CHAPTER 1

STRATEGIC MANAGEMENT
One of the essential parts of creating and running a small business is creating a mission or vision for the business
and a set of goals the company aims to achieve. Strategic decision making, or strategic planning, describes the
process of creating a company's mission and objectives and deciding upon the courses of action a company should
pursue to achieve those goals.
Strategic decisions are the decisions that are concerned with whole environment in which the firm operates, the
entire resources and the people who form the company and the interface between the two.

THE NATURE AND VALUE OF STRATEGIC MANAGEMENT

Strategic management is defined as the set of decisions and actions that result in
the formulation and implementation of plans designed to achieve a companys
objectives. It comprises nine critical tasks:
1.
Formulate the companys mission, including broad statements about its
purpose, philosophy, and goals.
2.
Conduct an analysis that reflects the companys internal conditions and
capabilities.
3. Assess the companys external environment, including both the competitive
and general contextual factors.
4. Analyze the companys options by matching its resources with the external
environment.
5. Identify the most desirable options by evaluating each option in light of the
companys mission.
6.
Select a set of long-term objectives and grand strategies that will achieve
the most desirable options.
7.
Develop annual objectives and short-term strategies that are compatible
with the selected set of long-term objectives and grand strategies.
8. Implement the strategic choices by means of budgeted resource allocations
in which the matching of tasks, people, structures, technologies, and reward
systems is emphasized.
9.
Evaluate the success of the strategic process as an input for future
decision-making.
As these nine tasks indicate, strategic management involves the planning, directing,
organizing, and controlling of a companys strategy-related decisions and actions.
By strategy, managers mean their large-scale, future-oriented plans for interacting

with the competitive environment to achieve company objectives. A strategy is a

companys game plan. Although that plan does not precisely detail all future
deployments (of people, finances, and material), it does provide a framework for
managerial decisions.

DIMENSIONS OF STRATEGIC DECISIONS

Strategic issues require top-management decisions.

Strategic issues require large amounts of the firms resources.

Strategic issues often affect the firms long-term prosperity.

Strategic issues are future oriented.

Strategic issues usually have multifunctional or multibusiness consequences.

Strategic issues require considering the firms external environment.

Three Levels of Strategy

The decision-making hierarchy of a firm typically contains three levels:

At the top of this hierarchy is the corporate level, composed principally of a

board of directors and the chief executive and administrative officers. In a
multibusiness firm, corporate-level executives determine the businesses in which
the firm should be involved. Corporate-level strategic managers attempt to exploit
their firms distinctive competences by adopting a portfolio approach to the
management of its businesses and by developing long-term plans, typically for a
five-year period.

In the middle of the decision-making hierarchy is the business level,

composed principally of business and corporate managers. These managers must
translate the statements of direction and intent generated at the corporate level
into concrete objectives and strategies for individual business divisions or SBUs.
They strive to identify and secure the most promising market segment within that
arena.

At the bottom of the decision-making hierarchy is the functional level,

composed principally of managers of product, geographic, and functional areas.
Whereas corporate- and business-level managers center their attention on doing
the right things, managers at the functional level center their attention on doing
things right. Thus, they address such issues as the efficiency and effectiveness of

production and marketing systems, the quality of customer service, and the success
of particular products and services in increasing the firms market shares.
depicts the three levels of strategic management as structured in practice. In
alternative 1, the firm is engaged in only one business and the corporate- and
business-level responsibilities are concentrated in a single group of directors,
officers, and managers. This is the organizational format of most small businesses.
Alternative 2, the classical corporate structure, comprises three fully operative
levelsthe corporate level, the business level, and the functional level. The
approach taken throughout this text assumes the use of alternative 2.

Characteristics of Strategic Management Decisions

The characteristics of strategic management decisions vary with the level of

strategic activity considered. As shown in Exhibit 13, decisions at the corporate
level tend to be more value oriented, more conceptual, and less concrete than
decisions at the business or functional level.

Corporate-level decisions are often characterized by greater risk, cost, and

profit potential; greater need for flexibility; and longer time horizons. Such decisions
include the choice of businesses, dividend policies, sources of long-term financing,
and priorities for growth.

Functional-level decisions implement the overall strategy formulated at the

corporate and business levels. They involve action-oriented operational issues and
are relatively short range and low risk. Functional-level decisions incur only modest
costs because they are dependent on available resources.

Business-level decisions help bridge decisions at the corporate and functional

levels. Such decisions are less costly, risky, and potentially profitable than
corporate-level decisions, but they are more costly, risky, and potentially profitable
than functional-level decisions. (Useful Web sites: www.alcoa.com (Alcoa);
www.sears.com)

FORMALITY IN STRATEGIC MANAGEMENT

Formality refers to the degree to which participants, responsibilities, authority, and

discretion in decision-making are specified. The size of the organization, its
predominant management styles, the complexity of its environment, as production
process, its problems, and the purpose of its planning system all play a part in
determining the appropriate degree of formality.
Strategy Makers

The ideal strategic management team includes decision makers from all three
company levels (the corporate, business, and functional levels)for example, the
chief executive officer (CEO), the product managers, and the heads of functional
areas. In addition, the team obtains input from company planning staffs, when they
exist, and from lower-level managers and supervisors.
Because strategic decisions have a tremendous impact on a company and require
large commitments of company resources, top managers must give final approval
for strategic action. Exhibit 13 aligns levels of strategic decision makers with the
kinds of objectives and strategies for which they are typically responsible.
Planning departments, often headed by a corporate vice president for planning, are
common in large corporations. Medium-sized firms often employ at least one fulltime staff member to spearhead strategic data-collection efforts. Even in small firms
or less progressive larger firms, strategic planning is often spearheaded by an
officer or by a group of officers designated as a planning committee.

