ManagementSci

ence Uni
t-
V

Uni
t–5St
rat
egi
cManagement

Thet
erm‘
str
ategi
cmanagement
’isusedt
odenot
eabr
anchofmanagementt
hat
i
sconcer
nedwi
tht
hedev
elopmentofst
rat
egi
cvi
sion,set
ti
ngoutobj
ect
ives,
f
ormul
ati
ngandi
mpl
ement
ingst
rat
egi
esandi
ntr
oduci
ngcor
rect
ivemeasur
esf
or
t
hedev
iat
ions(
ifany
)tor
eacht
heor
gani
zat
ion’
sst
rat
egi
cint
ent
.Ithast
wo-
fol
d
obj
ect
ives:

 Togai
ncompet
it
iveadv
ant
age,
wit
hanai
m ofout
per
for
mingt
hecompet
it
ors,
t
oachi
evedomi
nanceov
ert
hemar
ket
.
 Toactasagui
det
otheor
gani
zat
iont
ohel
pinsur
viv
ingt
hechangesi
nthe
busi
nessenv
ironment
.
Her
e,changes r
efert
o changes i
nthe i
nter
nalenv
ironment
,i.
e.wi
thi
nthe
or
gani
zat
ion,i
ntr
oduced byt
he manager
s such as t
he change i
n busi
ness
pol
i
cies,pr
ocedur
eset
c.andchangesi
ntheext
ernalenv
ironmentasi
nchanges
i
nthegov
ernmentr
ulest
hatcanaf
fectbusi
ness,compet
it
orsmov
e,changei
n
cust
omer
’st
ast
esandpr
efer
encesandsof
ort
h.

St
rat
egi
cManagementPr
ocess

1.Def
ini
ngt
hel
evel
sofst
rat
egi
cint
entoft
hebusi
ness:

 Est
abl
i
shi
ngv
isi
on,
Desi
gni
ngmi
ssi
onand

Set
ti
ng

 obj
ect
ivesFor
mul
ati
onofst
rat
egy

 Per
for
mingenv
ironment
alandor
gani
zat
ional
appr
aisal

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ManagementSci
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 Consi
der
ingst
rat
egi
es

 Car
ryi
ngoutst
rat
egi
canal
ysi
s

 Maki
ngst
rat
egi
es

 Pr
epar
ingst
rat
egi
cpl
an

 I
mpl
ement
ati
onofst
rat
egy

 Put
ti
ngst
rat
egi
esi
ntopr
act
ice

 Devel
opi
ngst
ruct
uresandsy
stems

 Managi
ngbehav
ior
alandf
unct
ional
impl
ement
ati
on

 St
rat
egi
cEv
aluat
ionandCont
rol

 Per
for
mingev
aluat
ion

 Exer
cisi
ngcont
rol

 Recr
eat
ingst
rat
egi
es

St
rat
egi
cManagementi
sal
laboutspeci
fyi
ngor
gani
zat
ion’
svi
sion,
missi
onand
obj
ect
ives,
env
ironmentscanni
ng,
craf
ti
ngst
rat
egi
es,
eval
uat
ionandcont
rol
.

I
mpor
tanceofSt
rat
egi
cManagement
 I
tgui
dest
hecompanyt
omov
einaspeci
fi
cdi
rect
ion.I
tdef
inesor
gani
zat
ion’
s
goalsandf
ixesr
eal
i
sti
cobj
ect
ives,
whi
char
einal
i
gnmentwi
tht
hecompany
’s
vi
sion.

 I
tassi
stst
hef
ir
minbecomi
ngpr
oact
ive,r
athert
hanr
eact
ive,t
omakei
tanal
yse
t
heacti
onsoft hecompeti
tor
sandt akenecessar
yst
epst
ocompet
eint
he
mar
ket
,inst
eadofbecomi
ngspect
ator
s.

 I
tact
sasaf
oundat
ionf
oral
lkeydeci
sionsoft
hef
ir
m.

 I
tat
tempt
stopr
epar
etheor
gani
zat
ionf
orf
utur
echal
l
engesandpl
ayt
her
oleof
pioneeri
nexpl
ori
ngoppor
tuni
ti
esandal
sohel
psi
nident
if
yingway
stor
each
thoseoppor
tuni
ti
es.

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ManagementSci
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t-
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 I
tensur
est
hel
ong-
ter
m sur
viv
aloft
hef
ir
m whi
l
ecopi
ngwi
thcompet
it
ionand
sur
viv
ingt
hedy
nami
cenv
ironment
.

The basi
c pur
pose ofst
rat
egi
c managementi
sto gai
n sust
ained-
str
ategi
c
compet
it
ivenessoft
hef
ir
m.I
tispossi
blebydev
elopi
ngandi
mpl
ement
ingsuch
st
rat
egi
es t
hatcr
eat
eval
ue f
ort
he company
.Itf
ocuses on assessi
ng t
he
oppor
tuni
ti
esandt
hreat
s,keepi
ngi
nmi
ndf
ir
m’sst
rengt
hsandweaknessesand
dev
elopi
ngst
rat
egi
esf
ori
tssur
viv
al,gr
owt
handexpansi
on.St
rat
egi
cint
ent
gi
vesani
deaofwhatt
heor
gani
zat
iondesi
rest
oat
tai
ninf
utur
e.I
tanswer
sthe
quest
ionwhatt
heor
gani
zat
ionst
ri
vesorst
andsf
or?I
tindi
cat
est
hel
ong-
ter
m
mar
ketposi
ti
on,whi
cht
heor
gani
zat
iondesi
rest
ocr
eat
eoroccupyandt
he
oppor
tuni
tyf
orexpl
ori
ngnewpossi
bil
i
ties.

St
rat
egi
cInt
entHi
erar
chy

1.Vi
sion:Vi
si
oni
mpl
i
est
hebl
uepr
intoft
hecompany
’sf
utur
eposi
ti
on.I
tdescr
ibes
wher
etheor
gani
zat
ionwant
stol
and.I
tist
hedr
eam oft
hebusi
nessandan
i
nspi
rat
ion,basef
ort
hepl
anni
ngpr
ocess.I
tdepi
ctst
hecompany
’saspi
rat
ions
f
ort
hebusi
nessandpr
ovi
desapeepofwhatt
heor
gani
zat
ionwoul
dli
ket
o
becomei
nfut
ure.Ev
erysi
ngl
ecomponentoft
heor
gani
zat
ioni
srequi
redt
o
f
oll
owi
tsv
isi
on.
2.Mi
ssi
on:Mi
ssi
ondel
i
neat
est
hef
ir
m’sbusi
ness,i
tsgoal
sandway
stor
eacht
he
goal
s.I
texpl
ainst
her
easonf
ort
heexi
stenceofbusi
ness.I
tisdesi
gnedt
ohel
p
pot
ent
ialshar
ehol
der
sandi
nvest
orsunder
standt
hepur
poseoft
hecompany
.A

