National Institute of Business Management

Chennai - 020

SECOND SEMESTER EMBA/MBA

Subject : Strategic Management

Attend any 4 questions. Each question carries 25 marks

(Each answer should be of minimum 2 pages / of 300 words)

1. Explain the setting of rights priorities and objectives for business

strategy planning.

The purposes of an operating plan are both: (a) to describe what

changes are required of the operating system to enhance its support
of the SBU’s (strategic business unit) business strategy; and (b) to
outline how these changes are to be achieved. For an operating
plan to achieve these purposes. it must be closely aligned the
business strategy. This means that the strategic imperatives or
demands required of the operating system by the business strategy
need clear articulation. Further, these strategic imperatives must
drive the focus and objectives of the operating plan. A useful and
easy to apply vehicle for achieving a tight linkage and alignment
between business strategy and operating plan

can be derived from the concept of operating system priorities.

 Consider the consequences in three situations where operating
system priorities were misaligned the requirements of the business
strategy.

SOME KEY ISSUES IN ACHIEVING ALIGNMENT:

Several important issues must be addressed to ensure a correct

alignment of operating plans with business strategies

• The operating system priorities required by a business strategy

are not necessarily understood at the operating unit level. Often,
business strategy is determined by senior executives in marketing
and finance (with help from strategic planners). Typically,
operations and technical manager’s ale involved peripherally if at
all. Yet when most company assets and a substantial portion of the
payroll are in operations and in technical functions, these often
develop their own sense of priorities and momentum, which are
often at odds with the business strategy.

• Cost reduction is not necessarily the only or even the primary

objective of an operating plan. Cost reduction should have top
priority only when the business strategy requires a reduction in
operating costs or the cost of goods and services sold.

• When a single operating plan serves two or more businesses,

each with its own strategy, differentiated priorities must reflect any
different strategic imperatives. Each business strategy must be
supported by an appropriate operating plan that addresses its
special requirements.

When operating priorities are implicit rather than explicit, they are
seldom understood uniformly among key executives and the entire
management and supervisory group. Priorities are frequently
determined by individual managers, applying their own best
judgment. Disagreement about priorities is natural. Yet a uniform
understanding of operating and improvement priorities by all
executives, managers and supervisors is critical for the successful
implementation of any operating plan.

HOW TO ENSURE ALIGNMENT:

It is crucial that the management group responsible for

implementing an operating plan shine a common understanding of
the business strategy they are supporting. its strategic imperatives
for the operating system, and the implied priorities. First, these
managers must recognize the need to achieve this uniform
understanding. Once this occurs. I have found that when they
employ a process of systematic analysis and discussion few
management groups have difficulty in reaching consensus on
operating system priorities. Their consensus can then be made
explicit, communicated broadly throughout the operating system,
and incorporated into day-to-day decision-making.

There is a four-step process for developing consensus about

operating system priorities. First, operating system managers need
to make explicit whatever perceptions they have about the

priorities that are actually driving current decisions. Second, the

planning group reviews the current

priorities that are actually driving current decisions. Second, the

planning group reviews the current business strategy to identify the
strategic imperatives for the operating system. Third, in light of
these strategic imperatives and the capabilities of the operating
system to perform against these imperatives, the planning group
discusses and reaches consensus on what the operating system
priorities should be, in order to support the business strategy.
Fourth the planning group compares their consensus with the
perceptions of current actual priorities. The nature and extent of
any difference will determine the actions required to reorient and
redirect all managers and supervisors in the operating system.

This instrument is based on a single premise. Any operating

system, whether it supports a business based primarily on goods,
services, or some combination, must be responsive to only two or
three out of seven possible strategic imperatives called for by any
business strategy.

1. Low total cost

2. Consistently providing appropriate quality defined by customer

requirements

3. Medina delivery commitments reliably

4. Responding nimbly to very short-term unexpected, relatively

minor changes in demand volume

5. Utilizing fixed assets effectively

 6. Flexibility in changing capacity to meet major changes in
demand

7. Flexibility in meeting market requirements for new products and

services in the shortest possible time.

2. How can congruence be achieved? Discuss budgets and rewards.

3. Describe how the operating plan addresses the key issues of a

business strategy to improve productivity.

