?
 Which elements of SWOT analysis are the part of external environment to an business
organisation?
 Which elements of SWOT analysis are the part of internal environment to an business
organisation?
 What is Management By objectives?
 What are the salient features of MBO management system?
 What are the characteristics of MBO management system?
 What the steps of MBO process?

References

 Koontz H. and Weihrich H., Essentials of Management: An International, Innovation,

and Leadership Perspective, Ed. 3, McGraw Hill Education Private Limited, India.
 Bhat A. and Kumar A., Management: Principles, Processes, and Practices, Ed. 10,
Oxford University Press, India.
 NATIONAL INSTITUTE OF TECHNOLOGY SIKKIM
Ravangla Campus
Barfung Block, Ravangla Sub Division, South Sikkim-737139
Department of Mechanical Engineering
Principles of Management (HS16101)

SWOT analysis
A SWOT analysis is a technique used to determine and define the Strengths, Weaknesses,
Opportunities, and Threats to an organisation. SWOT analysis can be applied to an entire
company or organisation, or individual projects within a single department. Most
commonly, SWOT analysis are used at the organisational level to determine how closely a
business is aligned with its growth trajectories and success benchmarks, but they can also
be used to ascertain how well a particular project.

Figure 1: SWOT analysis

 Strengths
 Characteristics of the business or individual that give it an advantage over
others in the industry.
 Positive tangible and intangible attributes, internal to an organisation or
individual.
 Beneficial aspects of the organisation or the capabilities of an organisation,
process capabilities, financial resources, products and services, customer
goodwill and brand loyalty.
 Examples - Abundant financial resources, Well-known brand name, Lower
costs [raw materials or processes], Superior management talent, Better
marketing skills, Good distribution skills, Committed employees.
 Weaknesses
 Characteristics that place the firm or individual at a disadvantage relative to
others.
 Detract the organisation from its ability to attain the core goal and influence
its growth.
 NATIONAL INSTITUTE OF TECHNOLOGY SIKKIM
Ravangla Campus
Barfung Block, Ravangla Sub Division, South Sikkim-737139
Department of Mechanical Engineering
Principles of Management (HS16101)

 Weaknesses are the factors which do not meet the standards we feel they
should meet. However, weaknesses are controllable. They must be
minimized and eliminated.
 Examples - Limited financial resources, Very narrow product line, Limited
distribution, Higher costs, Weak market image, Poor marketing skills,
Limited management skills, Under-trained employees.
 Opportunities
 Are external attractive factors that represent reasons your business is likely
to prosper.
 Chances to make greater profits in the environment - External attractive
factors that represent the reason for an organisation to exist & develop.
 Arise when an organization can take benefit of conditions in its environment
to plan and execute strategies that enable it to become more profitable.
 Organisation should be careful and recognize the opportunities and grasp
them whenever they arise.
 Examples - Rapid market growth, Rival firms are complacent, Changing
customer needs/tastes, New uses for product discovered, Economic boom,
Government deregulation, Sales decline for a substitute product.
 Threats
 External elements in the environment that could cause trouble for the
business - External factors, beyond an organisation’s control.
 Arise when conditions in external environment jeopardize the reliability and
profitability of the organisation’s business.
 Examples - Entry of foreign competitors, Introduction of new substitute
products, Product life cycle in decline, Changing customer needs/tastes,
Rival firms adopt new strategies, Increased government regulation,
Economic downturn.
The purposes of SWOT analysis are to –
 Help decision makers share and compare ideas.
 Bring a clearer common purpose and understanding of factors for success.
 Organise the important factors linked to success and failure in the business world.
 Help individual or organisation to understand their strengths and weaknesses.
 Promote strategic thinking.
Management By Objectives (MBO)
Management By Objectives (MBO) can be defined as a process whereby the performance
goals and objectives are set by each subordinate in collaboration with his/her superior at
the start of the appraisal period. It is a participative system of managing in which managers
look ahead for improvements, think strategically, stretch objectives at the beginning of a
time period, develop action and supporting plans, set performance, and ensure
accountability for results at the end of the time period. It aims at enhancing organisational
performance by synchronizing goals and subordinate objectives throughout the
 NATIONAL INSTITUTE OF TECHNOLOGY SIKKIM
Ravangla Campus
Barfung Block, Ravangla Sub Division, South Sikkim-737139
Department of Mechanical Engineering
Principles of Management (HS16101)

organisation. MBO is an appraisal tool – a motivational technique – a planning and control

method.
 Features of MBO

Figure 2: Salient features of MBO

 Characteristics of MBO

Figure 3: Characteristics of MBO

 NATIONAL INSTITUTE OF TECHNOLOGY SIKKIM
Ravangla Campus
Barfung Block, Ravangla Sub Division, South Sikkim-737139
Department of Mechanical Engineering
Principles of Management (HS16101)

 MBO process

Figure 4: Process of MBO

 Benefits of MBO
 Ensures personal commitments to organisational goals.
 Provides goal and role clarity in the organisation and in turn, helps in
improving efficiency and effectiveness.
 Ensures result-oriented planning.
 Develops effective control mechanism leading to timely corrective actions.
 Less supervision of subordinates and increased motivational level.
 Improves managerial effectiveness and efficiency.
 Disadvantages of MBO
 Failure to teach the philosophy of MBO across the organisation.
 Lack of guidelines to goal setters.
 Difficulty in setting verifiable objectives.
 Over-emphasis on short-term achievements at the cost of long-term growth
and development.
 Lack of flexibility to adopt changes with changing environmental factors.
 Over-emphasis on quantitative objectives.