Module 2

Vision
It outlines what the organization wants to be, or how it wants the world in
which it operates to be. It is a long-term view and concentrates on the
future. It can be emotive and is a source of inspiration. For example, a
charity working with the poor might have a vision statement which reads
"A World without Poverty."
Mission
Defines the fundamental purpose of an organization or an enterprise,
succinctly describing why it exists and what it does to achieve its vision. For
example, the charity above might have a mission statement as "providing
jobs for the homeless and unemployed".
Characteristics of Vision statement
In order to develop an effective shared vision statement, any company also
need to be able to describe the kinds of relationships that they want with:
a) His Customers,
b) His Suppliers,
c) His Competitors, and of course with his Team.
The main purpose of the vision statement is to outline the :dream state of
the business. In other words: if your business could be everything you
dreamed, how would it be?
Vision statement of Bill Gates
Bill Gates
There will be a personal computer on every desk running Microsoft
software. And now perhaps a little less famous, but still real example of a
vision statement from the real world (my company):
Components of Mission Statement
A Mission Statement describes how your business is going to accomplish its
vision.
The Mission Statement describes the what of your business. It states why
your organization is in business and what you are hoping to achieve.

A typical mission statement contains three components:

1. The overall purpose of your business - what are you trying to achieve.
2. What your business does - products and services it provides.
3. What's important to your business - the values your business lives by.
Mission statement of Dell
"With the power of Dell's team of talented people, we are able to provide
customers with superb value; high-quality, relevant technology; customized
systems; superior service and support; and products and services that are
easy to buy and use".
Purpose: provide customers with superb value technology
Business: high quality, relevant technology, customized systems
Values: superior service and support, easy to buy, easy to use
Objectives & goals
Objectives are open ended attributes that denote the future states or
outcomes.
Refer to the operational side of business
Goals are the close ended attributes& are prcised & expressed in specific
terms.
Objectives are the ends which state how the goals will be achieved.
An organization tries to its purpose into long term objectives &
Short term goals.
Different objectives are pursued like continuity of profits, efficiency, product
quality, employee satisfaction etc.
Goals are qualitative, objectives are mainly quantitative.
Thus objectives are measurable & comparable.
An organization may pursue multiple objectives.
Importance of objectives
Justify the organization

 Provide direction
Basis for management by objectives
Helps in strategic planning & management
Helps coordination
Provides standards for assessment & control
Helps decentralization
Characteristics of ideal objectives
Formulation should involve participation
They should be clear
Realistic
Flexibility
Consistency
Ranking (assigning priorities)
Verifiability
Balance
Understandable
Concrete & specific
Challenging
Should be in the constraints

What objectives are set?

Profit
Employee welfare
Marketing
Growth
Quality products & services
Power
Social responsibility of business
Business definition
Dimensions of business: Customer functions:-what is being satisfied; freshness, germs fight,
protection
Customer groups: - who is being satisfied; oral ,care, dental
protection
Alternative strategies: - how the need is being satisfied, paste powder,
foam
Business policy
It involves all member of organization
Explicit or implicit
Decision making process

 Formulated for frequent happenings

Pyramids of policies policies procedures ,standard operating plans
all guide to act but differ in the degree of guidance
Features of business policy
Credibility
Acceptability
Feasibility
Clear and consistent
Proper communication
Flexible
Relative to objectives
Policies should not be the result of opportunistic decisions
Determinants of business policy
Internal factors Mission
Objectives
Strength and weakness
Management value orientation
External factors Market structure
Nature of industry

 Economic and government policies

Technological social and political situation

Importance of business policy
For learning the course
Integrates knowledge
Deals with constraint and complexity of real life business
Broad perspective
Make study and practice of management more meaningful
For understanding business environment
Formulation of policies
Makes management receptive
Reduces feeling of isolation
For understanding the organization
Presents a basic frame work for understanding decision making
Brings the knowledge in strategic decision making
Importance of job performance
For personal development
Career choice

 Offers unique perspective to employees

Purpose of business policy
Integrate the knowledge in various functional areas of management
Generalist approach (problem solving)
Understand complex linkage with the operating system
Formulation of business policy
Goal specification and priorities
Identification of policy alternatives
Evaluation of policy alternatives
Check the acceptability
Choice of policy
Impact of external and internal environment
Function of business policy
Policy establishes indirect control over independent actions
Policy promotes uniform handling of similar activities
Ensures quicker decision
Institutionalize basic aspect of organization
Reduces uncertainty
Counter act resistance
Mechanism of avoiding hasty and ill decisions

Environmental scanning
Environmental scanning or analysis of environment is the diagnostic
phase of strategic management .It means the monitoring, evaluating&
dissemination of information from the external & internal environment to
the key people with the corporation.
The simplest way to conduct environmental scanning is through SWOT
analysis and PESTEL analysis.
SWOT is an acronym used to describe the particular strength, weakness,
opportunity and threat. The external environment consist of variables that
are outside the organization and not within the control of top
management .The internal environment of corporation consist of variables
that are within the organization and are not usually within the control of
outside parties.
SWOT Analysis
Strength is an inherent capacity which an organization can use to gain
strategic advantage.
Weakness is an inherent limitation or constraint which creates strategic
disadvantage.
Opportunity is a favorable condition in the organizations environment
which enables it to strengthen its position.
Threat is an unfavorable condition in the organizations environment which
creates a risk for or causes damage to the organization.

PESTEL Analysis
These are the factors affecting external environment .PESTEL is the
acronym used to describe the political, economic, social, technological,
environmental and legal environment of an industry or corporation.
1. Political: These factors determine the extent to which a government
may influence the economy or a certain industry. [For example] a
government may impose a new tax or duty due to which entire
revenue generating

structures of organizations might change. Political factors include tax

policies, Fiscal policy, trade tariffs etc. that a government may levy
around the fiscal year and it may affect the business environment
(economic environment) to a great extent.
2. Economic: These factors are determinants of an economys
performance that directly impacts a company and have resonating
long term effects. [For example] a rise in the inflation rate of any
economy would affect the way companies price their products and
services. Adding to that, it would affect the purchasing power of a
consumer and change demand/supply models for that economy.
Economic factors include inflation rate, interest rates, foreign
exchange rates, economic growth patterns etc. It also accounts for the
FDI (foreign direct investment) depending on certain specific
industries whore undergoing this analysis.
3. Social: These factors scrutinize the social environment of the market,
and gauge determinants like cultural trends, demographics,
population analytics etc. An example for this can be buying trends for
Western countries like the US where there is high demand during the
Holiday season.
4. Technological: These factors pertain to innovations in technology
that may affect the operations of the industry and the market
favorably or unfavorably. This refers to automation, research and
development and the amount of technological awareness that a
market possesses.

5. Legal: These factors have both external and internal sides. There are
certain laws that affect the business environment in a certain country
while there are certain policies that companies maintain for
themselves. Legal analysis takes into account both of these angles and
then charts out the strategies in light of these legislations. For
example, consumer laws, safety standards, labor laws etc.
6. Environmental: These factors include all those that influence or are
determined by the surrounding environment. This aspect of the
PESTLE is crucial for certain industries particularly for example
tourism,

farming,

agriculture

etc.

Factors

of

business

environmental analysis include but are not limited to climate,

weather,

geographical

environmental offsets etc.

location,

global

changes

in

climate,

Industry and Competitor Analysis

Industry Analysis
An industry is a group of firms producing a
similar product or service, such as music, fitness drinks, or electronic
games. Industry analysis is business research that focuses on the potential
of an industry. Once it is determined that a new venture is feasible in
regard to the industry and market in which it will compete, a more in
depth analysis is needed to earn the insandouts of the industry the firm
plans to enter. This analysis helps a firm determine if the niche markets it
identified during feasibility analysis are accessible and which ones

represent the University of Zurich ISU Institute for Strategy and

Business Economics Ulrich Kaiser A primer in Entrepreneurship Spring
semester 2008 3 during feasibility analysis are accessible and which ones
represent the best point of entry for a new firm.

When studying an industry, an entrepreneur must answer three questions

before pursuing the idea of starting a firm:
1) Is the industry accessiblein other words, is it a realistic place for a
new venture to enter?
2) Does the industry contain markets that are ripe for innovation or are
underserved?
3) Are there positions in the industry that will avoid some of the
negative attributes of the industry as a whole?
It is useful for a new venture to think about its position at both
the company level and the product or service level. At the company level, a
firms position determines how the entire company is situated relative to its
competitors.
The Importance of Industry Versus Firm Specific Factors
Firmlevel factors include a firms assets, products, culture,
teamwork among its employees, reputation, and other resources.
Industryspecific factors include the threat of new entrants, rivalry
among existing firms, the bargaining power of suppliers, and other
factors
In various studies, researchers have found that from eight to 30
percent of the variation in firm profitability is directly attributable to
the industry University of Zurich ISU Institute for Strategy and
Business Economics Ulrich Kaiser A primer in Entrepreneurship
Spring semester 2008 6 the variation in firm profitability is directly
attributable to the industry in which a firm competes.
Industry Types and the Opportunities They Offer Emerging Industries
Types of industries

Emerging Industries: industries in which standard operating

procedures have yet to be developed.

Fragmented Industries: industries that are characterized by a large

number of firms of approximately equal size.
Mature Industries: industries that are experiencing slow or no
increase in demand
Declining Industries: industries that are experiencing a reduction in
demand. Opportunities: leadership, establishing a niche market, and
pursuing a cost reduction strategy.
Global Industries: industries that are experiencing significant
international sales. Opportunities: multi domestic and global
strategies.
Competitor Analysis
After a firm has gained an understanding of the industry and
markets in which it plans to compete, the next step is to complete a
competitor analysis.
A competitor analysis is a detailed analysis a firms competition. It
helps a firm understand the positions of its major competitors and
the opportunities that are available to obtain a competitive advantage
in one or more areas
A competitive analysis grid is a tool for organizing the information a
firm collects about its primary competitors.

INTERNAL APPRAISAL

Meaning

 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.

It also involves finding out those internal issues because of which the
company might expect threats from the external environment.
Purpose, role and importance
1. Stands in capabilities and strength & weakness
2. Opportunity to be tapped in line with its capability
3. Match the Objective in line with its capability
4. Asses the capability gap
5. Select the specific lines in which it can grow
Internal factors to be analyzed
FINANCIAL & ACCOUNTING: Financial resources & strength, liquidity cash flow
Cost of capital
Relations with owners & stock holders.
Tax conditions
Financial planning
MARKETING & DISTRIBUTUING FACTORS: Product related

: variety, differentiation

Price related
Place

: logistics, channels of distribution

Promotion

: advertising, sales promotion, PR

 Integrative system : market research, packaging of product

PRODUCTION & OPERATION FACTORS; Use of RM

Production system, capacity
Location
Service design
Operation & control
Product planning
Material supply
Quality control
Lower cost, inventory
Capacity utilization
PERSONNEL CAPABILIY FACTORS: Use of HR skills
Safety welfare, security appraisal
Satisfaction morale, compensation, climate , structure, trade
unionism
INFORMATION CAPABILITY: Flow of information. Outside & within
DBMS, use of information

 Speed & IT infrastructure

GENERAL MANAGEMENT; Strategic analysis & intent formulation

Rewards & incentives

Goals & competence
CSR
Organization climate & regulations
R & D ENGINEERING:
New improved production
Material , processes
Cost advantage
Research capability
SOURCES OF INFORMATION:Internal
Employee opinion
Company files & documents
Financial statements
MIS
Annual reports
Functional area profile
External

 Comparative appraisal
Company reports &magazine
Through consultants

Methods & Techniques

INTERNAL ANALYSIS
Value chain analysis
Qualitative
Quantitative
Financial
Non-financial
METHODS AND TECHNIQUES
INTERNAL ANALYSIS
Value chain analysis
-Value chain analysis allows the firms to understand the parts of its
operations that create value and those that do not. Understanding these
issues is important because the firm earns above-average returns only
when the value it creates is greater than the costs incurred to create the
value
-In value-chain analysis the business activities are divided into two
categories: primary activities and support activities.