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ManagementSci
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mi
ssi
onst
atementhel
pst
oident
if
y,‘
whatbusi
nesst
hecompanyunder
takes.
’It
def
inest
hepr
esentcapabi
l
iti
es,
act
ivi
ti
es,
cust
omerf
ocusandbusi
nessmakeup.
3.Busi
nessDef
ini
ti
on:I
tseekst
oexpl
aint
hebusi
nessunder
takenbyt
hef
ir
m,wi
th
r
espectt
othecust
omerneeds,t
argetaudi
ence,andal
ter
nat
ivet
echnol
ogi
es.
Wi
tht
hehel
pofbusi
nessdef
ini
ti
on,onecanascer
tai
nthest
rat
egi
cbusi
ness
choi
ces.Thecor
por
ater
est
ruct
uri
ngal
sodependsupont
hebusi
nessdef
ini
ti
on.
4.Busi
nessModel
:Busi
nessmodel
,ast
henamei
mpl
i
esi
sast
rat
egyf
ort
he
ef
fect
iveoper
ati
onoft
hebusi
ness,ascer
tai
ningsour
cesofi
ncome,desi
red
cust
omerbase,andf
inanci
ngdet
ail
s.Ri
valf
ir
ms,oper
ati
ngi
nthesamei
ndust
ry
r
eli
esont
hedi
ff
erentbusi
nessmodel
duet
othei
rst
rat
egi
cchoi
ce.
5.Goal
sandObj
ect
ives:Thesear
ethebaseofmeasur
ement
.Goal
sar
etheend
r
esul
ts,t
hatt
heor
gani
zat
ionat
tempt
stoachi
eve.Ont
heot
herhand,obj
ect
ives
ar
eti
me-
basedmeasur
abl
eact
ions,whi
chhel
pint
heaccompl
i
shmentofgoal
s.
Thesear
etheendr
esul
tswhi
char
etobeat
tai
nedwi
tht
hehel
pofanov
eral
lpl
an,
ov
ert
hepar
ti
cul
arper
iod.

The v
isi
on,mi
ssi
on,busi
ness def
ini
ti
on,and busi
ness modelexpl
ains t
he
phi
l
osophyofbusi
nessbutt
hegoal
sandobj
ect
ivesar
eest
abl
i
shedwi
tht
he
pur
poseofachi
evi
ngt
hem.St
rat
egi
cInt
enti
sext
remel
yimpor
tantf
ort
hef
utur
e
gr
owt
handsuccessoft
heent
erpr
ise,
irr
espect
iveofi
tssi
zeandnat
ure.

Vi
sionSt
atement
Av
isi
onst
atementi
sadecl
arat
ionofanor
gani
zat
ion'
sobj
ect
ives,i
ntendedt
o
gui
dei
tsi
nter
naldeci
sion-
maki
ng.Av
isi
onst
atementi
snotl
i
mit
edt
obusi
ness
or
gani
zat
ionsand mayal
so beused bynon-
prof
itorgov
ernment
alent
it
ies.
Vi
sion i
san or
gani
zat
ion'
ssel
fcent
ered,egoi
sti
c,sel
fi
sh (
in aposi
ti
veand
necessar
ysense)pl
easur
eseeki
nggoalt
hatdi
rect
lyat
tr
act
sandmot
ivat
esi
ts
empl
oyees:whatacompany“
int
ake”
,"i
nhal
es"
,"br
eat
hesi
n;"whatcat
aly
zesa
company
'sact
ions.That
'
swhyv
isi
oni
sfi
rstofal
limpor
tantf
ort
hecompany
i
tsel
fandi
tsi
nter
naldeci
sion-
maki
ng,butnotf
orcust
omer
s-becausei
tgi
ves
di
rect
ionandener
gyt
oempl
oyeesoft
hecompanyr
athert
hant
ocust
omer
s.

Char
act
eri
sti
csofv
isi
onst
atementar
econci
se,cl
ear
,Ti
mehor
izon,f
utur
e-or
ient
ed,
st
abl
e,chal
l
engi
ng,
abst
ract
,andi
nspi
ri
ng.

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ManagementSci
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Vi
sionst
atement
smayf
il
lthef
oll
owi
ngf
unct
ionsf
oracompany
:

Ser
veasf
oundat
ionsf
orabr
oaderst
rat
egi
cpl
an

Moti
vat
eexist
ingempl
oyeesandat
tractpotent
ial
employeesbyclear
ly
cat
egor
izi
ngthecompany'
sgoal
sandat t
racti
ngli
ke-
mindedindi
vi
duals

Focuscompanyef
for
tsandf
aci
l
itat
ethecr
eat
ionofcor
ecompet
enci
esby
di
rect
ingt
hecompanyt
oonl
yfocusonst
rat
egi
coppor
tuni
ti
est
hatadv
ancet
he
company
'sv
isi
on

Hel
pcompani
esdi
ff
erent
iat
efr
om compet
it
ors.Forexampl
e,pr
ofi
tisacommon
busi
nessgoal
,andv
isi
onst
atement
sty
pical
l
ydescr
ibehowacompanywi
l
l
becomepr
ofi
tabl
erat
hert
hanl
i
stpr
ofi
tdi
rect
lyast
hel
ong-
ter
mvi
sion.

Mi
ssi
onSt
atement
Ami
ssi
onst
atementi
sther
epr
esent
ati
onofwhyanor
gani
zat
ionexi
sts,whati
ts
ov
eral
lgoal
is,
ident
if
yingt
hegoal
ofi
tsoper
ati
ons:
whatki
ndofpr
oductorser
vicei
t
pr
ovi
des,i
tspr
imar
ycust
omer
sormar
ket
,andi
tsgeogr
aphi
calr
egi
onofoper
ati
on.
Ami
ssi
oni
snotsi
mpl
yadescr
ipt
ionofanor
gani
zat
ionbyanext
ernalpar
ty,butan
expr
essi
on,madebyi
tsl
eader
s,oft
hei
rdesi
resandi
ntentf
ort
heor
gani
zat
ion.The
pur
poseofami
ssi
onst
atementi
stocommuni
cat
etheor
gani
sat
ion'
spur
poseand
di
rect
iont
oit
sempl
oyees,cust
omer
s,v
endor
s,andot
herst
akehol
der
s.Ami
ssi
on
st
atemental
socr
eat
esasenseofi
dent
it
yfori
tsempl
oyees.Or
gani
zat
ionsnor
mal
l
y
donotchanget
hei
rmi
ssi
onst
atement
sov
ert
ime,
sincet
heydef
inet
hei
rcont
inuous,
ongoi
ngpur
poseandf
ocus.

Obj
ect
ivesofaMi
ssi
onSt
atement
Thesol
epur
poseofami
ssi
onst
atementi
stoser
veasacompany
'sgoal
/agenda,
it
out
li
nescl
ear
lywhatt
hegoali
s.Somegener
icexampl
esofmi
ssi
onst
atement
s
woul
dbe,"
Topr
ovi
det
hebestser
vicepossi
blewi
thi
nthebanki
ngsect
orf
orour
cust
omer
s."or"
Topr
ovi
det
hebestexper
iencef
oral
lofourcust
omer
s."Ther
eason
whybusi
nessesmakeuseofmi
ssi
onst
atement
sist
omakei
tcl
earwhatt
heyl
ook
t
oachi
eveasanor
gani
zat
ion,
notonl
ytot
hemsel
vesandt
hei
rempl
oyeesbutt
othe

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ManagementSci
ence Uni
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cust
omer
sandot
herpeopl
ewhoar
eapar
toft
hebusi
ness,suchasshar
ehol
der
s.
Asacompanyev
olv
es,
sowi
l
lthei
rmi
ssi
onst
atement
.Thi
sist
omakesur
ethatt
he
companyr
emai
nsont
rackandt
oensur
ethatt
hemi
ssi
onst
atementdoesnotl
ose
i
tst
ouchandbecomebor
ingorst
ale.

