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 organization’s goals. Strategy can also be defined as “A general direction set for the company and its various

components to achieve a desired state in the future. Strategy results from the detailed strategic planning process”. • A strategy is all about integrating organizational activities and utilizing and allocating the scarce 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 organization’s 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 firm’s 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

• It deals with making and implementing decisions about future direction of an organization. by formulating and implementing appropriate strategies. • Strategic Management is a way in which strategists set the objectives and proceed about attaining them. 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.weaknesses. • Strategic management is nothing but planning for both predictable as well as unfeasible contingencies. 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. • It is applicable to both small as well as large organizations as even the smallest organization face competition and. they can attain sustainable competitive advantage. . make use of arising opportunities from the business environment and shouldn’t ignore the threats.

After conducting .STRATEGIC STEPS: MANAGEMENT PROCESS HAS FOLLOWING FOUR 1. After executing the environmental analysis process. 2. It helps in analyzing the internal and external factors influencing an organization. STRATEGY FORMULATION• Strategy formulation is the process of deciding best course of action for accomplishing organizational objectives and hence achieving organizational purpose. management should evaluate it on a continuous basis and strive to improve it. scrutinizing and providing information for strategic purposes. ENVIRONMENTAL SCANNING• Environmental scanning refers to a process of collecting.

4. developing decision making process. • Present businesses that have already created a strategic management plan will revert to these steps as per the situation’s requirement. in chronological order.environment scanning. STRATEGY EVALUATION• Strategy evaluation is the final step of strategy management process. and managing human resources. when creating a new strategic management plan. STRATEGY IMPLEMENTATION• Strategy implementation implies making the strategy work as intended or putting the organization’s chosen strategy into action. 3. so as to make essential changes. Strategy implementation includes designing the organization’s structure. • Evaluation makes sure that the organizational strategy as well as its implementation meets the organizational objectives. managers formulate corporate. • These components are steps that are carried. distributing resources. . business and functional strategies. measuring performance. The key strategy evaluation activities are: appraising internal and external factors that are the root of present strategies. and taking remedial / corrective actions.

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 other’s pricing and marketing strategies. There are few sellers because it is difficult for new sellers to enter the market. Each seller is alert to competitor’s strategies and move. BUSINESS ENVIRONMENT:

Political or Institutional that are uncontrollable in nature and affects the functioning of organization. The word Business in its economic sense means human activities like production. usually within the control of business. machinery and management. extraction or purchase or sales of goods that are performed for earning profits. man. Economical. money. Geo-Physical Factors. material. On the other hand. Business Environment may be defined as a set of conditions – Social.e. Business can make changes in these factors according to the change in the functioning of enterprise. . Internal Environment 2.The term Business Environment is composed of two words ‘Business’ and ‘Environment’. Business Environment has two components: 1. the word ‘Environment’ refers to the aspects of surroundings. In simple terms. the state in which a person remains busy is known as Business. Legal. External Environment INTERNAL ENVIRONMENT: • It includes 5 Ms i. Therefore. EXTERNAL ENVIRONMENT: • Those factors which are beyond the control of business enterprise are included in external environment. These factors are: Government and Legal factors.

Micro/Operating Environment 2.e. It is of two Types: 1. Customers. Market Intermediaries. they should not depend upon only one supplier. 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.Political Factors. Success of every business depends upon the level of their customer’s satisfaction. (2) CUSTOMERS: • Customers are regarded as the king of the market. Retailers . TYPES OF CUSTOMERS: 1. (1) SUPPLIERS: – • They are the persons who supply raw material and required components to the company. Socio-Cultural Factors. Demo-Graphical factors etc. They must be reliable and business must have multiple suppliers i. Competitors and Public. Wholesalers 2. It consists of Suppliers.

Financial Intermediaries 4. Business has to adjust itself according to the strategies of the Competitors. They may be the users or non-users of the product.g. TYPES:1. Government and Other Institutions 5. (5) PUBLIC: • Any group who has actual interest in business enterprise is termed as public e.3. Industries 4. Marketing Agencies 3. Foreigners (3) MARKET INTERMEDIARIES: • They work as a link between business and final consumers. MACRO/GENERAL ENVIRONMENT: – . media and local public. Physical Intermediaries (4) COMPETITORS: • Every move of the competitors affects the business. Middleman 2.

Infrastructural Facilities. Components: 1. Political Belief of Government 2. 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. capital markets etc. Insurance companies. (2) NON-ECONOMIC ENVIRONMENT: Following are included in non-economic environment:(I) POLITICAL ENVIRONMENT: It affects different business units extensively.It includes factors that create opportunities and threats to business units. Defense and Military Policies . Banking. Money markets. 2. Political Strength of the Country 3. Relation with other countries 4. IT HAS THREE ELEMENTS: • • • • ECONOMIC CONDITIONS OF PUBLIC ECONOMIC POLICIES OF THE COUNTRY ECONOMIC SYSTEM OTHER ECONOMIC FACTORS: – 1.

rivers. Centre State Relationship in the Country 6. lifestyles and living conditions. standard of living. services. income level (upper level. rainfall etc. • These factors include: attitude of people to work. family system. climatic conditions. (III) TECHNOLOGICAL ENVIRONMENT: • A systematic application of scientific knowledge to practical task is known as technology. religion. education . its size. (V) DEMOGRAPHIC ENVIRONMENT:• It is a study of perspective of population i.e. education. caste system. Every day there has been vast changes in products. not within the control of business. Thinking Opposition Parties towards Business Unit (II) SOCIO-CULTURAL ENVIRONMENT: • Influence exercised by social and cultural factors. age-sex composition. weather. port facilities. growth rate. (IV) NATURAL ENVIRONMENT: • It includes natural resources. sea. topographical factors such as soil. family size. is known as Socio-Cultural Environment. middle level and lower level). these changes must be analysed by every business unit and should adapt these changes. Every business unit must look for these factors before choosing the location for their business. marriage etc.5.