Top management shoulders broad responsibility for all the major elements of
strategic planning and management. General managers at the business level
typically have principal responsibilities for developing environmental analysis and
forecasting, establishing business objectives, and developing business plans
prepared by staff groups.
A firms president or CEO characteristically plays a dominant role in the strategic
planning process. The CEOs principal duty is often defined as giving long-term
direction to the firm, and the CEO is ultimately responsible for the firms success.
In implementing a companys strategy, the CEO must have an appreciation for the
power and responsibility of the board, while retaining the power to lead the
company with the guidance of informed directors. presents descriptions of the
changes that companies have made in an attempt to monitor the relationships
between the role of the board and the role of the CEO.

Benefits of Strategic Management

1.
problems.

Strategy formulation activities enhance the firms ability to prevent

2.
Group-based strategic decisions are likely to be drawn from the best
available alternatives.
3.
The involvement of employees in strategy formulation improves their
understanding of the productivity-reward relationship in every strategic plan and
thus heightens their motivation.

4.
Gaps and overlaps in activities among individuals and groups are reduced
as participation in strategy formulation clarifies differences in roles.
5.

Resistance to change is reduced.

STRATEGIC MANAGEMENT PROCESS

Because of the similarity among the general models of the strategic management
process, it is possible to develop an eclectic model representative of the foremost
thought in the strategic management area. . It serves three major functions.

First, it depicts the sequence and the relationships of the major components
of the strategic management process.

Second, it is the outline for this book. This chapter provides a general
overview of the strategic management process, and the major components of the
model will be the principal theme of subsequent chapters.

Third, the model offers one approach for analyzing the case studies in this
text and thus helps the analyst develop strategy formulation skills.

COMPONENTS OF THE STRATEGIC MANAGEMENT MODEL

Company Mission
The mission of a company is the unique purpose that sets it apart from other
companies of its type and identifies the scope of its operations. In short, the mission
describes the companys product, market, and technological areas of emphasis in a
way that reflects the values and priorities of the strategic decision makers.
Social responsibility is a critical consideration for a companys strategic decision
makers since the mission statement must express how the company intends to
contribute to the societies that sustain it. A firm needs to set social responsibility
aspirations for itself, just as it does in other areas of corporate performance.
Internal Analysis
The company analyzes the quantity and quality of the companys financial, human,
and physical resources. It also assesses the strengths and weaknesses of the
companys management and organizational structure. Finally, it contrasts the
companys past successes and traditional concerns with the companys current
capabilities in an attempt to identify the companys future capabilities.

External Environment
A firms external environment consists of all the conditions and forces that affect its
strategic options and define its competitive situation. The strategic management
model shows the external environment as three interactive segments: the remote,
industry, and operating environments.

Strategic Analysis and Choice

Simultaneous assessment of the external environment and the company profile
enables a firm to identify a range of possibly attractive interactive opportunities.
These opportunities are possible avenues for investment. However, they must be
screened through the criterion of the company mission to generate a set of possible
and desired opportunities. This screening process results in the selection of options
from which a strategic choice is made.
Long-Term Objectives
The results that an organization seeks over a multiyear period are its long-term
objectives. Such objectives typically involve some or all of the following areas:
profitability, return on investment, competitive position, technological leadership,
productivity, employee relations, public responsibility, and employee development.

Generic and Grand Strategies

Many businesses explicitly and all implicitly adopt one or more generic strategies
characterizing their competitive orientation in the marketplace. Low cost,
differentiation, or focus strategies define the three fundamental options.
Enlightened managers seek to create ways their firm possesses both low cost and
differentiation competitive advantages as part of their overall generic strategy. They
usually combine these capabilities with a comprehensive, general plan of major
actions through which their firm intends to achieve its long-term objectives in a
dynamic environment. Called the grand strategy, this statement of means indicates
how the objectives are to be achieved.
Action Plans and Short-Term Objectives
Actions plans translate generic and grand strategies into action by incorporating
four elements. First, they identify specific functional tactics and actions to be
undertaken in the next week, month, or quarter as part of the businesss effort to
build competitive advantage. The second element is a clear time frame for
completion. Third, action plans create accountability by identifying who is
responsible for each action in the plan. Fourth, each action in an action plan has

