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STRATEGIC MANAGEMENT

ROSHAN.S MBA - J

STRATEGY:

The

word

strategy

is

derived

from

the

Greek

word

strategos; stratus (meaning army) and ago (meaning leading/moving).

Strategy is an action that managers take to attain one or more of the organizations goals. Strategy can also be defined as A general direction set for the company and its various

components to achieve a desired state in the future. Strategy results from the detailed strategic planning process. A strategy is all about integrating organizational activities and utilizing and allocating the scarce so as resources to meet within the the

organizational objectives.

environment

present

While planning a strategy it is essential to consider that decisions are not taken in a vacuum and that any act taken by a firm is likely to be met by a reaction from those affected, competitors, customers, employees or suppliers.

Strategy can also be defined as knowledge of the goals, the uncertainty of events and the need to take into consideration the likely or actual behaviour of others.

Strategy is the blueprint of decisions in an organization that shows its objectives and goals, reduces the key policies, and plans for achieving these goals, and defines the business the company is to carry on, the type of economic and human

organization it wants to be, and the contribution it plans to make to its shareholders, customers and society at large. FEATURES OF STRATEGY 1. Strategy is Significant because it is not possible to foresee the future. Without a perfect foresight, the firms must be ready to deal with the uncertain events which constitute the business environment. 2. Strategy deals with long term developments rather than routine operations, i.e. it deals with probability of innovations or new products, new methods of productions, or new markets to be developed in future. 3. Strategy is created to take into account the probable

behaviour of customers and competitors. Strategies dealing with employees will predict the employee behaviour. 4. Strategy is a well-defined roadmap of an organization. It defines the overall mission, vision and direction of an

organization. The objective of a strategy is to maximize an organizations strengths and to minimize the strengths of the competitors. 5. Strategy, in short, bridges the gap between where we are and where we want to be. STRATEGIC MANAGEMENT

The

systematic

analysis

of

the

factors

associated

with

customers and competitors (the external environment) and the organization itself (the internal environment) to provide the basis for maintaining optimum management practices. The objective of strategic management is to achieve better

alignment of corporate policies and strategic priorities. Strategic Management is all about identification and

description of the strategies that managers can carry so as to achieve better performance and a competitive advantage for their organization. An organization is said to have competitive advantage if its profitability is higher than the average profitability for all companies in its industry. Strategic management can also be defined as a bundle of decisions and acts which a manager undertakes and which decides the result of the firms performance. The manager must have a thorough knowledge and analysis of the general and competitive organizational environment so as to take right decisions. They should conduct a SWOT Analysis (Strengths, Weaknesses, Opportunities, and Threats), i.e., they should make best possible utilization of strengths, minimize the organizational

weaknesses, make use of arising opportunities from the business environment and shouldnt ignore the threats. Strategic management is nothing but planning for both

predictable as well as unfeasible contingencies. It is applicable to both small as well as large organizations as even the smallest organization face competition and, by formulating and implementing appropriate strategies, they can attain sustainable competitive advantage. Strategic Management is a way in which strategists set the objectives and proceed about attaining them. It deals with making and implementing decisions about future direction of an organization. It helps us to identify the direction in which an organization is moving. Strategic management is a continuous process that evaluates and controls the business and the industries in which an organization is involved; evaluates its competitors and sets goals and strategies to meet all existing and potential

competitors; and then revaluates strategies on a regular basis to determine how it has been implemented and whether it was successful or does it needs replacement.

STRATEGIC STEPS:

MANAGEMENT

PROCESS

HAS

FOLLOWING

FOUR

1. ENVIRONMENTAL SCANNING Environmental scanning refers to a process of collecting, scrutinizing and providing information for strategic purposes. It helps in analyzing the internal and external factors

influencing an organization. After executing the environmental analysis process, management should evaluate it on a

continuous basis and strive to improve it. 2. STRATEGY FORMULATION Strategy formulation is the process of deciding best course of action for accomplishing organizational objectives and hence achieving organizational purpose. After conducting

environment

scanning,

managers

formulate

corporate,

business and functional strategies. 3. STRATEGY IMPLEMENTATION Strategy implementation implies making the strategy work as intended or putting the organizations chosen strategy into action. Strategy implementation includes designing the

organizations structure, distributing resources, developing decision making process, and managing human resources. 4. STRATEGY EVALUATION Strategy evaluation is the final step of strategy management process. The key strategy evaluation activities are: appraising internal and external factors that are the root of present strategies, measuring performance, and taking remedial / corrective actions.

Evaluation makes sure that the organizational strategy as well as its implementation meets the organizational objectives.

These components are steps that are carried, in chronological order, when creating a new strategic management plan.

Present businesses that have already created a strategic management plan will revert to these steps as per the situations requirement, so as to make essential changes.

COMPONENTS OF STRATEGIC MANAGEMENT PROCESS

Strategic management is an on-going process. Therefore, it must be realized that each component interacts with the other components and that this interaction often happens in chorus.

TYPES OF GOVERNMENTAL SYSTEM: 1. COMMAND SYSTEM: A system where the government, rather than the free market, determines what goods should be produced, how much should be produced and the price at which the goods will be offered for sale. The command system is a key feature of any communist society. China, Cuba, North Korea and the former Soviet Union are examples of countries that have command system. 2. FREE MARKET SYSTEM:

A market economy based on supply and demand with little or no government control.

A completely free market is an idealized form of a market economy where buyers and sells are allowed to transact freely (i.e. buy/sell/trade) based on a mutual agreement on price without state intervention in the form of taxes, subsidies or regulation.

In financial markets, free market stocks are securities that are widely traded and whose prices are not affected by availability.

In foreign-exchange markets, it is a market where exchange rates are not pegged (by government) and thus rise and fall freely though supply and demand for currency.

3. MIXED ECONOMY: An economic system that includes a mixture of capitalism and socialism. This type of economic system includes a combination of private economic freedom and centralized economic planning and government regulation.

TYPES OF MARKET: 1. PERFECT COMPETITION: The concept of perfect competition was first introduced by Adam Smith in his book "Wealth of Nations". Later on, it was improved by Edge worth. However, it received its complete formation in Frank Kight's book "Risk, Uncertainty and Profit" (1921). A MARKET STRUCTURE IN WHICH THE FOLLOWING FIVE CRITERIA ARE MET: All firms sell an identical product. All firms are price takers. All firms have a relatively small market share. Buyers know the nature of the product being sold and the prices charged by each firm. The industry is characterized by freedom of entry and exit. Sometimes referred to as "pure competition". "Prefect competition is a market in which there are many firms selling identical products with no firm large enough, relative to the entire market, to be able to influence market price". "The perfect competition is characterized by the presence of many firms. They sell identically the same product. The seller is a price taker".