SOME GUIDELINES FOR SETTING APPROPRIATE

PRIORITIES:

A few generic concepts can be useful to test how appropriate the

proposed operating system priorities are to current business
strategies. The Sponsor can use these concepts both to review and
validate an operating plan, and to allocate resources among several
operating plans in order to fund those strategies with the highest
potential for leverage in changing the operating system.

There is a widely accepted notion that an entire industry, like the

market offerings within it, progresses through a life cycle
(measured in terms of total revenues generated). Such cycles can
range from less than a decade to less than a century depending on
the industry. One can divide each lifecycle into four phases:
embryonic, growth, mature and aging. In general most businesses
in mature and aging industries pursue strategies intended to
maintain market position and maximize profit and cash generation.
Their operating plans focus internally on improving operations
both to lower total costs, and improve utilization of material,
energy, capital and people.

On the other hand businesses in embryonic or growth industries

will typically pursue strategies aimed at increasing market share by
exploiting combinations of and new markets or through market
penetration. Their operating plans focus externally to improve
quality, delivery reliability, and operating-system flexibility so as to
allow changes either in capacity, or in products and services.
Optimizing asset utilization is a focus typical for businesses whose
industries are in the late growth or early mature phases of their
lifecycle.

The appropriate focus of an operating plan corresponding to

different business strategies can be illustrated by a series of generic
relationships (Table 1). Such relationships can be considered
normative. An operating plan that deviates from the nm would
require special justification, and should be carefully reviewed.
Table:1

Business plan Thrust Operating plan Focus

If the basis thrust of a business Then the corresponding focus

of

plan is: Operating plan should be

1. Flexibility in market offerings design & development of

Maneuvering for position market offerings:response

time

2. Quality of market offerings Quality Assurance and

establishing and surviving Control: redesign of market

offerings
3.Market Penetration Selling capability : Service

Taking Share Price distribution:response time

bringing new capacity on stream

4.Internal rationalization Standardization :automation

Cost reduction and control Cost control: Information Flow

Efficiency

5.Diversification Coordination among units

Broadening the base

6. Selling Share Administration of details

milking, harvesting throughout the system:vigorous

Cost reduction: Pruning

7. Renewal of the Business Developement of new market

offerings

USING OPERATING SYSTEM PRIORITIES TO DETER1HNE

OPERATING PLAN OBJECTIVES

Once the planning group agrees on what the operating system

priorities should be they can apply these to the list of potential
high-leverage target opportunities identified in the process of
validating the operating system description. When first generated,
this list is an undifferentiated collection of nominations for possible
targets to be addressed by the operating plan. These nominations
must now be re-examined to identify those with the greatest
relevance to achieving the changes in the operating system most
crucial to the success of the business strategy.

The task for the planning group is now to identify the highest-
leverage target opportunities. They must sort through 20 to 40
possible high-leverage targets of opportunity to identify the 4 or 5
with the most promise for serving as the basis for the operating
plan’s objectives. The process is essentially one of screening each
nominated target against the priority criteria.

The process described enables a management group to derive

operating system priorities from both business strategy imperatives
and operating system performance capabilities. These priorities

Conclusions:
 A company’s business plan is one of its most important documents.
It can be used by managers and executives for internal planning. It
can be used as the basis for loan applications from banks and other
lenders. It can be used to start up ventures, the process of preparing
a business plan serves as a road map to the future by making
entrepreneurs and business owners think through their strategies,
evaluate their basic business concepts, recognize their business’s
limitations, and avoid a variety of mistakes.

Virtually every business needs a business plan. Lack of proper

planning is one of the most often cited reasons for business
failures. Business plans help companies identify their goals and
objectives and provide them with tactics and strategies to reach
those goals. They are not historical docum ents rather; they
embody a set of management decisions about necessary steps for
the business to reach its objectives and performance in accordance
with its capabilities.

4. Explain the growth of E-Business in India.

E-Business:

E-business (electronic business), derived from such terms as “e-

mail” and “e-commerce,” is the conduct of business on the
Internet, not only buying and selling but also servicing customers
and collaborating with business partners. One of the first to use the
term was IBM. When, in October, 1997, it launched a thematic
campaign built around the term. Today, major corporations are
rethinking their businesses in terms of the Internet and its new
culture and capabilities. Companies are using the Web to buy parts
and supplies from other companies, to collaborate on sales
promotions, and to do joint research. Exploiting the convenience,
availability, and world-wide reach of the Internet. many companies,
such as Amazon.com, the book sellers, has already discovered how
to use the Internet successfully

E-Business In India

India has an internet user base of about 140.1 million as of Jan

2015..Lh1121 The penetration of e-commerce is low compared to
markets like the United States and the United Kingdom but is
growing at a much faster rate with a large number of new entrants.
The industry consensus is that growth is at an inflection point.