Si
gni
fi
cance-I
tisi
mpor
tantt
hatami
ssi
onst
atementi
snotconf
usedwi
thav
isi
on
st
atement
.Asdi
scussedear
li
er,t
hemai
npur
poseofami
ssi
onst
atementi
stoget
acr
osst
heambi
ti
onsofanor
gani
sat
ioni
nashor
tandsi
mpl
efashi
on;i
tisnot
necessar
ytogoi
ntodet
ailf
ort
hemi
ssi
onst
atementwhi
chi
sev
identi
nexampl
es
gi
ven.Ther
easonwhyi
tisi
mpor
tantt
hatami
ssi
onst
atementandv
isi
onst
atement
ar
enotconf
usedi
sbecauset
heybot
hser
vedi
ff
erentpur
poses.Vi
sionst
atement
s
t
endt
obemor
erel
atedt
ost
rat
egi
cpl
anni
ngandl
eanmor
etowar
dsdi
scussi
ng
wher
eacompanyai
mst
obei
nthef
utur
e.

Thef
oll
owi
ngquest
ionsmustbeanswer
edi
nthemi
ssi
onst
atement

“
Whatdo wedo?
”— Themi
ssi
onst
atementshoul
d cl
ear
lyout
li
net
hemai
n
pur
poseoft
heor
gani
sat
ion,
andwhatt
heydo. “
Howdowedoi
t?”—I
tshoul
dal
so
ment
ionhow onepl
ansonachi
evi
ngt
hemi
ssi
onst
atement
. “
Whom dowedoi
t
f
or?
”— Theaudi
enceoft
hemi
ssi
onst
atementshoul
dbecl
ear
lyst
atedwi
thi
nthe
mi
ssi
onst
atement
.“Whatv
aluear
ewebr
ingi
ng?
”—Thebenef
it
sandv
aluesoft
he
mi
ssi
onst
atementshoul
dbecl
ear
lyout
li
ned.

Whendesi
gni
ngami
ssi
onst
atement
,itshoul
dbev
erycl
eart
otheaudi
encewhat
t
hepur
poseofi
tis.I
tisi
deal
forabusi
nesst
obeabl
etocommuni
cat
ethei
rmi
ssi
on,
goal
sandobj
ect
ivest
other
eaderwi
thouti
ncl
udi
nganyunnecessar
yinf
ormat
ion
t
hrought
hemi
ssi
onst
atement
.

St
rat
egy
:

Cr
eat
ingacompanyst
rat
egyi
sthef
inalst
epi
nthi
spr
ocess.Def
ini
ngt
hev
isi
onand
mi
ssi
onar
ecr
it
icalbef
orest
art
ingonst
rat
egi
cel
ement
s.Af
teral
l
,whati
sthe
st
rat
egyt
ryi
ngt
oachi
evei
fnott
hecompanymi
ssi
on?Andwhati
sthemi
ssi
oni
fnot
anembodi
mentoft
hev
isi
on?

Someor
gani
zat
ionsputaddi
ti
onalst
epsbet
weenf
ormi
ngt
hev
isi
on/
missi
onand
cr
eat
ing t
he st
rat
egy
.Forexampl
e,many choose t
o cr
eat
e an ov
eral
lli
stof

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ManagementSci
ence Uni
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obj
ect
ivesorgoal
sfi
rst
,andt
hent
ouset
hoseast
hebasi
sfort
hei
rcompany
st
rat
egy
.

Acompanyst
rat
egyshoul
dincl
udeshor
t-andl
ong-
ter
m goal
sandshoul
dexpl
ain
how t
hosegoal
swi
l
lbeachi
eved.I
tisf
ocusedonpr
esentact
ionsandout
comes
neededt
omov
ecl
osert
oachi
evi
ngt
hemi
ssi
on.Companyst
rat
egi
esev
olv
eandar
e
updat
edov
ert
imet
oadj
ustf
orcur
rentf
act
orssuchasl
ocaleconomi
ccondi
ti
ons
andcompanyneeds.
Doesy
ouror
gani
zat
ionhav
eawel
l
-cr
aft
edandeasy
-to-
communi
cat
evi
sion?Doesi
t
gui
deempl
oyeebehav
ior
?Doesy
ourmi
ssi
onr
efl
ecty
ourcor
eval
ues?I
siteasyt
o
l
i
nkt
hecompanyst
rat
egybackt
othev
isi
onandmi
ssi
on?
Goal
sandObj
ect
ives
St
rat
egi
cgoal
sar
ethehi
ghestgoal
soft
heor
gani
zat
ionorani
ndi
vi
dual
.St
rat
egi
c
goal
s ar
e used i
n st
rat
egi
c management
.Pr
oper
lysetst
rat
egi
c goal
s ar
e not
f
ocusedonl
yononemet
ri
cofoper
ati
onoft
heor
gani
zat
ion(
forexampl
e,j
ustt
ogai
n
pr
ofi
t,butt
heyar
econf
igur
edasbal
anced-(
e.g.Bal
ancedScor
ecar
d).
Thest
rat
egi
cgoal
soft
heor
gani
zat
ionar
eli
nkedt
oit
smi
ssi
onandf
ormul
ated
v
isi
on.St
rat
egi
cgoal
smaynotnecessar
il
ymeett
hecondi
ti
onsandpr
inci
plesof
SMART(
speci
fi
c,measur
abl
e,achi
evabl
e,r
eal
i
sti
candt
imeav
ail
abi
l
ity
),i
ftheyar
e
f
urt
herdi
sint
egr
atedi
ntot
hespeci
fi
cobj
ect
ives.
Thest
rat
egi
cgoal
sar
ecr
uci
alt
ocl
ari
fyi
tsv
isi
on,
whi
cht
heyconcr
eti
zeandspeci
fy
out
comes.Theyar
egener
all
ydef
inedbyt
heownerort
opmanagement
,whoi
sal
so
r
esponsi
blef
orachi
evi
ng t
hem.St
rat
egi
c goal
s concr
eti
ze t
he v
isi
on and hel
p
manager
stomanageandmot
ivat
est
affatt
heor
gani
zat
ion,t
oget
herwi
thpr
oper
ly
def
inedspeci
fi
cobj
ect
ives.

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ManagementSci
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Cor
por
atePl
anni
ngPr
ocess
Cor
por
atepl
anni
ng i
sani
mpor
tantand v
italbusi
nesspr
ocess.Undert
his,t
he
or
gani
zat
ion’
stopmanagementsi
tsdownt
ofor
mul
atepol
i
ciesandst
rat
egi
esand
communi
cat
ethem downwar
dfori
mpl
ement
ati
on.Thi
s pr
ocess ofcor
por
ate
pl
anni
ng ent
ail
s pr
epar
ing t
he company
’s mi
ssi
on,goal
s and obj
ect
ives.Any
or
gani
zat
ion’
s mi
ssi
on st
atementcl
ear
ly el
uci
dat
es i
ts pur
pose ofexi
stence.
Thr
ought
his,t
heor
gani
zat
ionpr
oject
sacor
por
atei
maget
othecust
omer
sand
pr
ovi
desdi
rect
ionf
ort
heempl
oyees.

