Subject – Strategic Management

ASSIGNMENT (MARKETING)

STRATAGIC MANAGEMENT

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Subject – Strategic Management

Q.1 Explain the evolution, role and importance of business policy and strategic
management. What would be the role of manager in this age?

Introduction

Strategic management is a dynamic process of aligning strategies, performance and business

results; it is all about people, leadership, technology and processes. Effective combination of
these elements will help with strategic direction and successful service delivery. It is a
continuous activity of setting and maintaining the strategic direction of the organization and its
business, and making decisions on a day-to-day basis to deal with changing circumstances and
the challenges of the business environment.

The term strategic management has been traditionally used. New title such as business policy,
corporate strategy and policy, corporate policies is essentially and extensively used which means
more or less the same concept.

Evolution of Strategic Management

1) In early 1920’s and 1930’s: The managers used day-to-day planning methods to
perform any task. However afterwards to anticipate the future, they tried using tools like
preparation of budgets and control systems like capital budgeting and management by
objectives. Even these techniques were unable to emphasize the future adequately.

2) In mid 1930’s (first phase of evolution of strategic management): As many businesses

had just started operations and were mostly in a single product line, there arose a need
for policy making. As companies grew they expanded their products and they catered to
more customers and which in turn increased their geographical coverage. Hence
According to the nature of business the planning was done on Adhoc basis.
However in the second half of the 1930’s, the expansion brought in complexity and lot
of changes in the external environment. Hence there was a need to integrate functional
areas; this integration was brought about by framing policies to guide managerial action.
Policies helped to have pre-defined set of actions, which helped people to make decision.
Policymaking was the owner’s prime responsibility. Thus Due to increase in the
environment changes, in 1930’s and 40’s policy formulation replaced ad-hoc policy
making, which led to emphasis shifted to the integration of functional areas in this
rapidly changing environment.

3) After II World War: There was more complexity and significant changes in the
environment. Competition increased with many companies entering into the market.
Business had grown much larger and companies were targeting larger market
geographically, serving more types of products and various types of customer. Policy
making and functional area integration was not sufficient for the complex needs of a
business.

4) Due to increase in the competition, in 1960’s there was a demand for critical look at the
basic concept of business. The environment played an important role in the business. The
relationship of business with the environment leads to the concept of strategy which

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marks the third phase of the evolution of strategic environment. This helped the
management to manage between the business and the environment.
5) In the early eighties the pattern changes with globalization, as many companies were
globalised which lead to the competition of the rival’s access the world. Japanese
companies along with other Asian companies unleashed a force across the world and
posed a threat for the US and European companies, which led to the current thinking.
This led to the current thinking which emerges in the eighties.

Role Of Strategic Management: -

1) Due to increase in the competition, in 1960’s there was a demand for critical look at the
bane corrupt of business.
2) The environment played an important role in the business.
3) The relationship of business with the environment lead to the concept of strategy.
4) In early sixties, this helped the management to manage between the business and the
environment.
5) In early eighties, as many companies were globalised which lead to the competition of
the rivals access the world.
6) Japanese companies along with other Asian companies unleashed a force across the
world and posed a threat for the US and European companies, which led to the current
thinking.
7) Strategic management focused on 2 aspects: -
• Strategic process of business.
• Responsibilities of strategic management.
8) Unlike others, in this phase the role of senior management is vital and of utmost
importance. Their role was important in decision-making like -

 Whether a company promotes a joint venture/new decision.

 Decides to go for an expansion.
 Takes other important actions.

9) All these actions and decision had a long-term impact on the company and its future
operations, which was the result of senior management decision-making.
10) Strategic management is both about the present and future course of action, which was
the prime responsibility senior management.

Strategic Management is

 The study of function and responsibilities of senior management

 The crucial problem that affects success in total enterprise.
 The decision that determine the direction of the organization and shape of its future
 Identity and molding of its character
 Mobilization and their allocation of the resources.

Hence as managers had variety of choices, decisions were based on the circumstances, which
would take the company in specified directions.

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Importance And Role Of Managers In Strategic Management: -

 Strategic management integrates the knowledge and experience gained in various

functional areas.
 It helps to understand and make sense of complex interaction in various areas of
management.
 It helps in understanding how policies are formulated and in creating appreciation of
complexities of environment that the senior management faces in policy formulation.
 Managers need to begin by gaining an understanding of the business environment and
to in control.

Role of Indian managers in this age: -

a) They should know to manage and understand information technology, which is

changing the face of business.
b) As public and common investors own and more companies managers need to
acquire skills to maximize shareholder value.
c) To have/take a strategic perspective, managers should foresee the future and
track changes in customer expectation. Intuitive, logic reasoning is required for
proper decision-making.
d) Successful companies depend on people. For people, management managers
should create capability for imitating and manage things through leadership and
should possess qualities like patience, commitment and perseverance.
e) Managers need to provide speed responses to environmental changes through
informational systems and organizational process.
f) As corporates are becoming more integrated with the public life, corporate
governance is becoming important which manager may have to practice.
g) Managers should learn to deal with confused and complex situations. They
should know to deal with global managers, business protocols and market
conditions.
h) In complex and certain situations, managers should have the courage in decision-
making to make unconventional decisions.
i) Managers should possess high ethical standards in business and focus on social
responsibility.

Conclusion

Thus we can say the purpose of strategic management is manifold. To be successful in

the business one should possess/have holistic approach and should know to integrate the
knowledge gained in various functional area of management. By having generalist approach, a
senior manager can understand the complex inter linkages operating within the organisation and
should have systematic approach in decision-making in relation with the changes which takes
place in the environment.

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Q. 2 What is strategy? At what levels is it formulated?

