Tribhuvan University

Central Department of Management

Master of Business Administration in Finance Program

BUSINESS ENVIRONMENT AND STRATEGIC MANAGEMENT

A reflection note
By
Aarju Poudel
Regd. No. 7-2-388-60-2015
Roll No: 08
Exam Roll No: 102/20
E-mail: aarju.769528@cdm.tu.edu.np
Central Department of Management
Tribhuvan University

Submitted to
Prof. Dr. Sanjay Kumar Shrestha
Central Development of Management
Tribhuvan University

In partial fulfillment of the requirements of the Master of Business Administration in Finance (MBA-
Finance) Program

Kirtipur, Kathmandu
January, 2022
Unit 1: Introduction

This unit mainly deals with the concepts, importance and components of business environment
and process and methods of environmental analysis.

Concept: Business Environment can be defined as the sum total of all individuals, institutions
and other forces outside the business that affects the overall performance and sustainability of the
business.

The forces which constitute the business environment are its suppliers, competitors, consumer
groups, media, government, customers, economic conditions, market conditions, investors,
technologies, trends, and multiple other institutions working externally of a business constitute its
business environment. These forces influence the business even though they are outside the
business boundaries. For example, changes in taxes by the government can make the customers
buy less. Here the business would have to re-establish its prices to survive the change. Even
though the business had no involvement in initiating the change it still had to adapt to it in order
to survive or use the opportunity to make profits. Now let us discuss the importance of the
business environment.

Importance: Business Environment is the most important aspect of any business. Some of the
major importances of Business Environment are listed below:

i. Adaptation
ii. Strategy formulation
iii. Stability
iv. Identifying strength and weaknesses
v. Determining opportunities and threats
vi. It helps in coping with changes.
vii. Helps in improving business performance.
viii. Helps identify threats and early warning signals.
ix. Support in planning and policies.
x. Helps in tapping useful resources.
xi. Helps to focus on customer needs and wants and helps the organization to follow focus
strategy.

Components: Internal and External Environment

Internal Environment: Internal Environment refers to all the factors and forces located inside the
business that affect the performance and result of business. It is the one and only fully
controllable environment by the business organization. The components of internal environment
are as follows:

i. Organization Culture
 ii. Goals, policies and strategies
iii. Organizational resources
iv. Organizational Structure

External Environment: It refers to all the factors and forces located outside the business that
affects the performance and results of business which are uncontrollable by business. It provides
opportunities and threats. The components of the external environment are:-

i. Task Environment: Suppliers, Customers, Finances, Marketing Intermediaries, Labor

Union.
ii. General Environment: Political or legal environment, Economic environment, Socio-
Cultural Environment, Technological Environment

Environment Analysis: It is the process of identifying all external and internal elements that can
affect the performance of the organization. It is important for understanding and predicting the
environment changes.

Process of Environment Analysis

i. Scanning: It is an act of collecting and detecting environmental events, trends and issues
so as to identify the organizational opportunities and threats with a view to formulate
organizational plans, policies and strategies.
ii. Monitoring: It involves tracking environmental trends and events.
iii. Forecasting: This step forecasts what is likely to happen. It lays out of path for
anticipated change.
iv. Assessment: It identifies key opportunities and threats.

Methods of Environment Analysis

For External Environment

i. SWOT Analysis
ii. PEST or PESTEL analysis
iii. Scenario Building
iv. ETOP
v. Porter's five model of competitive analysis

For Internal Environment

vi. Delphi Technique

vii. Comparative Analysis
viii. Porter's Value Chain Analysis
Unit 2: Issues of Business Environment in Nepalese Context

Structure and Challenges of Nepalese Economy

i. In Nepal, 68% of total population is dependent on agriculture.

ii. Agricultural sector contributes for 23% of total GDP.
iii. CPI-based inflation remained 8.56% on y-o-y basis.
iv. GDP is heavily dependent on remittance i.e. 9.1% of foreign workers.
v. Export is $2.69 billion and Import is $15.17 billion in 2021.
vi. GDP by sector: Agricultural-24.5%
Industry-13.7%
Service-61.8%
vii. Population below poverty line is 14.8% in 2022.
viii. Balance of Payments remained at a deficit of Rs. 269.81 billion.
ix. Gross foreign exchange reserves stood at $9.45 billion
x. Federal Government spending amounted to Rs. 1035.61 billion and revenue collection
Rs.942.13 billion.
xi. Broad money (M2) increased 3.9 percent. On y-o-y basis, M2 increased 9.0 percent.
xii. Deposits at BFIs increased 5.7 percent and private sector credit increased 13.5 percent.
xiii. On y-o-y basis, deposits increased 11.3 percent and private sector credit 15.7 percent.
xiv. GDP: $42.41 billion (nominal, 2022)
$163.32 billion (PPP, 2022)
xv. GDP per capita: $1412 (nominal, 2022)
$5400 (PPP, 2022)