Sy
stemat
icpr
ocessofdet
ermi
ninggoal
sthathast
obeachi
evedi
nthef
oreseeabl
e
f
utur
ewhi
chconsi
stsof
:(1)Management
'
sfundament
alassumpt
ionsaboutt
he
f
utur
eeconomi
c,t
echnol
ogi
cal
,andcompet
it
iveenv
ironment
s.(
2)Set
ti
ngofgoal
s
t
obeachi
evedwi
thi
naspeci
fi
edt
imef
rame.(
3)Per
for
manceofSWOTanal
ysi
s.(
4)
Sel
ect
ingmai
nandal
ter
nat
ivest
rat
egi
est
o achi
evet
hegoal
s.(
5)For
mul
ati
ng,
i
mpl
ement
ing,andmoni
tor
ingt
heoper
ati
onalort
act
icalpl
anst
oachi
evei
nter
im
obj
ect
ives.Oncet
hemi
ssi
onst
atementi
spr
epar
ed,
theor
gani
zat
ionnextchal
ksout
i
tsobj
ect
ives.Thesear
etangi
bleandmeasur
abl
etar
get
stheor
gani
zat
ioni
sai
ming
t
oachi
eve.Wi
tht
hesemeasur
abl
etar
get
s,t
heor
gani
zat
ioncanmoni
torgr
owt
hand
makenecessar
ycor
rect
ions.

Env
ironment
alScanni
ng:
Or
gani
zat
ional env
ironment consi
sts of bot
h ext
ernal and i
nter
nal f
act
ors.
Env
ironmentmustbescannedsoast
odet
ermi
nedev
elopmentandf
orecast
sof
f
act
orst
hatwi
l
linf
luenceor
gani
zat
ionalsuccess.Env
ironment
alscanni
ngr
efer
sto
possessi
onandut
il
izat
ionofi
nfor
mat
ionaboutoccasi
ons,pat
ter
ns,t
rends,and
r
elat
ionshi
pswi
thi
nanor
gani
zat
ion’
sint
ernalandext
ernalenv
ironment
.Ithel
pst
he
manager
stodeci
det
hef
utur
epat
hoft
heor
gani
zat
ion.Scanni
ngmusti
dent
if
ythe
t
hreat
sandoppor
tuni
ti
esexi
sti
ngi
ntheenv
ironment
.Whi
l
est
rat
egyf
ormul
ati
on,
an
or
gani
zat
ionmustt
akeadv
ant
ageoft
heoppor
tuni
ti
esandmi
nimi
zet
het
hreat
s.A
t
hreatf
oroneor
gani
zat
ionmaybeanoppor
tuni
tyf
oranot
her
.

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ManagementSci
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I
nter
nalanal
ysi
soft
heenv
ironmenti
sthef
ir
stst
ep ofenv
ironmentscanni
ng.
Or
gani
zat
ionsshoul
dobser
vet
hei
nter
nalor
gani
zat
ionalenv
ironment
.Thi
sincl
udes
empl
oyeei
nter
act
ionwi
thot
herempl
oyees,
empl
oyeei
nter
act
ionwi
thmanagement
,
manageri
nter
act
ionwi
thot
her
manager
s,and managementi
nter
act
ion wi
th shar
ehol
der
s,access t
o nat
ural
r
esour
ces,br
and awar
eness,or
gani
zat
ionalst
ruct
ure,mai
n st
aff
,oper
ati
onal
pot
ent
ial
,et
c.Al
so,di
scussi
ons,i
nter
views,andsur
vey
scanbeusedt
oassesst
he
i
nter
nalenv
ironment
.Anal
ysi
sofi
nter
nalenv
ironmenthel
psi
nident
if
yingst
rengt
hs
andweaknessesofanor
gani
zat
ion.

Asbusi
nessbecomesmor
ecompet
it
ive,
andt
her
ear
erapi
dchangesi
ntheext
ernal
env
ironment
,inf
ormat
ionf
rom ext
ernalenv
ironmentaddscr
uci
alel
ement
stot
he
ef
fect
ivenessofl
ong-
ter
m pl
ans.Asenv
ironmenti
sdy
nami
c,i
tbecomesessent
ial
t
oident
if
ycompet
it
ors’mov
esandact
ions.Or
gani
zat
ionshav
eal
sot
oupdat
ethe
cor
e compet
enci
es and i
nter
nal env
ironment as per ext
ernal env
ironment
.
Env
ironment
alf
act
orsar
einf
ini
te,hence,or
gani
zat
ionshoul
dbeagi
l
eandv
igi
l
eto
acceptandadj
ustt
otheenv
ironment
alchanges.Fori
nst
ance-Moni
tor
ingmi
ght
i
ndi
cat
ethatanor
igi
nalf
orecastoft
hepr
icesoft
her
awmat
eri
alst
hatar
einv
olv
ed
i
nthepr
oductar
enomor
ecr
edi
ble,whi
chcoul
dimpl
yther
equi
rementf
ormor
e
f
ocusedscanni
ng,f
orecast
ingandanal
ysi
stocr
eat
eamor
etr
ust
wor
thypr
edi
cti
on
aboutt
hei
nputcost
s.I
nasi
mil
armanner
,ther
ecanbechangesi
nfact
orssuchas
compet
it
or’
s act
ivi
ti
es,t
echnol
ogy
,mar
ket t
ast
es and pr
efer
ences.St
rat
egi
c
manager
smustnotonl
yrecogni
zet
hepr
esentst
ateoft
heenv
ironmentandt
hei
r
i
ndust
rybutal
sobeabl
etopr
edi
cti
tsf
utur
eposi
ti
ons.

SWOTAnal
ysi
s
SWOT Anal
ysi
sist
hemostr
enownedt
oolf
oraudi
tandanal
ysi
soft
heov
eral
l
st
rat
egi
cposi
ti
onoft
hebusi
nessandi
tsenv
ironment
.It
skeypur
posei
stoi
dent
if
y
t
hest
rat
egi
est
hatwi
l
lcr
eat
eaf
ir
m speci
fi
cbusi
nessmodelt
hatwi
l
lbestal
i
gnan
or
gani
zat
ion’
sresour
cesandcapabi
l
iti
est
other
equi
rement
soft
heenv
ironmenti
n
whi
cht
hef
ir
m oper
ates.

Page|
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ManagementSci
ence Uni
t-
V

Anov
erv
iewoft
hef
ourf
act
ors(
Str
engt
hs,Weaknesses,Oppor
tuni
ti
esandThr
eat
s)
i
sgi
venbel
ow-

1.St
rengt
hs -St
rengt
hs ar
ethe qual
i
ties t
hatenabl
e us t
o accompl
i
sh t
he
or
gani
zat
ion’
smi
ssi
on.Thesear
ethebasi
sonwhi
chcont
inuedsuccesscanbe
madeandcont
inued/
sust
ained.St
rengt
hscanbeei
thert
angi
bleori
ntangi
ble.
Thesear
ewhaty
ouar
ewel
l
-ver
sedi
norwhaty
ouhav
eexper
ti
sei
n,t
het
rai
tsand
qual
i
tiesy
ourempl
oyeespossess(
indi
vi
dual
l
yandasat
eam)andt
hedi
sti
nct
f
eat
urest
hatgi
vey
ouror
gani
zat
ioni
tsconsi
stency
.