Unique to India (and potentially to other developing countries),

cash on delivery is a preferred payment method. India has a vibrant
cash economy as a result of which 80% of Indian e-commerce
tends to be Cash on Delivery. However COD may harm e-
commerce business in India in the long run [4] and there is a need
to make a shift towards online payment mechanisms similarly.
Direct imports constitute a large component of online sales.
Demand for international consumer products (including long all
items) is growing much faster than in-country supply from
authorized distributors and e-commerce offerings.

Market size and growth :

India’s e-commerce market was worth about $3.8 billion in 2009.

it went up to $12.6 billion in 2013. In 2013, the e-retail market was
worth USS 2.3 billion. About 70% of India’s e-commerce market is
travel related.51 India has close to 10 million online shoppers and
is growing at an estimated 30%[61 CAGR vis-à-vis a global
growth rate of 8—10%. Electronics and Apparel are the biggest
categories in terms of sales.

Key drivers in Indian e-commerce are:

 • Increasing broadband Internet (growing at 20%m Mom) and 3G
penetration.18

• Rising standards of living and a burgeoning. Upwardly mobile

middle class with high disposable incomes

• Availability of much wider product range (including long tail and

Direct Imports) compared to what is available at brick and mortar
retailers

• Busy lifestyles, urban traffic congestion and lack of time for

offline shopping

• Lower prices compared to brick and mortar retail driven by

disintermediation and reduced inventory and real estate costs

• Increased usage of online classified sites, with more consumer

buying and selling second-hand goods

• Evolution of the online marketplace model with sites like

Jabong.com. Flipkart.

Asia- Pacific Region at a CAGR of over 57% between 2012—16

As per “India Goes Digitar’.10J a report by Revenues Capital. a

leading Indian Investment Bank specializing in digital media and
technology sector, the Indian e-commerce market is estimated at Rs
28.500 Crore ($6.3 billion) for the year 2011. Online travel
constitutes a sizable portion (87%) of this market today. Online
travel market in India is expected to grow at a rate of 22% over the
next 4 years and reach Rs 54.800 Crore ($12.2 billion) in size by
2015. Indian e-tailing industry is estimated at Rs 3.600 crore
(US$800 mn) in 2011 and estimated to grow to Rs 53.000 Crore
($11.8 billion) in 2015.

On 7 March 2014 e-tailer Flipkart claimed it has hit Si billion in

sales. a feat it has managed to achieve before its own target (2015).

Overall e-commerce market is expected to reach Rs 1.07.800

crores (US$24 billion) by the year 2015 with both online travel and
e-tailing contributing equal Another big segment in e-commerce is
mobiIe DTH recharge with nearly 1 million transactions daily by
operator websites.

THE GROWTH OF E-BUSINESS:

In the last few years of the 20th century all kinds of companies
began to think about doing business through the Internet. This is
astonishing given that, according to one view, e-commerce was
‘virtually non-existent’ in 1995. By 1998 the electronic economy
(e-economy) represented 6.5 percent of US GDP and 1 percent of
Japan’s GDP. This may not sound very much but the US e-
economy was expanding fast- by 65 percent in 1998. The rate of
growth to access the Internet grew dramatically. Already by 1996
tens of millions of people had access to the Web, but the numbers
were doubling each year at the time. At the start of the 2 1 century
some half a dozen countries, including the United States and
Germany, had one in five of their population with online access to
the Web via their own PCs. Internet service providers proliferated.
The United States had over 4,000 of them in 1996. Some, such as
America Online (AOL), quickly emerged as strong contenders for
leadership of this segment of the e-economy. Then banks,
insurance firms, book retailers, travel companies and various other
kinds of business moved quickly to establish a presence on the Net.
Many companies may have done so because they saw
opportunities. Many may have joined the Internet band wagon
simply in order to keep up with what their rivals are doing, or
might soon do.