one or more specific, immediate objectives that are identified as outcomes that
action should generate.
Functional Tactics
Within the general framework created by the businesss generic and grand
strategies, each business function needs to identify and undertake activities unique
to their function that help build a sustainable competitive advantage. Managers in
each business function develop tactics which delineate the functional activities
undertaken in their part of the business and usually include them as a core part of
their action plan. Functional tactics are detailed statements of the means or
activities that will be used to achieve short-term objectives and establish
competitive advantage.
Policies that Empower Action
Speed is a critical necessity for success in todays competitive, global marketplace.
One way to enhance speed and responsiveness is to force/allow decisions to be
made whenever possible at the lowest level in organizations. Policies are broad,
precedent-setting decisions that guide or substitute for repetitive or time-sensitive
managerial decision making. Creating policies that guide and preauthorize the
thinking, decisions, and actions of operating managers and their subordinates in
implementing the businesss strategy is essential for establishing and controlling
the ongoing operating process of the firm in a manner consistent with the firms
strategic objectives.
Restructuring, Reengineering, and Refocusing the Organization

Until this point in the strategic management process, managers have maintained a
decidedly market-oriented focus as they formulate strategies and begin
implementation through action plans and functional tactics. Now the process takes
an internal focusgetting the work of the business done efficiently and effectively
so as to make the strategy successful. What is the best way to organize ourselves to
accomplish the mission? Where should leadership come from? What values should
guide our daily activateswhat should the organization and its people be like? How
can we shape rewards to encourage appropriate action? The intense competition in
the global marketplace has made this traditional internally focused set of
questionshow the activities within their business are conductedrecast itself with
unprecedented attentiveness to the marketplace. Downsizing, restructuring, and
reengineering are terms that reflect the critical stage in strategy implementation
wherein managers attempt to recast their organization.
Strategic Control and Continuous Improvement

Strategic control is concerned with tracking a strategy as it is being implemented,

detecting problems or changes in its underlying premises, and making necessary
adjustments. In contrast to postaction control, strategic control seeks to guide
action in behalf of the generic and grand strategies as they are taking place and
when the end results are still several years away. The rapid, accelerating change of
the global marketplace of the last 10 years has made continuous improvement
another aspect of strategic control in many organizations. Continuous improvement
provides a way for managers to provide a form of strategic control that allows their
organization to respond more proactively and timely to rapid developments in
hundreds of areas that influence a businesss success. Exhibit 1-6 describes how
Yahoos e-commerce strategy was significantly undermined by its managements
failure to see fundamental shifts in its industry.
STRATEGIC MANAGEMENT AS A PROCESS
A process is the flow of information through interrelated stages of analysis toward
the achievement of an aim. Thus, the strategic management model in Exhibit 15
depicts a process. Managers evaluate historical, current, and forecast data in light
of the values and priorities of influential individuals and groupsoften called
stakeholdersthat are vitally interested in the actions of the business. The
interrelated stages of the process are the 11 components discussed in the last
section. Finally, the aim of the process is the formulation and implementation of
strategies that work, achieving the companys long-term mission and near-term
objectives.
Characteristics/Features of Strategic Decisions
Strategic decisions have major resource propositions for an organization. These
decisions may be concerned with possessing new resources, organizing others or
reallocating others.
Strategic decisions deal with harmonizing organizational resource capabilities with
the threats and opportunities.
Strategic decisions deal with the range of organizational activities. It is all about
what they want the organization to be like and to be about.
Strategic decisions involve a change of major kind since an organization operates in
ever-changing environment.
Strategic decisions are complex in nature.
f.
Strategic decisions are at the top most level, are uncertain as they deal with
the future, and involve a lot of risk.
g.
Strategic decisions are different from administrative and operational
decisions. Administrative decisions are routine decisions which help or rather

facilitate strategic decisions or operational decisions. Operational decisions are

technical decisions which help execution of strategic decisions. To reduce cost is a
strategic decision which is achieved through operational decision of reducing the
number of employees and how we carry out these reductions will be administrative
decision.

Strategy may operate at different levels of an organization -corporate level,

business level, and functional level. The strategy changes based on the levels of
strategy.
Corporate Level Strategy
Corporate level strategy occupies the highest level of strategic decision-making and
covers actions dealing with the objective of the firm, acquisition and allocation of
resources and coordination of strategies of various SBUs for optimal performance.
Top management of the organization makes such decisions. The nature of strategic
decisions tends to be value-oriented, conceptual and less concrete than decisions at
the business or functional level.
Business-Level Strategy.
Business-level strategy is applicable in those organizations, which have different
businesses-and each business is treated as strategic business unit (SBU). The
fundamental concept in SBU is to identify the discrete independent product/market
segments served by an organization. Since each product/market segment has a
distinct environment, a SBU is created for each such segment. For example,
Reliance Industries Limited operates in textile fabrics, yarns, fibers, and a variety of
petrochemical products. For each product group, the nature of market in terms of
customers, competition, and marketing channel differs.
Functional-Level Strategy.
Functional strategy, as is suggested by the title, relates to a single functional
operation and the activities involved therein. Decisions at this level within the
organization are often described as tactical. Such decisions are guided and
constrained by some overall strategic considerations. Functional strategy deals with
relatively restricted plan providing objectives for specific function, allocation of
resources among different operations within that functional area and coordi-nation
between them for optimal contribution to the achievement of the SBU and
corporate-level objectives. Below the functional-level strategy, there may be
operations level strategies as each function may be dividend into several sub
functions. For example, marketing strategy, a functional strategy, can be subdivided
into promotion, sales, distribution, pricing strategies with each sub function strategy
contributing to functional strategy.