 Qualitative
- Corporate culture
- Knowledge
- Moral
Quantitative
- Financial (ratio analysis)
- Non-financial (analysis employee turnover, inventory units,
absenteeism)
Comparative (strength & weakness & distinctive competencies)
- Historical
- Industry norms
- Bench marking (a point for purpose of meeting best
practices performances, process.
Comprehensive
- balance score card

- Key factor rating

Key factor rating
Market - product, service , price
Financial -source of funds, usage & management
Operations- production system, operation & control
Personnel -IR ,employee characteristics
information management; acquisition, synthesis & processing, usage

Module 3
Strategy formulation
Strategy formulation refers to the process of choosing the most
appropriate course of action for the realization of organizational goals and
objectives and thereby achieving the organizational vision.
The process of strategy formulation basically involves six main steps.
1. Setting Organizations objectives

The key component of any strategy statement is to set the long-term

objectives of the organization. It is known that strategy is generally a
medium for realization of organizational objectives. Objectives stress the
state of being there whereas Strategy stresses upon the process of reaching
there. Strategy includes both the fixation of objectives as well the medium
to be used to realize those objectives. Thus, strategy is a wider term which
believes in the manner of deployment of resources so as to achieve the
objectives.
While fixing the organizational objectives, it is essential that the factors
which influence the selection of objectives must be analyzed before the
selection of objectives. Once the objectives and the factors influencing

strategic decisions have been determined, it is easy to take strategic

decisions.
2. Evaluating the Organizational Environment
The next step is to evaluate the general economic and industrial
environment in which the organization operates. This includes a review of
the organizations competitive position. It is essential to conduct a
qualitative and quantitative review of an organizations existing product
line. The purpose of such a review is to make sure that the factors
important for competitive success in the market can be discovered so that
the management can identify their own strengths and weaknesses as well as
their competitors strengths and weaknesses.
After identifying its strengths and weaknesses, an organization must keep a
track of competitors moves and actions so as to discover probable
opportunities of threats to its market or supply sources.
3.

Setting Quantitative Targets

In this step, an organization must practically fix the quantitative target

values for some of the organizational objectives. The idea behind this is to
compare with long term customers, so as to evaluate the contribution that
might be made by various product zones or operating departments.

4. Aiming in context with the divisional plans

In this step, the contribution made by each department or division or
product category within the organization is identified and accordingly
strategic planning is done for each sub-unit. This requires a careful analysis
of macroeconomic trends.
5. Performance Analysis
Performance analysis includes discovering and analyzing the gap between
the planned or desired performance. A critical evaluation of the
organizations past performance, present condition and the desired future
conditions must be done by the organization. This critical evaluation

identifies the degree of gap that persists between the actual reality and the
long-term aspirations of the organization. An attempt is made by the
organization to estimate its probable future condition if the current trends
persist.
6. Choice of Strategy
This is the ultimate step in Strategy Formulation. The best course of action
is actually chosen after considering organizational goals, organizational
strengths, potential and limitations as well as the external opportunities
Strategy
A strategy is a plan of action designed to achieve a specific goal or series of
goals within an organizational framework.
TYPES OF STRATEGY
Integration Strategies

Type of Strategies

Defensive Strategies

Intensive Strategies

Diversification Strategies

Integration Strategy

Horizontal
Integration
Backward
Forward
Vertical
Integration

Integration
Strategy

Vertical Integration
Vertical integration is the degree to which a firm owns its upstream
suppliers and its downstream buyers

Vertical Integration: Backward Integration

Seven guidelines for when backward integration may be an especially
effective strategy are:
When an organizations present suppliers are especially expensive, or
unreliable.
When the number of suppliers is small and the number of
competitors is large.
When an organization competes in an industry that is growing
rapidly.
When an organization has both capital and human resources to
manage the new business of supplying its own raw materials.

 When the advantages of stable prices are particularly important.

When present supplies have high profit margins, which suggests that
the business of supplying products or services in the given industry is
a worthwhile venture.
When an organization needs to quickly acquire a needed resource.

Vertical Integration: Forward Integration

A company tends toward forward vertical integration when it controls
distribution centers and retailers where its products are sold.
Vertical Integration: Forward Integration
Six guidelines for when forward integration may be an especially
effective strategy are:
When an organizations present distributors are especially expensive,
or unreliable
When the availability of quality distributors is so limited as to offer a
competitive advantage to those firms that integrate forward.
When the advantages of stable prices are particularly important.
When present supplies have high profit margins, which suggests that
the business of supplying products or services in the given industry is
a worthwhile venture.
When an organization needs to quickly acquire a needed resource.
When an organization competes in an industry that is growing and is
expected to continue to grow markedly.
When the advantages of stable prices are particularly important.
When present supplies have high profit margins, which suggests that
the business of supplying products or services in the given industry is
a worthwhile venture.
When an organization needs to quickly acquire a needed resource.

Horizontal Integration
It is a strategy of seeking ownership of or increased control over a
firms competitors.
Growth strategy.
Mergers, acquisitions and takeovers among competitors allow for
increased economies of scale and enhanced transfer of resources and
competencies.
Horizontal Integration : Examples
Horizontal integration is accomplished by expansion into additional
business activities that are within the same level of the value chain.
Using the gemstones as an example, a wholesale jeweler could acquire
or merge with another wholesale jeweler in an attempt to
horizontally integrate the company.
These five guidelines indicate when horizontal integration may be an
especially effective strategy
When an organization can gain monopolistic characteristics in a
particular area or region without being challenged by the federal
government for tending substantially to reduce competition.
When an organization competes in a growing industry.
When increased economies of scale provide major competitive
advantages.
When an organization has both the capital and human talent needed
to successfully manage an expanded organization.
When competitors are faltering due to a lack of managerial expertise
or a need for particular resources that an organization possesses

Intensive Strategy

MarketDevelopment
Penetration
Product
Market
Development

Intensive
Strategy

The strategies require intensive efforts if a firms competitive

position with existing products is to improve.
Types of Strategies: Intensive Strategies
Market Penetration
A market penetration strategy seeks to increase market share for
present products or services in present markets through greater
marketing efforts.
Market penetration includes increasing the number of salespersons,
increasing advertising expenditures, offering extensive sales
promotion items, or increasing publicity efforts
Market development involvesintroducing present products or services
into new geographic areas.
These six guidelines indicate when market development may be an
especially effective strategy:

 When new channels of distribution are available that are reliable,

inexpensive, and of good quality.
When an organization is very successful at what it does.
When an organization has the needed capital and human resources to
manage expanded operations.
When an organization has excess production capacity.
When an organizations basic industry is rapidly becoming global in
scope.
Product Development
Product development is a strategy that seeks increased sales by
improving or modifying present products or services.
Product development usually entails large research and development
expenditures.
Googles new Chrome OS operating system illuminates years of
money spent on product development. Google expects Chrome OS to
overtake Microsoft Windows by 2015.
DEFENSIVE STRATEGY
Meaning

A management approach designed to reduce the risk of loss is known as

defensive strategies.

Types

1. Joint Venture

Two or more companies form a temporary partnership to reduce

each others competition, or to survive in a highly competitive
situation.

2.Retrenchment

Regrouping through cost and asset reduction to reverse declining sales and
profit. Sometimes it is called turnaround or reorganizational strategy.

3.Divestiture

A divestiture strategy is pursued when a company sells or divests

itself of a business or part of a business.
It may because of loss, less than target rate of return, urgency to
mobilise funds, managerial problems, or redefinition of the business
of the company.

4.Liquidation

Selling all of a companys assets, in parts, for their tangible worth.

Strategic Analysis

A strategic analysis for a business is one of the most basic and useful tools
for strategic business planning.It is the process of conducting research on
the business environment within which an organisation operates and on the
organisation itself, in order to formulate strategy.
The following attributes are commonly associated with it:
1. Identification and evaluation of data relevant to strategy formulation.
2. Definition of the external and internal environment to be analysed.
3. A range of analytical methods that can be employed in the analysis
Tools for Strategic Analysis
SWOT ANALYSIS
INDUSTRY ANALYSIS
DRIVING FORCE ANALYSIS
BCG MATRIX
VALUE CHAIN ANALYSIS
McKinsey 7S ANALYSIS
1. SWOT Analysis- This tool for strategic analysis was developed by Albert
Humprey for identifying opportunities and threats in the business
environment as well as strength and weakness within a firm. This tool
can be used for analysing the connectivity between environmental forces
and strategic capability, in so doing identifying key factors that
determine new strategies and providing a platform for testing and
validating strategic initiatives.
SWOT analysis starts by defining the objective of the project or business
activity and identifies the internal and external factors that are important
to achieving that objective. strengths and weaknesses are usually internal to
the organisation, while opportunities and threats are usually external.
2. Industry Anlysis- This aims at identifying and evaluating all the forces
that operates within and around the specific industry where a firm
competes. Industry analysis is also known as Five force analysis.

The framework for the Five Forces Analysis consists of these

competitive forces:
Industry rivalry (degree of competition among existing firms)intense
competition leads to reduced profit potential for companies in the same
industry
Threat of substitutes (products or services)availability of substitute
products will limit your ability to raise prices
Bargaining power of buyerspowerful buyers have a significant impact
on prices
Bargaining power of supplierspowerful suppliers can demand
premium prices and limit your profit
Barriers to entry (threat of new entrants)act as a deterrent against
new competitors
3. Driving Force Analysis- This tool is used for identifying the driving
forces of change and uncertainties in an industry in addition to assessing
their impact and proper solution.
How to conduct Driving Force Analysis
Identify all main driving forces in a particular industry.
Assess and rank the impact of each driving forces.
Consider impact and proper solution.
The link between driving forces and strategy
Sound analysis of an industrys driving forces is a prerequisite to sound
strategy making. Without keen awareness of what external factors will
produce the biggest potential changes in the companys business over
the next one to three years, managers will ill prepare to craft (pay
attention to the usage of this wordwhy not use MAKE) a strategy
tightly matched to emerging conditions. Similarly, if managers are
uncertain about the implications of each driving force or if their views
are incomplete or off-base, its difficult for them to craft a strategy that
is responsive to the driving forces and their consequences for the
industry. So driving forces is not something to take lightly; it has
practical strategy-making value and is basic to the task of thinking