That e-commerce is a growing business is indisputable and that the

Internet gives companies a way to achieve rapid growth in fairly
commonplace. The emerging e-economy is full of businesses that
have grown extraordinarily fast, often returning growth rates that
until recently were unimaginable. However, this is not a simple
story of new opportunities. Established firms may feel threatened
by the development of e-business. According to Thomas (2000),
everywhere you look it seems that cyber upstairs are challenging
the old order, seemingly teleporting in and threatening established
brands in retail, finance and service industries.

Some Internet companies enjoyed a growth of turnover that was

hard to believe. In the UK the winner of the 1999 Deloitte and
Touche National Technology Fast 50 was Data Discovery, a
Scottish firm that grew by over 9,000 percent in one year.

E-BUSINESS STRATEGIES FOR ESTABLISHED FIRMS:

In addition to looking at operational matters, firms may decide to

make a strategic response to the opportunities of the internet For
example, a firm must decide whether it wants to enter this new
competitive space immediately, wait until the nature of the threats
and opportunities of the economy becomes clearer, or concentrate
on becoming more efficient or effective in terms of its current
strategic posture. As with any need to interpret market signals,
there is ample scope for internal disagreement within the individual
firm. This disagreement can centre on the feasibility and returns of
c-business projects.
if established firms decide that a response is needed they have at
least two options. As shown by the case of the European insurance
industry, they can respond by maintaining their existing business
designs but adding a Web site, or by launching a properly designed
c-business of their own.

Those firms adopting the first option face problems. Some are
relatively minor, such as that of seeking to register the firm’s name
on the World Wide Web only to find, as Rolex Watches did, that
their name had already been registered by someone else. This was
an early lesson for established firms. The Internet is a channel to
business activity with its own peculiar rules- such as registering
names on a first come first served basis. This must add to the sense
of uncertainty about the risks.

EVOLUTION TO E-BUSINESS:

The preceding discussion of how established firms respond to the

challengers of the c-business might be compared with a model
presented by Price Waterhouse Coopers (1999). According to this
model, established businesses might pass through four stages in the
transition to c-business:

1. Implement a Web site

2. Extend the capabilities of the Web site into supply chains.

3. Develop online alliance.

4. Work on industrial convergence.

 In the first stage firms use a Web site for buying and selling
processes. In the second stage the emphasis is on the closer
integration of suppliers. In the third stage alliances develop
entailing important shifts in how industry operates. In the fourth
stage innovative products result from the convergence of sectors.

Conclusion:

Electronic Business, or “E-business”, may be defined broadly as

any business process that relies on an automated information
system. Today, this is mostly done with Web-based technologies.
Electronic business methods enable companies to link their internal
and external data processing systems more efficiently and flexibly,
to work more closely with suppliers and partners, and to better
satisfy the needs and expectations of their customers.

In practice, e-business refers to more strategic focus with an

emphasis on the functions that occur using electronic capabilities,
while e-commerce to be a subset of an overall e-business strategy.
E-commerce seeks to add revenue streams using the Worldwide
Web or the Internet. to build and enhance relationships with clients
and partners and to improve efficiency. Often, e-commerce
involves the application of knowledge management systems.

5. Does strategic management work? Examine.

Strategic Management:

Strategic Management is all about identification and description of

the strategies that managers can carry so as to achieve better
performance and a competitive advantage for their organization.
An organization is said to have competitive advantage if its
profitability is higher than the average profitability for all
companies in its industry.

Strategic management can also be defined as a bundle of decisions

and acts which a manager undertakes and which decides the result
of the firm’s performance. The manager must have a thorough
knowledge and analysis of the general and competitive
organizational environment so as to take right decisions. They
should conduct a SWOT Analysis (Strengths, Weaknesses,
Opportunities, and Threats), i.e., they should make best possible
utilization of strengths, minimize the organizational weaknesses,
make use of arising opportunities from the business environment
and shouldn’t ignore the threats. Strategic management is nothing
but planning for both predictable as well as unfeasible
contingencies. It is applicable to both small as well as large
organizations as even the smallest organization face competition
and, by formulating and implementing appropriate strategies, they
can attain sustainable competitive advantage.

It is a way in which strategists set the objectives and proceed about

attaining them. It deals with making and implementing decisions
about future direction of an organization. It helps us to identify the
direction in which an organization is moving.