2. MONOPOLY: A situation in which a single company or group owns all or nearly all of the market for a given type of product or service. By definition, monopoly is characterized by an absence of competition, which often results in high prices and inferior products. A monopoly is a market containing a single firm. In such

instances where a single firm holds monopoly power, the company will typically be forced to divest its assets. Antimonopoly regulation protects free markets from being dominated by a single entity. 3. OLIGOPOLY: A situation in which a particular market is controlled by a small group of firms. An oligopoly is much like a monopoly, in which only one company exerts control over most of a market. In an oligopoly, there are at least two firms controlling the market. In economics, the market consists of few sellers who are highly sensitive to each others pricing and marketing strategies. There are few sellers because it is difficult for new sellers to enter the market. Each seller is alert to competitors strategies and move. BUSINESS ENVIRONMENT:

The term Business Environment is composed of two words Business and Environment. In simple terms, the state in which a person remains busy is known as Business. The word Business in its economic sense means human activities like production, extraction or purchase or sales of goods that are performed for earning profits. On the other hand, the word Environment refers to the aspects of surroundings. Therefore, Business Environment may be

defined as a set of conditions Social, Legal, Economical, Political or Institutional that are uncontrollable in nature and affects the functioning of organization. Business Environment has two components: 1. Internal Environment 2. External Environment INTERNAL ENVIRONMENT: It includes 5 Ms i.e. man, material, money, machinery and management, usually within the control of business. Business can make changes in these factors according to the change in the functioning of enterprise. EXTERNAL ENVIRONMENT: Those factors which are beyond the control of business enterprise are included in external environment. These factors are: Government and Legal factors, Geo-Physical Factors,

Political

Factors,

Socio-Cultural

Factors,

Demo-Graphical

factors etc. It is of two Types: 1. Micro/Operating Environment 2. Macro/General Environment

MICRO/OPERATING ENVIRONMENT: The environment which is close to business and affects its capacity to work is known as Micro or Operating Environment. It consists of Suppliers, Customers, Market Intermediaries, Competitors and Public. (1) SUPPLIERS: They are the persons who supply raw material and required components to the company. They must be reliable and business must have multiple suppliers i.e. they should not depend upon only one supplier. (2) CUSTOMERS: Customers are regarded as the king of the market. Success of every business depends upon the level of their customers satisfaction. TYPES OF CUSTOMERS: 1. Wholesalers 2. Retailers

3. Industries 4. Government and Other Institutions 5. Foreigners (3) MARKET INTERMEDIARIES: They work as a link between business and final consumers.

TYPES:1. Middleman 2. Marketing Agencies 3. Financial Intermediaries 4. Physical Intermediaries (4) COMPETITORS: Every move of the competitors affects the business. Business has to adjust itself according to the strategies of the

Competitors. (5) PUBLIC: Any group who has actual interest in business enterprise is termed as public e.g. media and local public. They may be the users or non-users of the product. MACRO/GENERAL ENVIRONMENT:

It includes factors that create opportunities and threats to business units. Following are the elements of Macro

Environment: (1) ECONOMIC ENVIRONMENT: It is very complex and dynamic in nature that keeps on changing with the change in policies or political situations.

IT HAS THREE ELEMENTS: ECONOMIC CONDITIONS OF PUBLIC ECONOMIC POLICIES OF THE COUNTRY ECONOMIC SYSTEM OTHER ECONOMIC FACTORS: 1. Infrastructural Facilities, Banking, Insurance companies,
2. Money markets, capital markets etc.

(2) NON-ECONOMIC ENVIRONMENT: Following are included in non-economic environment:(I) POLITICAL ENVIRONMENT: It affects different business units extensively. Components: 1. Political Belief of Government 2. Political Strength of the Country 3. Relation with other countries 4. Defense and Military Policies

5. Centre State Relationship in the Country 6. Thinking Opposition Parties towards Business Unit (II) SOCIO-CULTURAL ENVIRONMENT: Influence exercised by social and cultural factors, not within the control of business, is known as Socio-Cultural

Environment. These factors include: attitude of people to work, family system, caste system, religion, education, marriage etc. (III) TECHNOLOGICAL ENVIRONMENT: A systematic application of scientific knowledge to practical task is known as technology. Every day there has been vast changes in products, services, lifestyles and living conditions, these changes must be analysed by every business unit and should adapt these changes. (IV) NATURAL ENVIRONMENT: It includes natural resources, weather, climatic conditions, port facilities, topographical factors such as soil, sea, rivers, rainfall etc. Every business unit must look for these factors before choosing the location for their business. (V) DEMOGRAPHIC ENVIRONMENT: It is a study of perspective of population i.e. its size, standard of living, growth rate, age-sex composition, family size, income level (upper level, middle level and lower level), education

level etc. Every business unit must see these features of population and recognise their various needs and produce accordingly. (VI) INTERNATIONAL ENVIRONMENT: It is particularly important for industries directly depending on import or exports. The factors that affect the business are: Globalisation, Liberalisation, foreign business policies, cultural exchange.

CHARACTERISTICS:a. Business environment is compound in nature. b. Business environment is constantly changing process. c. Business environment is different for different business units. d. It has both long term and short term impact. e. Unlimited influence of external environment factors. f. It is very uncertain. g. Inter-related components. h. It includes both internal and external environment. SECTORAL DIVISIONS OF BUSINESS: PUBLIC SECTOR: The public sector is that portion of society controlled by national, state or provincial, and local governments.

In the United States, the public sector encompasses universal, critical services such as national Defense, homeland security, police protection, fire fighting, urban planning, corrections, taxation, and various social programs.

The part of the economy concerned with providing basic government services.

The composition of the public sector varies by country, but in most countries the public sector includes such services as the police, military, public roads, public transit, primary education and healthcare for the poor.

The public sector might provide services that non-payer cannot be excluded from (such as street lighting), services which benefit all of society rather than just the individual who uses the service (such as public education), and services that encourage equal opportunity.

JOINT SECTOR: The joint sector is a form of partnership between the public sector and the private sector. Ownership & control shared by private entrepreneur. State and public. PRIVATE SECTOR: The part of a nation's economy which is not controlled by the government.

The part of the economy that is not state controlled, and is run by individuals and companies for profit.

The private sector encompasses all for-profit businesses that are not owned or operated by the government.

Companies and corporations that are government run are part of what is known as the public sector, while charities and other non-profit organizations are part of the voluntary sector.

FORMS OF ORGANIZATION: SOLE PROPRIETORSHIP: When the ownership and management of business are in control of one individual, it is known as sole proprietorship or sole tradership. It is seen everywhere, in every country, every state, every locality. The shops or stores which you see in your locality the grocery store, the vegetable store, the sweets shop, the chemist shop, the paanwala, the stationery store, the STD/ISD telephone booths etc. come under sole proprietorship. It is not that a sole tradership business must be a small one. The volume of activities of such a business unit may be quite large. However, since it is owned and managed by one single individual, often the size of business remains small. ADVANTAGES OF SOLE PROPRIETORSHIP: 1. EASY FORMATION:

The biggest advantage of a sole tradership business is its easy formation. Anybody wishing to start such a business can do so in many cases without any legal formalities. 2. BETTER CONTROL: The owner has full control over his business. He plans, organises, co-ordinates the various activities. Since he has all authority, there is always effective control. 3. PROMPT DECISION MAKING: As the sole trader takes all the decisions himself the decision making becomes quick, which enables the owner to take care of available opportunities immediately and provide immediate

solutions to problems.

4. FLEXIBILITY IN OPERATIONS: One man ownership and control makes it possible for change in operations to be brought about as and when necessary. DISADVANTAGES OF SOLE PROPRIETORSHIP: 1. UNLIMITED LIABILITY: In sole proprietorship, the liability of business is recovered from the personal assets of the owner. It restricts the sole trader to take more risk and increases the volume of his business.

2. LIMITED FINANCIAL RESOURCES:

The ability to raise and borrow money by one individual is always limited. The inadequacy of finance is a major handicap for the growth of sole proprietorship. 3. LIMITED CAPACITY OF INDIVIDUAL: An individual has limited knowledge and skill. Thus his capacities to undertake responsibilities, his capacity to manage, to take decisions and to bear the risks of business are also limited. 4. UNCERTAINTY OF DURATION: The existence of a sole tradership business is linked with the life of the proprietor. Illness, death or insolvency of the owner brings an end to the business. The continuity of business operation is, therefore, uncertain.