strategically about where the industry is headed and how to prepare for
the changes.
Comparative Cost Analysis
Cost-Benefit Analysis
Cost-Benefit Analysis is the implicit or explicit assessment of the
benefits and costs (i.e., pros and cons, advantages and disadvantages)
associated with a particular choice.Benefits and costs may be monetary
(pecuniary) or non-monetary (non-pecuniary, psychic).
Costbenefit analysis is often used by governments and other
organizations, such as private sector businesses, to appraise the desirability
of a given policy. It is an analysis of the expected balance of benefits and
costs, including an account of foregone alternatives and the status quo.
CBA helps predict whether the benefits of a policy outweigh its costs, and
by how much relative to other alternatives (i.e. one can rank alternate
policies in terms of the costbenefit ratio). Generally, accurate costbenefit
analysis
identifies
choices
that
increase welfare from
a utilitarian perspective. Assuming an accurate CBA, changing the status
quo by implementing the alternative with the lowest costbenefit ratio can
improve Pareto efficiency. An analyst using CBA should recognize that
perfect appraisal of all present and future costs and benefits is difficult, and
while CBA can offer a well-educated estimate of the best alternative,
perfection in terms of economic efficiency and social welfare are not
guaranteed
Evaluation
CBA attempts to measure the positive or negative consequences of a
project, which may include:
1. Effects on users or participants
2. Effects on non-users or non-participants
3. Externality effects
4. Option value or other social benefits.
A similar breakdown is employed in environmental analysis
of total economic value. Both costs and benefits can be diverse. Financial

costs tend to be most thoroughly represented in cost-benefit analyses due to

relatively abundant market data. The net benefits of a project may
incorporate cost savings or public willingness to pay compensation
(implying the public has no legal right to the benefits of the policy)
or willingness to accept compensation (implying the public has a right to
the benefits of the policy) for the welfare change resulting from the policy.
The guiding principle of evaluating benefits is to list all (categories of)
parties affected by an intervention and add the (positive or negative) value,
usually monetary, that they ascribe to its effect on their welfare.
The actual compensation an individual would require to have
their welfare unchanged by a policy is inexact at best. Surveys (stated
preference techniques)
or
market
behaviour
(revealed
preference techniques) are often used to estimate the compensation
associated with a policy; however, survey respondents often have strong
incentives to misreport their true preferences and market behaviour does
not provide any information about important non-market welfare impacts.
One controversy is valuing a human life, e.g. when assessing road
safety measures or life-saving medicines. However, this can sometimes be
avoided by using the related technique of cost-utility analysis, in which
benefits are expressed in non-monetary units such as quality-adjusted life
years. For example, road safety can be measured in terms of cost per life
saved, without formally placing a financial value on the life. However, such
non-monetary metrics have limited usefulness for evaluating policies with
substantially different outcomes. Additionally, many other benefits may
accrue from the policy, and metrics such as 'cost per life saved' may lead to
a substantially different ranking of alternatives than traditional cost
benefit analysis.
Another controversy is valuing the environment, which in the 21st
century is typically assessed by valuing ecosystem services to humans, such
as air and water quality and pollution. Monetary values may also be
assigned to other intangible effects such as business reputation, market
penetration, or long-term enterprise strategy alignment.
Present Value

Future, as well as present, benefits and costs must be included in the

analysis.But costs and benefits that accrue in the future are worth less than
costs and benefits today. Economic agents and society as a whole will
maximize the present value of expected net benefits. Costs and benefits may
occur over different periods of time, e.g., costs for a dam built today may be
spent primarily during the initial period of the project, but benefits will
accrue over the lifetime of the dam.
To account for all costs and benefits in the same units across time periods,
we calculate the present value of net benefits:
PV(NB) = Zigmat NB/(1+r)t
Net present value
In finance, the net present value (NPV) or net present
worth (NPW) is defined as the sum of the present values (PVs) of incoming
and outgoing cash flows over a period of time. Incoming and outgoing cash
flows can also be described as benefit and cost cash flows, respectively.
Time value of money dictates that time has an impact on the value
of cash flows. Cash flows of nominal equal value over a time series result in
different effective value cash flows that makes future cash flows less
valuable over time. If for example there exists a time series of identical cash
flows, the cash flow in the present is the most valuable, with each future
cash flow becoming less valuable than the previous cash flow. Thus, a cash
flow today is more valuable than an identical cash flow in the future. This
decrease occurs because the discount factor represents the expected rate of
return of each cash flow in a different investment with identical risk. With
each additional period, the present value of a subsequent future cash flow
decreases.
The NPV of an investment is determined by calculating the
present value (PV) of the total benefits and costs which is achieved by
discounting the future value of each cash flow (see Formula). NPV is a
useful tool to determine whether a project or investment will result in a net
profit or a loss because of its simplicity. A positive NPV results in profit,
while a negative NPV results in a loss. The NPV measures the excess or
shortfall of cash flows, in present value terms, above the cost of funds. In a

theoretical situation of unlimitedcapital budgeting a company should

pursue every investment with a positive NPV. However, in practical terms a
company's capital constraints limit investments to projects with the highest
NPV whose cost cash flows do not exceed the company's capital. NPV is a
central tool in discounted cash flow (DCF) analysis and is a standard
method for using thetime value of money to appraise long-term projects. It
is widely used throughout economics, finance, and accounting.
In the case when all future cash flows are incoming (such as
the principal and coupon payment of a bond) the only outflow of cash is the
purchase price, the NPV is simply the PV of future cash flows minus the
purchase price (which is its own PV). NPV can be described as the
difference amount between the sums of discounted cash inflows and cash
outflows. It compares the present value of money today to the present value
of money in the future, taking inflation and returns into account.
The NPV of a sequence of cash flows takes as input the cash flows
and a discount rate or discount curve and outputs a price. The converse
process in DCF analysis taking a sequence of cash flows and a price as
input and inferring as output a discount rate (the discount rate which
would yield the given price as NPV) is called the yield and is more
widely used in bond trading.
Formula
Each cash inflow/outflow is discounted back to its present value (PV). Then
they are summed. Therefore NPV is the sum of all terms,

where
the time of the cash flow
the discount rate (the rate of return that could be earned on an
investment in the financial markets with similar risk.);
the opportunity cost of capital
the net cash flow i.e. cash inflow cash outflow, at time t. For
educational purposes,

is commonly placed to the left of the sum to

emphasize its role as (minus) the investment.

The result of this formula is multiplied with the Annual Net cash
in-flows and reduced by Initial Cash outlay the present value but in cases
where the cash flows are not equal in amount, then the previous formula
will be used to determine the present value of each cash flow separately.
Any cash flow within 12 months will not be discounted for NPV purpose,
nevertheless the usual initial investments during the first year R0 are
summed up a negative cash flow.

Given the (period, cash flow) pairs ( ,

periods, the net present value

) where

is the total number of

is given by:

Many computer-based spreadsheet programs have built-in

formulae for PV and NPV

NPV: decision criteria

For a single project, a positive NPV indicates acceptability

For multiple (competing) projects, the project(s) with the
highest NPVs should receive highest priority

Benefitcost ratio
A benefit-cost ratio (BCR) is an indicator, used in the formal
discipline of cost-benefit analysis, that attempts to summarize the
overall value for money of a project or proposal. A BCR is the ratio of the
benefits of a project or proposal, expressed in monetary terms, relative to

its costs, also expressed in monetary terms. All benefits and costs should be
expressed in discounted present values.
Benefit cost ratio (BCR) takes into account the amount of
monetary gain realized by performing a project versus the amount it costs
to execute the project. The higher the BCR the better the investment.
General rule of thumb is that if the benefit is higher than the cost the
project is a good investment.
BCR = Discounted value of incremental benefits Discounted value of
incremental costs
Accept all projects with a BCR greater than 1, when costs and benefits are
discounted at the opportunity cost of capital.
Benefit/Cost ratio: decision criteria
For a single project, a B/C ratio which is greater than 1
indicates acceptability
For multiple (competing) projects, the project(s) with the
highest B/C ratios (greater than 1) should receive highest
priority

Internal rate of return

The internal rate of return (IRR) or economic rate of
return (ERR) is a rate of return used in capital budgeting to measure and
compare the profitability of investments. It is also called the discounted
cash flow rate of return (DCFROR).In the context of savings and loans, the
IRR is also called the effective interest rate. The term internal refers to the
fact that its calculation does not incorporate environmental factors (e.g.,
the interest rate or inflation).

The internal rate of return on an investment or project is the

"annualized effective compounded return rate" or rate of return that
makes the net present value (NPV as NET*1/(1+IRR)^year) of all cash
flows (both positive and negative) from a particular investment equal to
zero. It can also be defined as the discount rate at which the present value
of all future cash flow is equal to the initial investment or in other words
the rate at which an investment breaks even.
In more specific terms, the IRR of an investment is
the discount rate at which the net present value of costs (negative cash
flows) of the investment equals the net present value of the benefits
(positive cash flows) of the investment.
Calculation
Given a collection of pairs (time, cash flow) involved in a project,
the internal rate of return follows from the net present value as a function
of the rate of return. A rate of return for which this function is zero is an
internal rate of return.
Given the (period, cash flow) pairs ( ,
integer, the total number of periods
internal rate of return is given by

) where

is a positive

, and the net present value

, the

in:

The period is usually given in years, but the calculation may be

made simpler if is calculated using the period in which the majority of the
problem is defined (e.g., using months if most of the cash flows occur at
monthly intervals) and converted to a yearly period thereafter.
Any fixed time can be used in place of the present (e.g., the end of
one interval of an annuity); the value obtained is zero if and only if the
NPV is zero.
In the case that the cash flows are random variables, such as in the case of
a life annuity, the expected values are put into the above formula.

Often, the value of

cannot be found analytically. In this case, numerical

methods or graphical methods must be used.

Internal Rate of Return: decision criteria
For a single project, an IRR which is greater than the selected (for B/C
and/or NPV analysis) discount rate indicates acceptability

For multiple (competing) projects, the one with the largest IRR is the
most desirable
It has a certain attraction, but also has some problems
The argument that an IRR which is greater than the selected discount
rate is desirable can be questioned - discount rates can be arbitrary!
Calculation (by hand) is tedious & prone to error (but modern
spreadsheets are a help)
Under certain conditions there may be more than one correct solution
to an IRR problem
What is Portfolio Analysis ?
Portfolio analysis is a systematic way to analyse the products and services
that make up an association's business portfolio. All associations (except
the simplest and the smallest) are involved in more than one business.
Some of these include publishing, meetings and conventions, education and
training, government representation, research, standards setting, public
relations, etc. Each of these is one of the association's strategic business
units (SBUs). Each business consists of a portfolio of products and services.
For example, an association's publishing business might include a
professional journal, a lay magazine, specialized newsletters geared to
different member segments, CDs, a website, social networking sites, etc.
Portfolio analysis helps you decide which of these products and services
should be emphasized and which should be phased out, based on objective
criteria. Portfolio analysis consists of subjecting each of the association's
products and services through a progression of finer screens. During a
time of cutbacks and scarce resources, it is essential to screen out programs

and services that are not essential to most members. Those that appeal to a
more limited segment can be funded by those desiring the product or
service rather than by dues.
There are mainly two models
1. BCG Matrix
2. GE Matrix
1. Boston Consulting Group (BCG) Matrix is a four celled matrix (a 2 * 2
matrix) developed by BCG, USA. It is the most renowned corporate
portfolio

analysis tool. It provides a graphic representation for an organization to

examine different businesses in its portfolio on the basis of their related
market share and industry growth rates. It is a two dimensional analysis on
management of SBUs (Strategic Business Units). In other words, it is a
comparative analysis of business potential and the evaluation of
environment.
According to this matrix, business could be classified as high or low
according to their industry growth rate and relative market share.
Relative Market Share = SBU Sales this year leading competitors sales this
year.
Market Growth Rate = Industry sales this year - Industry Sales last year.
The analysis requires that both measures be calculated for each SBU. The
dimension of business strength, relative market share, will measure
comparative advantage indicated by market dominance. The key theory
underlying this is existence of an experience curve and that market share is
achieved due to overall cost leadership.
BCG matrix has four cells, with the horizontal axis representing relative
market share and the vertical axis denoting market growth rate. The midpoint of relative market share is set at 1.0. if all the SBUs are in same
industry, the average growth rate of the industry is used. While, if all the

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

10 x
x

1
0.1 x
Figure: BCG Matrix

Stars- Stars represent business units having large market share in a

fast growing industry. They may generate cash but because of fast
growing market, stars require huge investments to maintain their
lead. Net cash flow is usually modest. SBUs located in this cell are
attractive as they are located in a robust industry and these business
units are highly competitive in the industry. If successful, a star will
become a cash cow when the industry matures.