Challenges of Nepalese Economy

i. Corruption: A large share of the budget goes to corruption than the actual
development work.

ii. Natural Resources Utilization: We are rich with natural resources but we don’t have
the plan to utilize them. The first step for the country towards development is to be
self-sufficient with proper utilization of the resources, increase the export, and
decrease the trade deficit.
iii. Mass Poverty: Nepal ranks 147th among 189 countries with Human Development
Index: 0.579 in 2019 (Critical condition as most of developed nation above 0.9).
Further, Nepal ranks 165th among 189 countries in terms of per capita income.
iv. Unemployment and Brain Drain: Achievement till 14th plan has shown the
unemployment rate to be 11.4%. Further, National Labor Survey 17/18 has shown
that almost one third of those seeking job were in long-term unemployment.
v. Excessive Dependence on Agriculture: According to economic survey 2076/77,
population relying on agriculture is 60.4%, while the contribution is just 27.08%.
Only 56% of agricultural land has excess to irrigation facility.
vi. Trade Imbalance and Economic Dependency: According to economic survey
2076/77, import (924.24 billion) exceeds export (74.91 billion) by 12.3 times. And
further, around 62% of trade is done with India, and 14.8% with China.
vii. Prevalence of Poor Technology: Poor outdated technology leads to less efficiency.
And further, more human capital is needed to cope with the new technology which
will be costly.
viii. Inefficiency in utilization of Natural Resources: Nepal is heavily reliant on hydro
industry. Not much of economically valuable resources in Nepal like petroleum,
precious metals, etc.
ix. Topographic Challenge: Nepal is a mountainous country. Traveling through road is
time consuming a risky too. Air way, rail way are still in developing phase. Further
the cheapest way to import and export is through water (Ocean and sea). However,
Nepal does not own any port due to its topography. This has led to costly transport.

x. Skilled Manpower: We have less skilled manpower and most of them are going
abroad. The is virtually no skilled manpower left in the country who can contribute to
the country’s economic development.

xi. Political Instability: Every one of us knows how unstable Nepalese politics is which
has made the business environment so dynamic and uncertain.

xii. Policy Level: Large number of foreign companies are willing to invest in Nepal, but
the changing policy has stopped the process.

xiii. Trade Deficit: The country's foreign trade deficit has reached Rs 1 trillion 431 billion
and 300 million in the first 10 months of the fiscal year, 2021/22. This is 24.94
percent more than the trade deficit recorded in the corresponding period of last fiscal
year. It

Economic and Monetary Reforms in Nepal:

Capital Market Reform

The history of capital market began with the floatation of shares by Biratnagar Jute Mills Ltd.
and Nepal Bank Ltd. in 1937. Introduction of the Company Act in 1964, the first issuance of
Government Bond in 1964 and the establishment of Securities Exchange Center Ltd. in 1976
were other significant development relating to capital markets. Securities Exchange Center
was established with an objective of facilitating and promoting the growth of capital markets.
 Before conversion into stock exchange it was the only capital markets institution undertaking
the job of brokering, underwriting, managing public issue, market making for government
bonds and other financial services. Nepal Government, under a program initiated to reform
capital markets converted Securities Exchange Center into Nepal Stock Exchange in 1993
under the securities exchange act 1992. With the adaptation of economic liberalization
policy, it gave impetus for the growth of capital market of Nepal. As of now there are near
about 52 lacs DMAT holders in NEPSE and the market capitalization of Nrs.29 kharba
which was 42.84 kharba all time high on July 2021. The BFIs accounts for about 85% of the
total transaction of NEPSE.

Financial Market Reforms:

Nepal Bank Ltd. (1937) is the first financial institution in Nepal, followed by Nepal Rastra Bank
(1956). Financial institutions were government owned until the late 80’s after which
government’s liberalization policy allowed private sector involvement. Nepal Rastra Bank
through monetary policy is implementing financial sector reform initiative every year. This has
resulted in the growth of this sector. Due to reforms in finance sector, total number of banks and
financial institutions under the regulation of NRB has reached 235. Commercial banks account
for more than 70% of the financial system assets. This sector employs more than 75,000
(representing 0.8%) of the economically active population/persons using best professional
manpower available in the country and they are well paid. Its contribution to GDP has been
increasing. As of 14th May 2022, the total number of Financial institutions was 170 where the
number of total branches was 11,492.

