Suggested Readings:: DR Suresh Chandra CH

MBA III Semester
MB 302 - STRATEGIC MANAGEMENT

UNIT - I : Introduction Concept of Strategy - Levels-Strategic Decision Making -
Strategic Management - Elements-Process - Model - Vision - Mission - Business
Definition - Goals and Objectives - Balanced Scorecard Approach to Objectives -
Setting - Key Performance Indicators.
UNIT - II : Environmental and Organisational Appraisal Appraising the
Environment - Factors affecting Environmental Appraisal - Internal Environment -
Organisational Resources - Synergistic Effects - Competencies - Organisational
Capability Factors - Methods and Techniques used for Organisational Appraisal -
Preparing the Organisational Capability Profile.
UNIT - III : Corporate Level Strategies Corporate - Level Strategies - Expansion-
Stability -Retrenchment - Combination - Concentration - Integration -
Diversification - Internationalisation Strategies - Merger and Acquisition Strategies
- Stability - Retrenchment-Turnaround - Combination Strategies.
UNIT - IV: Strategic Analysis, Choice and Implementation Process of Strategic
Choice - Strategic Analysis - Factors in Strategic Choice - Strategy Implementation –
Project Implementation - Procedural Implementation – Resource Allocation -
Structural Implementation - Functional Strategies
UNIT - V: Strategic Evaluation and Control An Overview of Strategic Evaluation and
Control – Strategic Control - Operational Control - Techniques of Strategic
Evaluation and Control - Role of Organisational Systems in Evaluation.
Suggested readings :
1. Azhar Kazmi - Strategic Management and Business Policy, Tata McGraw Hill.
2. R.M. Srivastava - Management Policy and Strategic Management - Concepts, Skills and Practices Himalaya Publishing House.
3. V.S. Ramaswamy& S. Namakumari - Strategic Planning- Formulation of Corporate Strategy Text& Cases The Indian Concept Macmillan
Business Books.
4. Thomas L. Wheelen, J. David Hunger & Krish Rangarajan - Concepts in Strategic Management and Business Policy Pearson Education.
5. Ireland, Hoskisson, Hitt - Strategic Management Cengage Learning. 6. Subba Rao, P - Business Policy and Strategic Management
Himalaya Publishing House.
7. John A Pearce II, Richard B Robinson & Jr. Amita Mital- Strategic Management Formulation, Implementation and Control, Tata McGraw
Hill.
8. R. Srinivasam - Strategic Management, Prentice Hall of India Pvt. Ltd., Delhi.
9. Vipin Gupta, Kamala Gollakota & R. Srinivasam - Business Policy and Strategic Management, Prentice Hall of India Pvt. Ltd., Delhi.
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Dr Suresh Chandra Ch
(Notes compiled is for reference extracted from select references, material is not for commercial gain)
UNIT - I
Introduction to Strategic Management
Introduction Concept of Strategy - Levels-Strategic Decision Making - Strategic
Management - Elements-Process - Model - Vision - Mission - Business Definition - Goals
and Objectives - Balanced Scorecard Approach to Objectives - Setting - Key
Performance Indicators.
CONCEPT OF STRATEGY
“Strategy is the determination of the basic long term goals and objectives of an
enterprise and the adoption of the course of action and the allocation of resources
necessary for carrying out these goals.” -Alfrred D. Chandler.
“A strategy is a unified, comprehensive, and integrated plan that relates the
strategic advantages of the firm to the challenges of the environment. It is designed
to ensure that the basic objectives of the enterprise are achieved through proper
execution by the organization.”
-Lawrence R. Jauch & William F. Glueck.
LEVELS OF STRATEGIES
The strategies are executed at three different levels such as –
a) Corporate level
b) Business level
c) Functional/operational level
 Corporate level strategies are overarching plan of action covering the various
functions that are performed by different SBUs(strategic business unit, which
involved in a signal line of business) the plan deals with the objectives of the
company, allocation of resource and co-ordination of SBUs for best
performance.
The corporate level of management consists of the chief executive officer (CEO),
other senior executives, the board of directors, and corporate staff. These
individuals occupy the apex of decision making within the organization. The CEO is
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the principal general manager. In consultation with other senior executives, the role
of corporate- level managers is to oversee the development of strategies for the
whole organization. This role includes defining the goals of the organization,
determining what businesses it should be in, allocating resources among the
different businesses, formulating and implementing strategies that span individual
businesses, and providing leadership for the entire organization.
 Business level strategy is comprehensive plan directed to attain SBUs
objectives, allocation of resources among functional areas and coordination
between them for giving good contribution for achieving corporate level
objectives.
A business unit is a self- contained division (with its own functions— for example,
finance, purchasing, production, and marketing departments) that provides a
product or service for a particular market. The principal general manager at the
business level, or the business- level manager, is the head of the division. The
strategic role of these managers is to translate the general statements of direction
and intent that come from the corporate level into concrete strategies for individual
businesses.
 Functional level strategy is restricted to a specific function. It deals with
allocation of resources among different operations within that functional
area and coordinating them for better contribution to SBU and corporate
level achievement.
Functional- level managers are responsible for the specific business functions or
operations (human resources, purchasing, product development, customer service,
etc.) that constitute a company or one of its divisions. Thus, a functional manager’s
sphere of responsibility is generally confined to one organizational activity,
whereas general managers oversee the operation of a whole company or division.
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STRATEGIC DECISION MAKING
Strategic decision-making refers to identifying the best way to achieve goals and
objectives. These goals and objectives are long-term, and strategic decision-
making assists in describing a company's main objectives to achieve shorter-term
goals with a broad mission. In the long run, a company gets clarity and consistency
in realizing its objectives.
Strategic decision making is used in competitive companies and is intended to give
a company a competitive advantage by transitioning its scope and the way the
company runs its activities. The difference between strategic decision-making and
other decision-making processes like administrative and operational is that
strategic decision-making is a long-term process that takes a lot of resources and
has many uncertainties. Administrative decisions are short-term strategies.
Strategic decision-making keeps the company's long-term future in mind, unlike
other decision-making processes.
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Importance of Strategic Decision
 Strategic decision gives companies a competitive advantage. This advantage

is imperative for the health and survival of companies.
 Strategic decisions assist in pursuing knowledge and skills that are necessary
for a company's future.
 Strategic decisions assist in solving problems that require time and resources
to handle.
 The implementation of strategic decisions is vital to improving the
performance of any company because it is a method of realizing the goals of
companies in the future.
 Strategic management plays a critical role in the management of a company.
Strategic decisions are used in the planning process in which managers settle
on what goals a company will follow and what resources would best be
implemented to achieve those goals.
CONCEPT OF STRATEGIC MANAGEMENT