c. Liberalisation. Business environment is compound in nature. b. h. It includes both internal and external environment. It is very uncertain. d. Every business unit must see these features of population and recognise their various needs and produce accordingly. g. Business environment is different for different business units. state or provincial. cultural exchange. and local governments. . It has both long term and short term impact. The factors that affect the business are: Globalisation. Unlimited influence of external environment factors. Business environment is constantly changing process. e. foreign business policies. (VI) INTERNATIONAL ENVIRONMENT: • It is particularly important for industries directly depending on import or exports. Inter-related components. CHARACTERISTICS:a. SECTORAL DIVISIONS OF BUSINESS: PUBLIC SECTOR: • The public sector is that portion of society controlled by national. f.level etc.

critical services such as national Defense. corrections. and various social programs. but in most countries the public sector includes such services as the police. JOINT SECTOR: • The joint sector is a form of partnership between the public sector and the private sector. primary education and healthcare for the poor. public roads. . military. • 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).• In the United States. taxation. homeland security. urban planning. the public sector encompasses universal. police protection. State and public. • The part of the economy concerned with providing basic government services. and services that encourage equal opportunity. public transit. PRIVATE SECTOR: • The part of a nation's economy which is not controlled by the government. fire fighting. • The composition of the public sector varies by country. Ownership & control shared by private entrepreneur.

• The part of the economy that is not state controlled. However. • 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. ADVANTAGES OF SOLE PROPRIETORSHIP: 1. the sweets shop. EASY FORMATION: . since it is owned and managed by one single individual. the STD/ISD telephone booths etc. • The shops or stores which you see in your locality — the grocery store. in every country. It is seen everywhere. the stationery store. the paanwala. • Companies and corporations that are government run are part of what is known as the public sector. FORMS OF ORGANIZATION: SOLE PROPRIETORSHIP: • When the ownership and management of business are in control of one individual. often the size of business remains small. come under sole proprietorship. and is run by individuals and companies for profit. the vegetable store. every state. • The private sector encompasses all for-profit businesses that are not owned or operated by the government. the chemist shop. while charities and other non-profit organizations are part of the voluntary sector. every locality. it is known as sole proprietorship or sole tradership.

which enables the owner to take care of available opportunities immediately and provide immediate solutions to problems.The biggest advantage of a sole tradership business is its easy formation. PROMPT DECISION MAKING: As the sole trader takes all the decisions himself the decision making becomes quick. UNLIMITED LIABILITY: In sole proprietorship. the liability of business is recovered from the personal assets of the owner. FLEXIBILITY IN OPERATIONS: One man ownership and control makes it possible for change in operations to be brought about as and when necessary. 2. Anybody wishing to start such a business can do so in many cases without any legal formalities. He plans. It restricts the sole trader to take more risk and increases the volume of his business. 3. there is always effective control. co-ordinates the various activities. organises. DISADVANTAGES OF SOLE PROPRIETORSHIP: 1. LIMITED FINANCIAL RESOURCES: . 4. BETTER CONTROL: The owner has full control over his business. 2. Since he has all authority.

Thus his capacities to undertake responsibilities. Persons from similar background or persons of different ability and skills may join together to carryon a business. The continuity of business operation is. uncertain. 1932.The ability to raise and borrow money by one individual is always limited. 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. 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. LIMITED CAPACITY OF INDIVIDUAL: An individual has limited knowledge and skill. his capacity to manage. UNCERTAINTY OF DURATION: The existence of a sole tradership business is linked with the life of the proprietor. to take decisions and to bear the risks of business are also limited. death or insolvency of the owner brings an end to the business. 4. 3. JOINT STOCK COMPANY . therefore. Illness. The inadequacy of finance is a major handicap for the growth of sole proprietorship.

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

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. 1912 and other State Co-operative Societies Acts .• Any ten persons can form a co-operative society. • The main objectives of co-operative society are:    rendering service rather than earning profit. Generally it also provides some service to the society. and Self-help in place of dependence. Kendriya Bhandar in Delhi. • A co-operative society is entirely different from all other forms of organisation Forms of Business Organisation. It functions under the Co-operative Societies Ac t . Alaka in Bhubaneswar and similar others are all examples of consumer co-operatives B. PRODUCERS CO-OPERATIVES: . VARIOUS TYPES OF CO- ON THE BASIS OF OBJECTIVES. The cooperatives are formed primarily to render services to its members. mutual help instead of competition.

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

acquisitions or mergers. • Firms that choose to grow inorganically can gain access to new markets and fresh ideas that become available through successful mergers and acquisitions. INORGANIC: • A growth in the operations of a business that arises from mergers or takeovers.FORMS OF GROWTH OF BUSINESS: ORGANIC: • The growth rate that a company can achieve by increasing output and enhancing sales. . and are therefore not considered organic. Takeovers. acquisitions and mergers do not bring about profits generated within the company. • This excludes any profits or growth acquired from takeovers. the acquiring company will make an offer for the outstanding shares. TAKEOVERS: • A corporate action where an acquiring company makes a bid for an acquire. rather than an increase in the company’s own business activity. If the target company is publicly traded.

