S.M.C.

E
MANAGEMENT
SCIENCE
Unit-5: syllabus

✓ Strategic Management: Vision, Mission ,Goals,

✓ Strategy: Elements of Corporate Planning Process
✓ Environmental Scanning
✓ SWOT analysis
✓ Steps in Strategy Formulation & Implementation,
✓ Generic Strategy Alternatives.
✓ Global strategies.
✓ Theories of Multinational Companies.
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Q) DEFINE STRATEGIC MANAGEMENT AND EXPLAIN ITS VISION, MISSION, AND GOALS?

Strategic Management Introduction The word “strategy” is derived from the Greek word
“stratçgos”; stratus (meaning army) and “ago” (meaning leading/moving).

Strategy is an action that managers take to attain one or more of the organization’s goals.
Strategy can also be defined as “A general direction set for the company and its various
components to achieve a desired state in the future. Strategy results from the detailed strategic
planning process”.

A strategy is all about integrating organizational activities and utilizing and allocating the scarce
resources within the organizational environment so as to meet the present objectives. While
planning a strategy it is essential to consider that decisions are not taken in a vacuum and that
any act taken by a firm is likely to be met by a reaction from those affected, competitors,
customers, employees or suppliers.

Features of Strategy
✓ Strategy is Significant because it is not possible to foresee the future. Without a perfect
foresight, the firms must be ready to deal with the uncertain events which constitute the
business environment.

✓ Strategy deals with long term developments rather than routine operations, i.e. it deals
with probability of innovations or new products, new methods of productions, or new markets to
be developed in future.

✓ Strategy is created to take into account the probable behavior of customers and
competitors. Strategies dealing with employees will predict the employee behavior.

Definitions
✓ 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.

✓ 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.

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✓ Strategic management consists of the analysis, decisions, and actions an organization

undertakes in order to create and sustain competitive advantages.

✓ Strategic management is concerned with the analysis of strategic goals (vision, mission,
and strategic objectives) along with the analysis of the internal and external environment of the
organization.

Strategic Management 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.

Vision, Mission, Goal & Objectives

Vision and mission statements play an important role in strategy development by providing
vehicles to
Generate and screen strategic options. They also provide organizational identity and
understanding of business directions.

Vision
Dream or a picture to be achieved ultimately. Created by consensus. Forms mental image of
future to which people can align. Describes something possible, not necessarily predictable.
Provides direction and focus. Pulls people, who hold it, towards it.

A Vision Statement defines what your business will do and why it will exist tomorrow and it has
defined goals to be accomplished by a set date. A Vision Statement takes into account the
current status of the organization, and serves to point the direction of where the organization
wishes to go.

Your Vision Statement is a marketing tool and a business development tool because it
announces your company’s goals and purpose to your employees, suppliers, customers, vendors,
and the media.

✓ In concert with your Mission Statement, your Vision Statement will help you define the
future success for your business and what your business hopes to become.

✓ Your goals will be identified by measuring the gap between where you are today (your
Mission Statement), and where you want to be tomorrow (your Vision Statement), and then
defining strategies (goals) to close that gap. When you’ve achieved

✓ Your goal, it’s time to revisit your Vision Statement and begin setting new goals.

✓ Your Vision Statement must inspire and motivate staff, instill confidence, and represent
your business by articulating a common vision of the future.

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✓ For these reasons, a vision statement is essential for any small business.

✓ If you have already created your Mission Statement then creating your Vision Statement
will not be as much work; it is likely that many elements of your Vision Statement will have been
uncovered. That said your Vision Statement will still require time, patience, guidance, research, a
little sole searching and lots of honesty – just like your Mission Statement required.