 Role of strategists.
A strategist is a person with responsibility for the formulation and implementation of
a strategy. Strategy generally involves setting goals, determining actions to achieve
the goals, and mobilizing resources to execute the actions. A strategy describes how
the ends (goals) will be achieved by the means (resources). The senior leadership of
an organization is generally tasked with determining strategy. Strategy can be
intended or can emerge as a pattern of activity as the organization adapts to its
environment or competes. It involves activities such as strategic planning and
strategic thinking.
Strategy can combine some or all of the below factors: Vision (see below)
Mission Statement (see below)
Core Values (see below)
Goals and Objectives
Critical Success Factors what the organisation must get right to succeed
in its
mission
6. Positioning Similar to brand. Building a valued and preferred position in
the
7. minds of your target audience (how you would like them to describe you)
8. Brand/Reputation Developing and communicating powerful and
meaningful differences between your offerings and those of your competition
1.
2.
3.
4.
5.

2 Animal Protection Society Management

In a middle to large-sized organisation the strategy section would, in reality,
probably incorporate several sub-strategies covering key departments e.g.
campaign strategy, educational strategy, fundraising strategy, financial strategy
and IT strategy. Operational planning is agreeing the practical plans to implement
the strategy. This is dealt with separately. Strategic Planning Terminology and
Hierarchy There is a great deal of inconsistency in how the following terms:
strategic issue, goal, and objective, are used. The following is a useful
reference/guide that can be applied in the interests of establishing a common
vocabulary:

Strategic issue A problem or opportunity that the organisation wishes to address

or take
advantage of.
Goal Specific, measurable statements of what will be done to address strategic
issues.
Objective An activity that will help you accomplish a goal. Objectives, sometimes
called tactics, are framed in action plans that detail:
1.
2.
3.
4.

Responsibility
Timeline
Resources
Assessment/evaluation

Establishing Boundaries
In an animal protection organisation context, it is vital that strategy includes
boundaries and limits, and aims for focus and prioritisation. The temptation is to
include every issue and problem (that might potentially be addressed). However,
this is likely to be counterproductive in practice. The underlying objective should be
to maximise mission fulfilment, given available resources and this does not mean
tackling everything. It means harnessing resources and leveraging these to best
effect.

Vision and Mission

The vision and mission are the starting points of any strategy. We all need a vision
of who we are, and what we are aiming for. Then we need to decide what steps we
will take to
climb towards our ultimate goals. Some animal protection societies have both a
mission and a vision, although many have only a mission statement. Briefly, the
difference is as follows: 1. Mission Statement A declaration of an organizations purpose; its raison
d'tre.
2. Vision A realistic, credible, attractive future for your organization.
The mission is important because it can engage both the hearts (culture) and minds
(strategy) of the organisations staff and the board. A good mission that is used well
can be inspirational and develop a strong, shared organisational culture. It helps to
ensure that employees are emotionally tied to the organisation, and that their goals
are synchronised with those of the organisation.

The vision is a longer-range vision of success and, as such, can be a powerful

engine driving an organisation towards excellence. However, for most smaller
animal protection societies, a mission alone is probably sufficient. Indeed, it is
debatable whether having

3 Animal Protection Society Management

both a vision and a mission dilutes and confuses what should be a powerful
message of intent (particularly for external audiences).

Developing a Mission Statement

A mission statement sets forth the fundamental purposes for which your
organisation has been formed. It should cover:

Purpose why the organisation exists goals and objectives.

Programme how you will achieve your purpose
Principle what your values are

The mission statement should be: Understandable to the general public

Brief short paragraph
Realistic in terms of your financial and human resources
Specific to provide a framework for your developing objectives and
programmes
5. Broad enough to stand the test of time, so it does not need to be reworked
frequently
6. Accurate reflection of the boards intent and understanding
7. Operational (state the expected outcome)
1.
2.
3.
4.

Unit:-2

Todays business world rapid changes are too frequent. It would be crucial for
managers to invent new ways of surviving in the ever-changing business
environment. They would have to build up the capacity of a firm to face the changes
and adapting themselves to changes.
They would have to find out new ways of creating opportunities of profitability and
growth. The new rules and regulations also create more pressure on business.
To prepare for such ongoing eventualities, managers will have to prepare
themselves for really understanding the remote and the immediate environments of
business and mechanisms of changes that affect their industry or firm. The changes
have not only affect smaller companies but also the giants of various industries. It
creates an awareness of environmental forecasting.
1. Environmental Forecasting Methods:
Everyone can understand that the economic, technological, political and social
changes are a part of organizational life. Given that fact, the obvious questions, how
can these changes be forecast?
To say the least, forecasting is a most difficult process. Some forecasting rules are
the following:
(a) It is very difficult to forecast, especially, the future.
(b) The moment you forecast you know youre going to be wrong you just dont
know when and in which direction.
(c) If youre right, never let them forget it.
(d) Regardless of the possibility of error, to be successful, organizations must
forecast their future environment.
Forecasting methods and levels of sophistication vary greatly. The methods
employed may vary from educated guesses to computer projections using
sophisticated statistical analyses. Several factors determine the most appropriate
methods of forecasting, including the nature of the desired forecast, the available
expertise, and the available financial resources.