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

5. 2.• 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. as per the terms partnership agreement. all the partners give consent or 2. (I) DISSOLUTION BY AGREEMENT: A firm is dissolved in case 1. 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. When the business becomes unlawful. When all the partners excepting one decide to retire from the firm. • The dissolution of partnership among all partners of a firm is called dissolution of the firm. • On dissolution of the firm. 3. When all the partners or all excepting one partner becomes Insolvent or of unsound mind. 4. (II) COMPULSORY DISSOLUTION: A FIRM IS DISSOLVED COMPULSORILY IN THE FOLLOWING CASES: 1. A firm is also dissolved compulsorily if the partnership deed includes any provision regarding the happening of the . When all the partners or all excepting one partner die.

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

They should give some of their time to some social awareness programmes. methods and objects for the welfare of the society. He as a part of society also has to play an important role in bringing in new ideas. • Considering this aspect of a service towards society. • Irrespective of the basics of satisfying his personal goals and ambitions. • 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. intelligence and an art of making an enterprise run successfully. can help the entrepreneurs in generating more contacts in their society as well as get new business leads and ventures.ROLE OF ENTREPRENEURSHIP: • An entrepreneur is a person who holds a vision. also understand his responsibilities . • For gaining this they should participate in local forums and community meets. But what is the role of an entrepreneur from the social aspect. he should towards community. spirit.

or services. products. It is the implementation (execution) of innovation. devices. changing. • It is the development of new processes. It is the process of creating value through unique(exclusive) resource combinations to exploit opportunity. technology. • The action and result of imagination and ingenuity (cleverness or power of creative imagination).• Successful new products are usually associated with `ideacentric' (Full of ideas) creativity. . • Creativity is not ability to create out of nothing but the ability to generate new ideas by combining. and services for a useful purpose. INNOVATION • • Introduction of something new. ENTREPRENEURSHIP 1. • Creativity requires passion (strong feeling or emotion) and commitment. 2. methods. 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. or reapplying existing ideas.

Colleges play a far greater role in the society than just being centres of knowledge transfer and exchange. with about a sixth of the World's Human Resource.3. Knowledgeable of markets f. Innovation is the specific instrument of entrepreneurship. India also has its strengths in its diversity. required of colleges and other educational institutions to cultivate (educate) the habit of innovation. within themselves and in their students. it's faith in equality and freedom. India has a huge potential for innovation and entrepreneurship. the largest democracy of the World. or acquired(gained) by. qualities and characteristics inherent (built in) in. Self-confident and optimistic (Positive thinking) b. 5. CHARACTERISTIC OF SUCCESSFUL ENTREPRENEURS a. 3. THE ESSENCE OF ENTREPRENEURSHIP 1. India. It is therefore. Respond positively to challenges d. 6. Flexible and able to adapt e. entrepreneurs. Able to take calculated risk c. Independent minded . Able to get along well with others g. The utilization (using) of the skill sets. 2. 4.

external forces (competition. proposed that traditionally organizations (profit making or not for profit) can be divided into five components. minimum wage legislation etc). Energetic and diligent (carrying out a task steadily) j. culture. Perceptive(sharp thinking) p. Factors influencing organizational structure are or interested) with foresight (advance industry norms. Creative. size. experience. inflation. • Components identified by Mintzberg are useful for understanding the workflow of organizations. Responsive to criticism (comments or judgements) MINTZBERG MODES/APPROACHES: • Mintzberg. Versatile (variety ) knowledge i.h. Dynamic (active) leader l. 1. need to achieve k.  Strategic apex is the most senior level in the organization.Take initiatives (to go ahead) n. Responsive (reacting or responding positively) to suggestions m. Resourceful and persevering (performer) o. • In practice organizational structure may differ from proposed model. STRATEGIC APEX. Management working at this level is referred as board of .

CEO. 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 take major investing (takeovers) and financing (Shares issue) decisions.  They represent the organizational face to external stakeholders (person have interest in the organization like government). . 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. 2.Directors directors).  Integrity of organization can be judged by integrity of its board of directors. (chairman. 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 synchronize works of individual departments so that all departments work in single direction towards the achievement of organizational objectives. 3. receives reports from and management corrective accountants. monitors performances take actions where necessary. They deal with external stakeholder (Customers and suppliers etc).  They are responsible for quality and efficiency of the organizational results.  Operational core manager often referred to as operational managers are involved in day to day running of the organizations.  Making 20000 units of a product by production department does not help achieve organizational objectives if sales department cannot sell them. . They set budget. OPERATIONAL CORE.  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 are the personnel who actually achieve organizational objectives under the guidance of senior managers.

TECHNO STRUCTURE. 5. 4. they just provides information on inventory.  What activity or functional department is considered under techno structure depends on industry like in banking sector accounting is considered a core activity.  Difference is they do not involved in any revenue generating or core (for which organization exists) activity. .  Support staff is of least importance to the organization as their absence does not directly affects the performance of organization. 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. debtors and creditors information. as they now better what is practicable due their operational experience. SUPPORT STAFF. while in supermarket accounting is optional activity because supermarket will not closedown if accountants get absent.  Personnel work in techno structure are employees and managers just in the same way as chain command runs from strategic apex to operational core. They provide important information in deciding strategic directions and budgeting by senior managers.