St
rengt
hsar
ethebenef
ici
alaspect
soft
heor
gani
zat
ionort
hecapabi
l
iti
esofan
or
gani
zat
ion,
whi
chi
ncl
udeshumancompet
enci
es,
processcapabi
l
iti
es,
financi
al
r
esour
ces,
product
sandser
vices,
cust
omergoodwi
l
landbr
andl
oyal
ty.Exampl
es
ofor
gani
zat
ionalst
rengt
hsar
ehugef
inanci
alr
esour
ces,br
oadpr
oductl
i
ne,no
debt
,commi
tt
edempl
oyees,
etc.

2.Weaknesses-Weaknessesar
ethequal
i
tiest
hatpr
eventusf
rom accompl
i
shi
ng
ourmi
ssi
on and achi
evi
ng ourf
ullpot
ent
ial
.These weaknessesdet
eri
orat
e
i
nfl
uences on t
he or
gani
zat
ionalsuccess and gr
owt
h.Weaknesses ar
ethe
f
act
orswhi
chdonotmeett
hest
andar
dswef
eel
theyshoul
dmeet
.

Weaknesses i
n an or
gani
zat
ion maybe depr
eci
ati
ng machi
ner
y,i
nsuf
fi
cient
r
esear
chanddev
elopmentf
aci
l
iti
es,
nar
rowpr
oductr
ange,
poordeci
sion-
maki
ng,
et
c.Weaknessesar
econt
rol
l
abl
e.Theymustbemi
nimi
zedandel
i
minat
ed.For
i
nst
ance-t
oov
ercomeobsol
etemachi
ner
y,new machi
ner
ycanbepur
chased.
Ot
herexampl
esofor
gani
zat
ionalweaknessesar
ehugedebt
s,hi
ghempl
oyee
t
urnov
er,
compl
exdeci
sionmaki
ngpr
ocess,
nar
rowpr
oductr
ange,
lar
gewast
age
ofr
awmat
eri
als,
etc.

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ManagementSci
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3.Oppor
tuni
ti
es-Oppor
tuni
ti
esar
epr
esent
edbyt
heenv
ironmentwi
thi
nwhi
chour
or
gani
zat
ionoper
ates.Thesear
isewhenanor
gani
zat
ioncant
akebenef
itof
condi
ti
onsi
nit
senv
ironmentt
opl
anandexecut
est
rat
egi
est
hatenabl
eitt
o
become mor
e pr
ofi
tabl
e.Or
gani
zat
ions can gai
n compet
it
ive adv
ant
age by
maki
nguseofoppor
tuni
ti
es.

Or
gani
zat
ionshoul
dbecar
efulandr
ecogni
zet
heoppor
tuni
ti
esandgr
aspt
hem
whenev
ert
heyar
ise.Sel
ect
ingt
het
arget
sthatwi
l
lser
vet
hecl
i
ent
swhi
chgi
ve
desi
redr
esul
tsi
tsel
fisadi
ff
icul
ttask.Oppor
tuni
ti
esmayar
isef
rom mar
ket
,
compet
it
ion,i
ndust
ry/
gov
ernment and t
echnol
ogy
.Incr
easi
ng demand f
or
t
elecommuni
cat
ionsaccompani
edbyder
egul
ati
oni
sagr
eatoppor
tuni
tyf
ornew
f
ir
mst
oent
ert
elecom sect
orandcompet
ewi
thexi
sti
ngf
ir
msf
orr
evenue.

4.Thr
eat
s-Thr
eat
sar
isewhencondi
ti
onsi
next
ernalenv
ironmentj
eopar
dizet
he
r
eli
abi
l
ityandpr
ofi
tabi
l
ityoft
heor
gani
zat
ion’
sbusi
ness.Theycompoundt
he
v
ulner
abi
l
itywhent
heyr
elat
etot
heweaknesses.Thr
eat
sar
euncont
rol
l
abl
e.
Whenat
hreatcomes,t
hest
abi
l
ityandsur
viv
alcanbeatst
ake.Exampl
esof
t
hreat
sar
e-unr
estamongempl
oyees;ev
erchangi
ngt
echnol
ogy
;incr
easi
ng
compet
it
ionl
eadi
ngt
oexcesscapaci
ty,pr
icewar
sandr
educi
ngi
ndust
rypr
ofi
ts;
et
c.
Adv
ant
agesofSWOTAnal
ysi
s
SWOTAnal
ysi
sisi
nst
rument
ali
nst
rat
egyf
ormul
ati
onandsel
ect
ion.I
tisast
rong
t
ool
,buti
tinv
olv
esagr
eatsubj
ect
iveel
ement
.Iti
sbestwhenusedasagui
de,and
notasapr
escr
ipt
ion.Successf
ulbusi
nessesbui
l
dont
hei
rst
rengt
hs,cor
rectt
hei
r
weaknessandpr
otectagai
nsti
nter
nalweaknessesandext
ernalt
hreat
s.Theyal
so
keepawat
chont
hei
rov
eral
lbusi
nessenv
ironmentandr
ecogni
zeandexpl
oitnew
oppor
tuni
ti
esf
ast
ert
hani
tscompet
it
ors.

SWOTAnal
ysi
shel
psi
nst
rat
egi
cpl
anni
ngi
nfol
l
owi
ngmanner
-
a.I
tisasour
ceofi
nfor
mat
ionf
orst
rat
egi
cpl
anni
ng.

b.Bui
l
dsor
gani
zat
ion’
sst
rengt
hs.

c.Rev
ersei
tsweaknesses.

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11
ManagementSci
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V

d.Maxi
mizei
tsr
esponset
ooppor
tuni
ti
es.

e.Ov
ercomeor
gani
zat
ion’
sthr
eat
s.

f
.Ithel
psi
nident
if
yingcor
ecompet
enci
esoft
hef
ir
m.

g.I
thel
psi
nset
ti
ngofobj
ect
ivesf
orst
rat
egi
cpl
anni
ng.

h.I
thel
psi
nknowi
ngpast
,pr
esentandf
utur
esot
hatbyusi
ngpastandcur
rent
dat
a,f
utur
epl
anscanbechal
kedout
.
SWOTAnal
ysi
spr
ovi
dei
nfor
mat
iont
hathel
psi
nsy
nchr
oni
zi
ngt
hef
ir
m’sr
esour
ces
andcapabi
l
iti
eswi
tht
hecompet
it
iveenv
ironmenti
nwhi
cht
hef
ir
m oper
ates.

Li
mit
ati
onsofSWOTAnal
ysi
s
SWOTAnal
ysi
sisnotf
reef
rom i
tsl
i
mit
ati
ons.I
tmaycauseor
gani
zat
ionst
ovi
ew
ci
rcumst
ancesasv
erysi
mpl
ebecauseofwhi
cht
heor
gani
zat
ionsmi
ghtov
erl
ook
cer
tai
nkeyst
rat
egi
ccont
actwhi
chmayoccur
.Mor
eov
er,cat
egor
izi
ngaspect
sas
st
rengt
hs,weaknesses,oppor
tuni
ti
esandt
hreat
smi
ghtbev
erysubj
ect
iveast
her
e
i
sgr
eatdegr
eeofuncer
tai
ntyi
nmar
ket
.SWOT Anal
ysi
sdoesst
ressupont
he
si
gni
fi
canceoft
hesef
ouraspect
s,buti
tdoesnott
ellhow anor
gani
zat
ioncan
i
dent
if
ytheseaspect
sfori
tsel
f.