✓ Because it is so important it is recommended you have a coach or mentor work with you.
✓ Vision Statements and Mission Statements should clearly and concisely convey the
direction of the organization.
Characteristics of a ‘Good’ Vision Statement
There is no one formula to develop a vision. What matters is its appropriateness to UH Hilo and
the direction it sets for the institution.
There are though some general principles that may be helpful to us:
✓ Be inspirational:-The vision statement is supposed to challenge, enthuse and inspire. Use
powerful words and vivid phrases to articulate the kind of institution you are trying to become.
This is your chance to lift your institution's gaze above the grind of day-to-day gripes and
problems and to focus attention on 'the bigger picture' and the potential rewards that wait.
✓ Be ambitious:-If you set your sights on being 'within the top 10' the chances are that the
best you will come is 10th. If Your real aim is to hit the top 5, why not say so and go for broke?
What targets you set and how high you aim will, in them, also say something about you as an
organization. Ambitious, perhaps even audacious targets will help create the impression of an
organization that is going places, that aims high and demands high standards from its staff and
students in a way that comfortable, 'middle-of-the-road' benchmarks will not.
✓ Be realistic:-This may sound odd following on immediately from a call to 'Be ambitious',
perhaps even contradictory, but it is an important part of the balancing act that is required. For
just as the purpose of the vision is to inspire and enthuse, it is equally important that this
ambition is tempered by an underlying sense of realism. People need to believe that what is
envisaged is actually achievable; otherwise there is no reason for them to believe or buy in to it.
It is perfectly possible to be both ambitious and realistic and it is through successfully marrying
these two forces that the best vision statements will be formed. Stating that you will become
'ranked in the top 3 in the student satisfaction league table within 5 years' may be both
ambitious and realistic if you currently sit at number 7, but sound far less convincing if you
currently reside at number 57
✓ Be creative:-Albert Einstein once said that 'imagination is more important than
knowledge.' Of course, there is nothing wrong with saying that you will 'deliver world-class
learning and teaching standards but it is probably a safe bet that at least a dozen other
institutions will be saying the same thing. Just as a commercial company may need to think
creatively in order to identify gaps in the market, so too you may need to think imaginatively
about what your vision is and how you describe it to help stand out from the crowd.

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✓ Be descriptive:-Unlike with your mission statement, there is no pressure to pare your

vision down to the bone. Of course you want to be concise (indeed many of the best examples of
memorable visions to tend to be so), but there is no need to enforce an arbitrary limit on its
length. Take as much space as you need to get your vision across
✓ Be clear:-As with your mission statement it pays to avoid jargon, keep sentences short
and to the point and use precise, uncluttered language. Otherwise you risk diluting or losing your
message amongst the background 'noise'
✓ Be consistent:-Though bearing in mind their different purposes, there should still be an
element of continuity between your mission and vision statements, or at least some careful
thought and discussion given as to why this is not the case. At the same time, the vision need not
be constrained by the current remit of the mission. Perhaps the institution is keen to explore
new areas in the future: to become the region's conference venue of choice, for example, in
which case this would need to be reflected in the mission statement in due course.

Examples of Vision Statements

‘Peace’ - United Nations
‘There will be a personal computer on every desk running Microsoft software.’
[Short, simple, unequivocal, memorable and long term] – Microsoft
‘Our vision is every book ever printed in any language all available in 60 seconds’ – [Simple,
clear, bold, inspiring] - Amazon Kindle
‘GM's vision is to be the world leader in transportation products and related services. We will
earn our customers' enthusiasm through continuous improvement driven by the integrity,
teamwork, and innovation of GM people.’ [It is not short, it is not simple, it is not memorable
and contains too many words open to interpretation of meaning] – General Motors

Mission

✓ Statement of business. States the business reason for the organization's existence. Does
not state an outcome. Contains no time limit or measurement. Provides basis for
decisions on resource allocation and appropriate objectives. Defines current and future
business in terms of product, score, customer, reason, and market price.

✓ A Vision Statement defines what your business will do and why it will exist tomorrow and
it has defined goals to be accomplished by a set date. A Vision Statement takes into
account the current status of the organization, and serves to point the direction of where
the organization wishes to go.

✓ Your Vision Statement is a marketing tool and a business development tool because it
announces your company’s goals and purpose to your employees, suppliers, customers,
vendors, and the media.

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✓ In concert with your Mission Statement, your Vision Statement will help you define the
future success for your business and what your business hopes to become.

✓ Your goals will be identified by measuring the gap between where you are today (your
Mission Statement), and where you want to be tomorrow (your Vision Statement), and
then defining strategies (goals) to close that gap. When you’ve achieved your goal, it’s
time to revisit your Vision Statement and begin setting new goals.

✓ Your Vision Statement must inspire and motivate staff, instill confidence, and represent
your business by articulating a common vision of the future.

✓ For these reasons, a vision statement is essential for any small business.