 Departments like canteen. what is considered supporting activities depends on the industry. COMMUNICATION STRATEGY –  The development of a communication strategy is essential for the effective development and implementation of a strategic plan. STRATEGIC PLANNING TASK FORCE –  The development of a core team of organizational leaders is mandatory in the effective creation of a strategic plan.  In the communications strategy. COMPONENETS OF STRATEGIC PLANNING: ELEMENTS TO STRATEGIC PLANNING 1. 2. how they will be involved and what is being communicated to whom on the staff. cleaning and maintenance comes under this heading.  As like techno structure. . you should determine who will be involved in the planning process. Organization still spends on supporting activities because it provides good working environment and facilities (peon) to core employees to prevent down time.

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

too. 9. GOALS –  Goals are broad based strategies needed to achieve your organization’s mission. 7. measurable. a tactical strategy is built that prioritizes initiatives and aligns resources. measurable and time bound. TASKS –  Tasks are specific actionable events that are assigned to individuals/departments to achieve. realistic and time bound goals and vision. OBJECTIVES –  Objectives are specific.  The implementation strategy pulls all the plan pieces together to ensure collectively there are no missing pieces and that the plan is feasible. They. should be strategies that achieve the organization’s specific. 10.6. MONITORING OF STRATEGIC PLAN – . accountability measures are put in place to ensure implementation takes place. action oriented.  As a part of the implementation strategy. IMPLEMENTATION STRATEGY –  Once the plan has been outlined. 8.

institute strategic controls that monitor progress. compensation. management appraisal. and control processes".  This process includes the various management activities that are necessary to put strategy in motion.  It may be necessary to retool the plan and its assumptions if elements of the plan are off track. you must look objectively at the measurement criteria defined in our goals and objectives.  When evaluating the successes of a plan. During implementation of a strategic plan.  Strategy implementation is the translation of chosen strategy into organizational action so as to achieve strategic goals and objectives.  "The implementation process covers the entire managerial activities including such matters as motivation. STRATEGY IMPLEMENTATION:  Strategy implementation is "the process of allocating resources to support the chosen strategies". and ultimately achieve organizational goals. . it is critical to monitor the success and challenges of planning assumptions and initiatives.

 Organizational culture refers to the specialized collection of values.  Following are the main steps in implementing a strategy: 1. This control system equips managers with motivational incentives for employees as well as feedback on employees and organizational performance.  But. Developing an organization having potential of carrying out strategy successfully. quality. organizational structure is not sufficient in itself to motivate the employees. Disbursement of abundant resources to strategy-essential activities. norms and beliefs shared by organizational members and groups. 2. and customer satisfaction-the pillars of competitive advantage. Strategy implementation is also defined as the manner in which an organization should develop. and amalgamate organizational structure.  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. and culture to follow strategies that lead to competitive advantage and a better performance. control systems. utilize. .  An organizational control system is also required. attitudes.

economic and social goals. Creating strategy-encouraging policies. board of directors. It is the technique by which companies are directed and managed.  It means carrying the business as per the stakeholders’ desires. as well as. Linking reward structure to accomplishment of results. Employing best policies and programs for constant improvement.  The relationship between the owners and the managers in an organization must be healthy and there should be no conflict between the two. 4.  Corporate Governance is the interaction between various participants (shareholders. It is actually conducted by the board of Directors and the concerned committees for the company’s stakeholder’s benefit. CORPORATE GOVERNANACE:  Corporate Governance refers to the way a corporation is governed. 5.  It is all about balancing individual and societal goals. and company’s management) in shaping corporation’s performance and the way it is proceeding towards. . Making use of strategic leadership. 6.3.

the need for corporate governance arises.  Corporate Governance is essential to develop added value to the stakeholders. efficiency as well as globalization are significant factors urging corporate governance. Corporate Governance clearly distinguishes between the owners and the managers. .  In today’s market.  Corporate Governance ensures transparency which ensures strong and balanced economic development. the functions/ tasks of owners and managers should be clearly defined. rather. In modern corporations.  Corporate Governance deals with determining ways to take effective strategic decisions. Also.  Corporate Governance deals with the manner the providers of finance guarantee themselves of getting a fair return on their investment.  This also ensures that the interests of all shareholders (majority as well as minority shareholders) are safeguarded.oriented economy. These dimensions of corporate governance should not be overlooked.  The managers are the deciding authority. harmonizing. It gives ultimate authority and complete responsibility to the Board of Directors. The owners must see that individual’s actual performance is according to the standard performance.

GOOD CORPORATE GOVERNANCE ALSO MINIMIZES WASTAGES. 8. 3. COMPANY CAN RAISE CAPITAL EFFICIENTLY AND EFFECTIVELY. IT LOWERS THE CAPITAL COST. IT PROVIDES PROPER INDUCEMENT TO THE OWNERS AS WELL AS MANAGERS TO ACHIEVE OBJECTIVES THAT ARE IN INTERESTS OF THE SHAREHOLDERS AND THE ORGANIZATION. It includes both social and institutional a aspects. GOOD CORPORATE GOVERNANCE ENSURES CORPORATE SUCCESS AND ECONOMIC GROWTH. 5. Corporate as well Governance as ethical encourages environment. RISKS AND MISMANAGEMENT. AS A RESULT OF WHICH. STRONG CORPORATE GOVERNANCE MAINTAINS INVESTORS’ CONFIDENCE. IT ENSURES ORGANIZATION IN MANAGED IN A MANNER THAT FITS THE BEST INTERESTS OF ALL. CORRUPTION. 6. 7. BENEFITS OF CORPORATE GOVERNANCE 1. 4. THERE IS A POSITIVE IMPACT ON THE SHARE PRICE. 2.  Corporate Governance has a broad scope. trustworthy. IT HELPS IN BRAND FORMATION AND DEVELOPMENT. . It ensures that all shareholders fully exercise their rights and that the organization fully recognizes their rights. moral.

objectives and decision based on something than the pursuit of profits  And socially responsible firms must act ethically .  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.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.  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.