Ther
e ar
e cer
tai
nli
mit
ati
ons ofSWOT Anal
ysi
s whi
ch ar
e noti
n cont
rolof
management
.Thesei
ncl
ude-

a.Pr
icei
ncr
ease;

b.I
nput
s/r
awmat
eri
als;

c.Gov
ernmentl
egi
sl
ati
on;

d.Economi
cenv
ironment
;

e.Sear
chi
nganewmar
ketf
ort
hepr
oductwhi
chi
snothav
ingov
erseasmar
ket
duet
oimpor
trest
ri
cti
ons;
etc.

I
nter
nal
li
mit
ati
onsmayi
ncl
ude-
a.I
nsuf
fi
ci
entr
esear
chanddev
elopmentf
aci
l
iti
es;

Page|
12
ManagementSci
ence Uni
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b.Faul
typr
oduct
sduet
opoorqual
i
tycont
rol
;

c.Poori
ndust
ri
alr
elat
ions;

d.Lackofski
l
ledandef
fi
cientl
abour
;et
c.,

St
rat
egyFor
mul
ati
on
St
rat
egyf
ormul
ati
onr
efer
stot
hepr
ocessofchoosi
ngt
hemostappr
opr
iat
ecour
se
ofact
ionf
ort
her
eal
i
zat
ionofor
gani
zat
ionalgoal
sandobj
ect
ivesandt
her
eby
achi
evi
ngt
heor
gani
zat
ionalv
isi
on.Thepr
ocessofst
rat
egyf
ormul
ati
onbasi
cal
l
y
i
nvol
vessi
xmai
nst
eps.Thought
hese

st
epsdonotf
oll
ow ar
igi
dchr
onol
ogi
calor
der
,howev
ert
heyar
ever
yrat
ionaland
canbeeasi
l
yfol
l
owedi
nthi
sor
der
.

1.Set
ti
ngOr
gani
zat
ions’
obj
ect
ives-Thekeycomponentofanyst
rat
egyst
atement
i
stosett
hel
ong-
ter
m obj
ect
ivesoft
heor
gani
zat
ion.I
tisknownt
hatst
rat
egyi
s
gener
all
yamedi
um f
orr
eal
i
zat
ionofor
gani
zat
ionalobj
ect
ives.Obj
ect
ivesst
ress
t
hest
ateofbei
ngt
her
ewher
easSt
rat
egyst
ressesupont
hepr
ocessofr
eachi
ng
t
her
e.St
rat
egyi
ncl
udesbot
hthef
ixat
ionofobj
ect
ivesaswel
lthemedi
um t
obe
usedt
oreal
i
zet
hoseobj
ect
ives.Thus,st
rat
egyi
sawi
dert
erm whi
chbel
i
evesi
n
t
hemannerofdepl
oymentofr
esour
cessoast
oachi
evet
heobj
ect
ives.

Whi
l
efi
xi
ngt
heor
gani
zat
ionalobj
ect
ives,i
tisessent
ialt
hatt
hef
act
orswhi
ch
i
nfl
uencet
hesel
ect
ionofobj
ect
ivesmustbeanal
yzedbef
oret
hesel
ect
ionof
obj
ect
ives.Oncet
heobj
ect
ivesandt
hef
act
orsi
nfl
uenci
ngst
rat
egi
cdeci
sions
hav
ebeendet
ermi
ned,
iti
seasyt
otakest
rat
egi
cdeci
sions.

2.Ev
aluat
ingt
heOr
gani
zat
ionalEnv
ironment-Thenextst
epi
stoev
aluat
ethe
gener
aleconomi
candi
ndust
ri
alenv
ironmenti
nwhi
cht
heor
gani
zat
ionoper
ates.
Thi
sincl
udesar
evi
ewoft
heor
gani
zat
ionscompet
it
iveposi
ti
on.I
tisessent
ialt
o
conductaqual
i
tat
iveandquant
it
ati
ver
evi
ewofanor
gani
zat
ionsexi
sti
ngpr
oduct
l
i
ne.Thepur
poseofsuchar
evi
ewi
stomakesur
ethatt
hef
act
orsi
mpor
tantf
or
compet
it
ivesuccessi
nthemar
ketcanbedi
scov
eredsot
hatt
hemanagement
cani
dent
if
ythei
rownst
rengt
hsandweaknessesaswel
last
hei
rcompet
it
ors’
st
rengt
hsandweaknesses.

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ManagementSci
ence Uni
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V

Af
teri
dent
if
yingi
tsst
rengt
hsandweaknesses,
anor
gani
zat
ionmustkeepat
rack
ofcompet
it
ors’mov
esandact
ionssoast
odi
scov
erpr
obabl
eoppor
tuni
ti
esof
t
hreat
stoi
tsmar
ketorsuppl
ysour
ces.

3.Set
ti
ngQuant
it
ati
veTar
get
s-I
nthi
sst
ep,
anor
gani
zat
ionmustpr
act
ical
l
yfi
xthe
quant
it
ati
vet
argetv
aluesf
orsomeoft
heor
gani
zat
ionalobj
ect
ives.Thei
dea
behi
ndt
hisi
stocompar
ewi
thl
ongt
erm cust
omer
s,soast
oev
aluat
ethe
cont
ri
but
ion t
hatmi
ghtbe made by v
ari
ous pr
oductzones oroper
ati
ng
depar
tment
s.

4.Ai
mingi
ncont
extwi
tht
hedi
vi
sionalpl
ans-I
nthi
sst
ep,t
hecont
ri
but
ionsmade
byeachdepar
tmentordi
vi
sionorpr
oductcat
egor
ywi
thi
ntheor
gani
zat
ioni
s
i
dent
if
iedandaccor
dingl
yst
rat
egi
cpl
anni
ngi
sdonef
oreachsub-
uni
t.Thi
s
r
equi
resacar
eful
anal
ysi
sofmacr
oeconomi
ctr
ends.

5.Per
for
manceAnal
ysi
s-Per
for
manceanal
ysi
sincl
udesdi
scov
eri
ngandanal
yzi
ng
t
hegapbet
weent
hepl
annedordesi
redper
for
mance.Acr
it
icalev
aluat
ionoft
he
or
gani
zat
ions pastper
for
mance,pr
esentcondi
ti
on and t
he desi
red f
utur
e
condi
ti
onsmustbedonebyt
heor
gani
zat
ion.Thi
scr
it
icalev
aluat
ioni
dent
if
ies
t
hedegr
eeofgapt
hatper
sist
sbet
weent
heact
ualr
eal
i
tyandt
hel
ong-
ter
m
aspi
rat
ionsoft
heor
gani
zat
ion.An at
tempti
smadebyt
heor
gani
zat
ion t
o
est
imat
eit
spr
obabl
efut
urecondi
ti
oni
fthecur
rentt
rendsper
sist
.

6.Choi
ceofSt
rat
egy-Thi
sist
heul
ti
mat
est
epi
nSt
rat
egyFor
mul
ati
on.Thebest
cour
se ofact
ion i
s act
ual
l
y chosen af
terconsi
der
ing or
gani
zat
ionalgoal
s,
or
gani
zat
ionalst
rengt
hs,pot
ent
ialand l
i
mit
ati
ons as wel
las t
he ext
ernal
oppor
tuni
ti
es.