Cash Cows- Cash Cows represents business units having a large

market share in a mature, slow growing industry. Cash cows require
little investment and generate cash that can be utilized for investment
in other business units. These SBUs are the corporations key source
of cash, and are specifically the core business. They are the base of an
organization. These businesses usually follow stability strategies.
When cash cows lose their appeal and move towards deterioration,
then a retrenchment policy may be pursued.

Question Marks- Question marks represent business units having low

relative market share and located in a high growth industry. They
require huge amount of cash to maintain or gain market share. They
require attention to determine if the venture can be viable. Question
marks are generally new goods and services which have a good
commercial prospective. There is no specific strategy which can be
adopted. If the firm thinks it has dominant market share, then it can
adopt expansion strategy, else retrenchment strategy can be adopted.
Most businesses start as question marks as the company tries to enter
a high growth market in which there is already a market-share. If
ignored, then question marks may become dogs, while if huge
investment is made, and then they have potential of becoming stars.
Dogs- Dogs represent businesses having weak market shares in lowgrowth markets. They neither generate cash nor require huge
amount of cash. Due to low market share, these business units face
cost disadvantages. Generally retrenchment strategies are adopted
because these firms can gain market share only at the expense of
competitors/rival firms. These business firms have weak market
share because of high costs, poor quality, ineffective marketing, etc.
Unless a dog has some other strategic aim, it should be liquidated if
there is fewer prospects for it to gain market share. Number of dogs
should be avoided and minimized in an organization.

2. GE MATRIX
G.E. multi factorial analysis is a technique used in brand
marketing and product management the market they should continue to
invest in. It is conceptually similar to B.C.G analysis, but somewhat more
complicated. Like in BCG Analysis, a two-dimensional portfolio matrix is
created. However, with the GE model the dimensions are multi factorial.
One dimension comprises nine industry attractiveness measures; the other
comprises twelve internal business strength measures. The G.E matrix
helps a strategic business unit evaluate its overall strength.

Each product, brand, service, or potential product is mapped in this

industry attractiveness/business strength space. The GE multi factorial was
first developed by Mckinsey for General Electric in the 1970s.

Aims of the G.E model

This model aims to evaluate the existing portfolios of strategic business
units and to develop strategies to achieve growth by addition of new
products and businesses to this portfolio and further, to analyze which
business units to invest in and which ones to sell off.
Construction of the G.E Matrix
The G.E matrix is constructed in a 3x3 grid with Market
Attractiveness plotted on the Y-axis and Business Strength on the X-axis,
both being measured on a high, medium, or low score. Five steps must be
considered in order to formulate the matrix;

The range of products produced by the SBU must be listed

Factors which make the particular market attractive must be

identified

Evaluating where the SBU stands in this market

Processes through which calculations about business strength and
market attractiveness can be made

Determining which category an SBU lies in; high, medium, or low.

Market attractiveness

The attractiveness of a market is demonstrated by how beneficial it is for a

company to enter and compete within this market. It is based on various
factors; the size of the market and the rate at which it is growing, the
possibility of profit, the number of competitors within the industry and
their weaknesses
Business/competitive strength]
This helps decide whether a company is competent enough to compete in
the given market(s). It can be determined by factors within the company
itself such

as its assets and holdings, the share it company holds in the market and the
development of this share, the position in the market of its brand and the
loyalty of customers to this brand, its creativeness in coming up with new
and improved products and in dealing with the fluctuating situations of the
market, as well as keeping in mind environmental/government concerns
such as energy consumption, waste disposal etc.

Measuring market attractiveness and business strength

Once the factors that determine the two are identified and rated, each
factor is then given a certain magnitude and a calculation is made as
follows; factor 1 rating x factor 1 magnitude + factor 2 rating x factor 2
magnitude + ..... factor n rating x factor n magnitude.
Plotting
SBU's in the matrix can be represented as a circle; the radius exhibits the
size of the market, the SBU's holdings in the market are equated through a
pie

chart within the circle and an arrow outside the circle shows the standing
of the SBU expected in the future. In the image attached for example, an
SBU holds 45% of the market's shares. The arrow is outwards thus
showing that the SBU is expected to grow and gain strength and then its tip
indicates the future position of the SBU.

Investment Strategies
When considering investment, it must first be seen which box of the matrix
an SBU falls in; grow, selectivity, or harvest.
Grow
SBU's that are classified into this category attract various companies
investment as they are expecting to yield high returns in the future. These
investments should be split into categories such as research and
development, acquisition of other SBU's, extensive advertisements and
expanding production capacity.
Selectivity [
SBU's that hold a lot of ambiguity fall into this category. They are usually
only invested in if there is any prospect of competencies in managerial and
corporate capabilities and if companies have any money left after
investments in 'grow' business units.
Harvest
SBU's performing poorly in unattractive industries are classified into this
category. Companies only invest in them if they generate enough cash to
equal the investment amount, otherwise, they may be liquidated.
Advantages

Raises awareness between managers about the performance of their

products in the market and aids in developing strategies to get
maximum returns from the resources available.

Helps extract information about a business unit's strengths and

weaknesses and to devise strategies to accelerate and improve
performance.

Aids the business in growing and in providing information about

potential market opportunities.

It is more complex in comparison to the BCG matrix.

Limitations

There is no set rule to 'weight' factors and this process may be

subjective across different business unit's. For example, the weight given
to a factor by one business may be different to the weight/importance
given to it by another.

The formulation of a G.E. matrix is very expensive and time

consuming.

Investment strategies are often not implemented in an accurate and

proper manner.

The dynamics among SBU's themselves are not taken into account

Comparison with the BCG matrix

When compared to the BCG matrix consisting of four cells, the GE matrix
is more complex with its nine cells. This means it not only takes longer to
construct, but also to implement. The BCG matrix is a lot more simpler
and the factors needed to construct it are accessed more easily and
quickly.It takes into account a wide range of factors when determining
market attractiveness and business strengths, which is replaced by market
share and market growth in the BCG matrix. Also, where factors are
classified in the G.E matrix as high, medium and low, those in the BCG
matrix are divided between high and low. Moreover, the G.E matrix
overcomes many of the limitations and constraints of the BCG matrix.
Operational Plan
An operational plan can be defined as a plan prepared by a component of
an organization that clearly defines actions it will take to support the
strategic objectives and plans of upper management. However, to fully
understand operational plans, we should first look at the overall planning
process within a business. This diagram shows three levels of planning.

Type of
Plan

Created By

Strategic
plan

Top
Entire
managemen
organization
t

Mission of the
company, future Very broad
goals and
and general
ambitions

Tactical
plan

Single area of
Mid-level
the business as
managemen a whole (e.g. a
t
division of the
company)

Specific actions
to support or
work towards
the strategic
plan

Specific
actions and
ideas, but
not very
detailed

Operation
al plan

A unit within a
single area of
Low-level
the business
managemen (e.g. a
t
department
within a
division)

Specific plans
for low level
and day-to-day
activities and
processes that
will support and
enable the
tactical plan

Extremely
detailed
(who, what,
where and
when)

Scope

Includes

Level of
Detail

Let's summarize the characteristics of an operational plan. First, it assumes

that upper management has prepared both a strategic plan and a tactical
plan. This means that lower management should have a clear sense of what
they are trying to achieve. They just have to come up with a detailed plan
to make it happen!
Second, the operational plan is limited to only one part of the organization.
For example, a large corporation (strategic plan) has a manufacturing
division (tactical plan) that produces products A, B and C. Each product is
manufactured in a separate plant run by a plant manager who prepares a
separate operational plan. Operational plans can be subdivided into two
categories.
Single-use plans address only the current period or a specific
problem.
o An example would be a plan to cut costs during the next year.
On-going plans carry forward to future periods and are changed as
necessary.

o An example would be a long-term plan to retrain workers

instead of layoffs.

Example of Operational Plans

Congratulations, you have just been appointed plant manager for product
C! The division manager (your new boss) has just informed you that part of
the corporate strategic plan is to increase the return to shareholders over
the next five years. The division manager's tactical plan to support the
corporate goal has three parts. First, he wants to cut costs by ten percent
over the next year. Next, he also wants to avoid layoffs and to increase
production by three percent. He asks you to prepare an operational plan
for your plant that will show him what you will do to help him achieve
these goals. He wants to know very specifically what actions you will take,
when these actions will occur and who will perform them. He also wants to
know if you will require any additional financial resources or manpower to
implement your plan.
Let's get started by looking at the tactical plan items and trying to get some
ideas about what you can do.
Single-use or
Ongoing

Resources Required

Improve plant workflow

Single-use

Efficiency study, machine

relocation costs, training
costs

Acquire faster or more

efficient machinery and
equipment

Single-use

Purchase and installation

cost

Reduce inventory levels

Single-use

Production study, supplier

interaction, training costs

Reduce production waste

Single-use

Efficiency study, training

costs

Improve materials handling

procedures

Single-use

Efficiency study, training

costs, new equipment

To Cut Costs Ten Percent

To Avoid Layoffs

Single-use or
Ongoing

Resources Required

Do not replace workers who

quit or retire

Ongoing

None - policy only

Retrain workers for other

positions

Ongoing

Training costs

Increase or maintain sales and

Ongoing
production levels

Marketing costs, quality

control costs

Unlock Your Education

'FINANCIAL PLAN'
A comprehensive evaluation of an investor's current and future financial
state by using currently known variables to predict future cash flows, asset
values and withdrawal plans.
Most individuals work in conjunction with an investment or tax
professional and use current net worth, tax liabilities, asset allocation, and
future retirement and estate plans in developing the plan. These will be
used along with estimates of asset growth to determine if a person's
financial goals can be met in the future, or what steps need to be taken to
ensure that they are
Create a sound financial plan in six steps
1.
2.
3.

Establish your goals in life short, medium and long term

Work out what assets and liabilities you have write them down
Evaluate your current financial position how close are you to
achieving your goals?
4.
Develop your plan create a route map for achieving your
different goals
5.
Implement your plan make the changes and make it happen

6.