 CSR is about the organisation’s obligations to all stakeholders – and not just shareholders. just and fair 4. Ethical . Legal - responsibility to comply with the law (society’s codification of right and wrong) 3. Economic .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 . The difference is that ethics concern individual actions which can be assessed as right or wrong by reference to moral principles. Voluntary and philanthropic .not acting just for profit but doing what is right.responsibility to earn profit for owners 2.  THERE ARE FOUR DIMENSIONS OF CORPORATE RESPONSIBILITY 1.

a planning horizon is a future time period.  The planning horizon is the amount of time an organization will look into the future when preparing a strategic plan. shorter the planning horizon. during which. departments that support production will plan production work and determine material requirements. but other organizations such as the Forestry Commission in the UK have to use a much longer planning horizon to form effective plans. There are two schools of thought on this issue:  In the free market view. Many commercial companies use a five-year planning horizon. . its length is dictated by the degree of uncertainty in the external environment: higher the uncertainty.  In manufacturing. 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.

 The basic purpose of environmental scanning is to help management organization. review is often made annually. 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. It's important in the quest for total value. In Economics.  Continuous scanning systems: These systems constantly monitor components of the organizational environment.  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.  Environmental forecasting is a technique whereby managers attempt to predict the future characteristics of the . REGULAR SCANNING SYSTEMS: These systems or revolve around a regular review of the This determine the future direction of the environment significant environmental components. as opposed to short term pleasure consumption. a planning horizon is the length of time an individual plans ahead.

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

 The EFE matrix is the strategic tool used to evaluate firm existing strategies. Barriers . social. Perfect competition e.Entry Barriers . and competitive information. Barriers in the industry . oligopoly. political.  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. legal. Differentiation practiced by various players f. cultural. EFE matrix can be defined as the strategic tool to evaluate external environment or macro environment of the firm include economic. social.Exit Barriers EFAS (EFEM):  The EFE matrix allows strategies to summarize and evaluate economic. EXTERNAL FACTORS .  The EFE matrix consists of following attributes mentioned below. governmental. environmental.d. government. Nature of competition : Monopoly. political. technological. legal and competitive information. demographic. technological.Mobility g.

Identify a list of KEY external factors (critical success factors). it depends firm whether the firm is willing to exploit the opportunities or maybe they ignore the opportunities due to lack of resources. External factors are extracted after deep analysis of external environment. Assign a 1-4 rating to each critical success factor to indicate how effectively the firm’s current strategies respond to the factor.0 (very important). STEPS IN DEVELOPING THE EFE MATRIX: 1. Assign a weight to each factor. ranging from 0 (not important) to 1. 3. 2. Obviously there are some good and some bad for the company in the external environment. 4 = response is extremely good) . OPPORTUNITIES  Opportunities are the chances exist in the external environment.  Maximum number of threats for the firm reduces their power in the industry.  That’s the reason external factors are divided into two categories opportunities and threats. minimum no of threats in the external environment open many doors for the firm. THREATS  Threats are always evil for the firm. (1 = response is poor.

PORTOR’S APPROACH TO INDUSTRY ANALYSIS Michael Porter (Harvard Business School Management Researcher) designed various vital frameworks for developing an organization’s strategy. According to Porter. 6. Sum the weighted scores. One of the most renowned among managers making strategic decisions is the five competitive forces model that determines industry structure.5.4. 5. the nature of competition in any industry is personified in the following five forces: 1. Multiply each factor’s weight by its rating to determine a weighted score. THREAT OF NEW POTENTIAL ENTRANTS . Average total weighted score is 2.

These forces jointly determine the profitability of industry because they shape the prices which can be charged. THREAT OF SUBSTITUTE PRODUCT/SERVICES 3. BARGAINING POWER OF BUYERS 5.  The potential of these forces differs from industry to industry. RIVALRY AMONG CURRENT COMPETITORS FIGURE: PORTER’S FIVE FORCES MODEL:  The five forces mentioned above are very significant from point of view of strategy formulation. the costs which can be borne.2. and the investment required to compete in the industry. . BARGAINING POWER OF SUPPLIERS 4.

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. 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. LET’S DISCUSS THE FIVE FACTORS OF PORTER’S MODEL IN DETAIL: 1.  The threat of entry by potential competitors is partially a function of extent of barriers to entry. the managers should use the five forces framework to determine the competitive structure of industry. begins a competition for market share and lowers the current costs.  Entry of new players increases the industry capacity. RIVALRY AMONG CURRENT COMPETITORS: . Before making strategic decisions.

 Rivalry refers to the competitive struggle for market share between firms in an industry.  Strong buyers can extract profits out of an industry by lowering the prices and increasing the costs.  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 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. . BARGAINING POWER OF BUYERS:  Buyers refer to the customers who finally consume the product or the firms who distribute the industry’s product to the final consumers.