All forecasting techniques can be classified as either qualitative or quantitative.

Qualitative techniques are based primarily on opinions and judgments. Quantitative
techniques are based primarily on the analysis of data and the use of statistical
techniques. Several qualitative and quantitative techniques are available to
business.

2. Qualitative Forecasting Techniques:

a. Sales Force Composite:
Under the sales force composite method, a forecast of sales is determined by
combining the sales predictions of experienced sales people. Because sales people
are in constant contact with customers, they are often in a position to accurately
forecast sales.
Advantages of this method are the relatively low cost and simplicity. The major
disadvantage is that sales personnel are not always unbiased, especially if their
sales quotas are based on sales forecasts.
b. Customer Evaluation:
This method is similar to the sales force composite except that it goes to customers
for estimates of what the customers expect to buy. Individual customer estimates
are then pooled to obtain a total forecast.
This method works best when a small number of customers make up a large
percentage of total sales. Drawbacks are that the customer may not be interested
enough to do a good job and that the method has no provisions for including new
customers.
c. Executive Opinion:
With this method, several managers get together and devise a forecast based on
their pooled opinions. Advantages of this method are simplicity and low cost. The
major disadvantage is that the forecast is not necessarily based on facts.
d. Delphi Technique:
The Delphi technique is a method for developing a consensus of expert opinion.
Under this method, a panel of experts is chosen to study a particular question. The
panel members do not meet as a group and may not even know each others
identity. Panel members are then asked (usually by mailed questionnaire) to give
their opinions about certain future events or forecasts.

After the first round of opinions has been collected, the coordinator summarizes the
opinions and sends this information to the panel members. Based on this
information, panel members rethink their earlier responses and make a second
forecast.
This same procedure continues until a consensus is reached or until the responses
do not change appreciably. The Delphi technique is relatively inexpensive and
moderately complex.
e. Anticipatory Surveys:

In this method, mailed questionnaires, telephone interviews, or personal interviews

are used to forecast customer intentions. Anticipatory survey is a form of sampling,
in that those surveyed are intended to represent some larger population.
Potential drawbacks of this method are that stated intentions are not necessarily
carried out and that the sample surveyed does not represent the population. This
method is usually accompanied by medium costs and not much complexity.
3. Quantitative Forecasting Techniques:
a. Time-Series Analysis:
This technique forecasts future demand based on what has happened in the past.
The basic idea of time-series analysis is to fit a trend line to past data and then to
extrapolate this trend line into the future.
Sophisticated mathematical procedures are used to derive this trend line and to
identify and seasonal or cyclical fluctuations. Usually a computer program is used to
do the calculations required by a time-series analysis.
One advantage of this technique is that it is based on something other than opinion.
This method works best when a significant amount of historical data is available and
when the environmental forces are relatively stable. The disadvantage is that the
future may not be like the past.
b. Regression Modeling:
Regression modeling is a mathematical forecasting technique in which an equation
with one or more input variables is derived to predict another variable. The variable
being predicted is called the dependent variable. The input variables used to predict
the dependent variable are called independent variables.
The general idea of regression modeling is not determine how changes in the
independent variables affect the dependent variable. Once the mathematical
relationship between the independent variables and the dependent variable has

been determined, future values for the dependent variable can be forecast based on
known or predicted values of the independent variables.
The mathematical calculations required to derive the equation are extremely
complex and almost always require the use of a computer-. Regression modeling is
relatively complex and expensive.
c. Econometric Modeling:
Econometric modeling is one of the most sophisticated methods of forecasting. In
general, econometric models attempt to mathematically model an entire economy.
Most econometric models are based on numerous regression equations that attempt
to describe the relationships between the different sectors of the economy.
Very few organizations are capable of developing their own econometric models.
Those organizations that do use econometric models usually hire the services of
consulting groups or company that specialist in econometric modeling. This method
is very expensive and complex and is, therefore, primarily used only by very large
organizations.
4. Environmental Scanning:
We now turn to discuss the methods techniques employed by the organizations to
monitor their relevant environment and to gather data to derive information about
the opportunities and threats that affect their business. The process by which
organizations monitor their relevant environment to identify opportunities and
threats affecting their business is known as environmental scanning.