“Strategic management is concerned with the determination of the basic long-term
goals and the objectives of an enterprise, and the adoption of courses of action and
allocation of resources necessary for carrying out these goals”. – Alfred Chandler,
1962
“Strategic management is a stream of decisions and actions which lead to the
development of an effective strategy or strategies to help achieve corporate
objectives”. – Glueck and Jauch, 1984
Strategic management is a dynamic process .it is continual, evolving, iterative
process. it means that it cannot be a rigid, stepwise collection of few activities
arranged in a sequential order rather it is a continually evolving mosaic of relevant
activities. Managers perform these activities in any order contingent upon the
situation they face at a particular time. And this is to be done again & again over the
time as the situation demands.
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ELEMENTS & PROCESS OF STRATEGIC MANAGEMENT
Strategic management is a dynamic process .it is continual, evolving, iterative
process. it means that it cannot be a rigid, stepwise collection of few activities
arranged in a sequential order rather it is a continually evolving mosaic of relevant
activities. Managers perform these activities in any order contingent upon the
situation they face at a particular time. And this is to be done again & again over the
time as the situation demands.
Developing an organisational strategy involves four main elements – strategic
analysis, strategic choice, strategy implementation and strategy evaluation and
control. Each of these contains further steps, corresponding to a series of decisions
and actions, that form the basis of strategic management process.
1. Strategic Analysis: The foundation of strategy is a definition of organisational
purpose. This defines the business of an organisation and what type of organisation
it wants to be. Many organisations develop broad statements of purpose, in the
form of vision and mission statements. These form the spring – boards for the
development of more specific objectives and the choice of strategies to achieve
them.
The strategic formulation consists of the following steps.
1. Framing of mission statement
2. Analysis of internal & external environment
3. Setting of objectives
4. Performance
5. Alternative
6. Evaluation of strategies
2. Strategic Choice: The analysis stage provides the basis for strategic choice. It
allows managers to consider what the organisation could do given the mission,
environment and capabilities – a choice which also reflects the values of managers
and other stakeholders. These choices are about the overall scope and direction of
the business. Since managers usually face several strategic options, they often need
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to analyze these in terms of their feasibility, suitability and acceptability before
finally deciding on their direction.
It is not possible to any organization to implement all strategies therefore
management must be selective. It has to select the best strategy depending on the
situation and it has to consider in terms of its costs and benefits etc
3. Strategy Implementation: Implementation depends on ensuring that the
organisation has a suitable structure, the right resources and competencies (skills,
finance, technology etc.), right leadership and culture. Strategy implementation
depends on operational factors being put into place.
For any strategy implementation there are five major steps. Such as
1. Formulation of plans.
2. Identification of activities.
3. Grouping of activities.
4. Organizing resources.
5. Allocation of resources.
4. Strategy Evaluation and Control: Organisations set up appropriate monitoring
and control systems, develop standards and targets to judge performance.. The
feedback from strategic evaluation is meant to exercise control over the strategic
management process. Here the managers try to assure that strategic choice is
properly implemented and is meeting the objectives of the firm. It consists of
certain elements which are given below.
1. Setting of standards:- The strategists need to set standards, targets to implement
the strategies. it should be in terms of quality, quantity, costs and time. The
standard should be definite and acceptable by employees as well as should be
achievable.
2. Measurement of Performance:- Here actual performances are measured in terms
of quality, quantity, cost and time.
3. Comparison Of Actual Performance With Set Targets:- The actual performance
needs to be compared with standards and find out variations, if any.
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4. Analyzing Deviation And Taking Corrective Measures:- If any deviation is found
then higher authorities tries to find out the causes of it and accordingly as per its
nature takes corrective steps.
VISION, MISSION, GOALS AND OBJECTIVES
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Vision
Vision can be defined as “a mental image of a possible and desirable future
state of the organisation” (Bennis and Nanus). It is “a vividly descriptive image of
what a company wants tobecome in future”. Vision represents top management’s
aspirations about the company’sdirection and focus. Every organisation needs to
develop a vision of the future. A clearly articulated vision moulds organisational
identity, stimulates managers in a positive way and prepares the company for the
future. Vision has been defined in several different ways. Richard Lynch defines
vision as “ a challengingand imaginative picture of the future role and objectives of
an organisation, significantly going beyond its current environment and
competitive position.”
Mission
A mission can be defined as a sentence describing a company’s function,
markets and competitive advantages. It is a short Defining Mission, Goals and
Objectives NOTES Strategic Management : 33 written statement of your business
goals and philosophies. It defines what an organisation is, why it exists and its
reason for being. At a minimum, a mission statement should define who are the
primary customers of the company, identify the products and services it produces,
and describe the geographical location in which it operates.
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Goals and Objectives
The term “goal” is often used interchangeably with the term “Objective”. But
some authors prefer to differentiate the two terms. A goal is considered to be an
open-ended statement of what one wants to accomplish with no quantification of
what is to be achieved and no time criteria for its completion. For example, a simple
statement of “increased profitability” is thus a goal, not an objective, because it does
not state how much profit the firm wants to make. Objectives are the end results of
planned activity. They state what is to be accomplished by when and should be
quantified. For example, “increase profits by 10% over the last year” is an objective.
As may be seen from the above, “goals” denote what an organisation hopes to
accomplish in a future period of time. They represent a future state or outcome of
the effort put in now.
“Objectives” are the ends that state specifically how the goals shall be
achieved. In this sense, objectives make the goals operational. Objectives are
concrete and specific in contrast to goals which are generalized. While goals may be
qualitative, objectives tend to be mainly quantitative, measurable and comparable.
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BALANCED SCORE CARD APPROACH
A balanced scorecard is a strategic management performance metric that helps
companies identify and improve their internal operations to help their external
outcomes. It measures past performance data and provides organizations with
feedback on how to make better decisions in the future.
The balanced scorecard acts as a structured report that measures the performance
of company management. The management team can be evaluated against Key
Performance Indicators (KPIs) to show their contributions to the strategy and
attainment of the targets set forth. Success is measured against the specified goals
or targets to determine the rate at which the business is growing and how it
compares to its competitors.
The balanced scorecard is a management system aimed at translating an
organization's strategic goals into a set of organizational performance objectives
that, in turn, are measured, monitored and changed if necessary to ensure that
an organization's strategic goals are met.
KEY PERFORMANCE INDICATORS OF BALANCED SCORE CARD
The following are the key areas(KPIs) that a balanced scorecard focuses on:
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1. Financial perspective
Under the financial perspective, the goal of a company is to ensure that it earns a
return on the investments made and manages key risks involved in running the
business. The goals can be achieved by satisfying the needs of all players involved
with the business, such as the shareholders, customers, and suppliers.
The shareholders are an integral part of the business since they are the providers of
capital; they should be happy when the company achieves financial success. They
want to be sure that the company is continually generating revenues and that the
organization meets goals such as improving profitability and developing new
revenue sources. Steps taken to achieve such goals may include introducing new
products and services, improving the company’s value proposition, and cutting
down on the costs of doing business.
2. Customer perspective
The customer perspective monitors how the entity is providing value to its
customers and determines the level of customer satisfaction with the
company’s products or services. Customer satisfaction is an indicator of the
company’s success. How well a company treats its customers can obviously affect
its profitability. The balanced scorecard considers the company’s reputation versus
its competitors. How do customers see your company vis-à-vis your competitors? It
enables the organization to step out of its comfort zone to view itself from the
customer’s point of view rather than just from an internal perspective.
Some of the strategies that a company can focus on to improve its reputation among
customers include improving product quality, enhancing the customer shopping
experience, and adjusting the prices of its main products and services.
3. Internal business processes perspective
A business’ internal processes determine how well the entity runs. A balanced
scorecard puts into perspective the measures and objectives that can help the
business run more effectively. Also, the scorecard helps evaluate the company’s
products or services and determine whether they conform to the standards that
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customers desire. A key part of this perspective is aiming to answer the question,
“What are we good at?”
The answer to that question can help the company formulate marketing strategies
and pursue innovations that lead to the creation of new and improved ways of
meeting the needs of customers.
4. Organizational capacity perspective
Organizational capacity is important in optimizing goals and objectives with
favorable results. The personnel in the organization’s departments are required to
demonstrate high performance in terms of leadership, the entity’s culture,
application of knowledge, and skill sets. Proper infrastructure is required for the
organization to deliver according to the expectations of management. For example,
the organization should use the latest technology to automate activities and ensure
a smooth flow of activities.
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UNIT - II
Environmental and Organizational Appraisal
Appraising the Environment - Factors affecting Environmental Appraisal - Internal
Environment - Organizational Resources - Synergistic Effects - Competencies -
Organizational Capability Factors - Methods and Techniques used for Organizational
Appraisal - Preparing the Organizational Capability Profile.
APPRAISING THE ENVIRONMENT
There are numerous factors that affect the organization and its operations. These
factors can influence the organization in both positive as well as negative ways.
Identifying the issues and challenges. Existing in the external environment is extremely
important for an organization. In order to identify the factors in external environment,
an appraisal process of the industry's environment is necessary. Environmental
appraisal facilitates the managers with the ability to study the competitive structure
and competitive position of the organization along with the position of its competitors.
Environmental Appraisal/Environmental Scanning
In environmental scanning the broad environmental factors are analysed and studied.
These factors are not a part of the organisation's internal environment and hence are
uncontrollable in nature. These factors influence the businesses in a significant manner.
These factors are a part of the macro environment or the general environment. The
common macro environmental factors are economic, political, legal, technological,
social, etc.
Process of Environmental Appraisal
The process of environmental appraisal includes the following steps:
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(Material compile from existing literature, not for commercialization)
Importance of Environmental Scanning: Following are the points suggest importance
of scanning of business environment.
i) Identification of strengths: The analysis of internal environment helps to
identify the strength of the firm and every organization put its all efforts to
maintain and improve its strengths. For example every business will see that
how we maintain competent & dedicated employees. What will be ways with
which we can pursue good HRP & HRD and what will be the methods with
which we may have good & improved & latest technology etc?
ii) Identification of weaknesses: The business analysis gives idea about business
weakness. The weaknesses are barriers in the process of development. There
for every organization try to point out its drawback and will try to improve it.
Then the weakness may be in terms of its technology, HR, lack of finance or in
any other areas.
iii) Identification of opportunities: Opportunities generally resides outside the
business. Therefore external environment analysis helps to point out and use
for business benefits. Business also undertake all those efforts to grab that
opportunities. For example it govt. gives concession or subsidies. Then
business may cut its products prices and may gain large sell advantage of
products.
iv) Identification of threat: The business may have threats from its competitions
or rivals and others. Therefore environmental analysis helps to identify those
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threats and helps to defuse them before it affects on business or its
functioning.
v) Effective planning: Environmental scanning help to business in the
preparation of effective plan. The planning is the guide of the business or so it
is to be prepared defect free. Environmental analysis does that and helps
business.
vi) Survival and growth of business: Survival and growth are two basic
objectives of any business. Without attainment of their two, there is no
meaning to the existence of business. So analysis of environment ensures the
existence of their two objectives and according business unit.
vii) Facilitates organizing of Resources: Business units need different resources,
it includes natural, physical, Human resources etc. There resources are
limited in number. Therefore it should be used in very conscious way. The
analysis of environment enables business to organize all these resources in
required and logical manner.
viii) Flexibility in operations: A study of environment enables a firm to adjust its
activities depending upon the changing situation.
ix) Corporate image: Corporate image means create mental picture of the firm in
the minds of customer. Due to the analysis of environment, there is overall
improvement in the performance of the business, and its effect is there is
good image of the business among all i.e. customer dealer, suppliers etc.
x) Motivation to employees: Because of environmental analysis there are good
decisions, improved performances, and introduction of new HR policies,
employees in the organization are motivated.
Factors affecting Environmental Appraisal

Environment is defined as the actors and forces outside the company that affect
company’s ability to build and maintain successful relationships with target customers.
It is one of the chief components which ultimately decide the ability of organization in
serving its stakeholders and customers.
 Micro refers to small. Micro environment is also called as internal

environment. This refers to all the factors which are under the
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control of the organization and which influences the activity of
business activity. These include:
Help to promote, sell and distribute goods to final buyers
Include resellers, physical distribution firms, business services
agencies and financial intermediaries
Effective partner relationship management is essential
Micro environmental factors are:
a) Company: Al the internal employees of the company constitute company. Efficient

business activity depends on the smooth and coordinated efforts of the organization in
terms of fulfilling the requirements for business.
b) Suppliers (These provide the raw material and semi –assembled material to the
companies. Efficient flow of material through suppliers is very important to complete a
finished good. Eg: Many Chinese companies manufactures and transports mobile
equipments to India and companies like Micromax, Lemon, Karbonn assembles and
markets in India).
c) Intermediaries: These provide valuable assistance to the business company. These

include: a) Financial intermediaries (including banks, chit fund companies, money
lenders etc.) b) Business intermediaries (wholesalers, dealers, distributors, retailers,
customers).
d) Competitors: Many companies often make their products/services on the basis of

existing competitors products. They try to make more advanced ones than the
competitors.
Eg: Pepsi v/s Coca-cola's product lines.
e) Customers: They are the ultimate deciders of success or failure of the company.
They decide the price, features, liking or disliking of the products. These include
customers who are personal, business oriented, government customers, international
customers, reseller customers
f) Public: They closely monitor the business activities of the firm. They include general
public( normal citizens), Government pubic, citizen public internal pubic, media,
financial public.
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Organizational Resources:
Organization can be conceptualized as a collection of individuals deliberately structured
within identifiable boundaries to achieve predetermined goals.”
• Organizations are social entities
• All organizations have a structure
• Organizations are designed to achieve specific goals
• Organizations have identifiable boundaries
• Organizations exist in a relatively permanent basis
• All formal organizations use specific knowledge (or technology) to perform work-
related activities.
These features are visible in most organizations. In general, formal organizations
are the means by which we produce and supply a variety of goods and services.
“Organizational goals are desired states of affairs or preferred results that organizations
attempt to realize and achieve” (Amitai Etzioni). The idea of organizational goals has a
long history in economics, in which the classic position posits an entrepreneur or
ownership group which in turn establishes the goals of the firm. Alternatively, these
goals may represent a consensus arrived at by all members of the organization.
Organizational Resources are all assets that are available to a firm for use during the
production process. The four basic types of organizational resources are human,
monetary, raw materials and Capital. Organizational resources are combined, used, and
transformed into finished products during the production process.
SYNERGISTIC EFFORTS
Synergy means that the whole is greater than the sum of its parts. In organisational
terms, synergy means that as separate departments within an organisation co-operate
and interact, they become more productive than if each were to act in isolation. In
strategic management, the corporate parent has to create synergy among the separate
business units by effectively coordinating their activities, so that the corporate whole is
greater than the sum of the independent units. Synergy is said to exist for a multi-
divisional corporation if the return on investment (ROI) of each division is greater than
what the return would be if each division were an independent business.
According to Goold and Campbell, synergy can take place in one of the six forms:
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1. Shared Know-how: Combined units often benefit from sharing knowledge and skills.
This is also called a leveraging of core competencies.
2. Coordinated Strategies: Alligning the business strategies of two or more business
Notes units may provide a company with synergy by reducing competition, and
developing a coordinated response to common competitors.
3. Shared Tangible Resources: Combined units can sometimes save money by sharing
resources, such as a common manufacturing facility or R&D lab.
4. Economies of Scale or Scope: Coordinating the flow of products or services of one unit
with that of another unit can reduce inventory, increase capacity utilization and
improve market access.
5. Pooled Negotiating Power: Combined units can combine their purchasing to gain
bargaining power over common suppliers to reduce costs and improve quality. The
same can be done with common distributors.
6. New Business Creation: Exchanging knowledge and skills can facilitate new products
or services by combining the separate activities in a new unit or by establishing joint
ventures among internal business units.
COMPETENCIES
If managers are successful in their efforts to improve the efficiency, quality, innovation
and customer responsiveness of their organization, they may lower the cost structure of
the company and/or better differentiate its product offering, either of which can be the
basis for a competitive advantage. When a company is uniquely skilled at a value chain
activity that underlies superior efficiency, quality, innovation, or customer
responsiveness relative to its rivals, we say that it has a distinctive competency in this
activity.
A distinctive competency is a unique firm- specific strength that allows a company to