In this way. Buyers are not significant to strong suppliers. Substitutes pose a ceiling (upper limit) on the potential returns of an industry by . 4. Suppliers products have a few substitutes. BARGAINING POWER OF SUPPLIERS:  Suppliers refer to the firms that provide inputs to the industry. THREAT OF SUBSTITUTE PRODUCTS:  Substitute products refer to the products having ability of satisfying customers needs effectively. They have full information about the product and the market. etc) or the costs of industry in other ways. they are regarded as a threat. They purchase in large quantities. In this way. raw materials.  Strong suppliers can extract profits out of an industry by increasing costs of firms in the industry. Their product is an important input to buyer’s product.  They have high switching cost. they are regarded as a threat. Bargaining power of the suppliers refer to the potential of the suppliers to increase the prices of inputs( labour.  They pose credible threat of backward integration. Strong suppliers’ products are unique. services. 5. They emphasize upon quality products. They pose credible threat of forward integration.

and .  Lesser the number of close substitutes a product has.putting a setting a limit on the price that firms can charge for their product in an industry. however.  Whatever be the industry. and the capital investment essential for survival and competition in industry. trends. these five forces influence the profitability as they affect the prices. a sixth significant factor. greater is the opportunity for the firms in industry to raise their product prices and earn greater profits (other things being equal). This term refers to the reliance that develops between the companies whose products work is in combination with each other. patterns. the five forces model overlooks the role of innovation as well as the significance of individual firm differences.complementaries.The power of Porter’s five forces varies from industry to industry. the costs.  Strong complementors might have a strong positive effect on the industry. INTERNAL ENVIRONMENT SCANNING:  Environmental scanning refers to possession and utilization of information about occasions.  This five forces model also help in making strategic decisions as it is used by the managers to determine industry’s competitive structure. It presents a stagnant view of competition. Also.Porter ignored.

 This includes employee interaction with other employees. employee interaction with management.  It helps the managers to decide the future path of the organization. access to natural resources. interviews. an organization must take advantage of the opportunities and minimize the threats. SWOT ANALYSIS: (OR) TOWS MATRIX .relationships within an organization’s internal and external environment. discussions. manager interaction with other managers. brand awareness. main staff. etc. Organizations should observe the internal organizational environment.  Also.  While strategy formulation. and surveys can be used to assess the internal environment. operational potential. A threat for one organization may be an opportunity for another. and management interaction with shareholders.  Analysis of internal environment helps in identifying strengths and weaknesses of an organization. organizational structure. Scanning must identify the threats and opportunities existing in the environment.  Internal analysis of the environment is the first step of environment scanning.

 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 .  Its key purpose is to identify the strategies that will create a firm specific business model that will best align an organization’s resources and capabilities to the requirements of the environment in which the firm operates. Weaknesses. SWOT is an acronym for Strengths. it is the foundation for evaluating the internal potential and limitations and the probable/likely opportunities and threats from the external environment. by definition. Opportunities (O) and Threats (T) are considered to be external factors over which you have essentially no control.  Also. Opportunities and Threats.  SWOT Analysis is the most renowned tool for audit and analysis of the overall strategic position of the business and its environment. By definition. Strengths (S) and Weaknesses (W) are considered to be internal factors over which you have some measure of control.  In other words.

which includes human competencies. Weaknesses. no debt.  These are the basis on which continued success can be made and continued/sustained.  These are what you are well-versed in or what you have expertise in. broad product line. products and services. WEAKNESSES- . financial resources.  Examples of organizational strengths are huge financial resources. Strengths can be either tangible or intangible. Opportunities and Threats) is given belowSTRENGTHS Strengths are the qualities that enable us to accomplish the organization’s mission.  Strengths are the beneficial aspects of the organization or the capabilities of an organization. process capabilities. customer goodwill and brand loyalty. the traits and qualities your employees possess (individually and as a team) and the distinct features that give your organization its consistency. etc.  An overview of the four factors (Strengths. committed employees.and also helps in including them in the decision-making process of the organization.

 Weaknesses in an organization may be depreciating machinery.  They must be minimized and eliminated.to overcome purchased.  These arise when an organization can take benefit of obsolete machinery. narrow product range. high employee turnover. large wastage of raw materials. complex decision making process. insufficient research and development facilities.  These weaknesses deteriorate influences on the organizational success and growth. poor decision-making. etc. Weaknesses are the qualities that prevent us from accomplishing our mission and achieving our full potential. narrow product range. . OPPORTUNITIES Opportunities are presented by the environment within which our organization operates. etc. Weaknesses are controllable. For instance .  Other examples of organizational weaknesses are huge debts. Weaknesses are the factors which do not meet the standards we feel they should meet. 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. increasing competition leading to excess capacity. price wars and reducing industry profits. THREATS Threats arise when conditions in external environment jeopardize the reliability and profitability of the organization’s business. competition.  Selecting the targets that will best serve the clients while getting desired results is a difficult task. industry/government and technology.unrest among employees.  Examples of threats are . .  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. When a threat comes.  They compound the vulnerability when they relate to the weaknesses. the stability and survival can be at stake. Threats are uncontrollable.  Opportunities may arise from market.  Organization should be careful and recognize the opportunities and grasp them whenever they arise. etc. ever changing technology.