Business Government Interrelationship:

In Nepal government supports business through: Money, foreign currency and credit. Further it
helps by providing license to the business houses. Further it provides tools of ease like tariff and
quotas. Government has a lot in common with business. The relationship in between government
and business creates a number of opportunities for the overall development in the country. The
government efforts are directed towards the development of trade and industry. The government
formulates a number of policies and regulations for the prosperity of business. Similarly, the
government provides the infrastructure for development. Furthermore, it provides peace and
security to the business. The business also has a lot to do for the government like pay tax,
comply the laws, create employment, and involve in corporate social responsibility.

Additionally, it helps by building infrastructure, security/ law & order. And to reciprocate the
support, the business houses contribute to the economy by generating employment, tax revenues,
voluntary welfare program, and foreign currency reserve. Also, businesses help in mobilizing the
resources. And all this contribute to economic development.
 i. Infrastructure and manpower development

ii. Formulation of enactment of Regulations and policies

iii. Provide a stable environment

iv. Source of information

v. Financial Assistance

vi. Subsidies, incentives and grants

vii. Security

viii. Promotion of Business

Emerging Issues in Nepalese Political and governance environment:

Nepalese political environment has shown tremendous changes over the years. With the end of
Maoist armed rebellion and monarch, Nepal is declared as the federal democratic, republican
nation. Some of the key emerging issues in Nepalese political and governance environment are,
extreme political instability, lack of stable political decisions, lack of unified national foreign
policy, lack of coordination among government institutions, lack of honesty, integrity, and
commitment among leading political leaders & parties (unethical), extreme corruption at every
level, lack of proficient political leadership, lack of political vision among political strategic
leaders, extreme political tussle among political parties, over dependent private sector (i.e.,
crippled public sector), lawlessness & system is malfunctioning , violation of human rights &
rampant crimes, appointment of non-professionals in strategic key positions in public and
government sector, problem of transparency, extreme politicization in every sector (politically
oriented citizens), government following wrong economic models .

Socio-cultural trends and their impacts on Nepalese business organization:

Socio-cultural trends: Emergence of female bread winners, Change in lifestyles, the emergence
of urban teenagers, Growth in Nuclear Family, Change in Attitudes

Impacts of socio-cultural changes on Nepalese Business Organization: Impact on management,

Widespread Corruption, Gender difference, Social Responsibility, Modernization, Lack of
Planning, Work force diversity, Attitude towards work and Resist to change

Status of technology and its impact in Nepalese business:

Technology has important role in the economic development of a country. It also affects the
ways and strategy of doing business. It greatly affects business operations. The use of technology
in the work process enhances both efficiency and effectiveness. It affects inputs, processing, and
output quantitatively and qualitatively. Technology is changing all around the world. However
Nepalese organizations are not found to adjust to the rapidly changing technology in their
business operations and have been negatively impacted. Some of the negative impacts of
technology on business are capital burden, threat of quick replacement, increase in cost, need of
skilled manpower etc. while the positive impacts are productivity, competitive advantage,
innovation and increase in profit as well.

Traditional technology in Nepalese Business: Metallurgy, Pottery, Textile Manufacturing, Paper

Manufacturing, Architecture Manufacturing, Food, Agriculture, Medicine

Modern technology in Nepalese Business:

i. Improved cooking stoves are used to save energy

ii. In agro based industries, bio technology and tissue culture technology is used.

iii. The health related service industries use highly sophisticated technology.

iv. Solar power is increasingly being used as new technology.

v. Computer technology is used for teaching purpose.

vi. E-banking, mobile banking, SME banking, e-payment etc facilities provided by
banking sector

vii. Nepali transport and communication system has achieved rapid growth in last two
decades.

viii. Use of automatic and computer or digital technology in health sector.

ix. The government offices are also found to use information technology in their
operation.

x. The use of robotized technology has not been found in Nepal so far.

xi. Nepalese business firms have also benefitted from new technology in promotion of
their products.

Impact of technology in Nepalese business:

 i. Positive Impacts:- Increase productivity, Competitive advantage, Innovation, Increase in
profit, Customer value

ii. Negative Impacts:- Capital Burden, Threat of quick replacement, Increase in cost, Need
of skilled manpower

Issue of technology transfer and management: The major issues in transfer of technology
are: Point to point transfer and diffusion. Other issues include:

i. Lack of bilateral scientific/ technology advantages in the process of technology

transfer (mutual benefits).

ii. Lack of systematic and integrated engineering and socio-economic approach to the
technology transfer process.

iii. Lack of a relevant quantitative framework/approach to the analysis and evaluation of

technology transfer to developing countries.

iv. Lack of systematic and integrated engineering and socio-economic approach to the
technology transfer process.

v. Lack of a relevant quantitative framework/approach to the analysis and evaluation of

technology transfer to developing countries.