better differentiate its products and/or achieve substantially lower costs tCore
Competencies in Business
A business can choose to be operationally excellent in a number of different ways.
Below are common core competencies found in business:
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 Greatest Quality Products. This core competency means the company's
products are most durable, long-lasting, and most reliable. The company will
likely have invested in the strongest quality control measures, technically
proficient workers, and high-quality raw materials.
 Most Innovative Technology. This core competency means the company is an
industry leader in its sector. The company will likely have invested heavy
amounts of capital into research & development, holds many patents, and hires
experts in respective fields.
 Best Customer Service. This core competency means customers have the
greatest experience during (and after) their purchase. The company will likely
have invested in training for staff, large numbers of customer service
representatives, and processes to manage exceptions or issues as they arise.
 Largest Buying Power. This core competency leverages a company's economy
of scale. This company will likely have invested in mergers or acquisitions and
have built up strong relationships with vendors to gain favorable pricing or
service.
 Strongest Company Culture. This core competency promotes the internal
atmosphere of the business. The company aims to attract the best talent by
investing heavily in employee recognition, development, or collaborative, fun
events.
 Fastest Production or Delivery. This core competency means the company is
able to make or ship items the fastest. The company will likely have invested in
connected software systems as well as production processes and distribution
relationships.
 Lowest Cost Provider. This core competency means the company charges the
lowest price among comparable goods. The company will likely have invested in
the most efficient processes the reduce labor or material input.
 Highest Degree of Flexibility. This core competency allows the company to
quickly pivot in response to business opportunities or challenges. The company
will likely have invested in cross-training across employees or nimble software
solutions.
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TECHNIQUES AND METHODS OF ORGANIZATIONAL APPRAISAL
In order to formulate a corporate strategy and pursue its objectives, every organization
must first understand itself in great detail. Understanding its own strengths &
weaknesses and then matching them against the external threats & opportunities can
create organizational capabilities, while safeguarding the organization from the
onslaught of adverse situations. This is also called “Corporate Introspection” and this is
done through ‘Organizational Appraisal’. Organizational Analysis is a process of
systematically evaluating organizational capabilities which can provide a competitive
advantage in the market. The capabilities enable the organization to achieve strategic
advantage over its competitors for long-term success. Organizational Analysis is also
known as internal analysis, corporate appraisal, self approval, company analysis etc.
Factors in Organizational Appraisal

Organizational analysis involves the identification of factors which indicate the
organizational capabilities. These factors are known as organizational capability factors,
competitive advantage factors or strategic factors. The following are the organizational
capability factors that exist within an organization and which are critical for the
formulation and implementation of strategy;
Finance
Financial capability factors are concerned with the availability, usage and management
of funds. Some of the important factors which influence an organization’s financial
capability are;
 Sources of funds – Financing pattern (capital structure), cost of funds, financial
leverage, reserves & surplus, relationship with provider of funds, etc.
 Usage of funds – Fixed assets, current assets, loans & advances, dividend distribution.
 Management of funds – Accounting and budgeting systems, financial control system,
tax planning, return risk & management etc.
Business
The main factors that influence the business capability of an organization are as follows;
 Product related factors – Product mix, branding, product positioning, differentiation,
packaging etc.
 Price related factors – Pricing policies, price competitiveness, value for money
pricing, price changes etc.
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 Place related factors – Distribution network, transportation & logistics, relations
with intermediaries etc.
 Promotion related factors – Promotional mix, promotion tools, customer relationship
management etc.
 Integration and control related factors – Market standing, company image, business
information system, business organization, etc.
Operations
Operations capability factors relate to the production of goods and services. Major
factor influencing an organization’s operation capability are as under;
 Production System : Factors related to production system are plant location, capacity
& its utilization, plant layout, product design, material supply system, degree of
automation, extent of vertical integration etc.
 Operations and Control System: Factors related to operation & control system are
production planning, inventory management, cost & quality control, maintenance
system & procedures, etc.
 Research and Development : Factors related to research & development are product
development , R & D staff, technical collaboration & support, patent rights, level of
technology used etc.
Human Resources
In any organization, human resources make use of non-human resources. Human
resource capabilities relate to the acquisition & use of human resources, skills, and all
connected aspects that influence strategy formulation and implementation. Some of the
important factors which determine human resource capability are given below.
 Factors related to the human resource system – Human resource planning,
recruitment and selection, training and development, human resource mobility,
appraisal and compensation management, etc.
 Factors related to employee retention – Company’s image as an employer, career
development opportunities for employees, working conditions, employee benefits,
employee motivation and morale etc.
 Factors related to industrial relations – Union-Management relationship, collective
bargaining, grievance handling system, employee participation in management, etc.
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Components of Organization Appraisal
The major components of organizational appraisal are as follows;
 Internal Analysis
 Comparative Analysis
 Comprehensive Analysis
 SWOT Analysis
Components of Organizational Appraisal
Internal Analysis
The internal analysis of a firm focuses and evaluates the strengths that can be leveraged
and weaknesses that need to be worked upon. The techniques used in internal analysis
are;
VRIO Framework
VRIO Framework stands for Valuable, Rare, Imitable and Organization. It is a resource-
based evaluation to study the relevance and importance of resources available to an
organization. This presents a realistic picture of the available resources, rather than a
broad overview. The evaluating pointers are as described below;
Valuable – Resources that help an organization to create products that can favorably
compete in the market. These resources can be in the form of technology, human
resource, infrastructure, finance, proximity to the government etc.
Rare – Those resources that are valuable and that one or only a few firms in the
industry exclusively possess. A unique location or a highly motivated workforce are
example of rare resources.
Imitable – These are the capabilities which competitors either cannot duplicate or can
duplicate only at a very high cost. Excellent corporate image or exclusive patents are
example of inimitable capabilities.
Organized for usage – These are the capabilities which an organization can use
through its appropriate structure, business processes, control and reward system. The
availability of competent R & D personnel & research laboratory to continually string
out innovative products is an example of organized for usage capability.
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An Illustration of VRIO Framework
Value Chain Analysis

Every organization performs several activities. These activities are interrelated and
form a chain. Each activity in the chain creates some value and involves cost. Thus, a
value chain analysis is a set of interlinked and value–creating activities performed by an
organization. These value-creating activities also leave a cost signature in their wake. A
trade off between the generated value and the cost signature of each activity is crucial to
understand the effectiveness of each activity in the organization and the overall
organizational efficiency. These activities can be classified and studied as follows;
Porter’s Value Chain
Primary Activities – These activities are directly related to the creation of goods or
services. Primary activities consist of the following;
 Inbound Logistics: All the activities used for receiving, storing and transporting raw
material into the production process are known as inbound logistics.
 Operations: All activities involved in the transformation of raw material into finished
product are called operations.
 Outbound Logistics: All the activities used for receiving, storing and transporting
finished products are known as outbound logistics.
 Business and sales: These consist of activities used to promote and sell goods and
services to customers.
 Services: These are the activities used for enhancing and maintaining a product’s
value in the market.
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Support Activities – These activities provide support to the primary activities. Support
activities consist of;
 Firm Infrastructure – All activities for general management of the organization to
achieve its objective are called firm infrastructure.
 Human Resource Management – These comprise recruitment, selection, training,
deploying and retaining the human resources of an organization.
 Technology Development – Typical activities in this category are research &
development, product & process design, equipment design etc.
 Procurement – Obtaining raw materials, spare parts, supplies, machinery, equipment
and other purchased items are included in procurement.
Quantitative Analysis
In quantitative analysis, both financial and nonfinancial aspects are studied as follows;
 Financial Analysis – In order to judge the strength and weaknesses in different
functional areas, ratio analysis and economic value-added analysis are used.
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 Non-Financial Analysis – There are several aspects of an organization which cannot
be measured in financial terms. Non-financial analysis is used to assess these aspects.
Employee absenteeism and turnover, advertising recall rate, production cycle time,
service call rates, number of patents registered per annum, inventory turnover rate,
etc. are such aspects.
Qualitative Analysis
Those aspects of an organization which cannot be expressed in quantitative terms are
assessed through qualitative analysis. Corporate image, corporate culture, learning
ability, employment morale, etc. are examples of these aspects. Qualitative analysis can
be used to support and strengthen quantitative analysis.
Comparative Analysis
Strengths and weaknesses provide a competitive advantage to the organization when
these are unique and exclusive. Therefore an organization should compare its
capabilities with those of its competitors. Comparative analysis can be over a time
period, based on industry norms and through bench marking.
Historical Analysis
In historical analysis an organizations strengths and weaknesses are compared over
different time periods. Its reveals whether the strengths are improving or declining.
Areas which show continuous improvement are durable strengths. Hofer and Schendel
have developed a functional-area profile and resource deployment matrix for historical
analysis. Historical analysis can even be a comparison between a company’s own
performance over the years.
Industry Norms
Every industry has certain norms or standards for key parameters of performance. The
performance levels of a firm can be compared with the norms of the industry in which
the firm operated. For example, cost levels of Maruti Suzuki may be compared against
cost standards in the car industry. A more selective approach can be to compare with
firms that follow similar strategies. These firms are known as strategic group. According
to Miller and Dess, a strategic group is “a cluster of competitors that share similar
strategies and, therefore, compete more directly with one another than with other firms
in the same industry.
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Benchmarking
A benchmark means a reference point for the purpose of measurement and
comparison.” Benchmarking is the process of identifying, understanding and adapting
outstanding practices from within the same industry or from other businesses to help
improve performance.” The basic purpose of benchmarking is to match and even
surpass the best performer. The key question is benchmarking are: What to benchmark
and whom to benchmark. These questions can be answered by knowing the types of
bench marking . Based on what to benchmark, benchmarking is to following types;
 Performance benchmarking
 Process benchmarking
 Strategic benchmarking
 Competitive benchmarking
 Functional benchmarking
 Generic benchmarking
Comprehensive Analysis
Each of the techniques has its own benefits but fails to offer a comprehensive
representation of organizational strengths and weaknesses. Comprehensive analysis is
required to defeat this limitation. The techniques used in comprehensive analysis are as
follows;
Key Factor Rating
In this technique the key factors as listed under are analyzed to judge their positive and
negative impact on the functioning of the organization.
 Operations Capability – This involves evaluating and rating production, R&D and
operations control system capability factors.
 Human Resources Capability – Skills of the employees, industrial relations and
people management systems.
 General Management Capability – Organizational climate, information system and
corporate relations.
Balanced Scorecard
Balanced scorecard is the most comprehensive method of analyzing an organization’s
strengths and weaknesses. It integrates different perspectives with vision and strategy
to present a comprehensive and balanced picture of organizational performance. The
four key performance actions identified in balanced scorecard are as under;
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 Financial perspective
 Customer perspective
 Internal Business Processes Perspective
 Learning and innovative perspectives
Business Intelligence Systems
SWOT Analysis
SWOT analysis, also known as WOTS and TOWS analysis helps in understanding the
internal and external environment. It is very useful in strategy formulation as the
organization’s strengths and weaknesses can be matched with the opportunities and
threats outside. An effective strategy makes use of the organizational strengths to
capitalize on the opportunities and minimize the impact of weaknesses to neutralize the
threats. After SWOT analysis, an organization has to decide how to maximize its
strengths and minimize its weaknesses. It can also decide on how to exploit the
opportunities and to cover the threats. The SWOT can be simplified as follows;
Strength(S): Strength is an internal competency which facilitates an organization to gain
an advantage over its competitors.
Weakness (W): A weaknesses is a limitation or constraint which creates a competitive
drawback for the organization.
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Opportunity (O): An opportunity is an encouraging condition in the environment
external to the organization. However, it is available to everyone who has the ability to
leverage it.
Threat (T): A threat is an adverse condition in the environment that has the potential to
negatively impact the entire industry alike. Those with adequate preparation can
minimize the impact of threats.
Strength and weaknesses can be identified through organizational appraisal or analysis
of the internal environment. Environmental appraisal or analysis of the external
environment reveals opportunities and threats for an industry. Main advantages of
SWOT analysis are that it is simple to use, inexpensive, provides a comprehensive
picture of environment, and is flexible & can be adapted to different types of
organizations. It serves as the basis for strategic analysis.
Organizational Capability Profile
Organizational capabilities are something that people, organization and technology