St
rat
egyI
mpl
ement
ati
on

St
rat
egyi
mpl
ement
ati
oni
sthet
ransl
ati
onofchosenst
rat
egyi
ntoor
gani
zat
ional
act
ionsoast
oachi
evest
rat
egi
cgoal
sandobj
ect
ives.St
rat
egyi
mpl
ement
ati
oni
s
al
sodef
inedast
hemanneri
nwhi
chanor
gani
zat
ionshoul
ddev
elop,ut
il
ize,and
amal
gamat
e or
gani
zat
ionalst
ruct
ure,cont
rolsy
stems,and cul
tur
etof
oll
ow

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ManagementSci
ence Uni
t-
V

st
rat
egi
es t
hat l
ead t
o compet
it
ive adv
ant
age and a bet
ter per
for
mance.
Or
gani
zat
ionalst
ruct
ureal
l
ocat
esspeci
alv
aluedev
elopi
ngt
asksandr
olest
othe
empl
oyeesandst
ateshowt
heset
asksandr
olescanbecor
rel
atedsoasmaxi
mize
ef
fi
ciency
,qual
i
ty,andcust
omersat
isf
act
ion-
thepi
l
lar
sofcompet
it
iveadv
ant
age.
But
,or
gani
zat
ional
str
uct
urei
snotsuf
fi
cienti
nit
sel
ftomot
ivat
etheempl
oyees.

Fol
l
owi
ngar
ethemai
nst
epsi
nimpl
ement
ingast
rat
egy
:

 Dev
elopi
nganor
gani
zat
ionhav
ingpot
ent
ial
ofcar
ryi
ngoutst
rat
egy
successf
ull
y.
 Di
sbur
sementofabundantr
esour
cest
ost
rat
egy
-essent
ial
act
ivi
ti
es.
 Cr
eat
ingst
rat
egy
-encour
agi
ngpol
i
cies.
 Empl
oyi
ngbestpol
i
ciesandpr
ogr
amsf
orconst
anti
mpr
ovement
.
 Li
nki
ngr
ewar
dst
ruct
uret
oaccompl
i
shmentofr
esul
ts.
 Maki
nguseofst
rat
egi
cleader
shi
p.
Excel
l
ent
lyf
ormul
atedst
rat
egi
eswi
l
lfai
lift
heyar
enotpr
oper
lyi
mpl
ement
ed.Al
so,
i
tisessent
ialt
onot
ethatst
rat
egyi
mpl
ement
ati
oni
snotpossi
bleunl
esst
her
eis
st
abi
l
itybet
weenst
rat
egyandeachor
gani
zat
ionaldi
mensi
onsuchasor
gani
zat
ional
st
ruct
ure,
rewar
dst
ruct
ure,
resour
ce-
all
ocat
ionpr
ocess,
etc.

St
rat
egyi
mpl
ement
ati
onposesat
hreatt
omanymanager
sandempl
oyeesi
nan
or
gani
zat
ion.New powerr
elat
ionshi
psar
epr
edi
ctedandachi
eved.New gr
oups
(
for
malas wel
las i
nfor
mal
)ar
efor
med whose v
alues,at
ti
tudes,bel
i
efs and
concer
nsmaynotbe known.Wi
tht
he change i
n powerand st
atusr
oles,t
he
manager
sandempl
oyeesmayempl
oyconf
ront
ati
onbehav
iour

St
rat
egyEv
aluat
ion
Thesi
gni
fi
canceofst
rat
egyev
aluat
ionl
i
esi
nit
scapaci
tyt
oco-
ordi
nat
ethet
ask
per
for
medbymanager
s,gr
oups,depar
tment
set
c,t
hroughcont
rolofper
for
mance.
St
rat
egi
cEv
aluat
ioni
ssi
gni
fi
cantbecauseofv
ari
ousf
act
orssuchas-dev
elopi
ng
i
nput
sfornew st
rat
egi
cpl
anni
ng,t
heur
gef
orf
eedback,appr
aisalandr
ewar
d,
dev
elopmentoft
hest
rat
egi
cmanagementpr
ocess,j
udgi
ngt
hev
ali
dit
yofst
rat
egi
c
choi
ceet
c.

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ManagementSci
ence Uni
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V

Thepr
ocessofSt
rat
egyEv
aluat
ionconsi
stsoff
oll
owi
ngst
eps-
1. Fi
xi
ng benchmar
kofper
for
mance-Whi
l
efi
xi
ng t
hebenchmar
k,st
rat
egi
sts
encount
erquest
ionssuchas-whatbenchmar
kst
oset
,howt
osett
hem andhowt
o
expr
esst
hem.I
nor
dert
odet
ermi
net
hebenchmar
kper
for
mancet
obeset
,iti
s
essent
ialt
odi
scov
ert
hespeci
alr
equi
rement
sforper
for
mingt
hemai
ntask.The
per
for
mancei
ndi
cat
ort
hatbesti
dent
if
yandexpr
esst
hespeci
alr
equi
rement
smi
ght
t
hen bedet
ermi
ned t
o beused f
orev
aluat
ion.Theor
gani
zat
ion can usebot
h
quant
it
ati
veandqual
i
tat
ivecr
it
eri
aforcompr
ehensi
veassessmentofper
for
mance.
Quant
it
ati
vecr
it
eri
aincl
udesdet
ermi
nat
ionofnetpr
ofi
t,ROI
,ear
ningpershar
e,cost
ofpr
oduct
ion,r
ateofempl
oyeet
urnov
eret
c.Amongt
heQual
i
tat
ivef
act
orsar
e
subj
ect
iveev
aluat
ion off
act
orssuch as-ski
l
lsand compet
enci
es,r
iskt
aki
ng
pot
ent
ial
,fl
exi
bil
i
tyet
c.

2.Measur
ementofper
for
mance-Thest
andar
dper
for
mancei
sabenchmar
kwi
th
whi
ch t
he act
ual per
for
mance i
sto be compar
ed. The r
epor
ti
ng and
communi
cat
ionsy
stem hel
pinmeasur
ingt
heper
for
mance.I
fappr
opr
iat
emeans
ar
eav
ail
abl
eformeasur
ingt
heper
for
manceandi
fthest
andar
dsar
eseti
nthe
r
ightmanner
,st
rat
egyev
aluat
ionbecomeseasi
er.Butv
ari
ousf
act
orssuchas
manager
scont
ri
but
ionar
edi
ff
icul
ttomeasur
e.Si
mil
arl
ydi
vi
sionalper
for
mance
i
ssomet
imesdi
ff
icul
ttomeasur
eascompar
edt
oindi
vi
dualper
for
mance.Thus,
v
ari
abl
eobj
ect
ivesmustbecr
eat
edagai
nstwhi
chmeasur
ementofper
for
mance
canbedone.Themeasur
ementmustbedoneatr
ightt
imeel
seev
aluat
ionwi
l
l
notmeeti
tspur
pose.Formeasur
ingt
heper
for
mance,
financi
alst
atement
sli
ke-
bal
ancesheet
,pr
ofi
tandl
ossaccountmustbepr
epar
edonanannual
basi
s.