Enronmental Scanning & Monitoring- Techniques

SWOT (Strength-Weakness-Opportunity-Threat)
Identification of threats and Opportunities in the environment (External) and
strengths and Weaknesses of the firm (Internal) is the cornerstone of business policy
formulation; it is these factors which determine the course of action to ensure the
survival and growth of the firm.
PEST Analysis
A scan of the external macro-environment in which the firm operates can be
expressed in terms of the following factors:
Political

Economic
Social
Technological
1.Political Factors:tax policy
employment laws
environmental regulations
trade restrictions and tariffs
political stability
2.Economic Factors:economic growth
interest rates
exchange rates
inflation rate
3. Social Factors:Health awareness
Population growth rate
Age distribution
Career attitudes
Emphasis on safety

4. Technological Factors:R&D activity

Rate of technological change

Porters Approach to Industry Analysis:-

*A corporation is most concerned with the intensity of competition within its

industry.
*The level of this intensity is determined by basic competitive forces.
*In scanning its industry, the corporation must assess the importance to its success
of each of the six forces.
Competitive Structure of Industries:
*Threat of substitutes.
*Threat of new entrants.
*Rivalry among existing firms.
*Bargaining power of suppliers.
*Bargaining power of buyers.

QUEST

The Quick Environmental Scanning Technique, is a scanning procedure designed to

assist executives and planners to keep side by side of change and its implications
for the organizational strategies and policies.
QUEST produces a broad and comprehensive analysis of the external environment.
Environmental Threat and Opportunity Profile ()!
The Environmental factors are quite complex and it may be difficult for strategy
managers to classify them into neat categories to interpret them as opportunities
and threats. A matrix of comparison is drawn where one item or factor is compared
with other items after which the scores arrived at are added and ranked for each
factor and total weight age score calculated for prioritizing each of the factors.
This is achieved by brainstorming. And finally the strategy manger uses his
judgment to place various environmental issues in clear perspective to create the
environmental threat and opportunity profile.
Although the technique of dividing various environmental factors into specific
sectors and evaluating them as opportunities and threats is suggested by some
authors, it must be carefully noted that each sector is not exclusive of the other.
Internal Appraisal The internal environment,

Organizational environment consists of both external and internal factors.

Environment must be scanned so as to determine development and forecasts of
factors that will influence organizational success. 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.

As business becomes more competitive, and there are rapid changes in the external
environment, information from external environment adds crucial elements to the
effectiveness of long-term plans. As environment is dynamic, it becomes essential
to identify competitors moves and actions. Organizations have also to update the
core competencies and internal environment as per external environment.
Environmental factors are infinite, hence, organization should be agile and vigile to
accept and adjust to the environmental changes. For instance - Monitoring might
indicate that an original forecast of the prices of the raw materials that are involved
in the product are no more credible, which could imply the requirement for more
focused scanning, forecasting and analysis to create a more trustworthy prediction
about the input costs. In a similar manner, there can be changes in factors such as
competitors activities, technology, market tastes and preferences.
While in external analysis, three correlated environment should be studied and
analyzed
Immediate / industry environment
National environment
Broader socio-economic environment / macro-environment
Examining the industry environment needs an appraisal of the competitive structure
of the organizations industry, including the competitive position of a particular

organization and its main rivals. Also, an assessment of the nature, stage,
dynamics and history of the industry is essential. It also implies evaluating the
effect of globalization on competition within the industry. Analyzing the national
environment needs an appraisal of whether the national framework helps in
achieving competitive advantage in the globalized environment. Analysis of macroenvironment includes exploring macro-economic, social, government, legal,
technological and international factors that may influence the environment. The
analysis of organizations external environment reveals opportunities and threats for
an organization.
Strategic managers must not only recognize the present state of the environment
and their industry but also be able to predict its future positions.
As mentioned in the previous step of strategic planning process, a detailed analysis
of the environment factors is a must for writing down good plans for a company.
Every company begins with a set of resources and competencies, which they
attempt to improve with time. However at any given time no company can have all
the necessary resources in the exact proportion as required with correct set of
competencies. In other words every business will have certain areas where are
better than many others which we call their strength. Simultaneously the same
companies will have certain pain points which needs to be worked upon and
improved. So every company has to develop a clear understanding of what they are
good in where they need to do better so that they can plan out their next steps
accordingly. This is known as the internal appraisal of the company. Internal
appraisal is the next task in the strategic planning process. So in this task, a
company needs to find out whether the organization has the required strengths to
tap the opportunities spotted through the environmental scanning. Also it checks
out those areas which might get badly affected by the threat. In other words
internal appraisal also involves finding out those internal issues because of which
the company might expect threats from the external environment.
The process of internal appraisal has the following distinct parts:
Assessing the firms strength and weaknesses in the different area of operations
Appraisal of the status of strategic business units of the company
Assessment of the firms competitive advantage and core competence
Thus internal appraisal is a very important step towards a good strategic marketing
planning.

Strategic advantage profile is known as SAP. It shows strength and

weakness of an organization. Preparation of SAP is very similar process to the

1.
2.
3.
4.
5.