together brings into plate while working together to drive business results.
Organizational capabilities include collaboration, talent management which binds all
the part of the business together. Organizational capability-based strategy focuses on
planning, designing and delivering business capabilities to the firm.
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Organizational capabilities are of utmost important for both the organization as well as
the individual to deliver best business results. For a company, resources and capabilities
are important. The process of building strategies out of their capabilities into action is
the quality of a business leadership. The capabilities like skills, attitude, behavior helps
in gaining competitive advantage against its competitors and in turn helps in increasing
the value of a firm. Strategic capabilities focus on the firm’s assets and its market
position and determine how the firm can be able to employ strategies in future.
The important factors considered in Capability profile are:
a)Marketing: Assessemnt of the marketing position of a firm is the most ivital taks in the
analysis of its capability. The task relates the enterprise to the outstide world and is a
vital force in securing competitive advantage. The market standing of accompany
should be examine din the light of ht organisatinal objectives set in the area of
marketing. Where the objectives ofo rthe organization are to increase its sales by
increasing its consumption, optimizing its use through optimum distribution system
and need based maret segmentation, the management must look at the marketing
position of the company against these terms.
b) Manufacturing: Another crucial area which has to be examined for the purpose of
preparing the capability profile of an organization is manufacturing. Manufacturing
activity comprises all such activities as contribute to the conversion of raw materials
into finished products. Thus, various factors such as availability of materials,
production technology, operation procedure, cost of production, inventory control
system, location of facilities, capacity utilization, degree of veridical integration,
rationalization of resources and patterns of products need detailed examination to
determine the strengths and weaknesses of the organization.
c) Human Resources: one of the hallmarks of a successful enterprise overall period of

time is its human resource. Long term productivity and profitability of an enterprise
depends upon the state of human resources in the enterprise. Existence o highly
talented people, their commitment to the organization, sense of responsibility, morale,
and feeling of autonomy, sense of security and safety and amicable labor management
relations are the major characteristics of good organizational climate and the basic
factors behind the success of an organization.
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d) Finance: Key to success of an enterprise is in its financial strength. In determining
the financial strengths and weaknesses of a firm the management must analyze all
aspects of financial management such as financial planning, acquisition of funds,
utilization of funds, management of income and profitability.
e) Management: A more subtle factor in corporate competence is management

capability and attitude. Appraisal of managerial competence of an enterprise helps the
present managerial team in sensing changes, anticipating possible outcomes, exploiting
opportunities and circumventing in depending dangers in the environment. The major
thrust in the analysis o managerial competence is on technical organization, human and
conceptual skills and attitude.
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UNIT - III
Corporate Level Strategies
Corporate - Level Strategies - Expansion-Stability -Retrenchment - Combination -
Concentration - Integration -Diversification - Internationalisation Strategies - Merger and
Acquisition Strategies- Stability - Retrenchment-Turnaround - Combination Strategies.
A corporate-level strategy is a multi-tiered company plan that leaders use to define, outline
and achieve specific business goals. A corporate-level strategy can be used by a small
business to increase its profits over the next fiscal year, whereas a large corporation might
be overseeing the operations of multiple businesses to achieve more complex goals like
selling the company or entering a new market.
A Corporate Level Strategy is a multi-year and multi-tiered plan that outlines an
organization’s business goals. This strategy defines the organization’s direction in the
following years, such as expanding the business, increasing the profit margin, or wrapping
up business from a certain market segment.
According to Michael Porter, a business can have three levels of strategies:
1. Corporate Level Strategy
2. Business Level Strategy
3. Functional Level Strategy
(material is collected from multiple sources, not for commercial gain)
Corporate strategy is at the top of the Porter pyramid
Characteristics of Corporate Level Strategy
 Long Term: Corporate strategies are formulated for the long term.
 Uncertain: Being long term and broad by nature, corporate strategy is uncertain.
 Dynamic: Corporate strategies are dynamic and adapted to market conditions.
 Far-Reaching: Corporate strategies are broad, far-reaching, and affect the whole
organization.
 Decided at the Top Level: Corporate level strategies are created at the top level of
the organization.
Benefits of Corporate Level Strategy
The benefits of corporate level strategy are as follows:
 It allows organizations to scale their business
 It allows businesses to be proactive
 It provides businesses with a strategic direction
 It lets businesses adapt to market conditions
 It improves the decision-making process
 It increases efficiency
 It increases profitability
 It makes businesses durable and reliable
Expansion Strategy
Growth/Expansion strategy is implemented by redefining the business by enlarging the
scope of business and substantially increasing investment in the business. It is a popular
strategy that tends to be equated with dynamism, vigour, promise and success. An
enterprise on the move is more agreeable stereotype than a steady-state enterprise. It is
often characterised by significant reformulation of goals and directions, major initiatives
and moves involving investments, exploration and onslaught into new products, new
technology and new markets, innovative decisions and action programmes and so on.
Expansion also includes diversifying, acquiring and merging businesses. This strategy may
take the enterprise along relatively unknown and risky paths, full of promises and pitfalls.
Characteristics of Growth/Expansion Strategy
1. Expansion strategy involves a redefinition of the business of the corporation.
2. Expansion strategy is the opposite of stability strategy. While in stability strategy,
rewards are limited, in expansion strategy they are very high. In the matter of risks,
too, the two are the opposites of each other. Expansion strategy leads to business
growth. A firm with a mammoth growth ambition can meet its objective only
through the expansion strategy.
3. The process of renewal of the firm through fresh investments and new
businesses/products/markets is facilitated only by expansion strategy.
4. Expansion strategy is a highly versatile strategy; it offers several permutations and
combinations for growth. A firm opting for the expansion strategy can generate
many alternatives within the strategy by altering its propositions regarding
products, markets and functions and pick the one that suits it most.
5. Expansion strategy holds within its fold two major strategy routes: Intensification
Diversification. Both of them are growth strategies; the difference lies in the way in
which the firm actually pursues the growth.
Stability Strategy
Stability Strategy One of the important goals of a business enterprise is stability - to
safeguard its existing interests and strengths, to pursue well established and tested
objectives, to continue in the chosen business path, to maintain operational efficiency on a
sustained basis, to consolidate the commanding position already reached, and to optimise
returns on the resources committed in the business. A stability strategy is pursued by a
firm when It continues to serve in the same or similar markets and deals in same or similar
products and services. The strategic decisions focus on incremental improvement of
functional performance Stability strategy is not a ‘do nothing’ strategy. It involves keeping
track of new developments to ensure that the strategy continues to make sense. This
strategy is typical for those firms whose product have reached the maturity stage of
product life cycle. Small organizations may also follow stability strategy to consolidate their
market position and prepare for the launch of growth strategies.
Characteristics of Stability Strategy:
1. A firm opting for stability strategy stays with the same business, same product-
market posture and functions, maintaining same level of effort as at present.
2. The endeavour is to enhance functional efficiencies in an incremental way, through
better deployment and utilization of resources. The assessment of the firm is that
the desired income and profits would be forthcoming through such incremental
improvements in functional efficiencies.
3. Stability strategy does not involve a redefinition of the business of the corporation.
4. It is basically a safety-oriented, status quo oriented strategy.
5. It does not warrant much of fresh investments.
6. It involves minor improvements in the product and its packaging. The risk is also
less.
With the stability strategy, the firm has the benefit of concentrating its resources and
attention on the existing businesses/products and markets. The growth objective of firms
employing this strategy is quite modest. Conversely, only firms with modest growth
objective choose for this strategy.
Retrenchment Strategy
The Retrenchment Strategy is adopted when an organization aims at reducing its
one or more business operations with the view to cut expenses and reach to a more stable
financial position. Retrenchment Strategy
Definition: The Retrenchment Strategy is adopted when an organization aims at