6. but it involves a great subjective element.  They also keep a watch on their overall business environment and recognize and exploit new opportunities faster than its competitors. It helps in identifying core competencies of the firm. It is a source of information for strategic planning. 2. Overcome organization’s threats. correct their weakness and protect against internal weaknesses and external threats. Successful businesses build on their strengths. Builds organization’s strengths.  SWOT ANALYSIS HELPS FOLLOWING MANNERIN STRATEGIC PLANNING IN 1. 4.  SWOT Analysis provide information that helps in synchronizing the firm’s resources and capabilities with the competitive environment in which the firm operates. Maximize its response to opportunities. 5. It is a strong tool. and not as a prescription. 3. Reverse its weaknesses.ADVANTAGES OF SWOT ANALYSIS  SWOT Analysis is instrumental in strategy formulation and selection.  It is best when used as a guide. .

It helps in knowing past. . It helps in setting of objectives for strategic planning. present and future so that by using past and current data. weaknesses. LIMITATIONS OF SWOT ANALYSIS  SWOT Analysis is not free from its limitations.  THESE INCLUDE1.  SWOT Analysis does stress upon the significance of these four aspects. future plans can be chalked out. but it does not tell how an organization can identify these aspects for itself. 8.  Moreover. There are certain limitations of SWOT Analysis which are not in control of management. Price increase. opportunities and threats might be very subjective as there is great degree of uncertainty in market.7. categorizing aspects as strengths. It may cause organizations to view circumstances as very simple because of which the organizations might overlook certain key strategic contact which may occur.

4.  The use of EFAS and IFAS tables together with SFAS matrix deal with many of the criticism of SWOT analysis. 4.2. Lack of skilled and efficient labour. USA. Searching a new market for the product which is not having overseas market due to import restrictions. It provides a graphic representation for an organization to . BCG MATRIX:  Boston Consulting Group (BCG) Matrix is a four celled matrix (a 2 * 2 matrix) developed by BCG.  It is the most renowned corporate portfolio analysis tool. etc. Faulty products due to poor quality control. Economic environment. INTERNAL LIMITATIONS MAY INCLUDE1. 3. 5. 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. 2. Insufficient research and development facilities. Inputs/raw materials. Government legislation. Poor industrial relations. 3. etc.

In other words. it is a comparative analysis of business potential and the evaluation of environment.  The key theory underlying this is existence of an experience curve and that market share is achieved due to overall cost leadership.Industry Sales last year. business could be classified as high or low according to their industry growth rate and relative market share.  BCG matrix has four cells.examine different businesses in its portfolio on the basis of their related market share and industry growth rates. will measure comparative advantage indicated by market dominance.  It is a two dimensional analysis on management of SBU’s (Strategic Business Units).  Market Growth Rate = Industry sales this year . relative market share. with the horizontal axis representing relative market share and the vertical axis .  Relative Market Share = SBU Sales this year leading competitors sales this year. The dimension of business strength.  According to this matrix.  The analysis requires that both measures be calculated for each SBU.

 If all the SBU’s are in same industry. The mid-point of relative market share is set at 1.denoting market growth rate. the average growth rate of the industry is used. cash cows.1 x STARS Stars represent business units having large market share in a fast growing industry. . if all the SBU’s are located in different industries.  Resources are allocated to the business units according to their situation on the grid. 10 x 1x Figure: BCG Matrix 0. The four cells of this matrix have been called as stars.0. Each of these cells represents a particular type of business. then the mid-point is set at the growth rate for the economy. While. question marks and dogs.

a star will become a cash cow when the industry matures.  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.  These SBU’s are the corporation’s key source of cash. QUESTION MARKS Question marks represent business units having low relative market share and located in a high growth industry. They are the base of an organization. and are specifically the core business. They may generate cash but because of fast growing market. When cash cows lose their appeal and move towards deterioration.  If successful. Net cash flow is usually modest. CASH COWS Cash Cows represent business units having a large market share in a mature. slow growing industry. . then a retrenchment policy may be pursued.  These businesses usually follow stability strategies. stars require huge investments to maintain their lead.  Cash cows require little investment and generate cash that can be utilized for investment in other business units.

 Generally retrenchment strategies are adopted because these firms can gain market share only at the expense of competitor’s/rival firms.  If ignored. They neither generate cash nor require huge amount of cash. . Most businesses start as question marks as the company tries to enter a high growth market in which there is already a market-share.  There is no specific strategy which can be adopted. while if huge investment is made. They require attention to determine if the venture can be viable. Due to low market share.  Question marks are generally new goods and services which have a good commercial prospective. DOGS Dogs represent businesses having weak market shares in lowgrowth markets. these business units face cost disadvantages. then question marks may become dogs. then it can adopt expansion strategy. They require huge amount of cash to maintain or gain market share. and then they have potential of becoming stars. else retrenchment strategy can be adopted. If the firm thinks it has dominant market share.

ineffective marketing. This model ignores and overlooks other indicators of profitability. These business firms have weak market share because of high costs. 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. such as BCG matrix classifies businesses as low and high. the true nature of business may not be reflected. . but generally businesses can be medium also. etc. But BCG Matrix is not free from limitations.  High market share does not always leads to high profits.  Market is not clearly defined in this model. There are high costs also involved with high market share.  Growth rate and relative market share are not the only indicators of profitability. Thus.  Unless a dog has some other strategic aim. poor quality. 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.