3.Anal
yzi
ngVar
iance-Whi
l
emeasur
ingt
heact
ualper
for
manceandcompar
ingi
t
wi
thst
andar
dper
for
mancet
her
emaybev
ari
anceswhi
chmustbeanal
yzed.The
st
rat
egi
stsmustment
ion t
hedegr
eeoft
oler
ancel
i
mit
sbet
ween whi
ch t
he
v
ari
ance bet
ween act
ualand st
andar
d per
for
mance maybe accept
ed.The
posi
ti
ve dev
iat
ion i
ndi
cat
es a bet
terper
for
mance buti
tis qui
te unusual
exceedi
ng t
het
argetal
way
s.Thenegat
ivedev
iat
ioni
sani
ssueofconcer
n
becausei
tindi
cat
esashor
tfal
linper
for
mance.Thusi
nthi
scaset
hest
rat
egi
sts
mustdi
scov
ert
he causes ofdev
iat
ion and mustt
ake cor
rect
ive act
ion t
o
ov
ercomei
t.

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ManagementSci
ence Uni
t-
V

4.Taki
ngCor
rect
iveAct
ion-Oncet
hedev
iat
ioni
nper
for
mancei
sident
if
ied,i
tis
essent
ialt
opl
anf
oracor
rect
iveact
ion.I
ftheper
for
mancei
sconsi
stent
lyl
ess
t
hant
hedesi
redper
for
mance,t
hest
rat
egi
stsmustcar
ryadet
ail
edanal
ysi
sof
t
hef
act
orsr
esponsi
blef
orsuchper
for
mance.I
fthest
rat
egi
stsdi
scov
ert
hatt
he
or
gani
zat
ionalpot
ent
ialdoesnotmat
chwi
tht
heper
for
mancer
equi
rement
s,t
hen
t
hest
andar
dsmustbel
ower
ed.Anot
herr
areanddr
ast
iccor
rect
iveact
ioni
s
r
efor
mul
ati
ngt
hest
rat
egywhi
chr
equi
resgoi
ngbackt
othepr
ocessofst
rat
egi
c
management
,ref
rami
ngofpl
ansaccor
dingt
onewr
esour
ceal
l
ocat
iont
rendand
consequentmeans goi
ng t
othe begi
nni
ng poi
ntofst
rat
egi
c management
pr
ocess.

Gener
icSt
rat
egi
es:
TheGener
icSt
rat
egi
escanbeusedt
odet
ermi
net
hedi
rect
ion(
str
ategy
)ofy
our
or
gani
sat
ion.Mi
chael
Por
teruses4st
rat
egi
est
hatanor
gani
sat
ioncanchoosef
rom.
Hebel
i
evest
hatacompanymustchooseacl
earcour
sei
nor
dert
obeabl
etobeat
t
hecompet
it
ion.
Thef
ourst
rat
egi
est
ochoosef
rom ar
e:

1.CostLeader
shi
p
2.Di
ff
erent
iat
ion
3.CostFocus
4.Di
ff
erent
iat
ionFocus
Mi
chaelPor
terdescr
ibed t
he t
heor
yin hi
s1985 book‘
Compet
it
ive Adv
ant
age:
Cr
eat
ingandSust
aini
ngSuper
iorPer
f mance’
or .Thebasi
swasf
ormedbyt
hree
st
rat
egi
es,namel
ycostl
eader
shi
p,di
ff
erent
iat
ionandf
ocus.Hedi
vi
dedt
hel
att
er
i
ntocostf
ocusanddi
ff
erent
iat
ionf
ocus.

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ManagementSci
ence Uni
t-
V

Howt
oappl
ythePor
ter
’sGener
icSt
rat
egi
es?

Accor
dingt
oMi
chael
Por
tert
her
ear
efourGener
icst
rat
egi
es:

1.CostLeader
shi
p
Yout
argetabr
oadmar
ket(
lar
gedemand)andof
fert
hel
owestpossi
blepr
ice.Ther
e
ar
e2opt
ionswi
thi
nthi
scour
se.Youcanoptt
okeepcost
sasl
ow aspossi
ble;or
ensur
ethaty
ouhav
eal
argermar
ketshar
ewi
thav
eragepr
ices.I
nbot
hcases,t
he
poi
nti
stokeept
hecompanycost
sasl
ow aspossi
ble.Theconsumerpr
icei
sa
di
ff
erentst
ory
.
Or
gani
zat
ions t
hat appl
ythi
s st
rat
egy successf
ull
y usual
l
y hav
e subst
ant
ial
i
nvest
mentcapi
talatt
hei
rdi
sposal
,ef
fi
cientl
ogi
sti
csandl
owcost
swheni
tcomes
t
omat
eri
alsandl
abour
.Theor
gani
zat
ioni
sgener
all
yfocusedoni
nter
nal
processes.
2.Di
ff
erent
iat
ion
Yout
argetabr
oadmar
ket(
highdemand)
,buty
ourpr
oductorser
vicehasuni
que
f
eat
ures.Wi
tht
hisst
rat
egy
,youmakey
ourpr
oductasexcl
usi
veaspossi
ble,
maki
ng
i
tmor
eat
tr
act
ivet
hancompar
abl
epr
oduct
sof
fer
edbyt
hecompet
it
ion.Succeedi
ng
usi
ngt
hisst
rat
egyr
equi
resgoodr
esear
ch&dev
elopment
,innov
ati
onandt
heabi
l
ity
t
o del
i
verhi
gh qual
i
ty.Ef
fect
ive mar
ket
ing i
simpor
tant
,so t
hatt
he mar
ket
under
standst
hebenef
it
sofy
ouruni
quepr
oduct
.It
’si
mpor
tantt
obef
lexi
bleandt
o
beabl
etoadaptqui
ckl
yinachangi
ngmar
ket
,ory
our
iskt
hecompet
it
ionbeat
ing

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ManagementSci
ence Uni
t-
V

y
ouati
t.Suchanor
gani
sat
ioni
sfocusedont
heout
sidewor
ldandhasacr
eat
ive
appr
oach.
3.CostFocus
Yout
argetani
chemar
ket(
li
tt
lecompet
it
ion,‘
focusedmar
ket
’)andof
fert
hel
owest
possi
blepr
ice.I
nthi
sst
rat
egy
,youchooset
otar
getacl
earni
chemar
ketand
t
hroughunder
standi
ngt
hedy
nami
csoft
hemar
ketandt
hewi
shesoft
heconsumer
s,
y
oucanensur
ethatt
hecost
sremai
nlow.
4.Di
ff
erent
iat
ionFocus
Yout
argetani
chemar
ket(
li
tt
lecompet
it
ion,‘
focusedmar
ket
’)andy
ourpr
oductor
ser
vicehasuni
quef
eat
ures.Thi
sst
rat
egyof
teni
nvol
vesst
rongbr
andl
oyal
tyamong
consumer
s.I
t’
sver
yimpor
tantt
oensur
ethaty
ourpr
oductr
emai
nsuni
que,i
nor
der
t
ost
ayaheadofpossi
blecompet
it
ion.
I
nor
dert
ochooset
her
ightst
rat
egyf
ory
ouror
gani
sat
ion,
it’
simpor
tantbeawar
eof
t
hecompet
enci
esandst
rengt
hsofy
ourcompany
.

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