Monitor and review your plan at least yearly and make adjustments
when needed

Module - 4

Strategic choice
Choosing one action among several actions selected by the firm to respond
to the changes in the environment, in order to benefit from opportunities or
to avoid unhealthy effects from threats.
The main intention is to achieve the strategic fit between the organization
and its environment in order to accomplish the firms objectives by using
its strengths to overcome its weakness.
Factors to be considered before making a strategic choice
1. An analysis of the environmental analysis 1. SWOT Analysis, 2. PEST
Analysis, 3. Market Analysis (Michael Porters five forces of competitive
strategies)
2. An analysis of the companys resources 1. Financial resource, 2. Human
resource, expertise, 3. core competencies, 4. value chain analysis (Michael
Porters)
3. Portfolio Analysis 1. BCG matrix, 2. PLC, 3. GE screening ( 9 CELL
Model) 4. SHELL Directional Matrix)
Factors to be considered before making a strategic choice
1. Stake holder expectations.
2. The values and preferences of management decision-makers.

3. The realities of organizational climate. 1. Management style 2. Culture 3.

Structure

Strategic choices Strategic choices should meet one or all of the following
criteria
Suitability: refers to considerations as the ability of the strategy to
tackle major problems, improve competitive standing, exploit strengths,
and the extent to which it meets corporate objectives.
Feasibility: It refers to the extent to which that strategy can be achieved
given the financial, physical and human resource base of the company. In
other words, the capability of the company allows the co. to go ahead with a
particular strategy.
Acceptability: The strategy to be adopted should be acceptable to
various interested parties, such as management, employees, shareholders
and customers. Shareholders may be particularly sensitive to strategies of
the acquisition. The ultimate acceptance of a particular strategy might
depend on the attitude of senior management to risk. Sustainability:
this refers to the extent to which the strategy is difficult for others to copy
or how definitely the firm can consistently hold on to its chosen strategy.
Types of strategic options
Miles and Snow (1978) offer four main types of strategy
1. Defensive 2. Prospective 3. Analyser . 4. Reactive
Thinking behind.......
1. Defensive to defend the business
2. Prospective to gain prospects
3. Analyser to survive and sustain

activities

4. Reactive to keep afloat

The defender organization
The key focus of most defenders is to reduce cost and achieve efficiency
through low-cost operations.
The defender is unlikely to innovate and is best suited to stable
environments.

The prospector organization

The prospector organizations operates with a wide range of products in
a growing and usually fast-moving market.
Prospectors tend to focus on innovation and new market opportunities.
Prospector organizations tend to be flexible and decentralized and tend
to be creative while remaining efficient.
The prospector organizations tend to emphasize on R&D and marketing
as the crucial functions.
The analyzer organization
The analyzer organizations are rarely first in the market.
These organizations follow others after a thorough analysis of the
market and the competitors behaviour.
Analyzers can be found in both stable environments where they tend to
emphasize on cost reduction and in changing environments, where they
emphasize product differentiation.
The reactor organization
The reactor organizations tend to have mismatch between environment
and their strategy.
These organizations might not have any strategy at all.
These organizations find it difficult to respond to the changes in the
environment and their strategies could be inappropriate.

ROUTES FOR EXECUTION STRATEGIES

DEFENITION
A strategy is a plan of action designed to achieve a particular goal.
Strategic planning is an organization's process of defining its
strategy, or direction, and making decisions on allocating its
resources to pursue this strategy, including its capital and people.
Routes Execution of strategies
Strengthen accountability for results. Get people focused on the
results they need to accomplish, instead of overloading them with
activities and to-do lists. Start by looking at your organizations
position descriptions. If they list 27 tasks and job responsibilities,
your employees may be confused about which ones are most
important and how to handle so many responsibilities. Instead,
identify the 4-8 ongoing results the position is designed to accomplish
and for which the person is accountable.
Strengthen accountability for behaviours. Any significant business
strategy involves some degree of change in direction, focus,
structure, process, or a number of other factors. What makes it
successful is how well its sponsored by senior management, both in
words and in actions.

Build an employee population that acts like owners.

Companies that are excellent at reaching strategic goals have
developed employee populations who act like owners; they do the
right thing with gusto because its in their own best interests to do so

Strategy implementation
A good strategy without proper implementation is like a poor strategy
or no strategy at all
However having a good strategic plan is half the battle won, and the
other half is won through effective strategy implementation
Strategy means
A Plan of action intended to accomplish a specific goal.
Strategy implementation
It is a process that puts plans and strategies into action to reach goals.
It involves the design and management of systems to achieve the best
integration of ;
People,
Structure,
Processes &
Resources in achieving organizational objectives.
Strategy implementation affects an organization from top to bottom , it
affects all the functional and divisional areas of business.
Facts
Strategy Implementation is critical to a companys success , addressing
the who , where , when and how of reaching the desired goals and
objectives.
Focuses on entire organization.
Implementation occurs after environmental scans, SWOT analysis and
identifying strategic issues and goals

Nature of Strategy Implementation

Is managing forces during the action.

Focuses on efficiency.
Is primarily an operational process.
Requires special motivation and leadership skills.
Requires coordination among many individuals.

Implementation process
Communication / clarification of the goals, objectives and strategies
( at different levels of hierarchy ).
Determine the key managerial and operational tasks to be performed.
Assign tasks to the various departments and their managers / leaders
(depart mentation).
Operationalize those tactics in your strategy.
Determine the necessary indicators for measuring performance
(participatory styles of leadership / management).
Build an information system to provide the required accurate, adequate
and timely feedback
Establish recognition and reward system for motivating your staff.
Delegate authority with responsibility and establish a linking /
coordination mechanism.
Budget and allocate resources to the implementing divisions / departments /
sections
Strategy Formulation Implementation:
Interrelationship
STRATEGY FORMULATION

It is positioning forces before action.

It focuses on effectiveness.
It is an intellectual process
It requires good intuitive and analytical skills.
It requires coordination among few individuals.
Concepts and tools do not differ greatly for small, large, profit or nonprofit organization.

STRATEGY IMPLEMENTATION
It is managing forces during action.
It focuses on efficiency.

It is primarily and operational process.

It requires special motivational and leadership skills.
It requires combination of many individuals.
Concepts and tools vary substantially among small, large, profit or
non-profit organization.
ROLES OF ORGANIZATIONAL STRUCTURE

Organizational structure is the structure that establishment pattern of

relationship among the components or parts of an organization. It includes;

1.
2.

A framework through which the organization operates

pattern of relationships
duties and positions
Existence for purpose.
There are two dimensions,
Horizontal
Vertical
Traditional and modern structures
The achievement of the objectives of the enterprise efficiently
Organization involves grouping of activities
The responsibility for each group of activities is assigned to a
manager who has the authority to carry out the activities
Co-ordination horizontally and vertically
An organization structure should make clear the role, responsibility
and authority of everyone in the organization
Proper flow of communication

WHAT IS AN ORGANIZATION?
A social unit of people systematically structured and managed to
meet a need or to pursue collective goals on a continuing basis.
WHY DO WE NEED AN ORGANIZATIONAL STRUCTURE?
All organizations have a management structure that determines
the relationships between functions and positions and subdivides and

delegates roles, responsibilities and authority to carry out defined

tasks.
ORGANIZATIONAL STRUCTURE
It is a framework within which an organization arranges its lines of
authorities and communications and allocates rights and duties.
TYPES OF ORGANIZATIONAL STRUCTURE
1. Tall organizational structure
Large, complex organizations often require a taller
hierarchy.
In its simplest form, a tall structure results in one long
chain of command similar to the military
As an organization grows, the number of management
levels increase and the structure grows taller. In a tall
structure, a manager from many ranks and each has a
small area of control.

2. Flat organizational structure

It has fewer management levels, with each level
controlling a broad area or group.
Flat organizations focus on empowering employees
rather than adhering to the chain of command.
By encouraging autonomy and self-direction, flat
structures attempt to tap into employees creative
talents and to solve by collaboration.

3. Virtual organizational structure

Virtual organization can be thoughts of as a way in which
an organization uses information and communication
technologies to replace or augment some aspect of the
organization.

 People who are virtually organized primarily interact by

electronic means.
For example, many customers and consultants together
via telephone or the internet and problems solved
without ever bringing people together face to face.
4. Boundary less organizational structure
A boundary less organizational structure is a
contemporary approach in organizational design.
It is an organization that is not defined by, or limited to
the horizontal, vertical or external boundaries imposed
by a pre-defined structure.
It behaves more like an organism encouraging better
integration among employees and closer partnership
with stakeholders.
Its highly flexible and responsive and draws on talent
wherever its found.
FEATURES OF ORGANIZATIONAL STRUCTURE
Determines the manner and extent to which roles, power and
responsibilities are delegated.
Depends on objectives and strategies.
Depends as a perspective through which individual can see their
organization and its environment.
IMPORTANCE OF ORGANIZATIONAL STRUCTURE

Impacts effectiveness and efficiency.

Reduces redundant actions.
Promotes teamwork.
Improves communication.
Contributes to success or failure.

PURPOSE OF ORGANIZING
Divides work to be done in specific jobs and department.
Assigns tasks and responsibilities associated with individual jobs.
Coordinates diverse organizational tasks.

 Establishes formal lines of authority.

Allocates organizational resources.
Clusters jobs into units.

Chain of command
The continuous line of authority that extends from upper level of
organization to lowest level of organization and clarifies who reports to
whom.
Authority
The rights inherent in a managerial position to tell people what to do and
expect them to do it.
Responsibility
The obligation or expectation to perform. Responsibility brings with it
accountability.
Unity of command

The concept that a person should have one boss and should report only to
him.
Delegation
The assignment of authority to another person to carry out specific duties.

DEPARTMENTALISATION
When a company expands to supply goods or services. Produces variety of
different products. Engage in several different markets in such conditions
the company can adopt departmentalization.
FORMS OF FDEPARTMENTALISATION
Functional
Under each of these five managers, there will be subordinate
managers and under them, the subordinate staff.
The advantages of this type of structure are as follows:
(i)
It is a logical reflection of functions.
(ii)
It follows the principle of specialisation.
(iii) Maintains power and prestige of major functions.
(iv) Inter-departmental co-ordination is facilitated.
(v)
The structure is simple, logical and easy to understand.
(vi) Provides a good means of control at the top.
There are also some disadvantages:
(i)
Responsibility for profits tends to be at the top.
(ii)
There may be chances of heavy centralisation in decisionmaking.
(iii) Where geographical centralisation is desirable or required, this
form becomes unsuitable.
(iv) This is not very suitable where product lines have to be
emphasized.
(v)
There is a lower potential for manager development.
Product
The advantages of this type of structure are:

(i)
Places greater effort on individual product line.
(ii)
Better customer service arising from greater product
knowledge.
(iii) Simplifies departmentation of profitability of each product
line. Responsibility for profits is at the Division level.
(iv) Improves co-ordination of functional activities.
(v)
New department may be added without difficulty. Permits
growth and diversity of products and services.
(vi) Detailed information on markets for specific products will be
generated.
(vii) Extremely suitable where product lines are complex or vary
greatly.
(viii) Furnishes measurable training ground for Managers.
Some of the disadvantages inherent in such departmentation are:
(i)
A customer has to deal with different salesmen or managers for
different products of the same company.
(ii)
Extra costs of maintaining separate sales force for each
product.
(iii) Duplication of costs on travel, etc.
(iv) Tends to make maintenance of economical central services
difficult.
(v)
Results in increased problems of the top management control.
customer
Some advantages of this type of structure are:
(i)
Greater specialized customer service.
(ii)
Where marketing channels are considerably different for various
types of customers, this type of structure is very useful.
Some disadvantages of this type are:
(i)
May not be enough work for certain types of customers.
Hence, under employment of facilities and manpower
specialized in terms of customer groups.
(ii)
Problems of co-ordination might pose difficulties.
(iii) Unequal development of customer groups.
Geographic
The advantages of such departmentation are:

i)
Regional expertise is generated and managers can tackle
customers or competition better. Places responsibility at lower levels.
(ii)
Proximity will reduce costs of operation and administration.
(iii) Places emphasis on local markets and problems. Local
conditions might warrant different types of selling. This is possible
only in territorial departmentation.
(iv) Improves co-ordination at the regional level.
(v)
Better face-to-face communication with local interests in mind.
(vi) Better manager development.
Some disadvantages are listed as follows:
(i)
Involves higher costs of co-ordination and control from
headquarters.
(ii)
Results in more managerial levels which increases overhead
costs.
(iii) Unsuitable for departments like Finance, where no gains are
possible by specialisation on local factors.
(iv) Increases problems of the top management control.
ADVANTAGES OF DEPARTMENTALIZATION

Department can be staffed with specialized training

Shared management responsibility
Supervision is facilitated
Coordination within the department is easier.