Introduction: -

The concept of strategy is central to understanding the process of strategic management. The
term ‘strategy’ is derived from the Greek word “STRATEGOS”, which means Generalship - the
actual direction of military force, as distinct from governing its deployment. Therefore, the word
‘strategy’ means “ THE ART OF GENERAL ”.
Before making a decision managers have to look into the course of deciding since
Strategy involves situations like: -
a) How to face the competition.
b) Whether to undertake expansions/diversification
c) To be focused/ broad based
d) How to chart a turn around
e) Ensuring stability/should we go in for disinvestments etc

For a company, strategy is one of the most significant concepts to emerge in the field of
management, and also one of the most vital for survival and success.

Some definitions of strategy are as follows: -

According to Alfred chandler the strategy is the determination of basic long-term goals
and objectives of an enterprise and the adoption of the course of action and the allocation
of resources for carrying out these goals.

William Glueck defines strategy as “a unified, comprehension and integrated plan

designed to assure that the basic objectives of the enterprises are achieved”.

Michael Porter’s opinion is that the “ core of general management is strategy”.

Managers must make companies flexible, respond rapidly, benchmark the best practices,
outsource aggressively, develop core competencies; infact should know how to play new roles
everyday. Hyper competition is a common phenomenon that rivals copy very fast.

Companies can outperform rivals only if it can establish a difference it can preserve and deliver
greater value at a reasonable cost. Strategy rests on unique activities –“ The essence of
strategy is in the activities – choosing to perform things differently and to perform
different activities than rivals”.
Strategy is long term. If company focus is only on operational effectiveness. It can become
good and not better. Overemphasis on growth leads to the dilutions of strategy. Growth is
achieved by deepening strategy. Strategy is basically: -
 Strategy is the future plan of action, which relates to the companies activities and it
depends on the mission/vision of the company i.e. when it would like to reach from its
current position.
 It is concerned with the resource available today and those that will be required for the
future plan of action.
 It is about the trade off between its different activities and creating a fit among these
activities.

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A company will need strategy at various levels, as there is a different need at each level. A
company may have different business with a central corporate office. Thus will be multiple
strategies at different levels.

Levels Of Strategy

MISSION / VISION LEVEL

CORPORATE LEVEL

FUNCTIONAL LEVEL STRTEGIES [CORPORATE]

SBU1 SBU2 SBU3 (SBU LEVEL)

FUNCTIONAL LEVEL STRATEGIES

OPERATIONAL LEVEL

 Operational level strategies are derived from functional strategies.

 Functional strategies operate under the SBU – level.
 SBU- level strategies are put into action under the corporate – level strategy.
 Corporate level is derived from the societal-level strategy of a corporation.

1. Corporate level strategy: - It is the broad level strategy and all its plan of
actions is at corporate level to achieve what the company as a whole. It covers the various
strategies and functions performed by different SBU’s. The Strategies needs should be in
line with the company objectives.

2. SBU level (or business) strategy: - It will be line to achieve the objectives for
SBU’s, which are derived and in line with the corporate/company objectives. It would cover
allocation of resources among functional areas along with functional strategies, which again
are in line to functional strategies of the corporate level. Their needs to be coordination

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between the corporate and SBU level both in objectives and functional strategies for
optimization.

3. Functional strategy: - The functional strategy at the SBU level deals with a
relatively smaller area, providing objectives for a specific function in that SBU environment,
like marketing, finance, production, operation, etc.
These are the three levels at which strategic plans are made for most companies.

But larger companies may need to have strategies at some other levels too. Large companies or
companies with multiple business in different countries often need a larger level for the group as
whole. Sometimes even relatively smaller companies may often need a set of strategies at a level
higher than the corporate level. This is known as societal strategies.

4. Societal strategies: - A societal strategy is a generalized view or how the company

perceives itself in its role towards the society or even a country or countries, in terms of
a particular vision / mission statement, or even a need or a set of needs that it strives to
fulfill corporate level strategies are then derived from the societal strategy.

5. Operation level: - In the dynamic environment and due to the complexities of business,
strategies are needed to be set at lower levels i.e. at one step down the functional level,
known as operation level strategies. There are more specific & has a defined scope. E.g.
Marketing Strategy could be subdivided into sales Strategies for different segments &
markets, pricing, distribution, product development and communications and advertising
strategies etc. Some of them may be common & some unique to the target markets. It
should contribute to the functional objectives of marketing function. These are interlinked
with other strategies at functional level like those of finance, production etc

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Q. 3 What are the issues in Strategic Decision Making? Explain the role of various
Strategist. What are issues in making decisions?

Issues in Strategic Decision Making

1. While making a decision the company might have different people at different periods of
time. Decision requires judgments; a personal related factors are important in decision-
making. Hence decision may differ as person change.
2. Decisions are not taken individually, but often there is a task in decisions which could be
Individual Vs Group decision making. There will be a difference between the individual
and group decision-making.
3. A company would need to decide on what Criteria it should make its decision, thus it
needs a process of objective setting, which serve as benchmarks for evaluation of the
efficiency and effectiveness of the decision-making process.
4. There are three Major Criteria in decision Making: -
a. The concept of Maximization.
b. The concept of satisfying.
c. The concept of incrementalism.
Based on the concept chosen the strategic decisions will differ.
5. Generally decision-making process is logical and there will be rationality in decision-
making.
6. When it comes to Strategic decision making point of view there would be proper
evaluation & then exercising a choice from various available alternative resource, which
leads to attain the objectives in a best possible way.
7. Creativity in decision-making is required when there is a complete situation & the
Decision taken must be original & different.
8. There could be variability in decision-making based on the situation & Circumstances.

Various Roles of Strategists Management.

The senior management plays an important role in Strategic Management.