. The company must: a. and b. dogs may help other businesses in gaining competitive advantage. 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 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. They can earn even more than cash cows sometimes. Analyse its current business portfolio and decide which businesses should receive more or less investment. At times. Develop growth strategies for adding new products and businesses to the portfolio.  This four-celled approach is considered as to be too simplistic. whilst at the same time deciding when products and businesses should no longer be retained.

competitive strength replaces market share as the dimension by which the competitive position of each SBU is assessed. and includes a broader range of factors other than just the market growth rate. 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. THE MCKINSEY / GENERAL ELECTRIC MATRIX  The McKinsey/GE Matrix overcomes a number of the disadvantages of the BCG Box.it all depends on how the company is organised.  Firstly. market attractiveness replaces market growth as the dimension of industry attractiveness. a product line or even individual brands .  An SBU can be a company division.  Secondly.  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. Customer loyalty . Market Size b. Opportunity to differentiate products and services h. Overall risk of returns in the industry g.g. Market growth c. direct. Market profitability d. retail. Pricing trends e. Competitive intensity / rivalry f. wholesale FACTORS THAT AFFECT COMPETITIVE STRENGTH FACTORS TO CONSIDER INCLUDE: a. Relative brand strength c. Distribution structure (e. Strength of assets and competencies b. Market share d. Segmentation i. These are listed below: a.

region or country) to examine how others achieve their performance levels and to understand the processes they use. THE BENCHMARKING PROCESS  Benchmarking involves looking outward (outside a particular business. . Record of technological or other innovation h.  The search for "best practice" can take place both inside a particular industry. organisation.e. Distribution strength g.  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. 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. industry. Relative cost position (cost structure compared with competitors) f. and also in other industries (for example are there lessons to be learned from other industries?). In this way benchmarking helps explain the processes behind excellent performance.

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

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. developing new products and services and improving capabilities for dealing with changes in the external environment. It involves considering high level aspects such as core competencies.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. Benchmarking partners are drawn from the same sector. Focuses on improving specific critical processes and operations. Process benchmarking invariably involves producing process maps to facilitate comparison and analysis. Benchmarking partners are sought from best practice organisations that perform similar work or deliver similar services. This type of benchmarking often results in short term benefits. This type of analysis is often undertaken through trade associations or third parties to protect confidentiality. 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 .

usually less time and resources are needed. Improving activities or services for which counterparts do not exist.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. External benchmarking provides opportunities of learning from those who are at the "leading edge". Several business units within the same organisation exemplify good practice and management want to spread this expertise quickly. the credibility of the findings and the development of sound .g. standardised data is often readily available. However. This sort of benchmarking can lead to innovation and dramatic improvements. business units in different countries). Involves benchmarking businesses or operations from within the same organisation (e. Involves analysing outside organisations that are known to be best in class. There may be fewer barriers to implementation as practices may be relatively easy to transfer across the same organisation. real innovation may be lacking and best in class performance is more likely to be found through external benchmarking. 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 main advantages of internal benchmarking are that access to sensitive data and information is easier. and.

perhaps because there are too few benchmarking partners within the same country to produce valid results. information technology are increasing opportunities for international projects. 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. It is gaining popularity in recent time. .  The primary purpose is to subsidize the service program. 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.  Educational institutes running commercial complexes hospitals running a meditation class and fitness program are typical example of piggy backing.recommendations. However. International Benchmarking Best practitioners are identified and analysed elsewhere in the world.

 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. and finance and plant facilities. The non-profit organization should have the following resources before adopting piggy backing strategy. personnel. marketing.  Something to sell  Critical mass of management talent  Trustee support  Entrepreneurial attitude. COMPARING PLANNING: AND COORDINATING STRATEGIC & TACTICAL  Basic differences between strategic planning and tactical planning: . TACTICAL PLANNING:  Tactical Planning is Short range planning that emphasizes the current operations of various parts 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. Manager need both tactical and strategic planning program.  Because strategic planning focuses on the long term and tactical planning on the short term. upper management generally develops the strategic plans and because lower level managers generally have better understanding of the day to day organizational operations.  Because Strategic Planning emphasizes analyzing the future and tactical planning emphasizes analysing the everyday functioning of the organization. strategic plans cover a relatively long period of time whereas tactical plans cover a relatively short period of time. generally the lower level managers develop the tactical plans. tactical and strategic planning are integrally related.  Despite their differences.  Because strategic plans are based primarily on a prediction of the future and tactical plans on known circumstances that exist within the organization. and these program must be closely related to be successful. Since upper managers generally have a better understanding of the organization as a whole than lower level managers do. strategic plans are generally less detailed than tactical plans.

 Systematic recognition and analysis of assumptions on which a plan is based. 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.  Premises control is necessary to identify the key assumptions and its implementation. A major issue is determining which assumptions and premises should be monitored. Key assumptions and its implementation. 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. . to determine if they remain valid in changed circumstances or in light of new information.

IMPLEMENTATION CONTROL:  Implementation control is aimed at evaluating Implementation control is aimed at evaluating whether the plans.  This whether they are still valid or not. Its predetermined objectives or not. 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. STRATEGIC SURVEILLANCE:  Strategic surveillance aimed at a more Strategic surveillance aimed at a more generalized and overarching control generalized and overarching control³designed to monitor a broad range of events³designed to monitor a broad range of events inside and outside the company that are likely inside . programmes. 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 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.

. and needs assessment. SPECIAL ALERT CONTROL:  Special alert control. Also called need-gap analysis. (2)Cross listing factors required to achieve the future objectives ("what should be").and outside the company that are likely to threaten the course of a firms strategy´. which is based on a Special alert control. performance levels) of the present situation ("what is").to threaten the course of a firms strategy´. GAP ANALYSIS CONSISTS OF: (1)Listing of characteristic factors (such as attributes. competencies. 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. and then (3) Highlighting the gaps that exist and need to be filled. needs analysis.