Unit 3: Global Environment

Global Economy Concept and trends: Global economy can be defined as the sum of activities
that take place both within a country and between different countries. In other words, the global
economy refers to the interconnected worldwide economic activities that take place between
multiple countries. The international spread of capitalism, especially in recent decades, across
national boundaries and with minimal restrictions by governments. The global economy has
become hotly controversial. Critics allege that its props, free markets and free trade, take jobs
away from well-paid workers in the wealthy nations while creating sweatshops in the poor ones.
Its supporters insist that the free movement of capital stimulates investment in poor nations and
creates jobs in them. The process is also called globalization.

Globalization: The modern world is seen as world without geographical boundaries and any
kind of barriers. Globalization has been the major force behind this. Globalization can be defined
as a process of rapid economic, cultural and institutional integration among countries. It makes
the world more accessible to everyone.

Drivers of Globalization: Technological drivers, Political drivers, Market drivers, Cost drivers,
Competitive drivers

Effects of Globalization

i. Positive effects: Introduction of various new technologies and transfer of existing

technology, Employment, Culture, Foreign Trade, Resource Imperative, Competition,
Legal effects
ii. Negative effects: Job destruction and insecurity, Fluctuation in Price, Practice of Western
culture

Types of globalization:

1. Economic globalization: The main objective of economic globalization is on the integration

of international financial markets and the coordination of financial exchange. Free trade
agreements, such the North American Free Trade Agreement and the Trans-Pacific
Partnership are examples of economic globalization. 
2. Political globalization. Political globalization covers the national policies that bring
countries together politically, economically and culturally. Organizations such as NATO and
the UN are part of the political globalization effort.
3. Cultural globalization. This type of globalization focuses in a large part on the
technological and societal factors that are causing cultures to converge. These include
increased ease of communication, the pervasiveness of social media and access to faster and
better transportation.

Regional economic integration:

Regional economic integration has enabled countries to focus on issues that are relevant to their
stage of development as well as encourage trade between neighbors.

Types of regional economic integration

1. Free trade area. This is the most basic form of economic cooperation. Member countries
remove all barriers to trade between themselves but are free to independently determine
trade policies with nonmember nations. An example is the North American Free Trade
Agreement (NAFTA).
 2. Customs union. This type provides for economic cooperation as in a free-trade zone.
Barriers to trade are removed between member countries. The primary difference from
the free trade area is that members agree to treat trade with nonmember countries in a
similar manner.
3. Common market. This type allows for the creation of economically integrated markets
between member countries. Trade barriers are removed, as are any restrictions on the
movement of labor and capital between member countries. Like customs unions, there is
a common trade policy for trade with nonmember nations. The primary advantage to
workers is that they no longer need a visa or work permit to work in another member
country of a common market. An example is the Common Market for Eastern and
Southern Africa (COMESA).
4. Economic union. This type is created when countries enter into an economic agreement
to remove barriers to trade and adopt common economic policies. An example is the
European Union (EU).

Importance of Regional economic integration in Nepalese business:

i. Elimination of tariffs & non-tariff barriers in the region

ii. IP rights protections
iii. Increase in production, revenue and profit of companies
iv. Better allocation of resources
v. Employment opportunity
vi. Transfer of technology and new technology
vii. Elimination of FDI restriction
viii. Minimization of local monopoly
ix. Industrialization
x. Free cross boarder movement of goods
xi. enjoy comparative advantage
Foreign Direct Investment:

Foreign direct investment (FDI) is an investment from a party in one country into a business
or corporation in another country with the intention of establishing a lasting interest. Lasting
interest differentiates FDI from foreign portfolio investments, where investors passively hold
securities from a foreign country. A foreign direct investment can be made by obtaining a lasting
interest or by expanding one’s business into a foreign country.Foreign direct investment (FDI) is
when a company takes controlling ownership in a business entity in another country. With FDI,
foreign companies are directly involved with day-to-day operations in the other country. This
means they aren't just bringing money with them, but also knowledge, skills and technology. The
issue of a one-window policy is being considered to cut the red tape in land registration,
environment impact assessment and issuance of labor permits. Currently, foreign investors have
to deal with three ministries, Industry, Home and Environment, three departments, Industry,
Immigration and Land Revenue, and the Company Registrar’s Office. Investment Board Nepal is
currently engaged with potential investors of various countries in a bid to attract FDI in Nepal.