Examples of Mission Statements

✓ ‘To organize the world’s information and make it universally accessible and useful’ –
Google
✓ ‘To give ordinary folk the chance to buy the same thing as rich people’ – Wal-Mart
✓ ‘To contribute to society through the pursuit of education, learning, and research at the
highest international levels of excellence.’ - University of Cambridge

Characteristics of a ‘Good’ Mission Statement

There are no hard and fast rules to developing a mission - what matters most is that is generally
be considered to be an accurate reflection and useful summary of UH Hilo and ‘speaks’ to our
stakeholders. What follows though are some general principles that we could bear-in-mind:

✓ Make it as succinct as possible:-A mission statement should be as short and snappy as

possible - preferably brief enough to be printed on the back of a business card. The
detail which underpins it should be mapped out elsewhere.
✓ Make it memorable:-Obviously partially linked to the above, but try to make it
something that people will be able to remember the key elements of, even if not the
exact wording
✓ Make it unique to you:-It's easy to fall into the 'motherhood and apple pie' trap with
generic statements that could equally apply to any institution. Focus on what it is that
you strive to do differently: how you achieve excellence, why you value your staff or
what it is about the quality of the student experience that sets you apart from the rest.
✓ Make it realistic:-Remember, your mission statement is supposed to be a summary of
why you exist and what you do. It is a description of the present, not a vision for the
future. If it bears little or no resemblance to the organization that your staff knows it will
achieve little.
✓ Make sure it's current:-Though it is not something which should be changed regularly,

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neither should it be set in stone. Your institution's priorities and focus may change
significantly overtime - perhaps in response to a change of direction set by a new, or
major changes in state/federal policy.

Goals

❖ Results to be achieved. Describes ideal states to be achieved at some unidentified

future time. Defined
❖ Consistent with and related directly to vision and mission. Guide everyday decisions and
actions. Do not necessarily deal with measurable results.
❖ It's like having a personal trainer or coach. They can help you achieve your goals faster,
give you expert insight into new ideas, be more strategic, and help you avoid costly
mistakes and delays.
❖ Goal setting for yourself and your business is always important.

❖ You might choose to set your goals and revise your vision at the beginning of a New Year
Really anytime is a good time to reflect on your business's progress and plan how you want
your business to grow / change.

❖ Change is inevitable - so you might as well make it work for you.

❖ Your future will start being better the moment you think about setting goals for yourself and
your business. Why? Because realizing the need is always “half the battle” as my dad might
have said. It makes sense to get some professional assistance to define and achieve your
goals. Think of it as having a personal trainer.

❖ The best way to achieve your goals is to break the big goals into smaller achievements;
this makes them easier to attain and gives you small wins along the way. For example, if
your goal is to get 100 new clients in a year, make a smaller goal to contact 10 leads per
week (if on average you get 2 new clients for every 10 leads you call). Celebrate making each
of the10 calls and celebrate each new client.

❖ Setting goals is one of the best ways to measure your progress and create clarity. Consider the alternative –
drifting along without a plan.
✓ Your goals must be meaningful
✓ Your goals must be specific & measurable
✓ Your goals must be flexible
✓ Your goals must be challenging but realistic
✓ Your goals must be yours and must align with your Core Values

Objectives

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✓ How-Actions and Results-to plan to achieve the desired results. Focuses on critical
organization issues and milestones. Describe activities to be accomplished to achieve
goals. Identify dates when specific results are to be accomplished. Measurable in terms
of whether or not they are achieved. They may be changed when necessary for progress
towards goals.

✓ A measure of change in order to bring about the achievement of the goal. The
attainment of each goal may require a number of objectives to be….

✓ There is often much confusion between goals and objectives. Whereas as a goal is a
description of a destination, an objective is a measure of the progress that is needed to
get to the destination. The following table serves to illustrate the difference between
goals and objectives.

2Q) EXPLAIN THE STM PROCESS?

Strategic Management Process

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:

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.
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.
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.

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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 its implementation meets the
organizational objectives.