Strategic management is a continuous process that evaluates and

controls the business and the industries in which an organization is
involved; evaluates its competitors and sets goals and strategies to
meet all existing and potential competitors; and then reevaluates
strategies on a regular basis to determine how it has been
implemented and whether it was successful or does it needs
replacement.

Strategic Management gives a broader perspective to the

employees of an organization and they can better understand how
their job fits into the entire organizational plan and how it is co-
related to other organizational members. It is nothing but the art of
managing employees in a manner which maximizes the ability of
achieving business objectives. The employees become more
trustworthy, more committed and more satisfied as they can co-
relate themselves very well with each organizational task. They can
understand the reaction of environmental changes on the
organization and the probable response of the organization with the
help of strategic management. Thus the employees can judge the
impact of such changes on their own job and can effectively face
the changes. The managers and employees must do appropriate
things in appropriate manner. They need to be both effective as
well as efficient.

One of the major role of strategic management is to incorporate

various functional areas of the organization completely, as well as,
to ensure these functional areas harmonize and get together well.
Another role of strategic management is to keep a continuous eye
on the goals and objectives of the organization.

Following are the important concepts of Strategic Management:

Strategy - Definition and Features

Components of a Strategy Statement

Strategic Management Process

Environmental Scanning

Strategy Formulation

Strategy Implementation

Strategy Formulation vs Implementation

Strategy Evaluation

Strategic Decisions
Business Policy

BCG Matrix

SWOT Analysis

Competitor Analysis

Porter’s Five Forces Model

Strategic Leadership

Corporate Governance

Business Ethics

Core Competencies

Does Strategic Management Work?

One of the difficulties faced by managers trying to decide whether

it is worth studying strategy is that there is a wide spread belief that
it just does not work. This is especially true when people start to
discuss entrepreneurial and innovative behavior. Here the common
sense perception is that for entrepreneurs to be successful strategy
and plans are the last thing they need. These are seen as hemming
them in and constricting them. Improvisation or ‘off the cuff’
action is what is needed. Very few of us though can be quick wined
enough to manage spontaneous and clever action. It often comes as
a shock to people when they learn that many television shows are
not the spontaneous events they are made out to be.

Apart from those who believe that over-strategizing can lead to an

impoverishment of what is possible. curtailing the actions of
managers, others simply do not believe that strategic management
actually delivers what it sets out to achieve. Pragmatically we
believe that you have to judge whether or not it works for the type
of situations you will find yourself in.

There sufficient evidence from academic research to suggest that

managers would be advised to take strategic management seriously.
However, it can be said that the question of the value o strategic
management is complex. We can look at studies of actual
organizations and see if there is evidence that shows a correlation
between strategic plans and success. Strategic management
however, is not simply the use of strategic plans. It is a way of
looking at the responsibilities of management. It is a way of
looking at the organization’s present and future environment. It
may make use of a variety of techniques. It may produce formal
documents, but it may not. It is a way of generating actions, or
streams of action, top provide benefits to stake holders, to beat
competitors, and to make use of the capacity of the organization.

There are argument between protagonists of different kinds of

strategic management vocabulary. They may try to settle which
type of strategic management is right or true, but their arguments
and counter-arguments are remarkably inconclusive. Choosing
between them seems to be more a matter of choosing how you like
to look at management and what kinds of questions and
phenomena you find interesting and want to address. The choice,
then, is a personal decision based on the attractiveness of the
approach rather than its scientific validity. This is not just true of
strategic management. There are in fact, lots of broad theoretical
approaches in management that cannot easily

Here we need to stress yet again the importance of your own

assessment of what is worthwhile in terms of the outcomes
achieved. We do not believe it is possible to say categorically: do
this as opposed to that in these circumstances; but we do believe
that you have to judge the value of what you have done by its
effects.

BENEFITS OF STRATEGIC PLANNING:

 Over the years there have been numerous studies of strategic
planning and performance. Early studies measured the existence or
nature of planning and looked at organizational aspects of strategic
planning. One study indicated that organizations that planned
performed better than organizations that did not plan. Some studies
showed that organizations doing formal planning performed better
than other organizations. A study by Ansoff and colleagues (1970)
found that deliberate and systematic preplanning of acquisition
strategies was correlated with better financial performance.
Overviews of such empirical studies usually conclude that there is
a preponderance of evidence in favor of a link between company
performance and planning.