Foreign direct investment offers advantages to both the investor and the foreign host country.
These incentives encourage both parties to engage in and allow FDI.

Below are some of the benefits for businesses:

i. Market diversification
ii. Tax incentives
iii. Lower labor costs
iv. Preferential tariffs
v. Subsidies

The following are some of the benefits for the host country:

i. Economic stimulation
ii. Development of human capital
iii. Increase in employment
iv. Access to management expertise, skills, and technology

FDI: trends, opportunities, threats and problems in Nepalese context

Foreign Direct Investment means investment in equity share, re-investment of earning and
investment made in the form of loan made by a foreign investor in any industry.

Trends

i. FDI inflow in Nepal began in early 1980s

ii. During 80’s average annual FDI inflow into Nepal was US $ 0.5 million
iii. During 90’s average annual FDI inflow into Nepal was US $ 11 million
iv. This drastic change was observed due to liberalization trade policies
v. Till date Nepal has received FDI from 78 countries

Opportunities

i. Availability of Raw materials

ii. Improvement in BOP

iii. Revenue to government

 iv. Employment generation

v. New technology, knowledge, skill

Threats

i. Threat to local product

ii. Overutilization of resources

iii. Violation of human rights

iv. Environmental degradation

v. Political instability
vi. Poor infrastructure in Nepal

World trade organization:

WTO is an international organization that deals with the rules of trade between nations at the
global level. It was established in Jan 1, 1995 as the successor of GATT. It is an organization for
liberalizing trade and a forum for governments to negotiate trade agreements and to settle trade
argument.
Principles of World Trade Organization:

i. Non-Discrimination– Non-Discrimination has two aspects: Most favoured nation

(MFN) and National Treatment. Under the MFN, all WTO member countries should be
treated equally, without discrimination. For example- India decides to lower basic
customs duty for imports of iron-ore from China. This favour will have to be extended to
all other countries. National treatment– Foreign goods and local goods must be treated
equally
ii. Freer trade– All trade barriers should be lowered gradually through negotiations.
iii. Predictability– There should be stability and predictability in the trade rules of a nation.
iv. Promoting fair competition
v. Encourage development and economic reforms

Opportunities

i. Elimination of tariff and non-tariff barrier would result in variety of products and services

ii. at low cost

 iii. Helps Nepal to become prosperous

iv. Trading based on rule rather than power

v. Assurance to producer and exporter

vi. Development of industry through increased FDI

vii. Growth of international trade.

viii. Market access opportunities
ix. Policy stability
x. Attract foreign direct investment
xi. Gearing up domestic institutional capability
xii. Benefits of positive discrimination
xiii. Establishment of trade and transit rights
xiv. Government will become more rational in decision-making
xv. Rent seeking activities will decrease
xvi. Problem of transit will be less
xvii. Provisions of technical support
xviii. Access to markets, duty-free-quota-free access among member countries.

Threats

i. Need to amend acts to comply with WTO norms

ii. High cost to implement WTO rules and regulations

iii. BOP problem

iv. Nepal needs to improve production capacity, international quality
Unit 4: Fundamentals of Strategic Management

Generally, strategic management is art and science of formulating, implementing and evaluating,
cross-functional decisions that enable an organization to achieve its objectives. It is about
identification and description of the strategies that managers can carry so as to achieve better
performance and a competitive advantage for their organization. It is the process of decision
making and planning which leads to the development of an effective strategy to help achieve
organizational objectives.

It synergizes the strategic and operational orientation and provides an overall framework for
resource allocation among different units and time horizons. It can be regarded as the
architecture of integrative decision making. It results in the articulation of the corporate strategy
followed by competitive and functional strategy.

Characteristics: The characteristics of Strategic Management involve:

i. Top management involvement

ii. Requirement of large amounts of resources
iii. Affect the firms long-term prosperity
iv. Future oriented
v. Multi-functional or multi-business consequences
vi. Non-self generative decisions.

Importance: Firms are using strategic management for the following importance:

i. It provides the roadmap for the firm.

ii. It minimizes the chances of mistakes and unpleasant surprises.
iii. It helps the firm to be more proactive than reactive.
iv. It provides clear objectives and direction for employees.
v. It helps the firm to respond to environmental changes in a better way.
vi. It allows the firm to anticipate change and be prepared to manage it.