3Q) DISSCUSS THE ELEMENTS OF CORPORATE PLANNING PROCESS

Elements of corporate Planning Process

✓ Communication Strategy:–The development of a communication strategy is essential for

the effective development and implementation of a strategic plan. In the communications
strategy, you should determine who will be involved in the planning process, how they will
be involved and what is being communicated to whom on the staff.
✓ Strategic Planning Task Force:–The development of a core team of organizational leaders is
mandatory in the effective creation of a strategic plan. Each task force member should
represent a key business area or department of the organization to ensure the plan has
organization wide input and buy-in. The task force meets regularly with clearly defined
deliverables to be presented at each meeting.
✓ Vision Statement:–An organization’s vision statement is simply their roadmap for the
future. the direction of the organization should be broad to include all areas of impact but
narrow enough to clearly define a path.
✓ Mission Statement:–An organization’s mission is a definition of whom and what they are.
Often mission statements include core goals and values of the organization.
✓ Values:–Values are the organization’s fundamental beliefs in how they operate. Values can
provide a guideline for management and staff for acceptable organizational behavior. Often
values relate to the organization’s organizational culture.
✓ Goals:-Goals are broad based strategies needed to achieve your organization’s mission.
✓ Objectives:–Objectives are specific, measurable, action oriented, realistic and time bound
strategies that achieve the organization’s goals and vision.
✓ Tasks:–Tasks are specific actionable events that are assigned to individuals/departments to
achieve. They, too, should be specific, measurable and time bound.
✓ Implementation Strategy:–Once the plan has been outlined, a tactical strategy is built that

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prioritizes initiatives and aligns resources. The implementation strategy pulls all the plan
pieces together to ensure collectively there are no missing pieces and that the plan is
feasible. As a part of the implementation strategy, accountability measures are put in place
to ensure implementation takes place.
✓ Monitoring of Strategic Plan:–During implementation of a strategic plan, it is critical to
monitor the success and challenges of planning assumptions and initiatives. When
evaluating the successes of a plan, you must look objectively at the measurement criteria
defined in our goals and objectives. It may be necessary to retool the plan and its
assumptions if elements of the plan are off track.

4Q) WRITE THE CONCEPT OF ENVIRONMENTAL SCANNING?

Environmental Scanning
Environment literally means the surroundings external objects, influences or overall
circumstances under whichsomeone or something exists.
In Business the environment in which an organization exists could be broadly divided into two
parts:

✓ The Internal environment (Related the factors such as its personnel, physical
facilities, organization andfunctional means, which are generally controllable.
✓ The External environment (Related the factors such as economic, socio cultural,
Government and legal, demographic, geo – physical – by and large beyond the
control

✓ The External environment includes all the factors outside the organization, which
provide opportunities or pose threats tothe organization.

✓ The internal environment refers to all the factors within an organization which imparts
strengths or cause weaknesses of a strategic nature.

✓ The environment in which an organization exists can, therefore, be described in terms of

the opportunities and threats operating in the external environment apart from the
Strength and weaknesses existing in the internal environment.

INTERNAL ENVIRONMENT:-There are a number of internal factors which influence the strategy
and other decisions. Anoutline of the important internal factors is given below:

✓ Value system:-The value system of the founders and those at the helm of affairs has
important bearing on the choice of business, the mission and objectives of the
organization, business policies and practices. It is a widely acknowledges fact that the
extent to which the value system is shared by all in the organization is an important factor
contributing to success. Mission and Objectives:-The business domain of the company,

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priorities, direction of development, business philosophy, business policy etc. is guided

by the mission and objectives of the company. Management Structure and Nature:
the organizational structure, the composition of the board of directors, extent of
professionalization of management etc. are important factors influencing business
decisions.
✓ Internal Power Relationship:-Factors like the amount of support the top management
enjoys from lower levels and workers, shareholders and board of directors have
important influence on the decisions and their implementation. The relationship
between the members of the Board of directors is also a critical factor.
✓ Human Resources:-The characteristics of the human resources like skill, quality, morale,
commitment, attitudes, etc. could contribute to the strength or weakness of an
organization. Sometimes, organizations find it difficulties to carry out restructuring or
modernization because of resistance by employees whereas they are smoothly one in
some others.
✓ The involvement, initiative etc. of people at different levels may vary from organization
to organization. The organizational culture and overall environment have bearing on
them. John Towers, MD, Rover group, observes that a Japanese company of 30,000
employees is 30,000 process improvers. In a western company, it is 2,000 process
improvers and 28,000 workers. And in an Indian Company
✓ Company Image and Brand Equity:-The image of the company matters while raising
finance, forming joint ventures or other alliances, soliciting marketing intermediaries,
entering purchase or sale contracts, launching new products etc. Brand equity is also
relevant in several of these cases. However, there are a number of other internal factors
which contribute to business success/ failure or influences the decision making. These
are:-

✓ Physical Assets and facilities like the production Capacity, technology, and efficiency of
the productive apparatus, logistics etc. are among the factors which influence the
competitiveness
✓ R & D and technological capabilities, among other things, determine the ability to
innovate and compete.
✓ Marketing resources like the organization for marketing, quality of the marketing men,
brand equity; distribution network etc. has direct bearing on the marketing efficiency.
They are important also for brand extension, new product introduction etc.
✓ Financial Factors like financial policies, financial position, and capital structure are also
important internal environment affecting business performance, strategies and
decisions.