Role of Board Of Directors: The Board of Directors is the supreme Authority in a company.
They are the owners/ shareholders/ lenders. They are the ones who direct and responsible for the
governance of the company. The Company act and other laws bind them and their actions &
they sometimes do get involved in operational issues. Professionals on the B.O.D help to get
new ideas, perspectives & provide guidance. They are the link between the company and the
environment.

Role of C.E.O: The chief Executive Officer is the most important Strategist and responsible for
all aspects from formulations/Implementation to review of Strategic Management. He is the
leader, motivator & Builder who forms a link between company and the board of directors and
responsible for managing the external environment and its relationship.

Role Of Entrepreneur: They are independent in thought and action and they set / start up a
new business. A Company can promote the entrepreneurial spirit and this can be internal attitude
of an organization. They provide a sense of direction and are active in implementation.

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Role of Senior Management: They would either look after strategic management as
responsible for certain areas or as part of teams and are answerable to the B.O.Directors & the
C.E.O.

Role of SBU – Level Executives: They Co-ordinate with other SBU’s & with Senior
Management. They are more focused on their product / burners line. They are more on the
implementation role.

Role of Corporate Planning Staff: It provides administrative support, tools and techniques and
is a Co-ordinate function.

Role of Consultant: Often Consultants may be hired for a specialized new business or
Expertise even to get an unbiased opinion on the business & the Strategy.

Role of Middle Level Managers: They form an important link in strategizing &
Implementation. They are not actively involved in formulation of Strategies and they are
developed to be the future top management.

Q. 4 What is Strategic Management Process? Explain each step briefly.

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Answer:

Strategic Management Process:

In today's highly competitive business environment, budget-oriented planning or forecast-based

planning methods are insufficient for a large corporation to survive and prosper. The firm must
engage in strategic management process that clearly defines objectives and assesses both the
internal and external situation to formulate strategy, implement the strategy, evaluate the
progress, and make adjustments as necessary to stay on track.

Strategic Management is the process through which organization learn from their internal &
external environment, establish strategic decision, create strategies that are intended to help
achieve establish goals & execute there strategies achieve Establish goals and execute there
Strategies all in an effort to satisfy key organizational stake holders.

According to Glueck “it’s a stream of decisions and actions that lead to the development of an
effective strategy/ Strategies to help achieve Corporate Strategies.”

Similarly Hofer defines strategic management process as “it’s the process, which deals with
fundamental Organisational, renewal & growth with the development of strategies, Structures
and Systems necessary to achieve such renewal and growth and with the organizational systems
needed to effectively manage the strategy formulation and implementation process.”

Strategic management is the application of strategic thinking to the job of leading an

organization. Dr. Jagdish Sheth, a respected authority on marketing and strategic planning,
provides the following framework for understanding strategic management: continually asking
the question, "Are we doing the right thing?" It entails attention to the "big picture" and the
willingness to adapt to changing circumstances, and consists of the following three elements:

• Formulation of the organization's future mission in light of changing external factors

such as regulation, competition, technology, and customers
• Development of a competitive strategy to achieve the mission
• Creation of an organizational structure which will deploy resources to successfully carry
out its competitive strategy.

Following is the simple strategic management process: -

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COMPANY VISION &MISSION/ REQUIREMENTS

OF MAJOR STACKHOLDERS STRATEGIC INTENT

EXTENAL & INTERNAL ANALYSIS /

SWOT ENVIRONMENT ANALYSIS

DEFINE STRENGTHS/WEAKNESS/ CORE

COMPENTENCIES

GENERATE STRATEGIC ALTENATIVES/

EVALUATE & SELECT

IMPLEMENT/ FEEDBACK/CONTROL

From the above block diagram it states that Strategic Management is a process, which leads
to the formulation of Strategy/ Set of Strategies & managing the Organisational System for
the achievement of Vision, Mission Goals and Objectives.

Company Vision / Mission

While a business must continually adapt to its competitive environment, there are certain core
ideals that remain relatively steady and provide guidance in the process of strategic decision-
making. These unchanging ideals form the business vision and are expressed in the company
mission statement.

Company Vision is What a Company Wishes to become or aspire to be.

The mission statement describes the company's business vision, including the unchanging values
and purpose of the firm and forward-looking visionary goals that guide the pursuit of future
opportunities.

Guided by the business vision, the firm's leaders can define measurable
financial and strategic objectives. Financial objectives involve measures
such as sales targets and earnings growth. Strategic objectives are related
to the firm's business position, and may include measures such as market

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share and reputation.

Vision /Mission

Envisioned
Core Ideology
Future

Vivid
Core Values Core Purpose Audacious Goals
Description

Core Ideology: Is the unchanging part of organization. It is the character of an organization, this
would not change for a longer time even it were disadvantage.
Core Values: The core values are a few values (no more than five or so) that are central to the
firm. Core values reflect the deeply held values of the organization and are independent of the
current industry environment
Core Purpose: The core purpose is the reason that the firm exists. This core purpose is expressed
in a carefully formulated mission statement. Like the core values, the core purpose is relatively
unchanging and for many firms endures for decades or even centuries. This purpose sets the
firm apart from other firms in its industry and sets the direction in which the firm will proceed
Envisioned Future: Are the goals to be reached. It is classified into:
 Audacious Goals: These are the goals that the company would like to achieve. They are
tough needs extraordinary commitment and effort.
Vivid Description: These Goals are put into words that evoke a picture of what it would be like
to achieve the Audacious Goals.

Environmental Scan

The environmental scan includes the following components:

1. Internal analysis of the firm

2. Analysis of the firm's industry (task environment)
3. External macro environment (PEST analysis)

The internal analysis can identify the firm's strengths and weaknesses and the external analysis
reveals opportunities and threats. A profile of the strengths, weaknesses, opportunities, and
threats is generated by means of a SWOT analysis An industry analysis can be performed using
a framework developed by Michael Porter known as Porter's five forces. This framework
evaluates entry barriers, suppliers, customers, substitute products, and industry rivalry.