PARTNERSHIP A partnership form of organisation is one where two or more persons are associated to run a business with a view to earn profit. Persons from similar background or persons of different ability and skills may join together to carryon a business. Each member of such a group is individually known as partner

and collectively the members are known as a partnership firm. These firms are governed by the Indian Partnership Act, 1932. JOINT STOCK COMPANY

A Joint Stock Company form of business organisation is a voluntary association of persons to carry on business.

Normally, it is given a legal status and is subject to certain legal regulations. It is an association of persons who generally contribute money for some common purpose. The money so contributed is the capital of the company. The persons who contribute capital are its members. The proportion of capital to which each member is entitled is called his share, therefore members of a joint stock company are known as shareholders and the capital of the company is known as share capital. The total share capital is divided into a number of units known as shares. You may have heard of the names of joint stock companies like Tata Iron & Steel Co. Limited, Hindustan Lever Limited, Reliance Industries Limited, Steel Authority of India Limited, Ponds India Limited etc. The companies are governed by the Indian Companies Act, 1956. The Act defines a company as an artificial person created by law, having separate entity, with perpetual succession and a common seal. CO-OPERATIVE SOCIETY

Any ten persons can form a co-operative society. It functions under the Co-operative Societies Ac t , 1912 and other State Co-operative Societies Acts .

A co-operative society is entirely different from all other forms of organisation Forms of Business Organisation. The cooperatives are formed primarily to render services to its members. Generally it also provides some service to the society.

The main objectives of co-operative society are:

rendering service rather than earning profit, mutual help instead of competition, and Self-help in place of dependence. VARIOUS TYPES OF CO-

ON THE BASIS OF OBJECTIVES, OPERATIVES ARE FORMED: A. CONSUMER CO-OPERATIVES: These are formed to protect

the

interests

of

ordinary

consumers of society by making consumer goods available at reasonable prices. Kendriya Bhandar in Delhi, Alaka in

Bhubaneswar and similar others are all examples of consumer co-operatives

B. PRODUCERS CO-OPERATIVES:

These societies are set up to benefit small producers who face problems in collecting inputs and marketing their products. The Weavers co-operative society, the Handloom owners

cooperative society are examples of such co-operatives. C. MARKETING CO-OPERATIVES: These are formed by producers and manufactures to eliminate exploitation by the middlemen while marketing their product. Kashmir Arts Emporium, J&K Handicrafts, Utkalika etc. are examples of marketing co-operatives. D. HOUSING CO-OPERATIVES: These are formed to provide housing facilities to its members. They are called co-operative group housing societies. E. CREDIT CO-OPERATIVES: These societies are formed to provide financial help to its members. The rural credit societies, the credit and thrift societies, the urban co-operative banks etc. come under this category. F. FORMING CO-OPERATIVES: These are formed by small farmers to carry on work jointly and thereby share the benefits of large scale farming. Besides these types, other co-operatives can be formed with the objective of providing different benefits to its members, like the construction co-operatives, transport co-operatives, cooperatives to provide education etc.

FORMS OF GROWTH OF BUSINESS: ORGANIC: The growth rate that a company can achieve by increasing output and enhancing sales. This excludes any profits or growth acquired from takeovers, acquisitions or mergers. Takeovers, acquisitions and mergers do not bring about profits generated within the company, and are therefore not considered organic. INORGANIC: A growth in the operations of a business that arises from mergers or takeovers, rather than an increase in the

companys own business activity. Firms that choose to grow inorganically can gain access to new markets and fresh ideas that become available through

successful mergers and acquisitions. TAKEOVERS: A corporate action where an acquiring company makes a bid for an acquire. If the target company is publicly traded, the acquiring company will make an offer for the outstanding shares.

MERGERS AND ACQUISITIONS: A general term used to refer to the consolidation of companies. A merger is a combination of two companies to form a new company, while an acquisition is the purchase of one company by another in which no new company is formed. A corporate action in which a company buys most, if not all, of the target company's ownership stakes in order to assume control of the target firm. Acquisitions are often made as part of a company's growth strategy whereby it is more beneficial to take over an existing firm's operations and niche compared to expanding on its own. Acquisitions are often paid in cash, the acquiring company's stock or a combination of both. DISSOLUTION: Termination of a corporation's legal existence. Termination of a contract. Dissolution of the partnership (owing to retirement, death or insolvency of a partner), merely involves change in the relation of the partners but it does not end the firm; the partnership would certainly come to an end but the firm, the reconstituted one might continue under the same name.

So the dissolution of the partnership may or may not include the dissolution of the firm but the dissolution of the firm necessarily means the dissolution of the partnership.

On dissolution of the firm, the business of the firm ceases to exist since its affairs are would up by selling the assets and by paying the liabilities and discharging the claims of the

partners. The dissolution of partnership among all partners of a firm is called dissolution of the firm. (I) DISSOLUTION BY AGREEMENT: A firm is dissolved in case 1. all the partners give consent or 2. as per the terms partnership agreement. (II) COMPULSORY DISSOLUTION: A FIRM IS DISSOLVED

COMPULSORILY IN THE FOLLOWING CASES: 1. When all the partners or all excepting one partner becomes Insolvent or of unsound mind. 2. When the business becomes unlawful. 3. When all the partners excepting one decide to retire from the firm. 4. When all the partners or all excepting one partner die. 5. A firm is also dissolved compulsorily if the partnership deed includes any provision regarding the happening of the

following events expiry of the period for which the firm was formed, 6. Completion of the specific venture or project for which the firm was formed. (III) DISSOLUTION BY NOTICE: In case of a partnership at will, the firm maybe dissolved if any one of the partner gives a notice in writing to the other partners. (IV) DISSOLUTION BY COURT: A court may order a partnership firm to be dissolved in the following cases: 1. When a partner becomes of unsound mind 2. When a partner becomes permanently incapable of performing his/her duties as a partner. 3. When partner deliberately and consistently commits breach of agreements relating to the management of the firm; 4. when a partners conduct is likely to adversely affect the business of the firm; 5. when a partner transfers his/her interest in the firm to a third party; 6. When the court regards dissolution to be just and equitable.

ROLE OF ENTREPRENEURSHIP: An entrepreneur is a person who holds a vision, spirit, intelligence and an art of making an enterprise run

successfully. But what is the role of an entrepreneur from the social aspect. He as a part of society also has to play an important role in bringing in new ideas, methods and objects for the welfare of the society. Irrespective of the basics of satisfying his personal goals and ambitions, he should towards community. Considering this aspect of a service towards society, can help the entrepreneurs in generating more contacts in their society as well as get new business leads and ventures. For gaining this they should participate in local forums and community meets. They should give some of their time to some social awareness programmes. Entrepreneur is a person who habitually creates and innovates to build something of recognized value around perceived (aware) opportunities Entrepreneurship is what drives human lives to change for the better because entrepreneurs put their theoretical innovations into practice. also understand his responsibilities

Successful new products are usually associated with `ideacentric' (Full of ideas) creativity.

The action and result of imagination and ingenuity (cleverness or power of creative imagination).

Creativity is not ability to create out of nothing but the ability to generate new ideas by combining, changing, or reapplying existing ideas.

Creativity requires passion (strong feeling or emotion) and commitment.

INNOVATION Introduction of something new. It is the transformation (Conversion or modification) of creative ideas into useful applications by combining resources in new or unusual ways to provide value to society for or improved products, technology, or services. It is the development of new processes, methods, devices, products, and services for a useful purpose. ENTREPRENEURSHIP 1. It is the process of creating value through unique(exclusive) resource combinations to exploit opportunity.
2. It is the implementation (execution) of innovation.

3. The

utilization

(using)

of

the

skill

sets,

qualities

and

characteristics inherent (built in) in, or acquired(gained) by, entrepreneurs.