ETOP. There are generally five functional areas in most of the organizations.
These areas are
Production or Operation
Finance or Accounting
Marketing or Distribution
Human Resource & Corporate Planning
Research & Development

These functional areas are listed to identify their relative strength and weakness in
SAP. Each functional area is very broad having many components inside.
Every firm has strategic advantages and disadvantages. For example, large firms
have financial strength but they tend to move slowly, compared to smaller firms,
and often cannot react to changes quickly. No firm is equally strong in all its
functions. In other words, every firm has strengths as well as weaknesses.
STRATEGY must be aware of the strategic advantages or strengths of the firm to be
able to choose the best opportunity for the firm. On the other hand they must
regularly analyse their strategic disadvantages or weaknesses in order to face
environmental threats effectively
Examples:
The Strategist should look to see if the firm is stronger in these factors than its
competitors. When a firm is strong in the market, it has a strategic advantage in
launching new products or services and increasing market share of present products
and services.

Introduction
The balance scorecard is used as a strategic planning and a management
technique. This is widely used in many organizations, regardless of their scale, to
align the organization's performance to its vision and objectives.

The scorecard is also used as a tool, which improves the communication and
feedback process between the employees and management and to monitor
performance of the organizational objectives.

As the name depicts, the balanced scorecard concept was developed not only to
evaluate the financial performance of a business organization, but also to address
customer concerns, business process optimization, and enhancement of learning
tools and mechanisms.

The Basics of Balanced Scorecard

Following is the simplest illustration of the concept of balanced scorecard. The four
boxes represent the main areas of consideration under balanced scorecard. All four
main areas of consideration are bound by the business organization's vision and
strategy.

Balanced Scorecard
The balanced scorecard is divided into four main areas and a successful
organization is one that finds the right balance between these areas.

Each area (perspective) represents a different aspect of the business organization in

order to operate at optimal capacity.

Financial Perspective - This consists of costs or measurement involved, in terms of

rate of return on capital (ROI) employed and operating income of the organization.

Customer Perspective - Measures the level of customer satisfaction, customer

retention and market share held by the organization.

Business Process Perspective - This consists of measures such as cost and quality
related to the business processes.

Learning and Growth Perspective - Consists of measures such as employee

satisfaction, employee retention and knowledge management.

The four perspectives are interrelated. Therefore, they do not function

independently. In real-world situations, organizations need one or more perspectives
combined together to achieve its business objectives.

For example, Customer Perspective is needed to determine the Financial

Perspective, which in turn can be used to improve the Learning and Growth
Perspective.

Features of Balanced Scorecard

From the above diagram, you will see that there are four perspectives on a balanced
scorecard. Each of these four perspectives should be considered with respect to the
following factors.

When it comes to defining and assessing the four perspectives, following factors are
used:

Objectives - This reflects the organization's objectives such as profitability or market

share.

Measures - Based on the objectives, measures will be put in place to gauge the
progress of achieving objectives.

Targets - This could be department based or overall as a company. There will be

specific targets that have been set to achieve the measures.

Initiatives - These could be classified as actions that are taken to meet the
objectives.

A Tool of Strategic Management

The objective of the balanced scorecard was to create a system, which could
measure the performance of an organization and to improve any back lags that
occur.

The popularity of the balanced scorecard increased over time due to its logical
process and methods. Hence, it became a management strategy, which could be
used across various functions within an organization.

The balanced scorecard helped the management to understand its objectives and
roles in the bigger picture. It also helps management team to measure the
performance in terms of quantity.

The balanced scorecard also plays a vital role when it comes to communication of
strategic objectives.

One of the main reasons for many organizations to be unsuccessful is that they fail
to understand and adhere to the objectives that have been set for the organization.

The balanced scorecard provides a solution for this by breaking down objectives and
making it easier for management and employees to understand.

Planning, setting targets and aligning strategy are two of the key areas where the
balanced scorecard can contribute. Targets are set out for each of the four
perspectives in terms of long-term objectives.

However, these targets are mostly achievable even in the short run. Measures are
taken in align with achieving the targets.

Strategic feedback and learning is the next area, where the balanced scorecard
plays a role. In strategic feedback and learning, the management gets up-to-date
reviews regarding the success of the plan and the performance of the strategy.

The Need for a Balanced Scorecard

Following are some of the points that describe the need for implementing a
balanced scorecard:

Increases the focus on the business strategy and its outcomes.

Leads to improvised organizational performance through measurements.

Align the workforce to meet the organization's strategy on a day-to-day basis.

Targeting the key determinants or drivers of future performance.

Improves the level of communication in relation to the organization's strategy and

vision.

Helps to prioritize projects according to the timeframe and other priority factors.

Conclusion
As the name denotes, balanced scorecard creates a right balance between the
components of organization's objectives and vision.

It's a mechanism that helps the management to track down the performance of the
organization and can be used as a management strategy.

It provides an extensive overview of a company's objectives rather than limiting

itself only to financial values.

This creates a strong brand name amongst its existing and potential customers and
a reputation amongst the organization's workforce.

 Blue ocean strategy

1. The first part presents key concepts of blue ocean strategy, including Value
Innovation the simultaneous pursuit of differentiation and low cost and key
analytical tools and frameworks such as the strategy canvas, the four actions
framework and the eliminate-reduce-raise-create grid.