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Strategy Formulation
Strengths: it’s always in relation to the environment. It’s an unborn capacity, which needs to
fulfill two conditions.
Requirement for success.
1) It gives the Strategic Advantage.

It has strengths more than the competitor; it could gain more than the Competitor.
E.g. Superior research where new products & Innovations are required.

Weakness: It’s something required for success is missing/inherent inadequacy. It gives strategic
disadvantage to the Organisation.
E.g. Over dependence on a single product line in a mature market.

Core Competencies: Is developed over a period of time, using these competencies exceeding
well, it develops a fine art of Competition with its rules. This capacity of exercing turns them to
core competencies

Given the information from the environmental scan, the firm should match its strengths to the
opportunities that it has identified, while addressing its weaknesses and external threats. To
attain superior profitability, the firm seeks to develop a competitive advantage over its rivals. A
competitive advantage can be based on cost or differentiation.

Generate strategic alternatives/ evaluate & select

It means that there is a proper evaluation and exercising a choice from various alternative
available resources in such a way it may lead to the achievement of company’s objective.

The selected strategy is implemented by means of programs, budgets, and procedures.

Implementation involves organization of the firm's resources and motivation of the staff to
achieve objectives.

Implement/ feedback/control
The way in which the strategy is implemented can have a significant impact on whether it will
be successful. In a large company, those who implement the strategy likely will be different
people from those who formulated it. For this reason, care must be taken to communicate the
strategy and the reasoning behind it. Otherwise, the implementation might not succeed if the
strategy is misunderstood or if lower-level managers resist its implementation because they do
not understand why the particular strategy was selected

The implementation of the strategy must be monitored and adjustments made as needed.
Evaluation and control consists of the following steps:

1. Define parameters to be measured

2. Define target values for those parameters
3. Perform measurements
4. Compare measured results to the pre-defined standard
5. Make necessary changes

Q. 6 Write a detailed note on Goals and Objectives.

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Goals: -

Goals are targets that an organization hopes to/wants to accomplish in a future period of time.
Goals are clear and unambiguous and often an organization sets a combination of goals,
financial and non-financial, quantitative and qualitative. Goals are more on organizational levels
and thus in this sense they are broad in nature, so an organization could set goals on turn over,
profits, returns on assets/equity, it could also have market share, customer satisfaction,
employee’s satisfaction etc. as goals. The important thing to remember is that too many goals
can be confusing and can often lead to contradictions. So goals should be limited and
manageable, clear and consistent with each other.

Objectives: -

Objectives are the ends that state specifically how the goals shall be achieved. They are
concrete and specific in contrast to goals, which are generalized at the company wide level. In
this manner objectives make the goals operational. While goals may be qualitative, objectives
tend to be more quantitative in specification. In this way they are measurable and comparable.
a) Objectives are the ends that specify how the goals shall be achieved.
b) They are concrete and specific and they are in contrast with the goals.
c) Objectives make the goals operational and tend to Quantitative in specifications.
d) Objectives are set in a way that what the organization has to achieve for its employees,
shareholders, customers etc.,
e) Objectives are in relation with the environment. They are the brains of Strategic
Decision Making.
f) They are framed in line with the vision/mission of the organization and it helps to pursue
them.
g) Objectives are invariably Quantitative and provide clear measures and standards for
performance.
h) It helps to see whether the Organization is in right track or not.
i) Objectives should be concrete, specific, and understandable & should have clearly
defined time frame.
j) It must be measurable, actionable, challenging but controllable.
k) There must be co-relation with other objectives.
l) While setting objectives these are the factors to be evaluated. It should be specific at the
level, which it is being set. It should not be either too narrow or too broad.
m) There need to be multiplicity of objectives.
n) It should be formulated at different time frames like short term, medium term, and long
term & should be linked & consistent.
o) Since its in relation with the environment it needs to check whether they are fulfilling the
needs of customers, share holders etc.

Roles of objectives:
Objectives are set and in a way they define what the organization has to achieve for its
employees, share holders, customers etc. since objectives are set with the environment in mind
they define its relationship with its environment. Objectives are framed in line with the
vision/mission of the organization. This consistency helps the organization to pursue its vision
and mission. Objectives become the basis for strategic decision-making, as the right strategies
need to be formulated and implemented for achieving the objectives. Objectives are invariably

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quantitative. They provide clear measures and standards for performance. So they help in
appraisal, to see if the organization is on the right track or not.

Objectives can be set at two levels:

(1) Corporate level: These are objectives that concern the business or organisation as a whole

Examples of “corporate objectives might include:

• We aim for a return on investment of at least 15%

• We aim to achieve an operating profit of over £10 million on sales of at least £100 million

• We aim to increase earnings per share by at least 10% every year for the foreseeable future

(2) Functional level e.g. specific objectives for marketing activities

Examples of functional marketing objectives” might include:

• We aim to build customer database of at least 250,000 households within the next 12 months

• We aim to achieve a market share of 10%

• We aim to achieve 75% customer awareness of our brand in our target markets

Characteristics of objective

Both corporate and functional objectives need to conform to the commonly used SMART
criteria.

Specific - the objective should state exactly what is to be achieved.

Measurable - an objective should be capable of measurement – so that it is possible to determine

whether (or how far) it has been achieved

Achievable - the objective should be realistic given the circumstances in which it is set and the
resources available to the business.

Relevant - objectives should be relevant to the people responsible for achieving them

Time Bound - objectives should be set with a time-frame in mind. These deadlines also need to
be realistic.