THE ESSENCE OF ENTREPRENEURSHIP 1. Innovation is the specific instrument of entrepreneurship. 2. India, the largest democracy of the World, with about a sixth of the World's Human Resource.
3. India also has its strengths in its diversity; it's faith in

equality and freedom. 4. India has a huge potential for innovation and

entrepreneurship. 5. Colleges play a far greater role in the society than just being centres of knowledge transfer and exchange. 6. It is therefore, required of colleges and other educational institutions to cultivate (educate) the habit of innovation, within themselves and in their students. CHARACTERISTIC OF SUCCESSFUL ENTREPRENEURS a. Self-confident and optimistic (Positive thinking) b. Able to take calculated risk c. Respond positively to challenges d. Flexible and able to adapt e. Knowledgeable of markets f. Able to get along well with others g. Independent minded

h. Versatile (variety ) knowledge i. Energetic and diligent (carrying out a task steadily) j. Creative, need to achieve k. Dynamic (active) leader l. Responsive (reacting or responding positively) to suggestions m.Take initiatives (to go ahead) n. Resourceful and persevering (performer) o. Perceptive(sharp thinking) p. Responsive to criticism (comments or judgements) MINTZBERG MODES/APPROACHES: Mintzberg, proposed that traditionally organizations (profit making or not for profit) can be divided into five components. In practice organizational structure may differ from proposed model. Factors influencing organizational structure are or interested) with foresight (advance

industry norms, size, experience, culture, external forces (competition, inflation, minimum wage legislation etc). Components identified by Mintzberg are useful for

understanding the workflow of organizations. 1. STRATEGIC APEX. Strategic apex is the most senior level in the organization. Management working at this level is referred as board of

Directors directors).

(chairman,

CEO,

executes

and

non-executive

They set the objectives (increase sales by 10% in one year) and strategic direction (new product and markets developments) of the organization. They take major investing (takeovers) and financing (Shares issue) decisions. They are not involved in day to day operations of the business. They do not deal with customers and suppliers except in exceptional cases (dealing with complaints). They represent the organizational face to external

stakeholders (person have interest in the organization like government). Integrity of organization can be judged by integrity of its board of directors. 2. MIDDLE LINE. Middle line managers interpret objectives and strategies of the strategic level management into feasible plans and standards to get the work done through operational managers (see below).

They

set

budget,

receives

reports

from and

management corrective

accountants,

monitors

performances

take

actions where necessary. They often take investing (purchase equipment) and financing (Trade payable and overdraft management) decision to the extent of authority given by strategic level management. They synchronize works of individual departments so that all departments work in single direction towards the achievement of organizational objectives. Making 20000 units of a product by production department does not help achieve organizational objectives if sales

department cannot sell them. 3. OPERATIONAL CORE. Operational core manager often referred to as operational managers are involved in day to day running of the

organizations. They are the personnel who actually achieve organizational objectives under the guidance of senior managers. They deal with external stakeholder (Customers and suppliers etc). They are responsible for quality and efficiency of the

organizational results.

They provide important information in deciding

strategic

directions and budgeting by senior managers, as they now better what is practicable due their operational experience. 4. TECHNO STRUCTURE. Personnel work in techno structure are employees and

managers just in the same way as chain command runs from strategic apex to operational core. Difference is they do not involved in any revenue generating or core (for which organization exists) activity. They only assist managers at all levels performing core activities to perform it effectively and efficiently and report whenever corrective actions needs to be taken to achieve the performance targets and objectives. What activity or functional department is considered under techno structure depends on industry like in banking sector accounting is considered a core activity, while in supermarket accounting is optional activity because supermarket will not closedown if accountants get absent, they just provides information on inventory, debtors and creditors information. 5. SUPPORT STAFF. Support staff is of least importance to the organization as their absence does not directly affects the performance of

organization.

Organization still spends on supporting activities because it provides good working environment and facilities (peon) to core employees to prevent down time. Departments like canteen, cleaning and maintenance comes under this heading. As like techno structure, what is considered supporting

activities depends on the industry. COMPONENETS OF STRATEGIC PLANNING: ELEMENTS TO STRATEGIC PLANNING 1. COMMUNICATION STRATEGY The development of a communication strategy is essential for the effective development and implementation of a strategic plan. In the communications strategy, you should determine who

will be involved in the planning process, how they will be involved and what is being communicated to whom on the staff.

2. STRATEGIC PLANNING TASK FORCE The development of a core team of organizational leaders is mandatory in the effective creation of a strategic plan.

Each task force member should represent a key business area or department of the organization to ensure the plan has organization wide input and buy-in. The task force meets regularly with clearly defined

deliverables to be presented at each meeting. 3. VISION STATEMENT An organizations vision statement is simply their roadmap for the future. The direction of the organization should be broad to include all areas of impact but narrow enough to clearly define a path. 4. MISSION STATEMENT An organizations mission is a definition of whom and what they are. Often mission statements include core goals and values of the organization. 5. VALUES Values are the organizations fundamental beliefs in how they operate. Values can provide a guideline for management and staff for acceptable organizational behaviour. Often values relate to the organizations organizational

culture.

6. GOALS Goals are broad based strategies needed to achieve your organizations mission. 7. OBJECTIVES Objectives are specific, measurable, action oriented, realistic and time bound goals and vision. 8. TASKS Tasks are specific actionable events that are assigned to individuals/departments to achieve. They, too, should be strategies that achieve the organizations

specific, measurable and time bound. 9. IMPLEMENTATION STRATEGY Once the plan has been outlined, a tactical strategy is built that prioritizes initiatives and aligns resources. The implementation strategy pulls all the plan pieces together to ensure collectively there are no missing pieces and that the plan is feasible. As a part of the implementation strategy, accountability measures are put in place to ensure implementation takes place. 10. MONITORING OF STRATEGIC PLAN

During implementation of a strategic plan, it is critical to monitor the success and challenges of planning assumptions and initiatives. When evaluating the successes of a plan, you must look objectively at the measurement criteria defined in our goals and objectives. It may be necessary to retool the plan and its assumptions if elements of the plan are off track. STRATEGY IMPLEMENTATION: Strategy implementation is "the process of allocating

resources to support the chosen strategies". This process includes the various management activities that are necessary to put strategy in motion, institute strategic controls that monitor progress, and ultimately achieve

organizational goals. "The implementation process covers the entire managerial activities including such matters as motivation, compensation, management appraisal, and control processes". Strategy implementation is the translation of chosen strategy into organizational action so as to achieve strategic goals and objectives.

Strategy implementation is also defined as the manner in which an organization should develop, utilize, and amalgamate organizational structure, control systems, and culture to follow strategies that lead to competitive advantage and a better performance. Organizational structure allocates special value developing tasks and roles to the employees and states how these tasks and roles can be correlated so as maximize efficiency, quality, and customer satisfaction-the pillars of competitive advantage. But, organizational structure is not sufficient in itself to motivate the employees. An organizational control system is also required. This control system equips managers with motivational incentives for employees as well as feedback on employees and

organizational performance. Organizational culture refers to the specialized collection of values, attitudes, norms and beliefs shared by organizational members and groups. Following are the main steps in implementing a strategy: 1. Developing an organization having potential of carrying out strategy successfully. 2. Disbursement of abundant resources to strategy-essential activities.

3. Creating strategy-encouraging policies. 4. Employing best policies and programs for constant

improvement. 5. Linking reward structure to accomplishment of results. 6. Making use of strategic leadership.