PRACTITIONERS

While there is not total unanimity among researchers about. the

link between formal strategic planning and better performance,
most practitioners would no doubt think even a modest level of
support for the link would make it worthwhile to invest their time
and effort in developing strategic plans. In fact, the evidence is
better than modest. And surveys of practitioners suggest that their
experience has confirmed that investing in strategic planning is a
good idea.

A FUNCTIONAL VIEW:
 Even if academic research finds a correlation between strategic
planning and performance it might still be objected that the case for
strategic planning is unproven. It might be said, for example, that
better performing organizations have the extra management
capacity needed to carry out strategic planning. In contrast.
organizations that are doing less well may not have the time or
spare attention to think about strategic planning.

BENEFITS OF STRATEGIC INNOVATION:

Innovation has come to be seen as key driver of growth and

profitability. In the last couple of year the United States generated
more than a half of its economic growth from new industries born
in the last decade. However, this is not really new. Innovation is
part and parcel of the history of business cycles. Each major
business cycle is characterized by the rise of new industries. In the
late 1 8th and early 19th century textiles and iron were the new
industries. In the second half of the 19th century rail and steel
industries became important. In the last century the new industries
included electricity and chemicals, then petrochemicals, electronics
and aviation came to the force. The latest wave of innovation
covering the present period is summed up by describing the period
as the Information Age, meaning that there are new products and
services clustering around digital technology, software and new
media.

Reasons for Strategic plans fails:

• Failure to understand the customer

o Why do they buy

o Is there a real need for the product

o inadequate or incorrect marketing research

• Inability to predict environmental reaction

o What will competitors do

§ Fighting brads

§ Price wars
o Will government intervene

• Over-estimation of resource competence

o Can the staff, equipment, and processes handle the new strategy

o Failure to develop new employee and management skills

• Failure to coordinate

o Reporting and control relationships not adequate

o Organizational structure not flexible enough

• Failure to obtain employee commitment

o New strategy not well explained to employees

o No incentives given to workers to embrace the new strategy

• Under-estimation of time requirements

o No critical path

• Failure to follow the plan

 o No follow through after initial planning

o No tracking of progress against plan

o No consequences for above

• Failure to manage change

o Inadequate understanding of the internal resistance to change

o Lack of vision on the relationships between processes,

technology and organization

• Poor communications

o insufficient information sharing among stakeholders

o Exclusion of stakeholder and delegates

6. Write an essay on ‘Why Strategies fail’?

Strategies Fail - Facts

In an effort to deepen our understanding of why so many
strategies have failed in implementation, my partner,
Daniel Gray, designed and led in the mid 1980s, a
research project.. Its focus was on where things most often
go wrong in the process of strategy formulation and
implementation.
In this research, he invited a response to an extensive
questionnaire from a broad sample of business unit heads,
corporate planning directors, and chief executive officers
with substantial experience in strategic planning in
American multi-business corporations. He also conducted
executive seminars to search for remedies. There were
300 respondents to the questionnaire and 216 participants
in the day-and-a-half seminars. Of these, 61 per cent were
general management line executives either at corporate
or business unit level. The remaining 39 per cent were
corporate planning directors and staff. Forty-one per cent
of the seminar participants were from service businesses,
52 per cent from manufacturing businesses and 7 per cent
from government agencies.
In the responses both to the questionnaire and the
seminar, almost every participant (87 per cent) reported
feelings of disappointment and frustration with higher
experience with strategic planning. Fifty-nine percent
attributed their discontent mainly to difficulties
encountered in the implementation of plans. Two out of
three mice their implementation problems to the design of
their strategic planning systems and the way they manage
them. Yet despite all the frustration expressed, most
companies in the sample stated their resolve to continue
with strategic planning.