Q. 7 What is Environment? How is it Changing? Explain the process of SWOT analysis.

Elaborate what you would study in the environment.
Answer:
Environment

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The Environment of an organization is “the aggregate/total of all conditions, events and

influences that surrounds and affect it.”
Environment is complex – there are many factors in the environment. Most of the factors have
relationship with each other and the interrelationships with each other and the interrelationships
are in many different ways. The factors in environment have effect on the company and the
actions of the company in turn affects the environment and the effects are constantly changing .
Thus it has a great and far-reaching impact on the company.
Environment on abroad level can be classified as follows:
1. External environment
2. Internal environment

External environment is made up of all the factors, conditions and influences outside the
organization. This may give rise to opportunity which can be exploited or it may give rise to the
threat which can underline or cause the problem to the organization. Any organization has no or
very little control over the external environment. Examples: increased competition, increase
demand, change in govt policy, globalization etc .
Internal environment refers to all the factors with in the control of and inside the organization.
these factors may impart strengths which can be utilized to exploit the opportunities or become a
cause of weakness of a strategic nature. Examples: strengths can be are superior R&D, IT,
motivated HR etc and weakness can be over dependence on one product, lack of new product
development capabilities.
Change in environment:
The three major forces that drives the changes in external environment of a company are :
1. Customers
2. Competition &
3. Change.

Customers: Earlier days, Customers had little choice they used to buy the product that was
offered to them. These days’ customers come with more specifications and they demand for
customized products and they want individual attention. Hence customers have upper hands
these days. It’s difficult for an organization to survive in the long run unless they satisfy
customer’s needs so change in the customer preference is a major factor which influence the
external environment
Competition: As many companies emerge, the competition rises. They offer good quality of
products at lesser price and consumers prefer such products. Earlier the company could get into
market with an acceptable product/service at the best price would go to sell. But these days
customers prefer high quality at lowest price. The Company, which offers these at best price,
goes high quality and best service, becomes standard of all the competitors.
Changes: Changes has become both pervasive and persistent because companies face a greater
competitors and each one introduces a product and service innovation to the market with the
globalization of the economy. Hence the companies need to move fast in pace with the changing
environment otherwise it’s difficult to move. The change can be anything including political,
economical / legal, environmental, social /cultural, demographic etc.
The internal environment:

The internal environment also changes rapidly. Many times due to changes in the conditions the
factors which were earlier the strength of the company becomes weakness now. For example In
1776 Adam Smith described in his book, “The Wealth of Nations.” The Principle of division of

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labour for increasing the productivity and there by reducing the cost of goods. American
Companies became best in the world after applying the principles. But in today’s world, in many
industry the manufacturer has to make its product as per the customer requirement and the rate
of change of technology is quite high so specialized worker may become burden for a company
nothing is constant or predictable & these principles don’t work.

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. Environmental factors internal to the firm usually can be classified as strengths
(S) or weaknesses (W), and those external to the firm can be classified as opportunities (O) or
threats (T).

SWOT analysis can be used in conjunction with other tools for audit and analysis, such as PEST
analysis and Porter's Five-Forces analysis. It is also a very popular tool with business and
marketing students because it is quick and easy to learn. The SWOT analysis provides
information that is helpful in matching the firm's resources and capabilities to the competitive
environment in which it operates. As such, it is instrumental in strategy formulation and
selection. The following diagram shows how a SWOT analysis fits into an environmental scan:

Environmental
Scan

Internal Analysis External Analysis

Strengths Weaknesses Opportunities Threats

Strengths

A firm's strengths are its resources and capabilities that can be used as a basis for developing a
competitive advantage. It is an inherent capacity that is in relation to the environment. For an
organization to be a success it requires strength and it gives strategic advantage to gain more
than the competition.

Examples of such strengths include:

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1. patents
2. strong brand names
3. good reputation among customers
4. cost advantages from proprietary know-how
5. exclusive access to high grade natural resources
6. favorable access to distribution networks

Weaknesses

The absence of certain strengths may be viewed as a weakness. It is an inherent inadequacy that
is again in relation to the environment. It gives strategic disadvantage and something that
required for success is missing. It leads to competition where weakness can be used to gain more
due to inherent limitation / constraint/inadequacy.

For example, each of the following may be considered weaknesses:

 lack of patent protection

 a weak brand name
 poor reputation among customers
 high cost structure
 lack of access to the best natural resources
 lack of access to key distribution channels

In some cases, a weakness may be the flip side of a strength. Take the case in which a firm has a
large amount of manufacturing capacity. While this capacity may be considered a strength that
competitors do not share, it also may be a considered a weakness if the large investment in
manufacturing capacity prevents the firm from reacting quickly to changes in the strategic
environment.

Opportunities

The external environmental analysis may reveal certain new opportunities for profit and growth.
OPPORTUNITY: can be accomplished and can help to consolidate and strengthen the
organization. It’s a favorable condition for an organization in its environment

Some examples of such opportunities include:

1. an unfulfilled customer need

2. arrival of new technologies
3. loosening of regulations
4. removal of international trade barriers

Threats

Changes in the external environmental also may present threats to the firm. Also when the
opportunities are not utilized properly it can cause problem to the to the organization which

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causes threat. It is unfavorable condition for the organization. It causes risk/damage to an

organization.

Some examples of such threats include:

 shifts in consumer tastes away from the firm's products

 emergence of substitute products
 new strict regulations
 increased trade barriers

The SWOT Matrix

A firm should not necessarily pursue the more lucrative opportunities. Rather, it may have a
better chance at developing a competitive advantage by identifying a fit between the firm's
strengths and upcoming opportunities. In some cases, the firm can overcome a weakness in
order to prepare itself to pursue a compelling opportunity.