EXTERNAL ENVIRONMENT:

The external environment consists of two types of environment, viz micro environment and
macro environment. Recently the International environment comes under mega environment.

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Micro Environment:
The Micro environment consists of the actors in the company’s immediate environment, hat
affect the performance of thecompany. These include –
✓ Suppliers:–those who supply the inputs like raw materials.
✓ Marketing intermediaries:–which are ‘firms that aid the company in promoting, selling
and distributing itsgoods to final buyers’.
✓ Competitors:–not only other firms of similar products but also all those who compete for
the discretionaryincome of the consumers.
✓ Customers:–Business is a create of customer; therefore monitoring the customer
sensitivity is a prerequisitefor the business success.
✓ Publics–is any group that has an actual or potential interest in or impact on an
organization’s ability to achieve its interests. Media publics, citizen’s action publics and
local publics are some examples.

Macro Environment:
✓ The Macro environment consists of the larger societal forces that affect all the actors in
the company’s micro environment –namely:
✓ Demographic:–population growth rate, age composition, sex composition, education
level, caste and creed, religion etc.All factors which relevant to business.
✓ Economic:-economic condition, economic policies and the economic system are the
important external factors that constitute the economic environment of a business.
✓ Natural:-geographical and ecological factors, such as natural resources endowments,
weather and climatic conditions, topographic factors, location aspects in the global
context, ort facilities, etc., are all relevant to business.
✓ Technological:–the fast changing technologies also create problems for enterprises as
they render plants and products obsolete quickly. Product – market – matrix generally
has a much shorter life today than in the past. It is particularly so in the international
marketing context.
✓ Political:–Political and Government environment has close relationship with the
economic system and economic policy. For example, the communist countries had a
centrally planned economic system. In most countries, apart from those laws that
control investment and related matters, there are a number of laws which regulate the
conduct of business. These laws cover such matters as standards of product, packaging,
promotions etc.
✓ Socio- Cultural:- socio – cultural fabric is an important environment factor that should be
analyzed while formulating the business strategies. The cost of ignoring the customs,
traditions, taboos, tastes and preferences etc. of a people could be very high. The buying
and consumption habits of the people, their languages, beliefs, and values, customs and
traditions, tastes and performances, education are all factors that affect business.

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Mega Environment:-
Mega environment mainly consist of International Environment which is very important from
the point of certain categoriesof business.
Import and export dependency:
✓ Industries directly depends on Imports or exports
✓ Import – competing Industries.
✓ A boom in the export market or a relaxation of the protectionist policies may help
the export oriented industries.
✓ A liberalization of imports may help some industries which use imported items,
but may adversely affect important
– Competing industries.
World trade linkage:
✓ Oil price hikes have seriously affected a number of economics. These hikes have
increased the cost of production and the prices of certain products like fertilizers, synthetic
fabrics, etc. The high oil price has led to an increase in the demand for automobile models that
economies energy consumption.
✓ The oil crisis led to a reorientation of the government of India’s energy policy. Such
development affects the demand, consumption and investment pattern.

Q) DISCUSS THE CONCEPT OF SWOT ANALYSIS?

SWOT Analysis: Strengths, Weaknesses, Opportunities, and Threats

Internal factors–The strengths and weaknesses internal to the organization.

External factors– The opportunities and threats presented by the external environment to the
organization.

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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 alignan 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-

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.

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.

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.

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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-

✓ It is a source of information for strategic planning.

✓ Builds organization’s strengths.
✓ Reverse its weaknesses.
✓ Maximize its response to opportunities.
✓ Overcome organization’s threats.
✓ It helps in identifying core competencies of the firm.
✓ It helps in setting of objectives for strategic planning.
✓ It helps in knowing past, present and future so that by using past and current data,
future plans can be chalkedout.
Q) ELOBARATE THE CONCEPT OF STRATEGY FORMULATION AND IMPLEMENTATION?
Steps/Stages in Strategy Formulation and Implementation

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.

Setting Organizations’ objectives:-The key component of any strategy statement is to set

the long-termobjectives 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

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take strategic decisions.