It is striking that most companies remain committed to

strategic planning despite the disappointing returns on
their investments to date. The reasons for this are rooted
in the needs that led firms to adopt strategic planning in
the first place. Their managements have come to realize
that financial controls alone are insufficient to steer the
business. Balance sheet feedback is too aggregated, too
stripped of connotative information and often too late It
managers are to make more timely and appropriate mid-
course corrections in response to external change,
financial plans must be augmented and supplemented by
strategic plans. Without these, the penalty for inability to
adapt along the way is simply too great
Another reason that companies persist in planning despite
disappointment stems from a tendency by managers to
separate in their thinking, strategy formulation from
strategy execution. If one believes that the strategy was
 soundly developed in the first place, then subsequent
failures in
Implementation can be blamed on the poor work of those
lower down in the organization responsible for executing
the strategy. However, when one examines in depth the
relationship between strategy formulation and strategy
execution, this tendency to view the two aspects of
strategy as distinctly separate issues can be seen to be
wrongheaded.
The reasons for Strategies Fails:
1. Poor Preparation of Line Managers
It was noted that since the early 1980s. An increasing
number of companies have recognized that the
responsibility for formulating strategy belongs to line
managers, not staff planners. The latter’s rule is
supportive and facilitative. But in many instances, line
executives have been inadequately prepared to assume
this responsibility.
Line managers need to understand the key concepts and
language of strategic planning. It is unlikely that without
some help, they will uniformly understand the operational
meaning of such notions as ‘bases of competition’,
‘strategic issues’, ‘key success factors’, ‘portfolio role’, and
‘strategic management’. Typically, line managers view
strategic planning as an additional burden imposed from
above, diverting them from ‘running the business’. All too
often, many line managers adopt a grudging, mechanistic
approach to their planning duties. Small wonder that staff
planners creep back in to lend a hand and help fill the
void.

Another aspect of preparing line managers to become

more effective strategy formulators has to do with
broadening their perspective. They need to think about
the business as a whole rather than only their own
function. They need to know how to rise above their
specialized frames of reference into a general
management view of tnide-olTs between functions. They
also need to know what questions will be asked and what
 challenges to expect when they submit their proposed
business plans
2. Faulty Definition of the business
How the management of a firm conceives of and defines
each of the businesses they are conducting can have a
profound hearing on the business’s strategic behavior, its
competitive clout and on the strategic options
management may choose to implement.

These examples are meant to illustrate two issues

relevant to the connection between business definition
and successful strategy implementation. The first issue
has to do with ‘getting the definition right’. In this context,
‘right’ means in tune with the marketplace requirements
and competitive dynamics. It means the definition which
best positions the firm to compete successfully.

The other issue has to do with how similarly each manager

and executive perceives and understands the business
definition. Successful strategy implementation depends
heavily on an agreed business definition among the entire
management group. Differences in perception will
undermine the effectiveness of strategy implementation.
3. Faulty Definition of the Strategic Business
Unit(SBU)
When a multi-business fails to define its SBUs correctly
within its organizational structure, an excellent planning
process cannot undo the damage. When strategic
planning is newly installed, it is often assumed that the
organizational units already in place should handle the
planning. Because these units are typically a result of
historical evolution, they may owe their boundaries to
many factors that make them inappropriate to use as a
ha.sis for planning: geography, administrative
convenience, the terms of old acquisition deals, product
lines, traditional profit centers, a belief in healthy internal
competition, or old ideas about centralization and
decentralization.