To develop strategies that take into account the SWOT profile, a matrix of these factors can be
constructed. The SWOT matrix (also known as a TOWS Matrix) is shown below:

SWOT / TOWS Matrix

Strengths Weaknesses
S-O strategies W-O strategies
Opportunities

S-T strategies W-T strategies

Threats

• S-O strategies pursue opportunities that are a good fit to the company’s strengths.
• W-O strategies overcome weaknesses to pursue opportunities.
• S-T strategies identify ways that the firm can use its strengths to reduce its vulnerability
to external threats.
• W-T strategies establish a defensive plan to prevent the firm's weaknesses from making
it highly susceptible to external threats

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Q. 10 Explain the various types of Expansion strategies.

Answer: -

Introduction: -

Expansion strategies are the most popular and common corporate strategies. Companies aim for
substantial growth. A growing economy, burgeoning markets, customer seeking new ways of
need satisfaction, and emerging technologies offer ample opportunities for companies to seek
expansion.
When a company follows the expansion strategy, it aims at high growth. This can be done by a
large increase in one or more of its business. The scope of the business is broadened in terms of
their respective customer groups, customer functions, and alternative technologies-singly or
jointly in order to improve its overall performance. An expansion strategy has a significant and
profound impact on a company’s internal structure and processes, leading to changes in most of
the aspects of internal functioning. Expansion strategies are thus more risky as compared to
stability strategies.

Expansion strategies can be undertaken in a variety of ways:

1. Expansion through concentration:

Here company tries to increase business by concentrating in the core jobs .For expansion,
concentrations often the first preference strategy for a company. The simple reason for this is
that a company that is familiar with an industry would naturally like to invest more in known

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business rather than unknown ones. Each industry is unique in the sense that there are
established ways of doing things.

Concentration strategies have several advantages: -

1) Concentration involves fewer organizational changes.
2) It is less threatening and more comfortable staying with present business.
3) It also enables the company to specialize by gaining an in-depth knowledge of
this business and thus master the knowledge.
4) The decision-making has a high level of predictability.
5) Past experience is valuable as it is replicable.

Limitation of concentration strategies: -

1) Firstly, concentration strategies are heavily dependent on the industry, so adverse
conditions in an industry can also do affect companies if they are intensely
concentrated.
2) Secondly, factors such as product obsolescence, flick ness of markets, and
emergence of newer technologies can be threats
3) Thirdly, doing too much of a known thing may create an organizational inertia;
managers may not be able to sustain interest and find the work less challenging
and less challenging and less stimulating.
4) Finally, concentration strategies may lead to cash flow problems that may pose a
dilemma before a company. For expansion through concentration large cash
inflows are required for building up assets while the business are growing. But
when these business mature, company often faces a cash surplus with little scope
for investing in the present business.

2. Expansion through Integration:

Integration basically means combining activities on the basis of the value chain related to the
present activity of a company. Sets of interlinked activities performed by an organization right
from the procurement of basic raw materials right down to the marketing of the finished
products to the ultimate consumers is a value chain. So a company may prove up or down the
value chain and expand their business. This helps it to concentrate more comprehensively on the
customer groups and needs than it is already serving.

Integration results in a widening of scope of the business definition of a company. Integration is

also a part of diversification strategies as it involves doing something different from what the
company has been doing previously.

There are certain conditions under which a company adopts integration strategies. Most
common condition is a ‘make or buy’ decision. Transaction cost economies, a branch of study in
the economics of transaction and their costs helps to explain the situation where integration
strategies are feasible.

Types of integration there are two types of integration- vertical and horizontal
• Vertical integration: this could be of two types: backward and forward
integration. Backward integration means retreating to the source of raw materials- in
simple terms becoming your own supplier-while forward integration moves the

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organization nearer to the ultimate customer-in simple terms becoming your own
customer. When an organization starts making new products that are serve its own
needs, vertical integration takes place.
• Horizontal integration: when a company starts serving the same customers that it
knows very well with additional products that are different from the earlier products
in any of the terms of their respective customer needs. The simplest example is, a
hardware manufacture starts supplying software also.

3. Expansion through Diversification:

Diversification is a much-debated strategy and involves all the dimensions of strategic

alternatives. Diversification involves a drastic change in the business in terms of customer
functions, customer groups, or alternatives technologies of one or more of a company’s business
in isolation or in combination.

Different types of diversification strategies

There are basically two types of diversification strategies

1. Concentric diversification: when an organization takes up an activity in such a manner
that it is related to the existing business, it is called concentric diversification.
2. Conglomerate diversification: When an organization undertakes a strategy which
requires taking up those activities which are unrelated to the existing business, it is called
conglomerate diversification.

4. Expansion through cooperation:

Cooperative strategies could be of the following types:

Mergers: For a merger to take place two organizations are needed. One is the buyer
organization and the other is the seller. Both these types of organizations have a set of reasons
on the basis of which they merge.

The buyers wishes to merge

• to increase the value of the organization’s stock-to increase the growth rate and make a
good investment- to improve stability of earning and sales –to balance, complete, or
diversify product line- to reduce competition and to take advantages of synergy.
The seller wishes to merge
• to increase the value of the owner’s stock and investment –to increase the growth rate- to
acquire resources to stabilize operations- to benefit from tax concessions.

Joint Ventures Strategies: joint ventures conditions may be useful to gain access to a new
business under the following condition:
• Activity is uneconomical for one organization alone.
• Risk of business has to be shared and, is reduced for the participation companies.
• Distinctive competence of two or more organizations can be brought together

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Joint ventures are common within industries and in various countries. But they are especially
useful for entering international markets.

Q. 10 Write short notes on Integration & Diversification.

Answer:

Integration: Integration basically means combining activities on the basis of the value chain
related to the present activity of a company. Sets of interlinked activities performed by an
organization right from the procurement of basic raw materials right down to the marketing of
finished products to the ultimate consumers is a value chain. So a company may move up or
down the value chain and expand their business. This helps it to concentrate more
comprehensively on the customer groups and needs than it is already serving.