1. 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 purposeof 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.
2. 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.
3. 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.
4. 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.
5. 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.

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
Q) ELOBATE THE CONCEPT Generic Strategy Alternatives.
Generic Strategy Alternatives:

Generic strategy alternatives refer to the strategy alternatives in broader terms. After the
nature of business of' the firm is defined, the next task is to focus on the type of strategic

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alternative, in general, the firm should pursue. The strategist seeks to identify the righl
alternative through questions such as:
•Should we get out of this business entirely?
•Should we try to expand?

There are four strategic alternatives for any business. These are explained below:
(a)Expansion strategy
It can be adopted in the case of highly competitive and volatile industries, particularly, if they
are in the introduction stage of product/service life cycle.
(b)Stability strategy
It is a better choice when the firm is doing well, the environment is relatively less volatile, and
the product/service has reached the stability or maturity stage of the life cycle.
(c)Retrenchment strategy
It is the obvious choice when the firm is not doing well in terms of sales and revenue and finds
greater returns elsewhere, or the product/service is in the finishing stage of the product life
(d)Combination strategy
It is not a new strategy as it combines the other strategies. It is best suitable for multiple SBU
firms in times of economic transition and also when changes occur in the product/service life
cycle. If a firm realises that some of its main product lines have outlived their lives, it may iv:
any more profitable to continue investment with the same product.

Strategic alliances constitute another viable alternative. Companies can develop alliances with
the members of the strategic group and perform more effectively. These alliances may take any
of the following
(a)Product and/or service alliance
Two or more companies may get together to synergise their operations, seeking alliance for
their products and/or services
(b)Promotional alliance
Two or more companies may come together to promote their products and services. This is
called promotional alliance. A company may agree to carry out a promotion campaign during a
given period for the products and/or services of another company. The Cricket Board may
permit Coke's products lo be displayed during the cricket matches for a period of one year.
(c)Logistic alliance
Here the focus is on developing or extending the logistics support. One company extends
logistics support for another company's products and services. For example, the outlets of Pizza
Hut, Kolkata entered into a logistic alliance with TDK Logistics Limited, Hyderabad, to out¬
source the requirements of these outlets from more than 30 vendors all over India.
(d)Pricing collaborations
Companies may join together for special pricing collaborations. It is customary to find that
hardware and software companies in information technology sector offer each other price
discounts. Companies should be very careful in selecting strategic partners. The strategy should
be so selective such a partner who has complementary strengths and who can offset the

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present weaknesses. The acid test of an alliance is greater sales at less cost. It is a common
practice lo develop organizational structures or modify them, if necessary, to support the
alliances and make them successful.

Q) What is global strategy? And why is it important?

‘Global Strategy’ is a shortened term that covers three areas: global, multinational and
international strategies. Essentially, these three areas refer to those strategies designed to
enable an organization to achieve its objective of international expansion.
In developing ‘global strategy’, it is useful to distinguish between three forms of international
expansion that arise from a company’s resources, capabilities and current international position.
If the company is still mainly focused on its home markets, then its strategies outside its home
markets can be seen as international. For example, a dairy company might sell some of its excess
milk and cheese supplies outside its home country. But its main strategic focus is still directed to
the home market.

In South Korea, international and global soft

drinks strategy will involve mixing both the global brands like Coke and Sprite with the local
brands like Pocara Sweat (and, no, I don’t know what the brand tastes like!)

However, the Apple iPod was essentially following the same strategy everywhere in the world: in
this case, the advertising billboard was in North America but it could have been anywhere. One
of the basic decisions in global strategy begins by considering just how much local variation, if
any, there might be for a brand.

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Another more basic decision might be whether to undertake any branding at all. Branding is
expensive. It might be better to manufacture products for other companies that then undertake
the expensive branding. Apple iPods are made in China with the Chinese company manufacturing
to the Apple specification. The Chinese company then avoids the expense of building a brand.
But faces the strategic problem that Apple could fail to renew its contract with the Chinese
company, which might then be in serious financial difficulty.

As international activities have expanded at a company, it may have entered a number of

different markets, each of which needs a strategy adapted to each market. Together, these
strategies form a multinational strategy. For example, a car company might have one strategy for
the USA – specialist cars, higher prices – with another for European markets – smaller cars, fuel
efficient – and yet another for developing countries – simple, low priced cars.