CORPORATE GOVERNANACE: Corporate Governance refers to the way a corporation is governed. It is the technique by which companies are directed and managed. It means carrying the business as per the stakeholders desires. It is actually conducted by the board of Directors and the concerned committees for the companys stakeholders benefit. It is all about balancing individual and societal goals, as well as, economic and social goals. Corporate Governance is the interaction between various participants (shareholders, board of directors, and companys management) in shaping corporations performance and the way it is proceeding towards. The relationship between the owners and the managers in an organization must be healthy and there should be no conflict between the two.

The owners must see that individuals actual performance is according to the standard performance. These dimensions of corporate governance should not be overlooked. Corporate Governance deals with the manner the providers of finance guarantee themselves of getting a fair return on their investment. Corporate Governance clearly distinguishes

between the owners and the managers. The managers are the deciding authority. In modern

corporations, the functions/ tasks of owners and managers should be clearly defined, rather, harmonizing. Corporate Governance deals with determining ways to take effective strategic decisions. It gives ultimate authority and complete responsibility to the Board of Directors. In todays market- oriented economy, the need for corporate governance arises. Also, efficiency as well as globalization are significant factors urging corporate governance. Corporate Governance is essential to develop added value to the stakeholders. Corporate Governance ensures transparency which ensures strong and balanced economic development. This also ensures that the interests of all shareholders (majority as well as minority shareholders) are safeguarded.

It ensures that all shareholders fully exercise their rights and that the organization fully recognizes their rights. Corporate Governance has a broad scope. It includes both social and institutional a aspects. moral, Corporate as well Governance as ethical

encourages environment.

trustworthy,

BENEFITS OF CORPORATE GOVERNANCE 1. GOOD CORPORATE GOVERNANCE ENSURES CORPORATE

SUCCESS AND ECONOMIC GROWTH. 2. STRONG CORPORATE GOVERNANCE MAINTAINS INVESTORS CONFIDENCE, AS A RESULT OF WHICH, COMPANY CAN RAISE CAPITAL EFFICIENTLY AND EFFECTIVELY. 3. IT LOWERS THE CAPITAL COST. 4. THERE IS A POSITIVE IMPACT ON THE SHARE PRICE. 5. IT PROVIDES PROPER INDUCEMENT TO THE OWNERS AS WELL AS MANAGERS TO ACHIEVE OBJECTIVES THAT ARE IN

INTERESTS OF THE SHAREHOLDERS AND THE ORGANIZATION. 6. GOOD CORPORATE GOVERNANCE ALSO MINIMIZES WASTAGES, CORRUPTION, RISKS AND MISMANAGEMENT. 7. IT HELPS IN BRAND FORMATION AND DEVELOPMENT. 8. IT ENSURES ORGANIZATION IN MANAGED IN A MANNER THAT FITS THE BEST INTERESTS OF ALL.

CORPORATE SOCIAL RESPONSIBILITY (CSR) IS:


An obligation, beyond that required by the law and economics,

for a firm to pursue long term goals that are good for society. The continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as that of the local community and society at large. About how a company manages its business process to produce an overall positive impact on society CORPORATE SOCIAL RESPONSIBILITY MEANS: Conducting business in an ethical way and in the interests of the wider community Responding positively to emerging societal priorities and expectations A willingness to act ahead of regulatory confrontation Balancing shareholder interests against the interests of the wider community Being a good citizen in the community IS CSR THE SAME AS BUSINESS ETHICS? There is clearly an overlap between CSR and business ethics Both concepts concern values, objectives and decision based on something than the pursuit of profits And socially responsible firms must act ethically

The difference is that ethics concern individual actions which can be assessed as right or wrong by reference to moral principles. CSR is about the organisations obligations to all stakeholders and not just shareholders.

THERE ARE FOUR DIMENSIONS OF CORPORATE RESPONSIBILITY


1. Economic - responsibility to earn profit for owners 2. Legal

responsibility

to

comply

with

the

law

(societys

codification of right and wrong)


3. Ethical - not acting just for profit but doing what is right, just

and fair
4. Voluntary and philanthropic - promoting human welfare and

goodwill Being a good corporate citizen contributing to the community and the quality of life THE DEBATE ON SOCIAL RESPONSIBILITY Not all business organisations behave in a socially responsible manner And there are people who would argue that it is not the job of business organisations to be concerned about social issues and problems

There are two schools of thought on this issue: In the free market view, the job of business is to create wealth with the interests of the shareholders as the guiding principle
The

corporate social responsibility view is that business

organisation should be concerned with social issues

PLANNING HORIZON: Period covered by a particular plan or a firm's planning cycle. In general, its length is dictated by the degree of uncertainty in the external environment: higher the uncertainty, shorter the planning horizon. The planning horizon is the amount of time an organization will look into the future when preparing a strategic plan. Many commercial companies use a five-year planning horizon, but other organizations such as the Forestry Commission in the UK have to use a much longer planning horizon to form effective plans. In manufacturing, a planning horizon is a future time period, during which, departments that support production will plan production work and determine material requirements.

In Economics, a planning horizon is the length of time an individual plans ahead. It's important in the quest for total value, as opposed to short term pleasure consumption. ENVIRONMENTAL SCANNING AND FORECAST Environmental scanning is the process of gathering

information about events and their relationships within an organization's internal and external environments. The basic purpose of environmental scanning is to help management organization. The most widely accepted method for categorizing different forms of scanning divides into the following three types: IRREGULAR SCANNING SYSTEMS: These consist largely of ad hoc environmental studies. REGULAR SCANNING SYSTEMS: These systems or revolve around a regular review of the This determine the future direction of the

environment

significant

environmental

components.

review is often made annually. Continuous scanning systems: These systems constantly

monitor components of the organizational environment. Environmental forecasting is a technique whereby managers attempt to predict the future characteristics of the

organizational environment and hence make decisions today that will help the firm deal with the environment of tomorrow. Forecasting involves the use of statistical and non-statistical, or qualitative, techniques. Four techniques can be particularly helpful: time series analysis, judgmental forecasting, multiple scenarios, and the Delphi technique. INDUSTRY ANALYSIS a. General features / basic conditions of the b. industry c. Industry Environment d. Industry structure e. Industry attractiveness f. Industry performance g. Industry Practices h. Industry trends / the future of the industry COMPETITION ANALYSIS a. Five force shaping competition in the industry b. Profiling of competitors c. Firms competitive position in the industry INDUSTRY STRUCTURE a. No. of players b. Total market size c. Relative share of the players

d. Nature

of

competition

Monopoly,

oligopoly,

Perfect

competition e. Differentiation practiced by various players f. Barriers in the industry - Entry Barriers - Mobility g. Barriers - Exit Barriers EFAS (EFEM): The EFE matrix allows strategies to summarize and evaluate economic, social, cultural, demographic, environmental,

political, governmental, legal, technological, and competitive information. The EFE matrix is the strategic tool used to evaluate firm existing strategies, EFE matrix can be defined as the strategic tool to evaluate external environment or macro environment of the firm include economic, social, technological, government, political, legal and competitive information. The EFE matrix is similar to IFE matrix the only difference is that IFE matrix evaluate the internal factors of the company and EFE matrix evaluate the external factors. The EFE matrix consists of following attributes mentioned below. EXTERNAL FACTORS

External factors are extracted after deep analysis of external environment. Obviously there are some good and some bad for the company in the external environment. Thats the reason external factors are divided into two categories opportunities and threats. OPPORTUNITIES Opportunities are the chances exist in the external

environment, it depends firm whether the firm is willing to exploit the opportunities or maybe they ignore the

opportunities due to lack of resources. THREATS Threats are always evil for the firm, minimum no of threats in the external environment open many doors for the firm. Maximum number of threats for the firm reduces their power in the industry. STEPS IN DEVELOPING THE EFE MATRIX: 1. Identify a list of KEY external factors (critical success factors). 2. Assign a weight to each factor, ranging from 0 (not important) to 1.0 (very important). 3. Assign a 1-4 rating to each critical success factor to indicate how effectively the firms current strategies respond to the factor. (1 = response is poor, 4 = response is extremely good)

4. Multiply each factors weight by its rating to determine a weighted score. 5. Sum the weighted scores. 6. Average total weighted score is 2.5.