Integration results in a widening of the scope of the business definition of a company.

Integration is also a part of diversification strategies as it involves doing something different
from what the company has been doing previously. Typically in process-based industries such
as, petrochemicals, steel, textiles or hydrocarbons, we see enough examples of integrated
companies. These companies deal with products with a value chain extending from the basic
raw material to be ultimate consumer. One of the best examples is the Reliance Group.
Companies operating at one end of the value chain attempt to move up or down in the process
while integrating activities adjacent to their present activities.

These are certain conditions under which a company adopts integration strategies. Most
common condition is a ‘make or buy’ decision. Transaction cost economics, a branch of study
in the economics of transactions and their costs helps to explain the situation where integration
strategies are feasible. The cost of making the items used in the manufacture of one’s own
products is to be evaluated against the cost of procuring them from suppliers. If the cost of
making is less than the cost of procurement then the company moves up the value chain to make

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the items itself. Likewise, if the cost of selling the finished products is lesser than the price paid
to the sellers to do the same thing then it is profitable for the company to move down on the
value chain. In both these cases the company adopts an integration strategy.

Types of Integration:

1. Vertical Integration: Vertical integration could be of two types: backward and forward
integration. Backward integration means retreating to the source of raw material – in
simple terms becoming your own supplier- while forward integration moves the
organization nearer to the ultimate customer – in simple terms becoming your own
customer. When an organization starts making new products that serve its own needs,
vertical integration taken place. In other words, any new activity undertaken with the
purpose of either supplying inputs (such as raw materials, an automobile company going
in for a steel mill, this is backward integration) or serving as a customer for outputs (such
as marketing of company’s product, for example, Titan going into setting their own retail
outlets – this is forward integration) is vertical integration.

2. Horizontal Integration: When a company starts serving the same customers that it
knows very well with additional products that are different from the earlier products in
any of the terms of their respective customer needs, customer functions, or alternative
technologies, either singly or jointly, it is horizontal integration. An example, a
hardware manufacturer starts supplying software also, a car manufacturer getting into
vehicle insurance or selling fuel.

Diversification:

Diversification is a much-debated strategy and involves all the dimensions of strategic

alternatives. Diversification involves a drastic change in the business in terms of customer
functions, customer groups, or alternative technologies of one or more of a company’s
businesses in isolation or in combination.

Types of Diversification:

1. Concentric diversification: When an organization takes up an activity in such a manner

that it is related to the existing business, it is called concentric diversification.
2. Conglomerate diversification: When an organization undertakes a strategy which
requires taking up those activities which are unrelated to the existing business, it is called
conglomerate diversification.

Why are diversification strategies adopted?

The three basic and important reasons are:

• They minimize risk by spreading it over several businesses.
• Used to capitalize on organizational strengths or minimize weak nesses.
• This may be the only way out if growth in existing businesses is blocked due to
environmental and regulatory factors.

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Q. 14 What do you understand strategic evaluation and control?

Answer:

Strategic evaluation:

The purpose of strategic evaluation is to evaluate the effectiveness of strategy in achieving

organizational objectives, thus it is process of determining the effectiveness of a given strategy
in achieving the organizational objectives and taking corrective action wherever required.
From this definition, we can infer that the nature of the strategic evaluation and control process
is to test the effectiveness of strategy.

Importance of strategic evaluation: - The importance of strategic evaluation lies in its ability
to coordinate the tasks performed by individual managers, divisions or SBU’s, through the
control of performance. In the absence of this, individual managers may pursue goals, which are
inconsistent with the overall objectives. There is a need of feedback, appraisal and reward;
check on the validity of strategic choice; congruence between decision and intended strategy;
and creating inputs for new strategic planning.
Strategic evaluation helps to keep a check on the validity of a strategic choice. An ongoing
process of evaluation would, in fact, provide feedback on the continued relevance of the
strategic choice made during the formulation phase. This is due to the efficacy of strategic
evaluation to determine the effectiveness of strategy.

Participation in strategic evaluation: -

The board of directors enacts the formal role of reviewing executive decisions in the light of
their environment, business and organizational implications.

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Chief executives are ultimately responsible for all the administrative aspects of strategic
evaluation and control.
The SBU or profit-center heads may be involved in performance evaluation at their levels and
may facilitate evaluation by corporate level executives.
Audit and executive comities may be changed with the responsibility of continuous screening of
performances.
The corporate planning staff or department may also be involved in strategic evaluation.

Barriers in Evaluation:

1. The limits of control,

2. Difficulties in measurement,
3. Resistance to evaluation,
4. Tendency to rely on the short term assessment, and
5. Relying on efficiency versus effectiveness.

Requirements for effective evaluation:

1. Control should involve only the minimum amount of information. Too much information
tends to clutter up the control system and creates confusion.
2. Control should monitor the managerial activities and results even if the evaluation is
difficult to problem.
3. Long term and short term controls should be used so that a balanced approach to
evaluation can be adopted.
4. Rewards for meeting or exceeding standards should be emphasized so that, managers are
motivated to perform. Unnecessary emphasis on penalties tends to pressurize the
managers to rely on the efficiency rather than effectiveness.

Premise Control: -
Every strategy is based on certain assumptions about environment and organizational factors.
Some of these factors are highly significant and lay change in them can affect the strategy to a
large extent. Premise control is necessary to identify the key assumptions, and keep track of any
change in them so as to assess their impact on strategy and its implementation. It enables the
strategies to take the corrective action at the right time.

Implementation control: -
The implementation controls aimed at evaluating whether the plans, programs and projects are
actually guiding the organization towards it predetermined objectives or not.
Implementation control may be put into practice through the identification and monitoring of
strategic thrusts.
Another method of implementation control is milestone review.