For some companies, their international activities have developed to such an extent that they
essentially treat the world as one market with very limited variations for each country or world
region. This is called a global strategy. For example, the luxury goods company Gucchi sells
essentially the same products in every country.

Importantly, global strategy on this website is a shorthand for all three strategies above.

Implications of the three definitions within global strategy:

International strategy: the organization’s objectives relate primarily to the home market.
However, we have some objectives with regard to overseas activity and therefore need an
international strategy. Importantly, the competitive advantage – important in strategy
development – is developed mainly for the home market.
Multinational strategy: the organisation is involved in a number of markets beyond its home
country. But it needs distinctive strategies for each of these markets because customer demand
and, perhaps competition, are different in each country. Importantly, competitive advantage is
determined separately for each country.
Global strategy: the organisation treats the world as largely one market and one source of
supply with little local variation. Importantly, competitive advantage is developed largely on a
global basis.
Are there any other forms of global strategy?
In various books and research papers, you may see reference to other forms of ‘global strategy.’
For example, you will see ‘multi-domestic strategies’. These are useful and can be explored in
their context. However, the three strategies outlined above cover the main possibilities.

Why is global strategy important?

There are at least four answers to this question depending on the context:
From a company perspective, international expansion provides the opportunity for new sales
and profits. In some cases, it may even be the situation that profitability is so poor in the home
market that international expansion may be the only opportunity for profits.

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For example, poor profitability in the Chinese domestic market was one of the reasons that the
Chinese consumer electronics company, TCL decided on a strategy of international expansion. It
has then pursued this with new overseas offices, new factories and acquisitions to develop its
market position in the two main consumer electronics markets, the USA and the European
Union.
In addition to new sales opportunities, there may be other reasons for expansion beyond the
home market. For example, oil companies expand in order to secure resources – called resource
seeking. Clothing companies expand in order to take advantage of low labor costs in some
countries – called efficiency seeking. Some companies acquire foreign companies to enhance
their market position versus competitors – called strategic asset seeking. These issues are
identified in the film that you will shortly be able to see on the page ‘How do you build a global
strategy?’

From a customer perspective, international trade should – in theory at least – lead to lower
prices for goods and services because of the economies of scale and scope that will derive from a
larger global base. For example, Nike sources its sports shoes from low labor cost countries like
the Philippines and Vietnam. In addition, some customers like to purchase products and services
that have a global image. For example, Disney cartoon characters or ‘Manchester United’
branded soccer shirts.

From the perspective of international governmental organizations – like the World Bank – the
recent dominant thinking has been to bring down barriers to world trade while giving some
degree of protection to some countries and industries. Thus global strategy is an important
aspect of such international negotiations.

From the perspective of some international non-governmental organizations like Oxfam and
Medicine sans Frontiers, the global strategies of some – but not necessarily all – multinational
companies are regarded with some suspicion. Such companies have been accused of exploiting
developing countries – for example in terms of their natural mineral resources – in ways that are
detrimental to those countries. This important aspect of global strategy is explored in the
separate web section on Globalization.

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Q) EXPLAIN THE THEORIES OF MULTINATIONAL COMPANIES?

three theories that have been shown to have relevance to the relationship between
multinational corporations and the economic development of Nigeria will be reviewed. These
are:
“New Trade Theory” – (Krugman, 1970);
“Unequal Exchange Theory” – (Emmanuel, 1972); and
“Dependency Theory” – (Prebisch, 1950). mnc

The New Trade Theory

✓ The New Trade Theory was developed in the 1970s by the notable scholar Krugman Paul.
The basic assumption of the new trade theory is that every country has a comparative advantage
over other countries if the country constantly produces a particular product or is known for
rendering a specific service. Mnc

✓ The New Trade Theory (NTT) was a notable departure from the more popular neoclassical
economy theory

✓ Its cardinal departure point was hinged on the fact that countries can achieve competitive
advantage by producing what they know how to produce and continuously gaining experience by
producing same product overtime

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✓ A related study by Eluka, Ndubuisi-Okolo and Anekwe (2016) pointed out that “a critical
factor in determining international patterns of trade is the very substantial economies of scale
and network effect that can occur in key industries.

✓ A related study by Eluka, Ndubuisi-Okolo and Anekwe (2016) pointed out that “a critical
factor in determining international patterns of trade is the very substantial economies of scale
and network effect that can occur in key industries.