Disadvantages of departmentalization

Inter department documentation of activities is not possible

Decision- making becomes slow.
Delays when there are problems
Accountability and performance are difficult to monitor.
MATRIX STRUCTURE

A matrix organizational structure is a company structure in which the

reporting relationships are set up as a grid, or matrix, rather than in the
traditional hierarchy. In other words, employees have dual reporting
relationships - generally to both a functional manager and a product
manager.
Example

In the 1970s, Philips, a Dutch multinational electronics company, set up

matrix management with its managers reporting to both a geographical
manager and a product division manager. Many other large corporations,
including Caterpillar Tractor, Hughes Aircraft, and Texas Instruments, also
set up reporting along both functional and project lines around that time.
Advantages
In a matrix organization, instead of choosing between lining up staff along
functional, geographic or product lines, management has both. Staffers
report to a functional manager who can help with skills and help prioritize
and review work, and to a product line manager who sets direction on
product offerings by the company. This structure has some advantages:
Resources can be used efficiently, since experts and equipment can be
shared across projects.
Products and projects are formally coordinated across functional
departments.
Information flows both across and up through the organization.
Employees are in contact with many people, which helps with sharing
of information and can speed the decision process.
Disadvantages
It may take more time to decision.
Under this structure there could be confusion regarding job and task
responsibilities.
Cost and profit responsibilities may not be very clear in the matrix
organization.

there should be scope of conflicts

It may encourage bureaucratization.

Strategic Management Basics

Strategic management is the planning process through which company

leaders formulate strategies for accomplishing company missions and
objectives. It has four basic elements, according to the Management Study
Guide website's "Strategic Management Process - Meaning, Steps and
Components." These elements are environmental scanning, strategy
formulation, strategy implementation and strategy evaluation. These four
steps outline a sequential strategic process whereby leaders analyze the
company's current situation, prepare strategies, implement them and then
review strategic effectiveness.
Cultural Influence
Organizational culture is so impacting it can result in the success or failure
of a company. A strong organizational culture is one of the most sustainable
competitive advantages a company can have because it is difficult to copy.
Culture is simply a collection of shared norms or values within a
workplace, or what is generally referred to as a company's way of doing
things. Fun, family-friendly, positive, negative, upbeat, demoralizing and
stressful are some common adjectives used in describing work cultures.
Some of these have positive influences in production and performance,
while others are symptomatic or contribute to organizational problems.
Alignment
Because organizational cultures are unique and offer strategic advantages,
it makes complete sense that companies would consider culture in strategic
management. Consider a high-performing company that has a corporate
strategy of providing a fun and friendly customer-centered environment.
This would not align well with a stagnant culture or one with very
traditional and stoic employees. Instead, it is necessary for the company to
hire fun, friendly and customer-oriented workers and provide an
environment that is fun and rewards great customer-friendly behavior.
External and Internal Strategy
Another way of looking at strategic management that supports the
influence of culture is its balance between external and internal strategic
elements. Generally, strategy management aids in carrying out corporate
missions and visions. Missions and visions state the company's purpose and
values. They are intended to offer direction for the company as it interacts

with the marketplace, but they also typically connect to internal strategies
and culture. For instance, a company that markets itself as a green-friendly
organization to get business would likely also promote environmental
responsibility internally and make it part of the organizational culture.

Organisational Culture Introduction

The culture of an organisation is a set of norms, values and beliefs. These
have developed over time, unplanned and emergent. However, the culture
of an organisation is something that can have an enormous impact on the
way in which an organisation operates, and its effectiveness. It is also
something that can be assessed and, if necessary, changed over time.
Organisational culture interventions are notorious for their difficulty and
duration, 15 Animal Protection Society Management but if culture change
is needed this should not deter an organisation from embarking on the
process of change. Indeed, it may be the key to its survival. Different
cultures are reflected in different organisational structures and systems.
Indeed, it is important that structures and systems are appropriate to the
organisations culture. Also, different people prefer different organisational
cultures.
Key Cultures
Management theory (Harrison) defines four key cultures: Power
A power culture is frequently found in small campaigning societies. It
involves a powerful central character or leader. Its structure is depicted by
a web: Power culture usually operates informally, with few rules and procedures.
Control is exercised by the centre and decisions are taken on the basis of
power and influence.
Size is a problem for power cultures, as the web can break if it becomes too
large and complex. Then, the only way the organisation can remain web-

structured is to develop other spin-off organisations, each web-structures

in their own right.

Determinants of Culture
There are various factors that contribute towards the development of
organisational culture. These include:
Owner/Founder
Often the owner or founder will have an enormous role in establishing its
culture, although the impact will wane over time. Organisations dominated
by the owner or founder will tend to have a power culture.
Size
Culture often changes as an organisation grows. For example, as the
number of staff and functions of an organisation expand, a move towards
role culture is often seen.
Organisational Environment
In a rapidly changing environment, task culture may be appropriate. In a
static environment, role culture may be preferable. A challenging
environment (for example, in times of dictatorship or other challenge,
power culture may be appropriate.
National Culture
Different nationalities may work better in different organisational
cultures.
Function and Purpose
Different cultures may be appropriate for different functions or purposes.
For example, as previously examined, a task culture may be more
appropriate for campaigning and role culture for service delivery.
Goals or Objectives

Quality of service delivery is more likely to be achieved under role culture,

whereas successful campaigning is more likely under task culture. A power
or task culture is more appropriate for growth goals.
Staff
Different individuals prefer working under different organisational
cultures. It may be counter-productive for an organisation to attempt
culture change if key staff would feel uncomfortable or alienated in the
desired culture.
Technology
The move towards increased use of technology tends to push organisations
towards role culture, with associated procedures and protocols.
Policies
An organisations policies also become part of its culture, and impact
strongly on its work. It follows that these should be formulated and agreed
carefully, with full staff consultation.
Changing Cultures
Most animal protection organisations will feel that a balance of two or
more cultures would be appropriate for their organisation. Management
consultants have tools for assessing appropriate organisational culture(s)
and staff preferences in this regard. Different organisational cultures can
be successful, there is no optimum appropriateness and fit are the keys.
Organisational culture interventions can be complex and time-consuming.
However, it is clear from company analyses that if successful companies fail
to adapt their culture when the environment changes, then they cease to be
successful.

Strategic Leadership
Strategic leadership refers to a managers potential to express a
strategic vision for the organization, or a part of the organization,
and to motivate and persuade others to acquire that vision.
Strategic Leadership differs from ordinary leadership in the sense that:

 It has broad scope

Its impact is felt over a long time in the life of the business
It often involves the creation of significant organizational change
both inside and outside the organization.

Role of a leader
1. Achieving the task
2. Building and maintaining Team
3. Developing the individual.

Becoming a strategic leader

Strategic Competency
Strategic thinking skills
Command, Authority, Responsibility
Experience , Basic Skills, Knowledge
Values, Ethics, Codes, Morals, Standards

Personal traits for strategic leaders

Openness to new experience

Curiosity about the world and future
Enthusiasm and energy
Willingness to listen and learn
Ability to adapt rapidly to change
Self confidence
Result orientation
Innovativeness and creativity

Styles of Leadership
1. Authoritarian or autocratic
2. Participative or democratic

3. Delegative or free reign

1. Authoritarian or autocratic
Autocratic leadership, also known as authoritarian leadership, is a
leadership style characterized by individual control over all decisions and
little input from group members. Autocratic leaders typically make choices
based on their own ideas and judgments and rarely accept advice from
followers. Autocratic leadership involves absolute, authoritarian control
over a group.
Characteristics of Autocratic Leadership
Some of the primary characteristics of autocratic leadership include:
Little or no input from group members
Leaders make the decisions
Group leaders dictate all the work methods and processes
Group members are rarely trusted with decisions or important tasks.

2. Participative or democratic
Democratic leadership, also known as participative leadership, is a type of
leadership style in which members of the group take a more participative
role in the decision-making process. Researchers have found that this
learning style is usually one of the most effective and lead to higher
productivity, better contributions from group members, and increased
group morale.
Characteristics of Democratic Leadership
Some of the primary characteristics of democratic leadership include:
Group members are encouraged to share ideas and opinions, even though
the leader retains the final say over decisions.
Members of the group feel more engaged in the process.
Creativity is encouraged and rewarded.

Delegative or free reign

Laissez-faire leadership, also known as delegative leadership, is a type of
leadership style in which leaders are hands-off and allow group members to
make the decisions. Researchers have found that this is generally the
leadership style that leads to the lowest productivity among group
members.
Laissez-faire leadership is characterized by:
Very little guidance from leaders
Complete freedom for followers to make decisions
Leaders provide the tools and resources needed
Group members are expected to solve problems on their own
Laissez-faire leadership can be effective in situations where group members
are highly skilled, motivated and capable of working on their own. While
the conventional term for this style is 'laissez-faire' and implies a
completely hands-off approach, many leaders still remain open and
available to group members for consultation and feedback.
Theories of leadership
1.
2.
3.
4.

Trait Theory
Behavioural Theory
Contingency Theory
Situational Theory
1. Trait Theory
Leadership trait theory focuses on the leaders values and beliefs;
personality; need for achievement or acceptance; orientation to
power; gender; confidence; and mental, physical, and emotional
attributes. Early leadership trait theory assumed that people were
born with specific traits and that some traits aligned with strong
leadership. People with the right traits would become the best
leaders.Theories that consider personal qualities and characteristics
that differentiate leaders from non leaders.Leaders possess a set of
traits which make them distinct from followers.
2. Behavioural Theory

Behavioral theory contains some very different assumptions from

trait theory. Trait theory assumes that a leader is born with
specific traits that make him or her good leader. Behavioral
theory, on the other hand, assumes that you can learn to become a
good leader because you are not drawing on personality traits.
Your actionswhat you dodefine your leadership ability.
3. Contingency Theory
According to contingency theory, what works for a leader in one
situation may not work in another. This theory attempts to explain
why a leader who is very successful in one situation may fail when
transplanted to another or when the situation changes.
4. Situational Theory
Situational leadership theory focuses on the followers. It says
successful leadership is achieved by selecting the right leadership
style. A good leader will change intuitively between styles
according to the people and work they are dealing with.