2. The second part describes the four principles of blue ocean strategy formulation.
These four formulation principles address how an organization can create blue
oceans by looking across the six conventional boundaries of competition (Six Paths
Framework), reduce their planning risk by following the four steps of visualizing
strategy, create new demand by unlocking the three tiers of noncustomers and
launch a commercially-viable blue ocean idea by aligning unprecedented utility of
an offering with strategic pricing and target costing and by overcoming adoption
hurdles. The book uses many examples across industries to demonstrate how to
break out of traditional competitive (structuralist) strategic thinking and to grow
demand and profits for the company and the industry by using blue ocean
(reconstructionist) strategic thinking. The four principles are:

how to create uncontested market space by reconstructing market boundaries,

focusing on the big picture,
reaching beyond existing demand and
getting the strategic sequence right.
3. The third and final part describes the two key implementation principles of
blue ocean strategy including tipping point leadership and fair process. These
implementation principles are essential for leaders to overcome the four key
organizational hurdles that can prevent even the best strategies from being
executed. The four key hurdles comprise the cognitive, resource, motivational
and political hurdles that prevent people involved in strategy execution from
understanding the need to break from status quo, finding the resources to
implement the new strategic shift, keeping your people committed to
implementing the new strategy, and from overcoming the powerful vested
interests that may block the change
Blue oceans, in contrast, denote all the industries not in existence today the
unknown market space, untainted by competition. In blue oceans, demand is
created rather than fought over. There is ample opportunity for growth that is
both profitable and rapid. In blue oceans, competition is irrelevant because
the rules of the game are waiting to be set. Blue ocean is an analogy to

describe the wider, deeper potential of market space that is not yet explored.
[4][5]
The cornerstone of Blue Ocean Strategy is 'Value Innovation', a concept
originally outlined in Kim & Mauborgne's 1997 article "Value Innovation - The
Strategic Logic of High Growth" (Harvard Business Review 75, January
February 103-112).[6] Value innovation is the simultaneous pursuit of
differentiation and low cost, creating value for both the buyer, the company,
and its employees, thereby opening up new and uncontested market space.
The aim of value innovation, as articulated in the article, is not to compete,
but to make the competition irrelevant by changing the playing field of
strategy. The strategic move must raise and create value for the market,
while simultaneously reducing or eliminating features or services that are less
valued by the current or future market. The Four Actions Framework is used
to help create value innovation and break the value-cost trade-off. Value
innovation challenges Michael Porter's idea that successful businesses are
either low-cost providers or niche-players. Instead, blue ocean strategy
proposes finding value that crosses conventional market segmentation and
offering value and lower cost. Educator Charles W. L. Hill proposed a similar
idea in 1988 and claimed that Porter's model was flawed because
differentiation can be a means for firms to achieve low cost. He proposed that
a combination of differentiation and low cost might be necessary for firms to
achieve a sustainable competitive advantage.

The resource-based view (RBV) is a model that sees resources as key to

superior firm performance. If a resource exhibits VRIO attributes, the resource
enables the firm to gain and sustain competitive advantage.
According to RBV proponents, it is much more feasible to exploit external
opportunities using existing resources in a new way rather than trying to
acquire new skills for each different opportunity. In RBV model, resources are
given the major role in helping companies to achieve higher organizational
performance. There are two types of resources: tangible and intangible.
Tangible assets are physical things. Land, buildings, machinery, equipment
and capital all these assets are tangible. Physical resources can easily be
bought in the market so they confer little advantage to the companies in the
long run because rivals can soon acquire the identical assets.
Intangible assets are everything else that has no physical presence but can
still be owned by the company. Brand reputation, trademarks, intellectual
property are all intangible assets. Unlike physical resources, brand reputation
is built over a long time and is something that other companies cannot buy

from the market. Intangible resources usually stay within a company and are
the main source of sustainable competitive advantage.

The word dynamics appears frequently in discussions and writing about

strategy, and is used in two distinct, though equally important senses.
The dynamics of strategy and performance concerns the content of strategy
initiatives, choices, policies and decisions adopted in an attempt to improve
performance, and the results that arise from these managerial behaviors.
The dynamic model of the strategy process is a way of understanding how
strategic actions occur. It recognizes that strategic planning is dynamic, that
is, strategy-making involves a complex pattern of actions and reactions. It is
partially planned and partially unplanned.
A literature search shows the first of these senses to be both the earliest and
most widely used meaning of strategy dynamics, though that is not to
diminish the importance of the dynamic view of the strategy process.

The Peter Drucker theory of management is a series of founding

principles that reflect the importance of modern management objectives in
today's society. The Peter Drucker theory reflects the significance of
organizational environments and the ability of managers to work collectively
with their employees to initiate change and progress. Peter Drucker and
management are essential to the evolution and growth of today's small and
large businesses.
The Peter Drucker management theory is essential to the social and
organizational aspects of modern management processes. Drucker's theory
reflects many timely aspects of organizational management, including
flexible hours, virtual processes, and team building exercises. The Peter
Drucker management theory addresses knowledge management and the
ability of workers to share information effectively.
1. The management theory of Peter Drucker addresses unique designs for the
future of business management.
2. Inventing management is one of Peter Drucker's most influential principles.

3. A knowledge society reflects the significance of information sharing in

today's small and large organizations.