Strategic Surveillance: -
The premises and implementation types of strategy controls are specific in nature. Strategy
surveillance is designed to monitor a broad range of events inside and outside the company that
are likely to threaten the course of a firm’s strategy.
Broad based, general monitoring on the basis of selected information sources to uncover events
that are likely to affect the strategy of an organization.

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Emergency alert control: -

It is base on a trigger mechanism for rapid response and immediate reassessment of strategy in
the light of sudden and unexpected events.
Emergency alert control can be exercised through the formulation of contingency strategies and
assigning the responsibility of handling unforeseen events to crisis management teams.

The first step of signal detection can be performed by the emergency alert control systems.

Process of Evaluation:
The process of evaluation basically deals with four steps:
1) Setting standards of performance.
2) Measurement of performance.
3) Analyzing variances.
4) Taking Corrective actions.

Measurement of performance: -
Standards of performance act as the benchmark against which the actual performance is to be
compared.
Understand how the measurement of performance can take place.
The information system is the key element in any measurement exercise.
Operationally, measuring is done through the accounting, reporting, and communication
systems.
Important to look at the difficulties, timing and periodically in measuring.

Difficulties in measurement: -
It is not so difficult to measure effort as it is to assess departmental performance.
Timing of measurement:
Delay in measurement can defeat the purpose of evaluation itself.
On the other hand measuring before time cannot serve the purpose either .
It is better to measure at critical points in a task schedule.

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Q.16 Write a note on social responsibilities of a business & ethics and values .

Answer: -

Social responsibilities of a business

The World Business Council for Sustainable Development in its publication "Making Good
Business Sense" by Lord Holme and Richard Watts, describe the social responsibility of the
business as "Corporate Social Responsibility is the continuing commitment by business to
behave ethically and contribute to economic development while improving the quality of life
of the workforce and their families as well as of the local community and society at large".

The same report gave some evidence of the different perceptions of what this should mean from
a number of different societies across the world. Definitions as different as "CSR is about
capacity building for sustainable livelihoods. It respects cultural differences and finds the
business opportunities in building the skills of employees, the community and the
government" from Ghana, through to "CSR is about business giving back to society" from the
Philippines.

CSR is about how companies manage the business processes to produce an overall positive
impact on society.

Social responsibility becomes an integral part of the wealth creation process - which if managed
properly should enhance the competitiveness of business and maximise the value of wealth
creation to society.
Companies need to answer to two aspects of their operations.

1. The quality of their management - both in terms of people and processes (the inner circle)

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2. The nature of, and quantity of their impact on society in the various areas.

Outside stakeholders are taking an increasing interest in the activity of the company. Most look
to the outer circle - what the company has actually done, good or bad, in terms of its products
and services, in terms of its impact on the environment and on local communities, or in how it
treats and develops its workforce. But as with any process based on the collective activities of
communities of human beings (as companies are) there is no "one size fits all". In different
countries, there will be different priorities, and values that will shape how business act.

The pressure on business to play a role in social issues will continue to grow. Over the last ten
years, those institutions which have grown in power and influence have been those which can
operate effectively within a global sphere of operations. These are effectively the corporate and
the NGOs.

The benefits of Corporate Social Responsibility

1. Improved financial performance

2. Better risk and crisis management
3. Reduced operating costs
4. Increased worker commitment
5. Enhanced brand value and reputation
6. Good relations with government and communities
7. Long-term sustainability for your company and society
8. A license to operate
9. Long-term return on investments
10. Increased productivity

The ethics and values

Each of us has our own set of values and beliefs that we have evolved over the course of our
lives through our education, experiences and upbringing. We all have our own ideas of what is
right and what is wrong and these ideas can vary between individuals and cultures.

As an employee one bring with himself his own concept of what is right and what is wrong.
Every decision that we make, for better or for worse, is the application of these values to the
question at hand. This is made more difficult by the pressures of organizational life. There are
the pressures of productivity, competition, and bosses. Sometimes managers make decisions
which conflict with their own or society's values because of what they see as the pressures of the
business world.

There are five factors which affect decisions made on ethical problems.

1. The Law
2. Government Regulations
3. Industry and Company Ethical Codes
4. Social Pressures
5. Tension between personal standards and the goals of the organization

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The fundamental ethical principle holds that every human being is entitled to be treated not
merely as a means to the achievement of the ends of others, but as a being valuable in his or her
own right, as an end in himself or herself. But to respect someone as an end is to recognize that
he or she is an autonomous moral agent with free will and desires of his or her own. Thus, the
principle of respect for persons requires respect for individual autonomy. Some of ethical best
practices are as follows: -

1. Accept responsibility and be accountable for our actions

2. Honor our agreements and commitments
3. Respect and promote human rights in all our dealings
4. Exercise corporate power fairly and in an even-handed manner
5. Treat everyone, with whom we deal, fairly, honestly, and with dignity and respect
6. Conduct our business in an environmentally responsible manner and in accordance with
the principles of Sustainable Development
7. Make our decisions based on objective and appropriate criteria, free from improper
influences and ensure that we do not attempt to improperly influence the decisions of
others
8. Obey all laws governing the conduct of our business
9. Operate in all countries in accordance with the principles and standards we apply to our
domestic activities
10. Manage our business for the benefit of all shareholders
11. Take into account the effects of our actions on all stakeholders
12. Communicate to all our stakeholders in an honest and straight-forward manner
13. Carry out our activities in a socially responsible manner which benefits the local
communities in which we operate
14. Work with our employees to create work environments which are safe and healthy
15. Select and treat our employees in a fair and equitable manner
16. Establish a work environment that is free from discrimination, harassment, intimidation
and hostility of any kind
17. Respect the privacy of our employees and their families
18. Encourage our employees to take responsibility for their work, to be flexible and open-
minded, to find enjoyment and satisfaction in their work, and to be proud of our
Company

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