Strategy and Social Responsibility.

Social responsibility is an ethical framework which suggests that an entity,

be it an organization or individual, has an obligation to act for the benefit
of society at large.
Social responsibility is a duty every individual has to perform so as to
maintain a balance between the economy and the ecosystems
STRATEGY:
A method or plan chosen to bring about a desired future, such as
achievement of a goal or solution to a problem.
The art and science of planning and marshalling resources for their most
efficient and effective use

CSR broadly grouped under four heads, based on involvement

1. Community
2. Stakeholders
3. Production processes
4. Employee relations

Community
A community is a social unit of any size that shares common values.
Corporate sector involves both internal and external community. Fair
compensation for the land taken over from the local residents for the
project. Compensation for the use of natural resources. Such as water,
minerals, and vegetation. There could be initiatives aimed at providing
localized rural employment and livelihood opportunities to empower
rural communities. There is a growing commitment to raising the
quality of life and social wellbeing by contributing to the basic of life in
harmony with nature.
Stakeholders
While a company focuses on increasing wealth for shareholders. Main
stakeholders in the corporate sector include shareholders, employees,
surrounding community, vendors, and consumers.it is important that
every shareholders interest be addressed by the company.
Responsible requirement process ensures that the vendor understands
corporate values, and provides raw materials and components of
specifications that promote the quality of the finished products. In
addition the company makes sure that ethical practices are upheld in
materials supply to avoid adulteration, pilferage. And other mal
practices, and that trade practices respect the law of the land in regard
to payment of duties, taxes, etc. these tenants help to treat the vendor as
a partner and not a transaction based relationship.

Production process

Company has to provide safety equipment's, adopt safety procedures,

and the compliance in this regard has to be complete. However it is also
important for firms to be proactively engaged with stakeholders,
including the localal community Reduce energy use, limit or alter
material use, reduce water use, save natural resources. Efficiently
manage emissions, reduce waste, and recoverable items.
Employee relations
Respecting and ensuring employees freedom of association. Right to
collective bargaining. Proactive declaration on abolition of child labour.
Non-discrimination of resources on caste, creed and colour, and
respecting the time and comfort of employees.

Module 5
Strategic Evaluation and Control
Strategy Review
The firms internal and external environments are dynamic.
Therefore, the best conceived and implemented strategies become obsolete
Strategy Evaluationthe 3 Basics
Examining the underlying basis of the firms strategy
Comparing actual to expected results
Taking corrective action to address performance gaps
Effective Strategy Evaluation
Adequate and timely feedback
The cornerstone of effective evaluation

 Must have both Short- & long-term focus

Strategy Review Criteria (Richard Rumelt)

Consistency
Consonance=fit or harmony
Feasibility
Advantage

Consistency
If managerial problems continue despite changes in personnel and are
issue based, then strategies may be inconsistent. A strategy should not
present inconsistent goals and policies
If policy problems/issues continue to be brought to the top for
resolution, then strategies may be inconsistent.
If success for one department means failure for another department,
then strategies may be inconsistent.

Consonance
Strategy must represent an adaptive response to the external
environment and critical changes occurring within it.
Strategists need to examine sets of trends as well as individual trends
in evaluating strategies.
Difficult in matching key internal and external factors in formulation
of strategy.
Most trends are the result of interactions among other trends within
it.
Feasibility
Strategy must neither overtax available resources nor create
unsolvable sub problem

 Important to examine whether in the past the organization has

demonstrated the capabilities, abilities, competencies, skills, and
talents to carry out strategy.
Limitation on strategic choice imposed by individual and
organizational capabilities must be considered human and financial
resources of the enterprise
Increase in environments complexity
Contemporary Strategic Evaluation Difficulties
predicting the future with accuracy
Increasing number of variables
Rate of obsolescence of even the best plans
Increase in domestic and world events
Decreasing time span for which planning can be done with any
certainty
Process of Evaluating Strategies:
Should initiate managerial questioning of expectations and
assumptions
Should trigger a review of objectives and values
Should stimulate creativity in generating alternatives and criteria of
evaluation
Framework Matrix:
By developing a revised EFE Matrix and IFE Matrix, the underlying bases
of an organization's strategy can be approached and reviewed. A revised
IFE Matrix should focus on changes in the organization's management,
marketing, finance/accounting, production/operations, R&D, and MIS
strengths and weaknesses. A revised EFE Matrix should indicate how
effectively a firm's strategies have been in response to key opportunities
and threats. Another important strategy-evaluation activity is measuring
organizational performance. This activity includes comparing expected
results to actual results, investigating deviations from plans, evaluating
individual performance, and examining progress being made toward
meeting stated objectives. Both longterm and annual objectives are
commonly used in this process.

The final strategy-evaluation activity, taking corrective action,

requires making changes to reposition a firm competitively for the future.
Examples of changes that may be needed are altering an organization's
structure, replacing one or more key individuals, selling a division, or
revising a business mission. Taking corrective action raises employees' and
managers' anxieties. Research suggests that participation in strategyevaluation activities is one of the best ways to overcome individuals'
resistance to change.
How have competitors reacted to our strategies?
How have competitors strategies changed?
Have major competitors strengths and weaknesses changed?
I. Review Bases of Strategy
Why are competitors making certain strategic changes?
Why are some competitors strategies more successful than
others?
How satisfied are our competitors with their present market positions
and profitability?
How far can our major competitors be pushed before retaling.?
How could we more effectively cooperate with our competitors?
Key Questions in Evaluating Strategy:
Are our internal strengths still strengths?
Have we added other internal strengths?
Are our internal weaknesses still weaknesses?
Do we now have other internal weaknesses?
Are our external opportunities still opportunities?
Are there now external opportunities?
Are our external threats still threats?

 Are there now other external threats?

Are we vulnerable to a hostile takeover?
II. Measure Performance
Compare the firms performance over different time periods.
Compare the firms performance to competitors.
Compare the firms performance to industry averages.
Quantitative Analysis:
1.
2.
3.
4.
5.
6.
7.
8.

Return on investment
Return on equity
Profit margin
Market share
Debt to equity
Earnings per share
Sales growth
Asset growth

Qualitative Analysis:
1.
2.
3.
4.
5.
6.

Is the strategy internally consistent?

Is the strategy consistent with the environment?
Is the strategy appropriate in view of available resources?
Does the strategy involve an acceptable degree of risk?
Does the strategy have an appropriate time framework?
Is the strategy workable?

III. Take Corrective Action

Making changes to reposition a firm competitively for the future
Characteristics of an Effective System
1.
2.
3.
4.

Evaluation activities must be economical.

Evaluation activities must be meaningful.
Evaluation activities must provide timely information.
Evaluation system should be designed to provide a true picture of
what is happening.
5. Information derived from evaluation process should facilitate action.
6. Evaluation process should not dominate decisions.
7. Contingency Planning

8. Identify both beneficial and unfavourable events that could possibly

derail the strategy or strategies.
TECHNIQUES OF EVALUATION AND CONTROL
PERT: Programme Evaluation Review Technique was developed by the
Special Projects Office of the U.S. Navy, was first formally applied to the
planning and control of the Polaris Weapon System in 1958. This technique
worked well in expediting the successful completion of that programme.
PERT helps the management to answer the following ;

1. When will project be completed?

2. When will each individual part of the project start and finish?
3. Of the many parts in a project, which ones must be finished on
time to
avoid delaying the project?
4. Can resources be shifted to critical parts of the project from the
non-critical parts without affecting the overall completion time of the
project ?
5. Among the hundreds of the parts of the project, where should the
management concentrate its efforts at a given time ?
CPM: Critical Path Method was developed by Du Pont Company for the
purpose of scheduling. CPM is concerned with the reconciliation
enumerates the relationship between applying more men or other resources
to shorten the duration of a given project and the increased cost of these
resources.
Differences Between CPM and PERT:
CPM is based on a single estimate of time required for the completion of
activities. The CPM technique is used for projects like construction and
maintenance projects.
PERT is based on expected completion time, computed from three
estimates of time- the optimistic time the pessimistic time and the most

likely time. The PERT technique can be used for more complicated projects
like engineering and tolling projects.
PERT is used when time is important and there is not much concern for
cost and CPM is used when resource allocation is to be optimized and
overall cost has to be minimized.
STEPS INVOLVED IN PERT AND CPM
1. At first the estimated time for each and every activity is determined. In
case of PERT three estimates of time optimistic, pessimistic and the likely
time are determined. These estimates are often included in PERT because it
is difficult in many engineering and development projects, to estimate time
accurately in case of certain complex activities.
2. The next step is to calculate the critical path, that is, the sequence of
events which takes the longest time. Identifying the critical path at the start
of the programme or projects helps to monitor the particular sequence of
activities on this path so as to ensure that the total project gets completed
as per the schedule.
CHARACTERISTICS OF AN EFFECTIVE EVALUATION AND
CONTROL SYSTEM
1.Strategy evaluation activities must be economical ; too much information
can be just as bad as too little information. Control should involve only the
minimum amount of information needed to give a reliable picture of events.
Too many controls create confusion.
2.Strategic evaluation activities should be meaningful, they should relate to
a firms objectives. Controls should monitor only meaningful activities and
results, regarding of measurement difficulty.
3.Controls should be timely so that corrective action can be taken before it
is too late.
4.Strategy evaluation should be designed to provide a true picture of what
is happening . For example, in a severe economic downturn, productivity
and profitability ratios may drop alarmingly, although employees and
managers are actually working harder. Strategy evaluation should portray
this type of situation fairly.
5.The strategy evaluation process should not dominate decisions, it should

foster mutual understanding, trust, and common sense. No department

should fail to cooperate with another in evaluating strategies.
6. Strategy evaluations should be simple, not to cumbersome and not too
restrictive. Complex strategy evaluation systems often confuse people and
accomplish little. The test of an effective evaluation system is its usefulness,
not its complexity.
7. Long term as well as short term controls should be used.
8. Emphasis the reward of meeting or exceeding standards rather than
punishment for failing to meet standards.
MAJOR ADVANTAGES:
1. PERT and CPM help managers to plan, as it is difficult to make a timeevent analysis without planning. The subordinate manager must also plan
for the event for which he is responsible.
2.These techniques focus on the critical path or the sequence of events,
which requires the maximum possible time, so that the critical path can be
properly monitored so that the project completes as per the schedule.
The two broad types of control are:
1. Strategic control and
2. Operational control
Strategic control augmented by operational control makes strategic
implementation more effective.

STRATEGIC CONTROL
Strategic control is concerned with tracking the strategy as it is being
implemented, detecting problems or changes in underlying premises, and
making necessary adjustment.
There are four types of strategic control:

1.
2.
3.
4.

Premise control
Implementation control
Strategic surveillance and
Special alert control

Premise Control: It is designed to check systematically and continuously

whether or not the premises set during the planning and implementation
process are still valid.
Implementation Control: It is designed to assess whether the overall
strategy should be changed in the light of unfolding events and results
associated with incremental steps and actions that implement the overall
strategy.
Strategic Surveillance: It is designed to monitor a broad range of events
inside and outside the company that are likely to threaten the course of the
firms strategy.
Special Alert Control: A special alert control is the need to thoroughly and
often suddenly, reconsiders the firms basic strategy based on a sudden,
unexpected event.
OPERATIONAL CONTROL
Operational control systems guide, monitor, and evaluate progress in
meeting annual objectives.
The operational control system involves the following steps:
1.
2.
3.
4.