PORTORS APPROACH TO INDUSTRY ANALYSIS Michael Porter (Harvard Business School Management

Researcher) designed various vital frameworks for developing an organizations strategy. One of the most renowned among managers making strategic decisions is the five competitive forces model that determines industry structure. According to Porter, the nature of competition in any industry is personified in the following five forces: 1. THREAT OF NEW POTENTIAL ENTRANTS

2. THREAT OF SUBSTITUTE PRODUCT/SERVICES 3. BARGAINING POWER OF SUPPLIERS 4. BARGAINING POWER OF BUYERS 5. RIVALRY AMONG CURRENT COMPETITORS FIGURE: PORTERS FIVE FORCES MODEL:

The five forces mentioned above are very significant from point of view of strategy formulation. The potential of these forces differs from industry to industry. These forces jointly determine the profitability of industry because they shape the prices which can be charged, the costs which can be borne, and the investment required to compete in the industry.

Before making strategic decisions, the managers should use the five forces framework to determine the competitive

structure of industry. LETS DISCUSS THE FIVE FACTORS OF PORTERS MODEL IN DETAIL: 1. RISK OF ENTRY BY POTENTIAL COMPETITORS: Potential competitors refer to the firms which are not currently competing in the industry but have the potential to do so if given a choice. Entry of new players increases the industry capacity, begins a competition for market share and lowers the current costs. The threat of entry by potential competitors is partially a function of extent of barriers to entry. The various barriers to entry are Economies of scale Brand loyalty Government Regulation Customer Switching Costs Absolute Cost Advantage Ease in distribution Strong Capital base 2. RIVALRY AMONG CURRENT COMPETITORS:

Rivalry refers to the competitive struggle for market share between firms in an industry. Extreme rivalry among established firms poses a strong threat to profitability. The strength of rivalry among established firms within an industry is a function of following factors: Extent of exit barriers Amount of fixed cost Competitive structure of industry Presence of global customers Absence of switching costs Growth Rate of industry Demand conditions 3. BARGAINING POWER OF BUYERS: Buyers refer to the customers who finally consume the product or the firms who distribute the industrys product to the final consumers. Bargaining power of buyers refer to the potential of buyers to bargain down the prices charged by the firms in the industry or to increase the firms cost in the industry by demanding better quality and service of product. Strong buyers can extract profits out of an industry by lowering the prices and increasing the costs.

They purchase in large quantities. They have full information about the product and the market. They emphasize upon quality products. They pose credible threat of backward integration. In this way, they are regarded as a threat. 4. BARGAINING POWER OF SUPPLIERS: Suppliers refer to the firms that provide inputs to the industry. Bargaining power of the suppliers refer to the potential of the suppliers to increase the prices of inputs( labour, raw

materials, services, etc) or the costs of industry in other ways. Strong suppliers can extract profits out of an industry by increasing costs of firms in the industry. Suppliers products have a few substitutes. Strong suppliers products are unique. They have high switching cost. Their product is an important input to buyers product. They pose credible threat of forward integration. Buyers are not significant to strong suppliers. In this way, they are regarded as a threat.

5. THREAT OF SUBSTITUTE PRODUCTS: Substitute products refer to the products having ability of satisfying customers needs effectively. Substitutes pose a ceiling (upper limit) on the potential returns of an industry by

putting a setting a limit on the price that firms can charge for their product in an industry. Lesser the number of close substitutes a product has, greater is the opportunity for the firms in industry to raise their product prices and earn greater profits (other things being equal).The power of Porters five forces varies from industry to industry. Whatever be the industry, these five forces influence the profitability as they affect the prices, the costs, and the capital investment essential for survival and competition in industry. This five forces model also help in making strategic decisions as it is used by the managers to determine industrys competitive structure.Porter ignored, however, a sixth

significant factor- complementaries. This term refers to the reliance that develops between the companies whose products work is in combination with each other. Strong complementors might have a strong positive effect on the industry. Also, the five forces model overlooks the role of innovation as well as the significance of individual firm differences. It presents a stagnant view of competition. INTERNAL ENVIRONMENT SCANNING: Environmental scanning refers to possession and utilization of information about occasions, patterns, trends, and

relationships within an organizations internal and external environment. It helps the managers to decide the future path of the organization. Scanning must identify the threats and

opportunities existing in the environment. While strategy formulation, an organization must take

advantage of the opportunities and minimize the threats. A threat for one organization may be an opportunity for another. Internal analysis of the environment is the first step of environment scanning. Organizations should observe the

internal organizational environment. This includes employee interaction with other employees, employee interaction with management, manager interaction with other managers, and management interaction with

shareholders, access to natural resources, brand awareness, organizational structure, main staff, operational potential, etc. Also, discussions, interviews, and surveys can be used to assess the internal environment. Analysis of internal environment helps in identifying strengths and weaknesses of an organization. SWOT ANALYSIS: (OR) TOWS MATRIX

SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats. By definition, Strengths (S) and Weaknesses (W) are considered to be internal factors over which you have some measure of control. Also, by definition, Opportunities (O) and Threats (T) are considered to be external factors over which you have

essentially no control. SWOT Analysis is the most renowned tool for audit and analysis of the overall strategic position of the business and its environment. Its key purpose is to identify the strategies that will create a firm specific business model that will best align an

organizations resources and capabilities to the requirements of the environment in which the firm operates. In other words, it is the foundation for evaluating the internal potential and limitations and the probable/likely opportunities and threats from the external environment. It views all positive and negative factors inside and outside the firm that affect the success. A consistent study of the environment in which the firm operates helps in forecasting/predicting the changing trends

and also helps in including them in the decision-making process of the organization. An overview of the four factors (Strengths, Weaknesses, Opportunities and Threats) is given belowSTRENGTHS Strengths are the qualities that enable us to accomplish the organizations mission. These are the basis on which continued success can be made and continued/sustained. Strengths can be either tangible or intangible. These are what you are well-versed in or what you have expertise in, the traits and qualities your employees possess (individually and as a team) and the distinct features that give your organization its consistency. Strengths are the beneficial aspects of the organization or the capabilities of an organization, which includes human

competencies,

process

capabilities,

financial

resources,

products and services, customer goodwill and brand loyalty. Examples of organizational strengths are huge financial

resources, broad product line, no debt, committed employees, etc. WEAKNESSES-

Weaknesses

are

the

qualities

that

prevent

us

from

accomplishing our mission and achieving our full potential. These weaknesses deteriorate influences on the organizational success and growth. Weaknesses are the factors which do not meet the standards we feel they should meet. Weaknesses in an organization may be depreciating

machinery, insufficient research and development facilities, narrow product range, poor decision-making, etc. Weaknesses are controllable. They must be minimized and eliminated. For instance - to overcome purchased. Other examples of organizational weaknesses are huge debts, high employee turnover, complex decision making process, narrow product range, large wastage of raw materials, etc. OPPORTUNITIES Opportunities are presented by the environment within which our organization operates. These arise when an organization can take benefit of obsolete machinery, new machinery can be

conditions in its environment to plan and execute strategies that enable it to become more profitable.

Organizations can gain competitive advantage by making use of opportunities.