reducing its one or more business operations with the view to cut expenses and reach to a
more stable financial position.
In other words, the strategy followed, when a firm decides to eliminate its activities
through a considerable reduction in its business operations, in the perspective of customer
groups, customer functions and technology alternatives, either individually or collectively
is called as Retrenchment Strategy. The firm can either restructure its business operations
or discontinue it, so as to revitalize its financial position.
The following are the reasons for retrenchment strategy:
1. Poor Performance
It makes perfect sense to close down business lines or centres that are not generating value
and serve as productivity laggards in the company when performance is subpar and losses
are incurred.
2.Threat to Survival
A corporation will frequently shut down a portion of its operations when unexpected
activity in its product markets hinders the company's success. Many times, the company's
shareholders also compel such a plan.
3. Redistribution of Resources
The corporation may be required to scale back operations in the current business and
redistribute the resources freed to more productive areas if other outstanding investment
possibilities arise.
4. Inadequate Resources
The corporation might also require financial resources to maintain its current market
position. The corporation might not have the money and might be compelled to separate
off unproductive parts of its operations to redeploy the resources.
5. To Ensure Better Management and Greater Effectiveness
A corporation may occasionally diversify too much. As a result, it loses control, which
impacts operational efficiency. Retrenching helps the company reduce its size to a tolerable
level by streamlining its product line.
Diversification Strategy
Diversification is the process of adding new businesses to the existing businesses of the
company. In other words, diversification adds new products or markets to the existing
ones. A diversified company is one that has two or more distinct businesses. The
diversification strategy is concerned with achieving a greater market from a greater range
of products in order to maximize profits. From the risk point of view, companies attempt to
spread their risk by diversifying into several products or industries.
Diversification can be achieved through a variety of ways:
1. Through mergers and acquisitions.
2. Through joint ventures and strategic alliances. (ICICI Bank and Vodafone made a
strategic alliance to launch m-pesa app)
3. Through starting up a new unit (internal development)
Thus, the first concern in diversifying is what new industries to get into and whether to
enter by starting a new business unit or by acquiring a company already in the industry or
by forming a joint venture or strategic alliance with another company. A company can
diversify narrowly into a few industries or broadly into many industries. The ultimate
objective of diversification is to build shareholder value i.e., increasing value of the firm’s
stock.
Reasons for Diversification: The important reasons for a company diversifying their
business are:
1. Saturation or decline of the current business: If the company is faced with diminishing
market opportunities and stagnating sales in its principal business, it may become
necessary to enter new businesses to achieve growth.
2. Better opportunities: Even when the current business provides scope for further growth,
there may be better opportunities in new lines of business. A firm in a “sunset industry”
may be tempted to enter a “sunrise industry.”
3. Sharing of resources and strengths: Diversification enables companies to leverage
existing competencies and capabilities by expanding into businesses where these resources
become valuable competitive assets. By sharing production facilities, technological
capabilities, managerial expertise, distribution channels, sales force, financial resources
etc., synergy can be obtained.
4. New avenues for reducing costs: Diversifying into closely related businesses opens
newavenues for reducing costs.
5. Technologies and products: By expanding into industries, the company can obtain
newtechnologies and products, which can complement its present businesses.
6. Use of brand name: Through diversification, the company can transfer its powerful and
well-known brand name to the products of other businesses.
7. Risk minimization: The big risk of a single-business firm is having all its eggs in one
industry basket. If the market is eroded by the appearance of new technologies,
newproducts or fast–changing consumer preferences, then a company’s prospects can
quickly diminish.
Types of Diversification
Diversification strategies can help mitigate the risk of a company operating in only one
industry. If an industry experiences issues or slows down, being in other industries can
help soften the impact. Companies can also diversify within their own industry. There are
three types of diversification:
1. Related Diversification —Diversifying into business lines in the same industry; Volkswagen
acquiring Audi is an example.
2. Unrelated Diversification —Diversifying into new industries, such as Amazon entering the
grocery store business with its purchase of Whole Foods.
3. Geographic Diversification —Operating in various geographic markets, which is the
corporate strategy of Starbucks, Target, and KFC.
Eg: Diversification strategy is widely adopted in India. Some examples are given here.
1. A public sector giant, Oil India Ltd. (OIL), which had been operating in oil exploration and
production, diversified into related areas, such as, gas cracking.
2. The reputed multinational affiliate, ITC Ltd. has diversified into hotels, papers, agri-
business packaging, and priming from its original cigarette business in response to national
objectives and priorities.
3. Smaller companies, like, Blowplast in the moulded luggage industry is in plastic seating
systems, and marketing of branded toys.
4. Unitech in civil engineering is into steel-making, exports, consumer electronics, power
transmission, and real estate.
Mergers and Acquisitions
A merger refers to a combination of two or more companies into one company. It may
involve absorption or consolidation. In absorption one company acquires another
company, and in consolidation two or more companies join to form a new company.
Mergers may be broadly classified as follows: (i) Concentric– within same industries and
taking place at the same level of economic activity – exploration, production or
manufacturing wholesale distribution or retail distribution to the ultimate consumer.
Horizontal merger: A firms engaged in same line of business
Vertical merger: A firms engaged in different stages of production in an industry. (ii)
Conglomerate – Merger of firms engaged in unrelated lines of business or between
unrelated businesses.
Reason for mergers
a. To undertake diversification This follows the need of a narrowly based business to
reduce the risks by broadening its activities. To reduce the risks effectively, the acquired
firm must not be subject to the same risk promoting factors as a parent firms even though
its may operate in a different fields.
b. To secure scare sources of supply Where any of the resources which the business needs
are in short supply or subject to other difficulties, one solution for it is to acquire its own
sources. By mergering the different resources available with two or more units can be
pooled together.
c. To secure economies of scale Increase in volume of often leads to decrease in operating
costs, thereby enabling a larger capacity bank to survive. Merger is considered when the
bank has low profitability and through merger bank can secure economies of scale.
d. To have better management Where the business suffer from poor management and it
does not appear possible to rectify this in the near future, the problem may be resolved by
merging with good management team.
e. To improve the financial standing When two firms join together, the strengths of both of
them are added together and the market may put a higher valuation on such combination
than on the constituent parts.
f. To achieve a monopoly position The elimination of competition by absorption gives a
firm a greater control over a market. The competition in the market can be reduced with
the merger of firms engaged in the similar market.
g. Revival of Sick units Merger can bring out a revival of sick units. The sick units can
merged with strong companies, and therefore, the problem of industrial sickness can be
avoided in case of certain units.
2. Amalgamation: It is an arrangement‘ or reconstruction‘. Amalgamation is a legal
process by which two or more companies are joined together to form a new entity or one
or more companies are to be absorbed or blended with another and as a consequence the
amalgamating company loses its existence and its shareholders become the shareholders of
new company or the amalgamated company. To give a simple example of amalgamation,
we may say A Ltd. and B Ltd. form C Ltd. and merge their legal identities into C Ltd. It may
be said in another way that A Ltd. + B Ltd. = C. Ltd.
Acqusition
Acquisition refers to the strategic move of one company buying another company by
acquiring major stakes of the firm. Usually, companies acquire an existing business to share
its customer base, operations and market presence. It is one of the popular ways of business
expansion.
However, such a purchase may be proceeded with or without the approval of the target
company, which is the firm that is acquired.
An acquisition is a corporate strategy to gain access to new potential assets, resources,
technology to attain fast business growth and expansion. It helps the firm diversify its
business operations and product line by acquiring a company belonging to a different
industry while diminishing the entry barriers of a new market.
Turnaround Strategies
Turnaround recovery strategies are a range of measures that companies employ to
recover from a period of a performance decline. The range of measures is important since
they mark an upturn phase of a company after a period of significant negativity.
Turnaround strategy is a revival measure for overcoming the problem of
industrial sickness. It is a strategy to convert a loss-making industrial unit to a profitable
one. Turnaround is a restructuring process that converts the loss-making company into a
profitable one. It brings the industrial unit into its original position and stabilizes its
performance. Implementation plays an important role in turnaround management. The
success of the turnaround strategy depends on the commitment of top-level
management.
A turnaround is essential to the survival of a failing business. Turnaround is a
sustained positive change in the performance of a business to obtain desired results. A
successful turnaround is a complex procedure that requires a strong management team
and sound business core. The turnaround also requires the leadership of competent
management, capital, and trust and support of the company employees and
shareholders. The important elements of turnaround strategy are as follows:
a. Changes in the top management
b. Initial credibility-building actions
c. Neutralising external pressures
d. Identifying quick payoff activities
e. Quick cost reductions
f. Revenue generation
g. Asset liquidation for generating cash
h. Better internal coordination
There is three phases in turnaround management:
1. Diagnosis of the problem faced by the company.
2. Choosing the appropriate turnaround strategy.
3. Implementation of the strategy.
Eg: SCCL: During 2003-04, SCCL has lossed Rs.450 crore due to the employes strike in the
mines which has resulted in huge decline in production resulted into raising losss. The
company has later adopted turnaround strategy through implementing better welfare
measures, introducing heavy machinery and slowly taking the decisions to ban the strikes
in the company.
Dell declared that it would implement the cost-cutting strategy in 2006, and the company
did by removing the middlemen and directly selling its products to the customers. The
company had faced huge losses. In 2007, the company followed the turnaround strategy
and started selling its computers through retailers and middlemen, and became the world’s
largest computer retail brand.
The CEO of Apple, Steve Jobs left the company in 1985 due to the declining company
position. The tech company kept on declining for the next 12 years and reached the level of
bankruptcy. However, Steve Jobs rejoined the company in 1997 with a new strategy and
enthusiasm, and it became the world’s leading Tech Company later.
Internationalization Strategy
By definition, an international strategy is a strategy through which the firm sells its goods
or services outside its domestic market. International markets yield plenty of new
opportunities for your business to grow. With an internationalization strategy your
business could see:
a. Increase in market size and emergence of new markets
b. Greater ROI
c. Competitive advantage by location
d. Global brand recognition
e. Global customer satisfaction
Business internationalization can have huge benefits, but that doesn’t mean it’s risk-free.
You’ll have to consider some risks when adopting an internationalization strategy,
including increased costs, barriers to trade, and lack of sensitivity to local demand. Firms
pursuing an international strategy are neither concerned about costs nor adapting to the
local cultural conditions. They attempt to sell their products internationally with little to no
change. When Harley Davidson sells motorcycles abroad, they do not need to lower their
prices or adapt the bike to local motorcycle standards.
Types of Internationalization Stratgies
An internationalization strategy can be broken down into the following three strategies:
Multi-domestic Strategy
This strategy customizes produce and service offerings to a foreign country. As the name
implies, the international company seeks to compete more as a domestic player than as a
foreign provider of goods and services. This requires a thorough understanding of the local
market, as well as employing local managers and employees.
Global Strategy
This strategy offers the same product or service in foreign nations. The idea, however, is to
capitalize on economies of scale to have a low-cost structure strategy (low cost of
producing and delivering the goods or services).
Transnational Strategy
This strategy is a middle-ground between multi-domestic and global strategy. It calls for
slight modifications to products or services while still attempting to take advantage of the
economies of scale in producing more of the core products.
Combination Strategy
A combination strategy is said to be employed by a company when it tries to achieve
several business objectives with the aid of a single strategy. Business strategies usually
involve objectives like growth, consolidation or stability. Some business strategies can be
combined like offering differentiated products in a niche market and growth. Combination
strategies are aimed at improving the competitive position of a company in the industry. In
the combination strategy, the organisation attempts to achieve two or more business
objectives at the same time.
Combination Strategy Example : Reliance Industries started off as a textile
manufacturer. However because of distribution inefficiencies in the market the company
was forced to open retail outlets of its own under the brand name "Vimal". By getting into
direct retailing of its products Reliance was able to sidestep the wholesaler and retailers in
the market who were not pushing his products. Reliance therefore used a combination of
horizontal and vertical integration. Reliance was using many petrochemicals in its existing
business Reliance then decided to get into the manufacture of petrochemicals so that it
could price its products competitively. In this, it got into the manufacture of Polyester
Staple Fibre (PSF). It further got into the refining of crude oil and set up a world class oil
refinery at Hazira. Large diversified companies are using combination strategies to meet
their objectives. This also satisfies the diversified needs of all the strategic business units of
a company. A company is not a slave to a single strategy but can be practising several
strategies at the same time. Some units of a company could be pursuing a growth strategy
whereas some of the other units of the organisation could be in the decline or maturity of
the product life cycle and hence could be in a process of retrenchment or stability.
UNIT-IV: STRATEGIC ANALYSIS, CHOICE AND
IMPLEMENTATION
UNIT - IV: Strategic Analysis, Choice and Implementation Process of Strategic Choice
- Strategic Analysis - Factors in Strategic Choice - Strategy Implementation – Project
Implementation - Procedural Implementation – Resource Allocation - Structural
Implementation - Functional Strategies
STRATEGIC ANALYSIS AND CHOICE