21st century challenges in strategic management

i. Art or science issues- whether follow scientific steps of strategic management process or
it should be practiced differently by individual managers differently
ii. The Visible or Hidden Issue- Should the strategy should be visible to stakeholders
including the competitors or the opposite
iii. The Top-Down or Bottom-Up Approach- Should the middle and lower level management
be actively involved in strategic planning or not
iv. Lack of adaptation
 v. High levels of employee disengagement
vi. Lack of organizational alignment/learning

Process of Strategic Management:

i. Assessing the organization's current strategic direction;

ii. Identifying and analyzing internal and external strengths and weaknesses;
iii. Formulating action plans;
iv. Executing action plans; and
v. Evaluating to what degree action plans have been successful and making changes when
desired results are not being produced.
Strategic Decisions: Concept, Characteristics and Approaches

Strategic decisions are those decisions that have an influence over years, decades, and even
beyond the lifetime of the project. Once a strategic decision is made, it is very unlikely to be
altered in the short term.

Characteristics

i. Strategic decision affects the long-term direction of company

ii. It affects operational decision
iii. Strategic decision are affected by environmental forces
iv. They are affected by belief of top management
v. It concerns with matching organizational strength with environmental opportunity
vi. It helps to achieve competitive advantage

Approaches

Entrepreneurial mode

Strategy is made by one powerful person. It focuses on opportunity rather than on problem. Its
most important role is the growth and development of organization.

Adaptive mode

It is also known as “muddling through”. They don’t focus on opportunity rather focus on reactive
solution.

Planning mode

It involves gathering information for situational analysis, development of alternative strategy and
selecting appropriate strategy. It includes both proactive search for opportunity and reactive
solution of existing problem.
Pattern of strategic decision making in Nepalese organizations

i.Managers are not better decision makers in Nepalese organization

ii.Inability to recognize core competencies
iii.Strategic decision making are not based on broad perspectives
iv. Ad hoc in strategic decision making- due to less competitiveness, domination of goreign
multinationals
v. Reactive rather than proactive- Nepalese manager and top executive are not able to
anticipate future and plan in time to take advantage of opportunity
vi. Short term perspective- most Nepalese organization are concerned with short run result and
not long run perspective

Red Ocean Vs Blue Ocean Strategy

Blue ocean strategy is the ultimate strategy for a company that ensures its continued survival and
consequently excellence in the industry but to ensure this strategy the company has to invest
diligently into research, development and innovation so that before some other companies will
copy or duplicate its technology, our company should modify and innovate products to attract
customers.

But if the company does not deviate from the traditional way of doing business that is flocking
together in the same specific place, selling more or less similar products, then the company is
competing with several contestants neck to neck and chances are high there is bloodshed in the
process of eliminating others out. Now the ocean becomes red due to bloodshed and the
company is supposed to have pursued red ocean strategy

Red ocean sells in existing market and therefore meets the existing demand whereas blue ocean
operates in new market and pursue new demand.

Red ocean beat competition with aggressive marketing and better pricing whereas blue ocean
make competition irrelevant.

To sum up, unexplored and untainted by competition blue oceans are vast, deep and powerful in
terms of opportunity and growth .

Strategic Leadership: Concept and Role

i. Strategic leaders empower others to perform to realize goals.

ii. Strategic leaders influence human behavior, their thoughts, and feelings effectively often
in uncertain & complex environments
iii. Strategic leaders manage knowledge, i.e. create and commercialize innovation
iv. Strategic leadership guides in strategic planning such as formulating vision, mission,
objectives, etc
 v. Strategic leadership is the ability of top-level manager to determine future course of
action and direction and motivate employees to make effort in that direction.
vi. The role of strategic leaders are as follows :
vii. Strategic leadership involves coping with increasing changes in the global economy.
viii. Strategic leaders help firm have strategic competitiveness

Social and Ethical Issues in Strategic Management

i. Organizational value, individual value

ii. Managing change
iii. Corporate governance
iv. Impact of company decisions on stakeholders at home and host countries
v. Health Insurance Discrimination among employees
vi. Environmental impact of strategic decisions
vii. Social impact , e.g. outsourcing from sweatshops, off shoring and unemployment
viii. Managerial motive of Self gain at the cost of other stakeholders
Unit 6: Creating a good strategy

Analyzing market environment

A PESTEL analysis is a framework or tool used by strategic managers to analyze and monitor
the macro-environmental factors that have an impact on an organization. The result of which is
used to identify threats and weaknesses which are used in a SWOT analysis.