Such rationales for unit boundaries often lead to faultily

 defined SBUs. Executives who take organizational
structure as a given before planning begins seldom realize
that their SBU definitions are defective. Organization
theory and strategic management hold that the main
purpose of organization.
The faultiness of the reorganization logic and its
consequences for strategic planning can be attributed to
ignorance or discounting of customer and competitor
behavior in the major borne appliance market specifically,
the product line organization with its associated localized
strategic perspective impeded consideration of several
important factors that characterize this market. These
includes
· Quality and style: customers expect that the
refrigerator, dishwasher, cooking range, etc.. Which they
purchase be coordinated in terms of quality (materials
used, perfonnance, warrantie& etc.) arid appearance
(colour, tones, physical design, features. etc.).
· Price: customers expect a pricing policy that unifies the
major kitchen appliances within the context of the
manufacturer’s ‘quality and style’ philosophy.
· Competition: the division responsible for cooking
ranges quickly discovered that its competitors and
distribution channels were identical to those faced by its
sister divisions, which manufactured refrigerators,
dishwashers, etc. Despite this extensive overlap each
division was waging its own battle with the same set of
competitors.
4. Excessive Focus on the Numbers
When in strategic planning there is an excessive focus on
financial and other numbers relevant to business
performance, the resultant plan is likely to have serious
distortions and be of limited value in guiding
implementation. A numbers-driven plan is often the result.
of a short- term. bottom-line mindset on the part of top
management. There is also likely to be an excessive focus
on the numbers when the staff supports function for
planning is under the control of the corporate financial
function.
 When performance numbers govern strategy formulation.
SBU managers responsible for carrying out the strategy
tend to make arbitrary or constrained strategic choices.
Such choices seldom reflect the realities of the industry,
markets and competitive environment.
5. Imbalance between External and Internal
Considerations
Earlier we have noted that strategic planning differs from
earlier efforts to plan for the long term by its primary
emphasis on the firm’s external environment In practice,
this means developing an understanding of the firm’s
industry, markets, customers and competition, and using
this knowledge to determine what is strategically relevant
when assessing the firm’s capabilities, and competitive
strengths and weaknesses. Understanding and focusing on
externals is crucial in making the strategic choices that
will lead to the desired long-term outcomes.
6. Unrealistic Self-assessment
There is another element in strategic planning that can
significantly influence the quality of the strategic choices
and the extent to which a strategy can be implemented
successfully. This is the quality of management’s analysis
of their organization’s capabilities to carry out various
strategies. Management’s assessment of the firm’s
strengths and weaknesses in the light of possible courses
of action is an important consideration in the choice of
strategic options. Further, this assessment is an important
input to the definition of the work required to implement
the selected options.
7. Insufficient Action Detailing
Implementation is bound to go awry if strategy
formulation goes no further than defining general thrusts
and end-point goals.

About seven out of ten companies do not carry the

formulation of strategy much beyond some general
statement of thrust such as market penetration or internal
efficiency and some generalized goal such as excellence.
Having only generalizations to work which makes
 implementation very difficult. Targets don’t mean much if
no one maps out the pathways leading to them. After this
kind of half- baked strategy is handed over for execution,
subordinates who have not been in on the formulation of
the strategy are left to deal with its cross-impacts and
trade-offs when they bump into them.

The cure for half-baked strategy is action detailing, but

this task often baffles and irritates many executives. Only
one in three of the companies have a process or a forum
for the interfunctional debate and testing of unit
strategies. Their procedures for action detailing and other
kinds of reality testing are often nonexistent or merely
rudimentary. Action detailing of a sort is carried on in
some places as a part of operational planning, but it
usually follows strategic planning and takes the strategy
as given. Planning in detail should be used as a further
test of a strategy’s feasibility.
8. Insufficient Effective Participation Across Functions
Strategic plans are of better quality and are more
likely to be implemented successfully when the plan is
formulated by a team of executives and managers working
together in ‘real time’. This team should include the SBU
general manager, the functional heads who report to this
executive and middle-level managers Elected for their
ability to contribute usefully to the debate. In addition, the
planning team should include other functional executives
and managers outside the SBU who are responsible in
providing strategically significant resources and
supporting services to the SBU.
9. Poor Management of corporate Face-off
In a multi-business corporation, even when all the steps in
the strategy development process are taken according to
the principles of best practice, strategic plans can be
ruined and the whole system undermined at the final
corporate review stage. The issue here is how good is the
design and management of the planning cycle when the
SBUs’ proposed plans hit the corporate screen. This may
be called the corporate face-off.
 The face-off is a moment of inevitable, healthy conflict Not
only do all the units’ resource requests often exceed what
Corporate is prepared to provide, but also their aggregate
performance promises are often less than the Corporate
requires. Performance requirements typically come from
an analysis of Capital Market.
10. Conflicts with Institutionalized controls and
systems
The foregoing nine factors describe flaws in the ‘upstream
strategic planning process that can undermine
‘downstream’ strategy implementation.

This tenth factor is the only one directly applicable to the

implementation process. A strategic planning system can’t
achieve its full potential until it is integrated with other
control systems such as budgets, information, and
rewards. The badly designed, poorly managed face-off is a
manifestation of a deeper problem - compartmentalized
thinking which treats various existing control systems as
freestanding and strategically neutral. When this is the
case, there is a high probability that conflicts will arise
between the requirements and organizational impact of
each SBU’s intended strategies, and the requirements of
institutionalized control systems. These are usually far
more deeply rooted in the organization’s culture than
strategic thinking and planning. When conflicts occur, the
existing control systems prevail and strategy
implementation suffers.

25 x 4=100 marks