Organization should be careful and recognize the opportunities and grasp them whenever they arise. Selecting the targets that will best serve the clients while getting desired results is a difficult task. Opportunities may arise from market, competition,

industry/government and technology. Increasing demand for telecommunications accompanied by deregulation is a great opportunity for new firms to enter telecom sector and compete with existing firms for revenue. THREATS Threats arise when conditions in external environment

jeopardize the reliability and profitability of the organizations business. They compound the vulnerability when they relate to the weaknesses. Threats are uncontrollable. When a threat comes, the stability and survival can be at stake. Examples of threats are - unrest among employees; ever changing technology; increasing competition leading to excess capacity, price wars and reducing industry profits; etc.

ADVANTAGES OF SWOT ANALYSIS SWOT Analysis is instrumental in strategy formulation and selection. It is a strong tool, but it involves a great subjective element. It is best when used as a guide, and not as a prescription. Successful businesses build on their strengths, correct their weakness and protect against internal weaknesses and

external threats. They also keep a watch on their overall business environment and recognize and exploit new opportunities faster than its competitors. SWOT Analysis provide information that helps in

synchronizing the firms resources and capabilities with the competitive environment in which the firm operates. SWOT ANALYSIS HELPS FOLLOWING MANNERIN STRATEGIC PLANNING IN

1. It is a source of information for strategic planning. 2. Builds organizations strengths. 3. Reverse its weaknesses. 4. Maximize its response to opportunities. 5. Overcome organizations threats. 6. It helps in identifying core competencies of the firm.

7. It helps in setting of objectives for strategic planning. 8. It helps in knowing past, present and future so that by using past and current data, future plans can be chalked out.

LIMITATIONS OF SWOT ANALYSIS SWOT Analysis is not free from its limitations. It may cause organizations to view circumstances as very simple because of which the organizations might overlook certain key strategic contact which may occur. Moreover, categorizing aspects as strengths, weaknesses, opportunities and threats might be very subjective as there is great degree of uncertainty in market.
SWOT Analysis does stress upon the significance of these four

aspects, but it does not tell how an organization can identify these aspects for itself. There are certain limitations of SWOT Analysis which are not in control of management. THESE INCLUDE1. Price increase;

2. Inputs/raw materials; 3. Government legislation; 4. Economic environment; 5. Searching a new market for the product which is not having overseas market due to import restrictions; etc. INTERNAL LIMITATIONS MAY INCLUDE1. Insufficient research and development facilities; 2. Faulty products due to poor quality control; 3. Poor industrial relations; 4. Lack of skilled and efficient labour; etc. SFAS MATRIX: Strategic Factor Analysis Summary (SFAS) matrix includes only the most important factors gathered from environmental scanning thus provides info essential for strategy

formulation. The use of EFAS and IFAS tables together with SFAS matrix deal with many of the criticism of SWOT analysis. BCG MATRIX: Boston Consulting Group (BCG) Matrix is a four celled matrix (a 2 * 2 matrix) developed by BCG, USA. It is the most renowned corporate portfolio analysis tool. It provides a graphic representation for an organization to

examine different businesses in its portfolio on the basis of their related market share and industry growth rates. It is a two dimensional analysis on management of SBUs (Strategic Business Units). In other words, it is a comparative analysis of business potential and the evaluation of

environment. According to this matrix, business could be classified as high or low according to their industry growth rate and relative market share. Relative Market Share = SBU Sales this year leading

competitors sales this year. Market Growth Rate = Industry sales this year - Industry Sales last year. The analysis requires that both measures be calculated for each SBU. The dimension of business strength, relative market share, will measure comparative advantage indicated by market dominance. The key theory underlying this is existence of an experience curve and that market share is achieved due to overall cost leadership. BCG matrix has four cells, with the horizontal axis

representing relative market share and the vertical axis

denoting market growth rate. The mid-point of relative market share is set at 1.0. If all the SBUs are in same industry, the average growth rate of the industry is used. While, if all the SBUs are located in different industries, then the mid-point is set at the growth rate for the economy. Resources are allocated to the business units according to their situation on the grid. The four cells of this matrix have been called as stars, cash cows, question marks and dogs. Each of these cells represents a particular type of business.

10 x

1x Figure: BCG Matrix

0.1 x

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. SBUs 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. CASH COWS Cash Cows represent 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 SBUs are the corporations 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 lose their appeal and move towards deterioration, then a retrenchment policy may be pursued. 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, and then they have potential of becoming stars. DOGS Dogs represent businesses having weak market shares in lowgrowth 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

competitors/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. LIMITATIONS OF BCG MATRIX The BCG Matrix produces a framework for allocating resources among different business units and makes it possible to compare many business units at a glance. But BCG Matrix is not free from limitations, such as BCG matrix classifies businesses as low and high, but

generally businesses can be medium also. Thus, the true nature of business may not be reflected. Market is not clearly defined in this model. High market share does not always leads to high profits. There are high costs also involved with high market share. Growth rate and relative market share are not the only indicators of profitability. This model ignores and overlooks other indicators of profitability.

At

times,

dogs

may

help

other

businesses

in

gaining

competitive advantage. They can earn even more than cash cows sometimes. This four-celled approach is considered as to be too simplistic. GE MATRIX: The business portfolio is the collection of businesses and products that make up the company. The best business portfolio is one that fits the company's strengths and helps exploit the most attractive opportunities. The company must: a. Analyse its current business portfolio and decide which

businesses should receive more or less investment, and

b. Develop growth strategies for adding new products and businesses to the portfolio, whilst at the same time deciding when products and businesses should no longer be retained. The two best-known portfolio planning methods are the Boston Consulting Group Portfolio Matrix and the McKinsey / General Electric Matrix (discussed in this revision note). In both methods, the first step is to identify the various Strategic Business Units ("SBU's") in a company portfolio.

An SBU is a unit of the company that has a separate mission and objectives and that can be planned independently from the other businesses. An SBU can be a company division, a product line or even individual brands - it all depends on how the company is organised. THE MCKINSEY / GENERAL ELECTRIC MATRIX The McKinsey/GE Matrix overcomes a number of the

disadvantages of the BCG Box. Firstly, market attractiveness replaces market growth as the dimension of industry attractiveness, and includes a broader range of factors other than just the market growth rate. Secondly, competitive strength replaces market share as the dimension by which the competitive position of each SBU is assessed. The diagram below illustrates some of the possible elements that determine market attractiveness and competitive strength by applying the McKinsey/GE Matrix to the UK retailing market:

FACTORS THAT AFFECT MARKET ATTRACTIVENESS

Whilst any assessment of market attractiveness is necessarily subjective, there are several factors which can help determine attractiveness. These are listed below: a. Market Size b. Market growth c. Market profitability d. Pricing trends e. Competitive intensity / rivalry f. Overall risk of returns in the industry g. Opportunity to differentiate products and services h. Segmentation i. Distribution structure (e.g. retail, direct, wholesale

FACTORS THAT AFFECT COMPETITIVE STRENGTH FACTORS TO CONSIDER INCLUDE: a. Strength of assets and competencies b. Relative brand strength c. Market share d. Customer loyalty

e. Relative

cost

position

(cost

structure

compared

with

competitors) f. Distribution strength g. Record of technological or other innovation h. Access to financial and other investment resources BENCHMARKING
Benchmarking is the process of identifying "best practice" in

relation to both products (including) and the processes by which those products are created and delivered. The search for "best practice" can take place both inside a particular industry, and also in other industries (for example are there lessons to be learned from other industries?).
The objective of benchmarking is to understand and evaluate

the current position of a business or organisation in relation to "best practice" and to identify areas and means of performance improvement. THE BENCHMARKING PROCESS Benchmarking involves looking outward (outside a particular business, organisation, industry, region or country) to

examine how others achieve their performance levels and to understand the processes they use. In this way benchmarking helps explain the processes behind excellent performance.