Market analysis includes: Consumer behavior analysis, competitor analysis, promotion analysis,
retail/distribution analysis, sales analysis, gap analysis. These particular dimensions help to
create and conduct a market analysis. Also, Porter’s five forces also help to analyze the
environment. The forces are: Bargaining power of suppliers, customers, and complementary,
threat of substitutes, threat of new entrants, and rivalry among existing competitors.

Further, Core competencies are the resources and capabilities that comprise the strategic
advantages of a business. A modern management theory argues that a business must define,
cultivate, and exploit its core competencies in order to succeed against the competition.
However, Competitive advantage refers to factors that allow a company to produce goods or
services better or more cheaply than its rivals. These factors allow the productive entity to
generate more sales or superior margins compared to its market rivals. From my understanding,
competitive advantage is superior to core competencies. Because competitive advantage is a
scenario where the company will be able to form core competencies that is profitable, unique,
and must not be imitable. For example, two company might have same core competencies.

However, if one company is able to adapt and provide its core competencies in a profitable way
and in difficult to imitate, then it has a competitive advantage. Strength: The resources are the
base to form capability which in turn is used to form competencies. Using strength to exploit
opportunity, protect your weakness from attack, to convert threats/ challenges to opportunity,
convert threat/ challenges to opportunity, to convert weakness into strength. And if it becomes
core to the business then it will be core competencies. Knowing needs: The Company needs to
identify the customers need. And building competitive advantage creates delight among the
customers. Create satisfaction and delight for the customers. Striking a balance: Striking between
profit and social responsibility, to striking interest of different stakeholders, and quality and
price. Fitting or stretching: Fitting whatever your resources and capabilities with specific
customer needs, or stretching your existing capabilities to satisfy enhanced customers’ needs and
wants. The three approaches are examples of "generic strategies," because they can be applied to
products or services in all industries, and to organizations of all sizes. They were first set out by
Michael Porter in 1985 in his book, "Competitive Advantage: Creating and Sustaining Superior
Performance." Porter called the generic strategies "Cost Leadership" (no frills), "Differentiation"
(creating uniquely desirable products and services) and "Focus" (offering a specialized service in
a niche market). He then subdivided the Focus strategy into two parts: "Cost Focus" and
"Differentiation Focus."

Unit 6: Creating a good strategy

Implementation of strategy is the process through which a chosen strategy is put into action. “It
is concerned with translation of strategy into action & is concerned with both planning
howthe chosen strategy can be put into effect and managing changes required. Good strategy
with poor implementation or poor strategy with good implementation is likely to lead to
problems. Strategy implementation is the fourth step in the strategic management process and it’s
where you turn your strategic plan into action. This can be anything from executing a new
marketing plan to increase sales to implementing a new work management software to boost
efficiency across internal teams.

Step 1: Set and communicate clear, strategic goals

The first step is where you’re strategic plan and your strategy implementation overlap. To
implement a new strategy, you first must identify clear and attainable goals. Your goals should
include your vision and mission statements, long-term goals, and KPIs. The clearer the picture,
the easier the rest of your strategy implementation will be for your team and organization simply
because everyone will be working towards the same goals. As with all things, communication is
key. Once your goals are clearly defined, use goal tracking software to communicate your
strategy with the rest of your team.

Step 2: Engage your team

To implement your strategy both effectively and efficiently, you need to create focus and drive
accountability. There are a few ways in which you can keep your team engaged throughout the
implementation process:

• Determine roles and responsibilities early on. Use a RACI matrix to clarify your teammate’s
roles and ensure that there are no responsibility gaps.

• Delegate work effectively. While it can be tempting to have your eyes on everything,
micromanagement will only hold you back. Once you’ve defined everyone’s roles and
responsibilities, trust that your team will execute their tasks according to the implementation
plan.

• Communicate with your team and ensure that everyone knows how their individual work
contributes to the project. This will keep everyone motivated and on track.

Step 3: Execute the strategic plan

Allocate necessary resources—like funding for strategic or operational budgets—so your team
can put the strategic plan into action. If you don’t have the right resources you won’t be able to
achieve your strategic plan, so this should be a top priority. Here’s how you can ensure that your
team has the resources they need:

• Start with the end in mind to effectively align your project’s objectives, key deliverables
milestones, and timeline.

• Identify available resources like your team’s capacity, your available budget, required tools or
skills, and any other unconventional resources

• Define a clear project scope so you know exactly what your project needs when. Share your
project plan with everyone involved in the implementation process using a work management
tool. The better built out your strategic plan is, the easier it will be to implement it.