✓ However, concerns have been raised by scholars pertaining the workability of the new
trade theory (Sen, 2005), specifically, as it concerns the effect of firm size and market structure
of the country.

✓ New trade theory is also said to encourage monopoly in a market and may discourage
international corporations from doing business in a country adopting it. Nevertheless, new trade
theory recognizes the importance of “scale economies, imperfect markets, and product
differentiation” (Bhattacharjea, 2004; Sen, 2010). mnc
Dependency Theory
✓ Dependency theory is a theory of how developing and developed nations interact. It can
be seen as an opposition theory to the popular free market theory of interaction. Dependency
theory was first formulated in the 1950s, drawing on a Marxian analysis of the global economy,
and as a direct challenge to the free market economic policies of the post-War era.

✓ The free market ideology holds, at its most basic, that open markets and free
trade benefit developing nations, helping them eventually to join the global economy as equal
players. The belief is that although some of the methods of market liberalization and opening
may be painful for a time, in the long run they help to firmly establish the economy and make
the nation competitive at the global level.

✓ Dependency theory, in contrast, holds that there are a small number of established
nations that are continually fed by developing nations, at the expense of the developing nations’
own health.

✓ These developing nations are essentially acting as colonial dependencies, sending their
wealth to the developed nations with minimal compensation. In dependency theory, the
developed nations actively keep developing nations in a subservient position, often through
economic force by instituting sanctions, or by proscribing free trade policies attached to loans
granted by the World Bank or International Monetary Fund.

✓ Dependency theory was incredibly popular during the 1960s and 1970s, when the free
market policies of development theory seemed to have led much of the developing world to the
brink of economic collapse.

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✓ In the 1990s, with the rising success of countries such as India and Thailand, dependency
theory lost some support, as it appeared development theory may indeed have been working.
These days, although not as popular as in its heyday, dependency theory is nonetheless
widespread in progressive circles, particular among groups working on alternative modes
of capitalism in the developing world.

✓ The critiques of dependency theory can be leveled within a nation as well as

internationally.

✓ In fact, dependency theory tends to trace its roots to back before the emergence of
modern post-colonialism. On an internal level, dependency theory can be seen applying to
regions within a country. In the United States, for example, historically the industrial Northeast
can be seen drawing wealth from the agricultural south in a pattern reflected in the modern
world by the industrial northern hemisphere and the productive southern hemisphere.

✓ Dependency theory also posits that the degree of dependency increases as time goes on.
Wealthy countries are able to use their wealth to further influence developing nations into
adopting policies that increase the wealth of the wealthy nations, even at their own expense.

✓ At the same time, they are able to protect themselves from being turned on by the
developing nations, making their system more and more secure as time passes.

✓ Capital continues to migrate from the developing nations to the developed nations,
causing the developing nations to experience a lack of wealth, which forces them to take out
larger loans from the developed nations, further indebting them.

Unequal Exchange Theory

✓ The continuously underdevelopment of third world countries by the Western countries
motivated Emmanuel Arghiri to proposed the unequal exchange theory in 1972. According to
Houston and Paus (1987) Emmanuel’s unequal theory precisely describe “the proportion
between equilibrium prices that is established through the equalization of profits between
regions in which the rate of surplus value is institutionally different. Since the differences in rates
of surplus value are the direct result of wage differentials, inequality of wages as such, all other
things being equal, is alone the cause of the inequality of exchange”. mnc

✓ Though there have much criticism of the Emmanuel’s hypothesis that “unequal exchange”
is accountable for the underdevelopment of the third world countries (e.g. Gibson, 1980; Foot &
Webber, 1983; Houston & Paus, 1987). Houston and Paus (1987) recommended a total
abandonment of this theory, since they proposed that the idea of equal exchange is not
achievable and that unequal exchange cannot be used to explain disproportionate development
among partner nations. However in recent studies (e.g. Eluka, et al., 2016), this theory has been
used to explain the underdevelopment of dependent countries. As in the case of Nigeria where

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the county exports it crude oil and other natural resources at a very cheap rate to the
multinational companies who took it out to refine and sell the refined products back to the
country at exorbitant prices. mnc

✓ All the theories discussed shared common fundamental characteristics that the
development of one country is at the expense of another. Therefore, all countries especially the
less development states should strive to be self-sufficient for its basic and endeavor to export
more goods than they import. The applicability and relevance of these theories to the Nigerian
situation is discussed in the following paragraphs.

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