Establishing criteria and standards

Measuring and comparing performance
Performance gap analysis
Taking corrective measures
TYPES OF OPERATIONAL CONTROL

There are three important types of operational control systems, namely

budgeting, scheduling and focusing on key success factors.
STRATEGIC AUDITING

Auditing meaning

Auditing refers to a systematic examination of books, accounts,

documents and vouchers of an organization to ascertain how far the
financial statements present a true and fair view of the concern.
Strategic auditing.
The external environment in which a business operates can
create opportunities which a business can exploit, as well as threats which
could damage a business. However, to be in a position to exploit
opportunities or respond to threats, a business needs to have the right
resources and capabilities in place.
An important part of business strategy is concerned with ensuring
that these resources and competencies are understood and evaluated - a
process that is often known as a "Strategic Audit".

DEFINITION OF AUDITING
The human resource audit is the process of examining policies, procedures,
documentation, systems and practices with respect to an organizations HR
functions.
PURPOSE
Reveal strength and weakness in the non profits human resource system
Focus on analysing and improving on the HR functions in the organization.
SCOPE
Identifying current procedure and practice
Analysing cost and the effectiveness of time and resource allocation
Reviewing clients satisfaction and expectation
STEPS
Organization overview
List theHR practicesof the organisation

HR dept overview and checking

Asses current practising areas and measure them against the criterion that
you have developed
Meetings/ Interview with HR people and common employees
Analyse the result
Prepare recommendations
Recommendations and areas of improvement
COMPONENTS
Roles,head count,and HR information systems
Staffing Process
Personal records documentation
Training,development and carreer management
Compensation,rewards and benefits
Performance measurement and evaluation
Termination/demotion and transition/turnover
Legal Actions
AUDIT FEEDBACK
Maintaining updated resume database
Contract employees should be hirefor short term projects
Separate place for personal files
Goals and objectives should be updated quarterly
For hiring and promotions who holds the final authority
Separation process need more clearance and transparency
Functional headsshould review screened resumes

Employess must aware the quality policy,timing, and mission and vision of
a company
More report formatsneed to addin HRMS or HRIS
More focus required on succession planing
Forms of reimbursement need to be introduced
Employee handbook updated on yearly basis
To improve the entire communication system.

I.

Financial auditing.

1. Resource audit.

The resource audit identifies the resources available to a

business. Some of these can be owned (e.g. plant and machinery,
trademarks, retail outlets) whereas other resources can be obtained
through partnerships, joint ventures or simply supplier
arrangements with other businesses.
2. Value chain analysis.
Value Chain Analysis describes the activities that take place
in a business and relates them to an analysis of the competitive
strength of the business.
Value Chain Analysis is one way of identifying which activities are
best undertaken by a business and which are best provided by others.
3. Core Competence Analysis:
Core competencies are those capabilities that are critical to a
business achieving competitive advantage. The starting point for
analyzing core competencies is recognizing that competition between
businesses is as much a race for competence mastery as it is for
market position and market power.
4. Performance Analysis:
The resource audit, value chain analysis and core competence
analysis help to define the strategic capabilities of a business. After
completing such analysis, questions that can be asked that evaluate
the overall performance of the business. These questions include:
- How have the resources deployed in the business changed over time;
this is "historical analysis"
- How do the resources and capabilities of the business compare with
others in the industry - "industry norm analysis?"
- How do the resources and capabilities of the business compare with
"best-in-class" - wherever that is to be found- "benchmarking"
- How has the financial performance of the business changed over
time and how does it compare with key competitors and the industry
as a whole? - "ratio analysis"
5. Portfolio Analysis:

Portfolio Analysis analyses the overall balance of the strategic

business units of a business. Most large businesses have operations in
more than one market segment, and often in different geographical
markets. Larger, diversified groups often have several divisions (each
containing many business units) operating in quite distinct industries.
An important objective of a strategic audit is to ensure
that the business portfolio is strong and that business units requiring
investment and management attention are highlighted.
6. SWOT Analysis:
SWOT is an abbreviation for Strengths, Weaknesses, Opportunities
and Threats. SWOT analysis is an important tool for auditing the
overall strategic position of a business and its environment.

Detailed insights into the plan and strategy

Marketing
Investments
TV Advertising
Print Advertising
Sponsorships
Web site
Ranking in search
engine
Partner spend
External Influences

Economic/Social
Trends
Category Trends
Market Segment
Competitive
Activity
Price Trends
Popularity of Your

Awareness and familiarity with your

Penetration of Marketing
Activities

Attributes/Benefits Perceived
in Your Brand

Search Your Brand (e.g., web,

Purchase
Your Sales
Brand Equity

1.
Paid Marketing
Paid marketing is a tricky job and you have to find out a
formula which fits your business.
Paid marketing should work hand in hand with other
factors like a smooth navigation in website, better
Content
Marketing

This2.
is the
core to
the whole digital
marketing process.

It is key to create brand awareness and

drive online engagements.

It should maintain a blog with regular posts

The content should vary according to the

channel viz. Facebook, Twitter, etc.

The content should inform, entertain or

otherwise add value to the daily life of end

3. E-mail Marketing

E-mail marketing is still one of the

most powerful ways to share across your
content and communicate with your subscribers in a consistent way.

Sending personalized emails

considering the demographics

Emails regarding offers, coupons,

contests, festival wishes, etc.
Pre-booking reminders to highly engaging
customers

4. Social Media Marketing

Social media is not just a playground of teenagers anymore.
It has evolved into a multi-purpose tool across different
demographics.
It helps you in crafting your loyal customers and in the long term
boosts your brand image.
Short-term direct sales target
Types of social medias

A. Facebook

Medium is digital worlds most loved one

Facebook provides a lot of convenience for branding and even

Social
media is not just a playground of
transactions

Use more images for posting than videos

Engage in the comment section giving

personal attention

Use different apps for coupons, offers,

etc.

loyalty management,

B. Twitter
Same as Facebook, Twitter also introduced the buy button
Figure out what frequency of posting you
to it.

can manage and commit

Engage with your audience using annotations which are either

commentaries or hyperlinks.

c. YouTube
Visuals always add a whole new dimension to your marketing mix.

We need to utilize the king of all visual content platforms YouTube

Which has over 1 billion unique visitors each month?

Shoot shorter videos

Create your channel and segment the videos

into different playlists

Small business firm

Independently owned & operated
Not dominant in field
Not engaged in innovative practices
Entrepreneurial venture
Primary goals profitability and growth
Characterized by innovative strategic practices
Differences
Not in types of goods and services
Fundamental views on growth and innovation

Entrepreneur
Ultimate strategist
All 3 levels
Corporate
Business
functional
Lack of strategic planning in small business
Not enough time
Unfamiliar with strategic planning
Lack of skills
Lack of trust and openness
Degree of formality
Process far more informal in small companies than in large
corporations
Strategic decision-making process for entrepreneurial ventures
Develop basis business idea
Product/service with target market/customers
Scan external environment
Locate factors of opportunity/threat
Scan internal factors
Relevant to the new business
Analyze strategic factors
Current situation using SWOT
- Decide go or no go
Opportunity to go

 Generate business plan

Transform idea into reality

Sources of Innovation
The unexpected
The incongruity
Innovation based on process need
Changes in industry or market structure

 Demographics
Changes in perception, mood, meaning
New knowledge
Factors affecting new venture success
Structure of industry
Business strategy of new venture
Behavioral characteristics of entrepreneur

Entrepreneurial Characteristics
Identify opportunities better
Sense of urgencyaction oriented
Detailed knowledge-physical stamina
Access to outside help
Sub-stages of small business development
Existence
Survival
Success
Take-off
Resource maturity
Evaluation and Control
Line between debt and equity blurred
Lifestyle part of financial statements
Standard financial formulas dont apply
Personal preference

 Banks combine personal and business wealth

Strategy for nonprofit organizations
Developing a good strategy is key to running an effective charity or non
profit organisation. Find out about the strategy development process and
how to do it well.
Strategy
a careful plan or method for achieving a particular goal usually over a long
period of time

Direction setting
Explanation of direction-setting, what it is and how to do it in your non
profit or charitable organisation.
If those involved with your charity (including those it works with and for)
don't know where youre going, then you are unlikely to get there!
Direction-setting is a mobilising and motivating activity, and one that is
fundamental to an effective strategy. In this section you will find
information on:
Considering impact
Be sure to know the impact you want your non profit to have before you set
the strategy.
Stakeholder analysis
Understanding what your stakeholders need and how to deal with their
needs is fundamental to strategy development.
Involving beneficiaries
Involving beneficiaries encompasses a whole range of activity from
asking their opinions on services you provide, to including them on
recruitment panels for staff and volunteers and involving them in the
running of the organisation at board level. Beneficiaries bring a
unique perspective to any discussion about the success of a not-for-

profit organisation because they can talk with direct experience

about what it is like to be on the receiving end of your services.
External environment analysis
Sustainability and the success of your non profit organisation will
only be realised if you are aware of the forces and trends affecting
your external environment.
There are a wide range of major forces and trends in our external
environment. It makes sense to invest time in thinking about their
potential future impact both in the short and long term. It's also
often helpful to consider what other players in your market are
doing, and what your
relationship with them might be.Long-term sustainability comes
from an ability to balance two things: the ability to anticipate likely
future events and the ability to deal with realities emerging from the
day to day.
PESTAL analysis
Internal environment analysis
Methods, tools and information to help you analyse your internal
environment.
A strong focus on conditions within your organisation is just as
important as reviewing the other players in the outside world. In
this section you will find information on: Internal environment analysis and considering risk
Understanding how your organisation thinks and works is vital to
improving performance and effectiveness.
Tools to assess the internal environment
Tools and methods to help you analyse your organisation's strengths and
weaknesses in order to develop a realistic and achievable strategy. Covers
core competencies, appreciative inquiry, portfolio analysis and Capacity
Assessment Grid.

 Developing strategic options

Choosing the right strategic options for your charity or non
profit organisation, following your analysis.
A vital step in strategy development is about taking all of the
ideas emerging from the analysis, weighing them up, and
making some decisions about your course of action to achieve
the vision and mission.
Whilst there are some tools to help, some of this activity is
about using your experience, taking a 'punt', having the
strength of mind to go for it. Safely!
The strategic plan
Your non profit organisation's strategic plan shows you know
the direction in which you are heading and how to get there.
SWOT analysis
A really useful tool to help collect together all of your thinking
from your external analysis of opportunities and threats and
your internal analysis of strengths and weaknesses.
SWOT'ing a PEST
Using a combination of these two useful strategy tools to
develop some strategic options.
Decision-making matrix
Sometimes deciding between strategic options is really tough.
This matrix can help you weigh up different strategic options to
make an informed, objective decision.
Cost benefit analysis

Considering both elements is an important part of decision

making.
Implementing strategy
How to implement your strategy plan including how to
involve people within its implementation and how to
create strategy maps.
Strategy is nothing without implementation!
Successful implementation is about managing strategic
change and getting buy-in, ensuring everyone in the
organisation is delivering the strategy in their day-to-day
work