Step 4: Stay agile

You’ll inevitably run into issues as you begin implementing your strategy. When this happens,
shift your goals or your approach to work around them. Create a schedule so you can frequently
update the status of your goals or implementation strategy changes. Depending on the strategy
you’re implementing, you can create weekly, monthly, or quarterly project status reports. Share
these updates with your external stakeholders, as well as your internal team, to keep everyone in
the loop.

Step 5: Get closure

Once you implement the strategy, connect with everyone involved to confirm that their work
feels complete. Implementing a strategy isn’t like a puzzle that’s finished when the last piece is
set. It’s like planting a garden that continues to grow and change even when you think you’re
done with your work.

Step 6: Reflect

Conduct a post-mortem or retrospective to reflect on the implemented strategy, as well as

evaluate the success of the implementation process and the strategy itself. This step is a chance
to uncover lessons learned for upcoming projects and strategies which will allow you to avoid
potential pitfalls and embrace new opportunities in the future.
Unit 8: Strategic monitoring

Strategy evaluation is the process by which the management assesses how well a chosen strategy
has been implemented and how successful or otherwise the strategy is. To simply put, strategy
evaluation entails reviewing and appraising the strategy implementation process and measuring
organizational performance. Evaluating the strategy helps improve it, distinguish between what
works and what doesn’t, and contribute to the ongoing development and adaptation of the
strategy to the changing conditions and complexities in the industry. Strategy evaluation operates
at two levels; strategic and operational. At the strategic level, the focus is given to the
consistency of the strategy with the environment, and at the operational level, how well the
organization is pursuing the strategy is assessed.

Through the process of strategy evaluation, strategists can make sure that the,

• Premises made during strategy formulation are correct

• Strategy is guiding the organization towards accomplishing its objectives

• Managers are doing what they are supposed to be doing to effectively implement the strategy

• The organization is performing well, schedules are being followed, and resources are being

properly utilized

• Whether there’s a need to reformulate or change the strategy

Strategy Evaluation Process

The strategy evaluation is carried out in order to determine that the strategy is helping the
organization achieve its objectives. It compares the actual performance of the organization with
desired results and provides the necessary insight into the corrective action that needs to be taken
to improve the performance of the organization. Following are the steps in the process of
evaluating strategy.

1. Establish standards

This step starts with determining what standards to set, how to set them, and the terms used to
express the standards. To do this,

• Identify the key areas of performance which are usually based on the key managerial tasks
pertaining to strategic requirements. Standards should be set within these identified key
performance areas. Performance indicators have to be set on the basis of quantitative or
qualitative criteria in order to make measuring performance easier.

• Quantitative criteria – on the basis of this criteria, performance can be evaluated in two ways:
Either by comparing how the company has performed against its past achievements or against
the performance of the industry average or that of the competitors.

• Qualitative criteria – in order to assess factors such as core competencies, capabilities, risk-
bearing capacity, workability, and flexibility, companies need a set of qualitative criteria such as
the ones suggested by Glueck and Jauch,

Consistency (evaluating strategy against company objectives, environmental assumptions, and

internal conditions)

• Appropriateness (evaluating strategy with regard to resource capabilities, risk preference, and
time horizon)

• Workability (evaluating the feasibility and simulation of the strategy)

2. Measure Performance

The standards of performance set will serve as the benchmark against which the actual
performance will be evaluated. Based on these standards, managers should decide how to
measure the performance and how often to do so. The methods used to measure performance
may vary on the standard set; usually, data such as the number of materials used, units produced,
the monetary amount of services utilized, the number of defects found, processes followed,
quality of output, and return on investment, are used.

3. Analyze Variances

Evaluating the actual performance against the standards of performance will reveal whether;

• The actual performance matches the budgeted performance

• The actual performance differs from the budgeted performance in a positive way

• The actual performance differs from the budgeted performance in a negative way

A predetermined set range of tolerance limits can be used to determine whether the results can be
accepted satisfactorily. If the actual performance deviates from the budgeted performance within
the set tolerance limit, the performance can be considered acceptable and the variance
insignificant. On the other hand, if the performance is below standards, effort must be directed to
finding the root causes of the deviation and coming up with corrective action to fix it.

5. Take Corrective Action

In the case the actual performance falls out of the tolerance limit, corrective action must be taken

to solve it. The deviation can be caused internally or externally, predicted or random, or
temporary

or permanent. If the actual performance is below the standards consistently, a thorough analysis

should be carried out to find the root causes. If the organizational potential can’t meet the

performance requirements, consider adopting attainable performance standards. In the case of an

extreme deviation, you might have to consider formulating the strategy, which might require you

to start from the beginning of the strategic management process.