Strategic analysis and choice is essentially a decision-making process. This involves
generating feasible alternatives, evaluating those alternatives and choosing a
specific course of action that could best enable the firm to achieve its mission and
objectives. Alternative strategies do not come from a vacuum. They are derived from
the firm’s present strategies keeping in view the vision, mission, objectives andalso
the information gathered from external and internal analysis. They are consistent
with or built on past strategies that have worked well.
According to Glueck and Jauch, “strategic choice is the decision to select from among
the alternatives considered the strategy which will best meet the enterprise
objectives. This decision-making process consists of four distinct steps: 1. Focusing
on a few alternatives. 2. Considering the selection factors. 3. Evaluating the
alternatives. 4. Making the actual choice.
BCG Matrix:
The Boston Consulting Group (BCG) growth-share matrix is a planning tool that
uses graphical representations of a company’s products and services in an effort to
help the company decide what it should keep, sell, or invest more in.
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Associate Professor, Vaagdevi Group
The matrix plots a company’s offerings in a four-square matrix, with the y-axis
representing the rate of market growth and the x-axis representing market share. It
was introduced by the Boston Consulting Group in 1970.
 he BCG growth-share matrix is a tool used internally by management to
assess the current state of value of a firm's units or product lines.
 BCG stands for the Boston Consulting Group, a well-respected management
consulting firm.
 The growth-share matrix aids the company in deciding which products or
units to either keep, sell, or invest more in.
 The BCG growth-share matrix contains four distinct categories: "dogs," "cash
cows," "stars," and “question marks.”
 The matrix helps companies decide how to prioritize their various business
activities.
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Understanding a BCG Growth-Share Matrix
The BCG growth-share matrix breaks down products into four categories, known
heuristically as "dogs," "cash cows," "stars," and “question marks.” Each category
quadrant has its own set of unique characteristics.
1. Stars- Stars represent business units having large market share in a fast growing
industry. They may generate cash but because of fast growing market, stars
require huge investments to maintain their lead. Net cash flow is usually modest.
SBU’s located in this cell are attractive as they are located in a robust industry
and these business units are highly competitive in the industry. If successful, a
star will become a cash cow when the industry matures.
2. Cash Cows- Cash Cows represents business units having a large market share in
a mature, slow growing industry. Cash cows require little investment and
generate cash that can be utilized for investment in other business units. These
SBU’s are the corporation’s key source of cash, and are specifically the core
business. They are the base of an organization. These businesses usually follow
stability strategies. When cash cows loose their appeal and move towards
deterioration, then a retrenchment policy may be pursued.
3. Question Marks- Question marks represent business units having low relative
market share and located in a high growth industry. They require huge amount
of cash to maintain or gain market share. They require attention to determine if
the venture can be viable.
Question marks are generally new goods and services which have a good
commercial prospective. There is no specific strategy which can be adopted. If
the firm thinks it has dominant market share, then it can adopt expansion
strategy, else retrenchment strategy can be adopted.
Most businesses start as question marks as the company tries to enter a high
growth market in which there is already a market-share. If ignored, then
question marks may become dogs, while if huge investment is made, then they
have potential of becoming stars.
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4. Dogs- Dogs represent businesses having weak market shares in low-growth
markets. They neither generate cash nor require huge amount of cash. Due to
low market share, these business units face cost disadvantages. Generally
retrenchment strategies are adopted because these firms can gain market share
only at the expense of competitor’s/rival firms.
These business firms have weak market share because of high costs, poor
quality, ineffective marketing, etc. Unless a dog has some other strategic aim, it
should be liquidated if there is fewer prospects for it to gain market share.
Number of dogs should be avoided and minimized in an organization.
1. Low Growth, High Share. Companies should milk these “cash cows” for cash
to reinvest elsewhere.
2. High Growth, High Share. Companies should significantly invest in these
“stars” as they have high future potential.
3. High Growth, Low Share. Companies should invest in or discard these
“question marks,” depending on their chances of becoming stars.
4. Low Share, Low Growth. Companies should liquidate, divest, or reposition
these “pets.”
GE MATRIX
The GE-McKinsey Matrix (a.k.a. GE Matrix, General Electric Matrix, ) is a portfolio
analysis tool used in corporate strategy to analyze strategic business units or
product lines. The GE matrix was developed by Mckinsey and Company consultancy
group in the 1970s. The nine cell grid measures business unit strength against
industry attractiveness and this is the key difference. Whereas BCG is limited to
products, business units can be products, whole product lines, a service or even a
brand.
Industry Attractiveness:
This factor refers to the ease with which the business unit will be able to
accrue profit in the industry. When evaluating the business along this dimension,
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consider the long term growth potential, industry size, industry profitability, entry
and exit barriers, etc. Furthermore, evaluate the power of suppliers and buyers as
well as any other environmental factors that could influence industry attractiveness.
The vertical axis of this matrix – Industry Attractiveness – is divided into High,
Medium and Low. Industry attractiveness represents the profit potential of the
industry for a business to enter and compete in that industry. The higher the profit
potential, the more attractive is the industry. An industry’s profitability is affected
by the current level of competition and future changes in the competitive
landscape. Factors you could choose to base this on include:
 Market size
 Market growth
 Pestel factors
o Political
o Economical
o Social
o Technological
o Environmental
o Legal
 Porters five forces
o Competitive rivalry
o Buyer power
o Supplier power
o Threat of new entrants
o Threat of substitution
Business Unit Strength:
When evaluating a business unit along this dimension, consider how it fares relative
to its competitors within the industry. Some factors that can help a business assess
its competitive advantage in an industry are: Factors to determine how strong a unit
is compared to others in its industry include:
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 Market share
 Growth in market share
 Brand equity
 Profit margins compared to competition
 Distribution channel process –
Industry Attractiveness:
Factors you could choose to base this on include:
 Market size
 Market growth
 Pestel factors
 Porters five forces
o Competitive rivalry
o Buyer power
o Supplier power
o Threat of new entrants
o Threat of substitution
Business Unit Strength:
Factors to determine how strong a unit is compared to others in its industry include:
 Market share
 Growth in market share
 Brand equity
 Profit margins compared to competition
 Distribution channel process – the strength of
Grow/Invest:
Units that land in this section of the grid generally have high market share and
promise high returns in the future so should be invested in. The best position for a
business to be in is the Invest/Grow section. A business can reach this scenario if it
is operating in a moderate to highly attractive industry while having a moderate to
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highly competitive position within that industry. In such a situation, there is a
massive growth potential.
However, to grow, a business needs resources, such as assets and capital. These
investments are necessary to increase capacity, reach new customers through
marketing or improve products through Research & Development.
Hold/Selectivity Strategy
Units that land in this section of the grid can be ambiguous and should only be
invested in if there is money left over after investing in the profitable units. This
strategy is also referred to as Hold strategy. A business in the selectivity / earnings
section is a bit more tricky. The business is either in a low – moderate competitive
position in an attractive industry or in an extremely high competitve position in a
less attractive industry. Deciding whether to invest or not to invest largely depends
on the business’s outlook. It could expect to, either improve its competitive position
or shift to a more attractive industry.
Harvest/Divest Strategy
This strategy is most appropriate for a business that:
 has a low competitive position
 is active in an unattractive industry, or
 a combination of
 the two
These businesses do not have too many promising outlooks. The strategic responses
to consider are:
1. Divest the business units by selling it to an interested buyer for a reasonable
price. This also known as a carve-out, or
2. Choose a harvest strategy
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Factors Affecting Strategic Choice
 Environmental constraints
 Internal organizations and management power relationships
 Values and preferences
 Management`s attitude towards risk
 Impact of past strategy
 Time constraints- time pressure, frame horizon, the timing of the decision
 Information constraints
 Competitors reaction
Environmental Constraints
The dynamic elements of environment affect the way in which choice of strategy
is made. The survival and prosperity of a firm depend largely on the interaction of
the elements of environment—such as shareholders, customers, suppliers,
competitors, the government and the community. These elements constitute the
external constraints. The flexibility in the choice of strategy is often governed by the
extent and degree of the firm’s dependence on the environment.
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Pearce and Robinson state, “A major constraint on strategic choice is the
power of environmental elements. If a firm is highly dependent on one or
more environmental factors, its strategic alternatives and ultimate choice
must accommodate this dependence. The greater a firm’s external
dependence, the lower its range and flexibility in strategic choice.”
 Well established, large companies in different industries are more powerful
vis-a-vis their environments and therefore have greater flexibility in the
strategic choice than their counterparts in the respective fields.
Intenral Organizational factors
Organisational factors also affect the strategic choice. These include organisational
mission, strategic intent, goals, organisation’s business definition, resources,
policies, etc. Besides these factors, organisational strengths, weaknesses, and
capability to implement strategic alternatives also affect the strategic choice.
Information Constraints:
Availability of information is a crucial factor in the choice of strategy. Managers
choose a strategic option on the basis of relevant data and information. The degree
of uncertainty and risk depends upon the amount of information that is available to
the strategist. The greater the amount of available information, the lesser the risk is.
Hence, managers must ensure the availability of all information bearing on the
strategic alternatives.
Competitors’ Reactions:
It is important to consider the competitors’ reactions, responses and capacity to
react and its impact while choosing a strategic alternative.
For example, if a company decides to choose an aggressive strategy which directly
affects the key competitors to react, then the company may also pursue an
aggressive counter-strategy for safety. It would be unrealistic for the company not
to consider that possibility.
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Impact of Past Strategies:
It has been noticed that the choice of current strategy may be influenced by what
type of strategies have been used or followed in the past. Pearce and Robinson have
said, “A review of past strategy is the point at which the process of strategic choice
begins. As such past strategy exerts considerable influence on the final strategic
choice.”
Managerial Attitudes towards Risk:

Managerial attitude towards risk is yet another significant factor that affects the’
choice of a strategy. Basically, risk is a perception. Risk is an attitude or a mind-set.
Risk is the function of likelihood and impact. Risk involves both likelihood and
impact. Risk is a possible loss both financial and non-financial which is subject to
occurrence of an event which may or may not happen.
Risk is, thus, contingent. Hence, the managerial decision is guided by the attitude of
the decision- maker towards risk. Based on this “attitude towards risk”, decision-
makers can be of three types namely, Risk lover, Risk Averse and Risk neutral.
Influence of Past Strategy:

Future has its roots in the past. To this, past strategy is no exception. That is, choice
of the current and the future is influenced by the past strategy due to number of
reasons. The foundation for formulation of new strategies is the past strategy.
In the light of the past strategy, the strategist either might not have thought of
altering it or it is also possible that the strategists might have taken the things lightly
and might not have thought of alternatives with the seriousness that they deserve
due to inertia.
Time Dimension of Strategic Choice:
Yet another very important factor in the process of strategic decision making is the
time dimension of strategic choice.
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This time dimension has four elements which one cannot ignore, these are:
(i) Time pressure,
(ii) Time frame,
(iii) Time horizon and
(iv) Timing of the decision.
Reaction of Competitors:
The strategic choice of a strategy option is bound to reflex in the competitors’
reaction. Therefore, a wise strategist places himself in the shoes of the competitor or
competitors to know where exactly the shoe bites. Only after studying the reactions,
he may be able to take correct decision than ignoring the impact of competitor
reaction.
Strategy Implementation
Strategy Implementation refers to the execution of the plans and
strategies, so as to accomplish the long-term goals of the organization. It converts
the opted strategy into the moves and actions of the organisation to achieve the
objectives.
Simply put, strategy implementation is the technique through which the firm
develops, utilises and integrates its structure, culture, resources, people and control
system to follow the strategies to have the edge over other competitors in the
market.
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Strategy Implementation is the fourth stage of the Strategic Management process,
the other three being a determination of strategic mission, vision and objectives,
environmental and organisational analysis, and formulating the strategy. It is
followed by Strategic Evaluation and Control.
Process of Strategy Implementation
1. Building an organization, that possess the capability to put the strategies into action
successfully.
2. Supplying resources, in sufficient quantity, to strategy-essential activities.
3. Developing policies which encourage strategy.
4. Such policies and programs are employed which helps in continuous improvement.
5. Combining the reward structure, for achieving the results.
6. Using strategic leadership.
The process of strategy implementation has an important role to play in the
company’s success. The process takes places after environmental scanning, SWOT
analyses and ascertaining the strategic issues.
Prerequisites of Strategy Implementation
 Institutionalization of Strategy: First of all the strategy is to be institutionalized, in
the sense that the one who framed it should promote or defend it in front of the
members, because it may be undermined.
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 Developing proper organizational climate: Organizational climate implies the
components of the internal environment, that includes the cooperation,
development of personnel, the degree of commitment and determination, efficiency,
etc., which converts the purpose into results.
 Formulation of operating plans: Operating plans refers to the action plans,
decisions and the programs, that take place regularly, in different parts of the
company. If they are framed to indicate the proposed strategic results, they assist in
attaining the objectives of the organization by concentrating on the factors which
are significant.
 Developing proper organisational structure: Organization structure implies the
way in which different parts of the organisation are linked together. It highlights the
relationships between various designations, positions and roles. To implement a
strategy, the structure is to be designed as per the requirements of the strategy.
 Periodic Review of Strategy: Review of the strategy is to be taken at regular
intervals so as to identify whether the strategy so implemented is relevant to the
purpose of the organisation. As the organization operates in a dynamic
environment, which may change anytime, so it is essential to take a review, to know
if it can fulfil the needs of the organization.
Even the best-formulated strategies fail if they are not implemented in an
appropriate manner. Further, it should be kept in mind that, if there is an alignment
between strategy and other elements like resource allocation, organizational
structure, work climate, culture, process and reward structure, then only the
effective implementation is possible.
Aspects of Strategy Implementation
 Creating budgets which provide sufficient resources to those activities which are
relevant to the strategic success of the business.
 Supplying the organization with skilled and experienced staff.
 Conforming that the policies and procedures of the organisation assist in the
successful execution of the strategies.
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 Leading practices are to be employed for carrying out key business functions.
 Setting up an information and communication system, that facilitate the workforce
of the organisation, to perform their roles effectively.
 Developing a favourable work climate and culture, for proper implementation of the
strategy.
Strategy implementation is the time-taking part of the overall process, as it puts the
formulated plans into actions and desired results.
GAP ANALYSIS
A gap analysis is a process of assessing the differences in performance between a
business’ information systems or software applications to decide whether business
requirements are being met and, if not, what steps should be taken to make sure
they are met successfully.
A gap analysis (also known as a needs analysis) is the process of comparing the
current business performance with the desired performance. The "gap" in a gap
analysis is where the business currently stands versus where you want the business
to be.
Creating a gap analysis can help the business in a few ways. Here's how:
 Brainstorm strategies. Creating a gap analysis can help strategic teams figure out
potential action plans they can use to hit their goals.
 Identify weak points. If the business didn't perform as expected, using a gap analysis
can help the team figure out the root cause of certain performance gaps.
 Measure actual resources. If the team has a surplus of resources at the end of the
year, a gap analysis can help identify specifically how everything was performing,
and how resources were allocated so they can be used more efficiently in the future.
Benefits of using a gap analysis
Creating a gap analysis is a way to review the current strategies to see what’s
working, and what’s still needed. Performing one can help the business in a number
of ways, including:
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 Identifying weak points. If the business didn't perform as expected, you can use a
gap analysis to help the team figure out the root cause of performance gaps.
 Measuring current resources. If the team has a surplus of resources at the end of the
year, a gap analysis can help identify specifically how resources were allocated so
they can be used more efficiently in the future.
Gap Analysis can be understood as a planned tool used for analyzing the gap
between the target and expected results, by assessing the extent of the task and the
ways, in which gap might be bridged. It engages makes a comparison of the present
performance level of the entity or business unit with that of the standard
established previously.
Gap Analysis is a process of identifying the gap between optimized distribution and
integration of resources and the current level of allocation. In this, the concern’s
strengths, weakness, opportunities, and threats are analyzed, and possible moves
are examined. Different strategies are selected on the basis of:
 Width of the gap
 Importance
 Chances of reduction
If the gap is thin, stability strategy is the best alternative. However, when the gap is
large, and the reason is environment opportunities, expansion strategy is
appropriate, and if it is due to the past and proposed a bad performance,
retrenchment strategies are the perfect option.
Types of Gaps
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The term ‘strategy gap’ entails the variance between actual performance and the
desired one, as mentioned in the organization’s mission, objectives, and strategy for
reaching them. It is a threat to the concern’s future performance, growth, and
survival, which is likely to influence the efficiency and effectiveness of the company.
There are four types of Gap:
Performance Gap
The difference between anticipated performance and the actual performance.
Product/Market Gap
The gap between budgeted sales and real sales is termed as product/market gap.
Profit Gap
The variance between a targeted and real profit of the company.
Manpower Gap
When there is a lag between the essential number and quality of workforce and
actual strength in the organization, it is known as manpower gap.
PROJECT IMPLEMENTATION
Project implementation involves directly managing a project to ensure it meets the
objectives outlined in the planning phase. Project managers must implement a
project effectively so that the team can produce the deliverables required to satisfy
the clients or key stakeholders of the project. Project implementation is the process
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of putting a project plan into action to produce the deliverables, otherwise known as
the products or services, for clients or stakeholders. It takes place after the planning
phase, during which a team determines the key objectives for the project, as well as
the timeline and budget. Implementation involves coordinating resources and
measuring performance to ensure the project remains within its expected scope and
budget. It also involves handling any unforeseen issues in a way that keeps a project
running smoothly.
To implement a project effectively, project managers must consistently
communicate with a team to set and adjust priorities as needed while maintaining
transparency about the project's status with the clients or any key stakeholders
There are several steps involved in implementing a project, including some planning
that must occur before the implementation can begin. Here is a list of steps for
implementing a project effectively:
1. Assess the Project Plan:
In the first phase of the project cycle, it's beneficial to establish a plan that meets the
expectations of management, clients and key stakeholders. Before implementing a
project, assess the plan and make sure that everyone on the team understands the
project deliverables.
2.Execute the Plan:
With a plan in place and expectations set for the team, it's time to start work on the
project. During this step, project managers want to have regular discussions with
the team about their progress. Measure the project's timeline against the projected
schedule and monitor resources to ensure the team has what they need to complete
the project successfully.
3.Make changes as needed:
During any type of project, it's likely that a project manager needs to make changes
during implementation, such as to address additional requests from the client or to
keep the project within its scope. Make these adjustments as necessary, relying on
the project plan to identify solutions.
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4.Analyze the Project Data:
Throughout the implementation phase of a project, it's important to analyze data
consistently to measure how a project is progressing against the initial projections.
Gather the feedback:
Once the team has completed the project deliverables, there are still some essential
steps left in the process. Gather feedback from the project team, clients and
stakeholders about the project's outcome, assessing what parts of the project went
according to plan and what areas the team could improve in the future.
Provide final reports:
In the last part of the implementation phase, provide reports to the project team,
clients and stakeholders outlining how the project performed against the projected
budget and timeline.
PROCEDURAL IMPLEMENTATION:
A procedure refers to a series of the related task which make-up a chronological
sequence. It is an established way of performing the work to be accomplished.
Procedural implementation level concerned with the completion of all statutory and
other formalities which have been prescribed by the Government both at Central
and State. The major procedural requirements involved in the strategy
implementation process are discussed as under:
(i) Licensing Requirements
The licensing provisions have been provided under the Industries (Development
and Regulation) Act, 1951. In many industries, an industrial license is required
particularly in those industries which are perceived to be injurious to public health.
(ii) FEMA Requirements
Under the provisions of FE MA, all companies registered under the Companies Act,
1956 having a foreign shareholding in excess of 50%, and all foreign companies are
required to obtain permission from the Reserve Bank of India, regarding different
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activities like fresh investments, issue of shares and debentures, acquisition of an
Indian business unit, etc.
(iii) Foreign Collaboration Procedures
The emergence of joint venture projects with foreign collaborators brings
technology and participation in equity Besides, joint ventures, Indian companies
may enter technology agreements for the import of technical know-how.
(iv) Capital Issue Requirements
Under the provisions of the Securities Exchange and Board of India Act, 1992, SEBI
exercises some controls over capital issues to the public in the form of adherence to
disclosure norms. For this purpose, SEBI scrutinizes the prospectus of the company
intending to enter the capital market to ensure that relevant information has been
provided in the prospectus on the basis of which the public can analyze the worth of
issue of shares or debentures.
(v) Import and Export Requirements
Import and Export requirements differ in two types of goods i.e. which are under
the list of open general license and those under the restrictive list.
RESOURCE ALLOCATION
Resource allocation deals with the procurement and commitment of financial,
physical and human resources to strategic tasks for achievement of organisational
objectives. This involves the process of providing resources to particular business
units, divisions, functions etc for the purpose of implementing strategies. All
organisations have at least five types of resources:
1. Physical Resources
2. Financial Resources
3. Human Resources
4. Technological Resources
5. Intellectual Resources
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These resources may already exist in the organisation or may have to be acquired.
Resource allocation decisions are very critical in that they set the operative strategy
for the firm. Resource allocation decisions about how much to invest in which areas
of business reinforce the strategy and commit the organisation to the chosen
strategy.
The resource allocation process can sometimes become fairly complex, and
may even create several difficulties to the strategists. Some of the difficulties that
can create problems are:
1. Scarcity of Resources
2. Restrictions on Generating Resources
3. Bloated Demands
4. Negative Attitude
. 5. Budget Battles
6. Budgetary Process
STRUCTURAL IMPLEMENTATION
To implement its strategy successfully a firm must have an appropriate
organisational structure. An organisational structure is a set of formal tasks and
reporting relationships which provide a framework for control and coordination
within the organisation. The visual representation of an organisational structure is
called organisational chart. The purpose of an organisational structure is to
coordinate and integrate the efforts of employees at all levels – corporate, business
and functional levels – so that they work together to achieve the specific set of
strategies.
Organisational structure is a tool that managers use to harness resources for getting
things done. It is defined as:
1. The set of formal tasks assigned to individuals and departments.
2. Formal reporting relationships, including lines of authority, responsibility,
number of hierarchical levels and span of manager’s control.
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3. The design of systems to ensure effective coordination of employees across
departments.
The set of formal tasks and formal relationships provides a framework for vertical
control of the organisation.
FUNCTIONAL STRATEGIES
Functional strategies are relatively short-term activities that each functional area
within a company will carry out to implement the broader, longer-term corporate
level and business level strategies. Each functional area has a number of strategy
choices, that interact with and must be consistent with the overall company
strategies. Functional strategies provide direction to functional managersregarding
the plans and policies to be adopted in each functional area.
Functional strategies are developed to ensure that :
1. The strategic decisions are implemented by all the parts of an organisation.
2. There is a basis available for controlling activities in different functional areas of a

business.
3. The time spent by functional managers on decision-making may be reduced.
4. Similar situations occurring in different functional areas are handled by the

functional managers in a consistent manner.
5. Coordination across different functions takes place where necessary.
*****
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UNIT-V: STRATEGIC EVALUATION AND CONTROL
UNIT - V: Strategic Evaluation and Control An Overview of Strategic Evaluation and
Control – Strategic Control - Operational Control - Techniques of Strategic Evaluation
and Control - Role of Organisational Systems in Evaluation.
Strategic Evaluation and Control:

Strategic evaluation and control is the final phase in the process of strategic
management. Its basic purpose is to ensure that the strategy is achieving the goals
and objectives set for the strategy. It compares performance with the desired results
and provides the feedback necessary for management to take corrective action.
According to Fred R. David, strategy evaluation includes three basic activities:
(1) examining the underlying bases of a firm’s strategy,
(2) comparing expected results with actual results, and
(3) taking corrective action to ensure that performance conforms to plans.
Strategic evaluation generally operates at two levels – strategic and operational
level. At the strategic level, managers try to examine the consistency of strategy with
environment. At the operational level, the focus is on finding how a given strategy is
effectively pursued by the organisation. For this purpose, different control systems
are used both at strategic and operational levels.
Strategic control is a type of “steering control”. We have to track the strategy as it is
being implemented, detect any problems or changes in the predictions made, and
make necessary adjustments. This is especially important because the
implementation process itself takes a long time before we can achieve the results.
Strategic controls are, therefore, necessary to steer the firm through these events.
Types of Strategic Control : There are four types of strategic controls:
1. Premise control
2. Strategic surveillance
3. Special alert control
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4. Implementation control
Premise Control:
Premise Control Strategy is built around several assumptions or predictions, which
are called planning premises. Premise control checks systematically and
continuously whether the assumptions on which the strategy is based are still valid.
If a vital premise is no longer valid, the strategy may have to be changed. The sooner
these invalid assumptions are detected and rejected, the better are the chances of
changing the strategy. The premise control is concerned with two types of factors:
1. Environmental factors
2. Industry factors
1. Environmental Factors: The performance of a firm is affected by changes in
environmental factors like the rate of inflation, change in technology, government
regulations, demographic and social changes etc. Although the firm has little or no
control over environmental factors, these factors have considerable influence over
the success of the Notes strategy because strategies are generally based on key
assumptions about them.
2. Industry Factors: Industry factors also affect the performance of a company.
Competitors, suppliers, buyers, substitutes, new entrants etc. are some of the
industry factors about which assumptions are made. If any of these assumptions go
wrong, strategy may have to be changed.
Strategic Surveillance: Strategic surveillance is a broad-based vigilance activity in
all daily operations both inside and outside the organisation. With such vigilance,
the events that are likely to threaten the course of a firm’s strategy can be tracked.
Business journals, trade conferences, conversations, observations etc. are some of
the information sources for strategic surveillance.
Special Alert Control: Sudden, unexpected events can drastically alter the course of
the firm’s strategy. Such events trigger an immediate and intense reconsideration of
the firm’s strategy.
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5) Financial Controls :
The organisation also puts into place financial controls to monitor the progress of
the strategy. These controls are in the form of the performance of the organisation
against set standards. Some examples of financial measures are return on equity
(ROE), return on net worth (RONW), and return on assets (ROA).
6) Output Control :
In this strategic control, the strategic manager sets a target for the performance of
each division, department and employee of the organisation and then compares the
actual performance against the set standards. These set standards thus set goals
against which the division, department and employee can be measured.
7) Behavior Control :
Behavior control visualizes the adoption of a strict system of rules and regulations
to control the behavior of divisions, functions and individuals in a particular way.
Process of Strategic Control
Strategic control is done in the following manner :
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1) Determine what to Control :
The first thing to be decided are the activities that the organisation wants to keep
track of and control. These are normally decided based on the objectives, mission,
vision and the goal setting done as a result of planning. It is necessary for managers
to decide what they must control because it is not possible to monitor and control
every activity.
2) Set Control Standards :
Once the organisation has decided what it wants to control, the next step is to set
standards for each of these. Standards are nothing but targets against which the
actual performance can be measured to judge if the performance is up to mark or
not. Standards represent the benchmark against which the organisation can
measure its current performance, define future targets and also evaluate historical
performances. They can be both quantitative and qualitative. The five bases on
which standards are set are quantity, quality, time, cost and behavior. Each of these
need to be further analysed for establishment of control standards.
3) Measure Performance :
The next step is to actually measure the output or performance and compare against
the standard. Strategic control standards are based the practice of competitive
bench marking the process of measuring a firm's performance in its industry. of the
top performance in against that of the Strategic controls can can also be initiated
through the process of competitive bench marking.
4) Compare Performance to Standards :
Next the actual performance is compared to the standard set. If the earlier stages are
done properly and systematically in the organisation, then the actual comparison of
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the performance and the standard is a very easy process.
5) Determine the Reasons for the Deviations :
Once the divergence is seen in the actual performance and the standard, the next
step is to understand why the divergence has been caused. The organisation needs
to examine if the shortfall in achievement is due to genuine shortcomings in the
internal factors of the organisation or because of external events which are not
possible for the organisation to control.
6) Take Corrective Action :
The last step in the process is to initiate remedial action. Managers can do one of the
following :
1. Do nothing
2. Rectify the actual performance
3. Change the standard
OPERATIONAL CONTROL:
Operational control systems are designed to ensure that day-to-day actions are
consistent with established plans and objectives. It focuses on events in a recent
period. Operational control systems are derived from the requirements of
the management control system. Corrective action is taken where performance does
not meet standards. This action may involve training, motivation, leadership,
discipline, or termination.
Evaluation Techniques for Operational Control:
 Value chain analysis: Firms employ value chain analysis to identify and evaluate
the competitive potential of resources and capabilities. By studying their skills
relative to those associated with primary and support activities, firms are able to
5
understand their cost structure and identify their activities through which they can
create value.
 Quantitative performance measurements: Most firms prepare formal reports of
quantitative performance measurements (such as sales growth, profit
growth, economic value-added, rational analysis, etc.) that managers review at
regular intervals. Benchmarking: It is a process of learning how other firms do
exceptionally high-quality things. Some approaches to benchmarking are simple and
straightforward. For example, Xerox Corporation routinely buys copiers made by
other firms and takes them apart to see how they work. This helps the firms to stay
abreast of their competitors’ improvements and changes.
 Key Factor Rating: It is based on a close examination of key factors affecting
performance (financial, marketing, operations, and human resource capabilities)
and assessing overall organizational capability based on the collected information.
To be effective, operational control systems, involve four steps common to all post-
action controls:
1. Set standards of performance
2. Measure actual performance
3. Identify deviations from standards set
4. Initiate corrective action
1.Setting of Standards: The first step in the control process is setting of standards.
Standards are the targets against which the actual performance will be measured.
They are broadly classified into quantitative standards and qualitative standards.
Quantitative: These are expressed in physical or monetary terms in respect of
production, marketing, finance etc. They may relate to: 1. Time standards 2. Cost
standards 3. Productivity standards 4. Revenue standards
2.Measurement of Performance :The second step in operational control is the
measurement of actual performance. Here, the actual performance is measured
against the standards fixed. Standards of performance act as the benchmark against
6
which the actual performance is to be compared. It is important, however, to
understand how the measurement of performance actually takes place.
Operationally measuring is done through accounting, reporting and communication
systems.
3 Identifying Deviations: The third step in the control process is identifying
deviations. The measurement of actual performance and its comparison with
standards of performance determines the degree of deviation or variation between
actual performance and the standard. Broadly, the following three situations may
arise: 1. The actual performance matches the standards 2. The actual performance
exceeds the standards 3. The actual performance falls short of the standards The
first situation is ideal, but sometimes may not be realistic. Generally, a range of
tolerance limits within which the results may be accepted satisfactorily, are fixed
and deviations from it are considered as variance.
4 Taking Corrective Action: The last and final step in the operational control
process is taking corrective action. Corrective action is initiated by the management
to rectify the shortfall in performance. If the performance is consistently low, the
strategists have to do an in depth analysis and diagnosis to isolate the factors
responsible for such low performance and take appropriate corrective actions.
There are three courses for corrective action: 1. Checking performance 2. Checking
standards 3. Reformulating strategies, plans and objectives.
Techniques of Strategic Control:

Organisations use many techniques or mechanisms for strategic control. Some of
the important mechanisms are:
1. Management Information systems: Appropriate information systems act as an
effective control system. Management will come to know the latest performance in
key areas and take appropriate corrective measures.
7
2. Benchmarking: It is a comparative method where a firm finds the best practices in
an area and then attempts to bring its own performance in that area in line with the
best practice. Best practices are the benchmarks that should be adopted by a firm as
the standards to exercise operational control. Through this method, performance
can be evaluated continually till it reaches the best practice level. In order to excel, a
firm shall have to exceed the benchmarks. In this manner, benchmarking offers
firms a tangible method to evaluate performance.
3. Balanced scorecard: It is a method based on the identification of four key
performance measures i.e. customer perspective, internal business perspective,
innovation and learning perspective, and the financial perspective. This method is a
balanced approach to performance measurement as a range of financial and non-
financial parameters are taken into account for evaluation.
Differences between Strategic Control & Operational Control:
Role of Organisational Systems in Evaluation

Strategic evaluation operates in the context of various organizational systems. An
organization develops various systems which help in integrating various parts of the
8
organization. The major organizational systems are: information system, planning
system, motivation system, appraisal system and development system. All these
organizational systems play their role in strategic evaluation and control. Some of
these systems are closely and directly related and some are indirectly related to
evaluation and control. In connection with the role of organizational systems in
strategic evaluation, the following systems may be important.
Information System
Evaluation and control action is guided by adequate information from the beginning
to the end. Management information and management control systems are closely
interrelated which the information system is designed on the basis of control
system. Every manager in the organization must have adequate information about
his performance, standards and how he is contributing to the achievement of
organizational objectives. There must be a system of information tailored to the
specific management needs at every level, both in terms of adequacy and timeliness.
Planning System
Planning is the basis for control in the sense that it provides the entire spectrum on
which control function is based. In fact, these two terms are often used together in
the designation of the department which carries production planning, scheduling
and routing. It emphasizes that there is a plan which directs the behavior and
activities in the organization. Control measures these behavior and activities and
suggests measures to remove deviation. Thus, there is a reciprocal relationship
between planning and control.
Motivation System
Motivation system is not only related to evaluation and control system but to the
entire organizational processes. Lack of motivation on the part of managers is a
significant barrier in the process of evaluation and control. Since the basic objective
of evaluation and control is to ensure that organizational objectives are achieved.
9
Motivation plays a central role in this process. It energizes managers and other
employees in the organization to perform better which is the key for organizational
success.
Appraisal System
Appraisal or performance appraisal system involves systematic evaluation of the
individual with regard to his performance on the job and his potential for
development. While evaluating an individual, not only his performance is taken into
consideration but also his abilities and potential for better performance. Thus,
appraisal system provides feedback for control system about how individuals are
performing.
Development System
Development system is concerned with developing personnel to perform better in
their present positions and likely future positions that they are expected to occupy.
Thus, development system aims at increasing organizational capability through
people to achieve better results. These results become the basic for evaluation and
control. Role of organizational systems in strategic evaluation should not be
undermined.
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MBA III Semester

MB 302 - STRATEGIC MANAGEMENT

 Strategic decision gives companies a competitive advantage. This advantage

CONCEPT OF STRATEGIC MANAGEMENT

VISION, MISSION, GOALS AND OBJECTIVES

APPRAISING THE ENVIRONMENT

Environmental Appraisal/Environmental Scanning

The process of environmental appraisal includes the following steps:

Factors affecting Environmental Appraisal

 Micro refers to small. Micro environment is also called as internal

a) Company: Al the internal employees of the company constitute company. Efficient

c) Intermediaries: These provide valuable assistance to the business company. These

d) Competitors: Many companies often make their products/services on the basis of

Eg: Pepsi v/s Coca-cola's product lines.

A distinctive competency is a unique firm- specific strength that allows a company to

Factors in Organizational Appraisal

Value Chain Analysis

Organizational Capability Profile

Organizational capabilities are something that people, organization and technology

The important factors considered in Capability profile are:

c) Human Resources: one of the hallmarks of a successful enterprise overall period of

e) Management: A more subtle factor in corporate competence is management

Characteristics of Corporate Level Strategy

Definition: The Retrenchment Strategy is adopted when an organization aims at

STRATEGIC ANALYSIS AND CHOICE

Managerial Attitudes towards Risk:

Influence of Past Strategy:

Functional strategies are developed to ensure that :

1. The strategic decisions are implemented by all the parts of an organisation.

2. There is a basis available for controlling activities in different functional areas of a

3. The time spent by functional managers on decision-making may be reduced.

4. Similar situations occurring in different functional areas are handled by the

5. Coordination across different functions takes place where necessary.

Strategic Evaluation and Control:

Strategic control is done in the following manner :

2) Set Control Standards :

4) Compare Performance to Standards :

6) Take Corrective Action :

2. Rectify the actual performance

3. Change the standard

Techniques of Strategic Control:

Differences between Strategic Control & Operational Control:

Role of Organisational Systems in Evaluation

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