When the lessons learnt from a benchmarking exercise are applied appropriately, they facilitate improved performance in critical functions within an organisation or in key areas of the business environment. APPLICATION OF BENCHMARKING INVOLVES FOUR KEY STEPS: 1. Understand in detail existing business processes 2. Analyse the business processes of others 3. Compare analysed 4. Implement the steps necessary to close the performance gap Benchmarking should not be considered a one-off exercise. To be effective, it must become an on-going, integral part of an ongoing improvement process with the goal of keeping abreast of ever-improving best practice. own business performance with that of others

TYPES OF BENCHMARKING THERE ARE A NUMBER OF DIFFERENT TYPES OF BENCHMARKING, AS SUMMARISED BELOW: TYPE DESCRIPTION MOST APPROPRIATE

Strategic Benchmarking

Where businesses need to improve overall performance by examining the long-term strategies and general approaches that have enabled high-performers to succeed. It involves considering high level aspects such as core competencies, developing new products and services and improving capabilities for dealing with changes in the external environment. Changes resulting from this type of benchmarking may be difficult to implement and take a long time to materialise Businesses consider their position in relation to performance characteristics of key products and services. Benchmarking partners are drawn from the same sector. This type of analysis is often undertaken through trade associations or third parties to protect confidentiality. Focuses on improving specific critical processes and operations. Benchmarking partners are sought from best practice organisations that perform similar work or deliver similar services. Process benchmarking invariably involves producing process maps to facilitate comparison and analysis. This type of benchmarking often results in short term benefits.

FOR THE FOLLOWING PURPOSES Re-aligning business strategies that have become inappropriate

Performance Or Competitive Benchmarking

Process Benchmarking

Assessing relative level of performance in key areas or activities in comparison with others in the same sector and finding ways of closing gaps in performance Achieving improvements in key processes to obtain quick benefits

Functional Benchmarking

Internal Benchmarking

Businesses look to benchmark with partners drawn from different business sectors or areas of activity to find ways of improving similar functions or work processes. This sort of benchmarking can lead to innovation and dramatic improvements. Involves benchmarking businesses or operations from within the same organisation (e.g. business units in different countries). The main advantages of internal benchmarking are that access to sensitive data and information is easier; standardised data is often readily available; and, usually less time and resources are needed. There may be fewer barriers to implementation as practices may be relatively easy to transfer across the same organisation. However, real innovation may be lacking and best in class performance is more likely to be found through external benchmarking. Involves analysing outside organisations that are known to be best in class. External benchmarking provides opportunities of learning from those who are at the "leading edge".

Improving activities or services for which counterparts do not exist.

Several business units within the same organisation exemplify good practice and management want to spread this expertise quickly, throughout the organisation

External Benchmarking

Where examples of good practices can be found in other organisations and there is a lack of good practices within internal This type of benchmarking business units can take up significant time and resource to ensure the comparability of data and information, the credibility of the findings and the development of sound

recommendations.

International Benchmarking

Best practitioners are identified and analysed elsewhere in the world, perhaps because there are too few benchmarking partners within the same country to produce valid results.

Where the aim is to achieve world class status or simply because there are insufficient national" businesses against which to Globalisation and advances in benchmark. information technology are increasing opportunities for international projects. However, these can take more time and resources to set up and implement and the results may need careful analysis due to national differences

STRAEGIC PIGGY BACKING: It is a new fund generating activity undertaken by the nonprofit organization which is aimed at reducing the gap between expenses and revenue. The primary purpose is to subsidize the service program. It is gaining popularity in recent time. Educational institutes running commercial complexes hospitals running a meditation class and fitness program are typical example of piggy backing.

The

non-profit

organization

should

have

the

following

resources before adopting piggy backing strategy; Something to sell Critical mass of management talent Trustee support Entrepreneurial attitude. TACTICAL PLANNING: Tactical Planning is Short range planning that emphasizes the current operations of various parts of the organization. Short Range is defined as a period of time extending about one year or less in the future. Managers use tactical planning to outline what the various parts of the organization must do for the organization to be successful at some point 1year or less into the future. Tactical plans are usually developed in the areas of production, marketing, personnel, and finance and plant facilities. COMPARING PLANNING: AND COORDINATING STRATEGIC & TACTICAL

Basic differences between strategic planning and tactical planning:

Since upper managers generally have a better understanding of the organization as a whole than lower level managers do, upper management generally develops the strategic plans and because lower level managers generally have better

understanding of the day to day organizational operations, generally the lower level managers develop the tactical plans. Because Strategic Planning emphasizes analyzing the future and tactical planning emphasizes analysing the everyday functioning of the organization, facts on which to base

strategic plans are usually more difficult to gather than are facts on which to base tactical plans. Because strategic plans are based primarily on a prediction of the future and tactical plans on known circumstances that exist within the organization, strategic plans are generally less detailed than tactical plans. Because strategic planning focuses on the long term and tactical planning on the short term, strategic plans cover a relatively long period of time whereas tactical plans cover a relatively short period of time. Despite their differences, tactical and strategic planning are integrally related. Manager need both tactical and strategic planning program, and these program must be closely related to be successful.

Tactical planning should focus on what to do in the short term to help the organization achieve the long term objectives determined by strategic planning.

FOUR TYPES OF STRATEGIC CONTROLS PREMISE CONTROL IMPLEMENTATION CONTROL STRATEGIC SURVEILLANCE SPECIAL ALERT CONTROL PREMISE CONTROL: A type of strategic control that involves identifying key assumptions and premises for plans and then gathering data systematically to monitor their on-going accuracy. A major issue is determining which assumptions and premises should be monitored. Systematic recognition and analysis of assumptions on which a plan is based, to determine if they remain valid in changed circumstances or in light of new information.
Premises control is necessary to identify the key assumptions

and

its

implementation.

Key

assumptions

and

its

implementation.

Premises control serves the purpose of Premises control serves

the purpose of continually testing the assumptions to find out continually testing the assumptions to find out whether they are still valid or not.
This whether they are still valid or not. This enables the strategists to take corrective enables the

strategists to take corrective action at the right time rather than continuing action at the right time rather than continuing with a strategy which is based on erroneous with a strategy which is based on erroneous assumptions. IMPLEMENTATION CONTROL:
Implementation control is aimed at evaluating Implementation

control is aimed at evaluating whether the plans, programmes, and projects whether the plans, programmes, and projects are actually guiding the organization towards are actually guiding the organization toward sits predetermined objectives or not. Its predetermined objectives or not. STRATEGIC SURVEILLANCE: Strategic surveillance aimed at a more Strategic surveillance aimed at a more generalized and overarching control

generalized and overarching controldesigned to monitor a broad range of eventsdesigned to monitor a broad range of events inside and outside the company that are likely inside

and outside the company that are likely to threaten the course of a firms strategy.to threaten the course of a firms strategy. SPECIAL ALERT CONTROL:
Special alert control, which is based on a Special alert control,

which is based on a trigger mechanism for rapid response and trigger mechanism for rapid response and immediate

reassessment of strategy in the immediate reassessment of strategy in the light of sudden and unexpected event slight of sudden and unexpected events GAP ANALYSIS: A technique for determining the steps to be taken in moving from a current state to a desired future-state. Also called need-gap analysis, needs analysis, and needs assessment. GAP ANALYSIS CONSISTS OF: (1)Listing of characteristic factors (such as attributes,

competencies, performance levels) of the present situation ("what is"), (2)Cross listing factors required to achieve the future objectives ("what should be"), and then
(3) Highlighting the gaps that exist and need to be filled.