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From Copy
1. Discuss the BCG matrix and GE Nine cells matrix as the techniques of portfolio analysis.
Portfolio analysis is a tool for top management to make investment decisions in different units of a business
with a view to profitable returns. Portfolio analysis aids to develop corporate strategy in a multi business
corporation. In this analysis, top management view its product lines and business units as a series of
investment from which it expects a profitable return. From a portfolio analysis, the top management
constantly judge to ensure the best return on the corporations invested money. Following are the most
popular portfolio analysis.

1. Boston Consulting group’s Matrix (BCG Matrix)

2. General Electric (GE) Business Screen
3. Hofer’s Product-Market Evolution Matrix
4. Public Sector’s Portfolio Matrix

Portfolio analysis is commonly used in strategy formulation because its offers certain advantages:

 It encourages top management to evaluate each of the business units individually and to set
objectives and allocate resources for each.
 It stimulates the use of externally oriented data to supplement management’s judgment and
decisions.
 It raises the issue of cash-flow availability for use in expansion and growth.
 Its graphic depiction facilities communication.

From net
BCG growth-share matrix
BCG Growth-Share Matrix (also known as BCG matrix, BCG analysis, or Boston Box) was developed by
Bruce Henderson in the early 1970s for Boston Consulting Group, world known
management consulting company. The Boston Consulting Group matrix presents different business units
or major product lines based on their relative market share and the growth rate of the market. The model is
useful in brandmarketing, strategic management and production management and business portfolio
analysis.
Content of the BCG growth share matrix
After using method of calculating the BCG matrix two main variables are placed along the axes (Fig. 1) :

Fig. 1. BCG growth-share matrix

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Market growth - Y axis
Market growth is represented by the vertical axis. The axis is divided into two segments: more and less than
10 percent growth per year. A market growth above 10 percent is considered high Therefore, this variable
symbolizes the attractiveness of the market.
Relative market share - X axis
Relative market share is represented by the horizontal axis. It is company's market share divided by the share
of its biggest competitor. Relative market share serves as a measure of the company's strength in the relevant
market segment.
The limiting value is at 1: a value greater than 1 implies that a company has the largest relative market share
and therefore is the market leader. A relative market share of 0.1 means that the company's sales volume is
only 10 percent of the leader's sales volume; a relative share of 10 means that the company's strategic
business unit (SBU) is the leader and has 10 times the sales of the next-strongest competitor in that market.
The highest value typically is defined on the left, and the lowest on the right.

In portfolio matrix four types of products can be distinguished, depending on the placement of a product-
market combination in one of the four quadrants:
Stars
These are products with a high market share in a strongly growing market. The cash resources used for and
the cash resources required by these products are both high and therefore in principle are in balance. After
some time all growth slows. This is the reason, why stars become finally Cash Cows if they keep their
market share. If they will not be able to hold the market share, they will become Dogs.
Cash Cow
These are products with a high market share in a market that is not growing very much. As a result of the
strong market position, they produce many cash resources, and they require few investments because of the
limited market growth.
Question Marks
These products (also called Problem Children or Wild Cats) have a small market share in a rapidly
growing market. As the name indicates, they have unsure and questionable situation and can create
problems: they produce little but require a lot of cash resources. If they are able to strengthen their position,
they can become stars and over time, when market growth decreases, cash cows.
Dogs
These are products with a low market share in a market that is growing very little. Therefore, they produce
little but also require few investments. That means that the cash resources used for and the cash resources
required by these products are both low and for that reason are in balance. Dogs are worthless cash traps,
they do not bring sufficient profits for a company.

Strategic recommendations based on product portfolio matrix

Based on the BCG analysis and above described product market matrix, company has to decide what
objective, strategy, and budget should be assigned to each SBU. Several general investment strategies may
be recommended.
Growth (Build) - strategy
For some Question Marks a company may use a growth strategy financed by Cash Cows
The part of the Cash Cows' revenues would strengthen the positions of Question Marks that have the
potential to become Stars. In that case, a company increases its market share substantially.
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Maintain position (Hold) - strategy
The strong positions of the Stars and the Cash Cows should be maintained.
Also, if the Dogs have a sound size, they may be an important part of a company's activities. In that case, a
maintenance strategy appears also to be promising.
Harvest or milk - strategy
The main aim of this strategy is to rise short-term cash flow despite the long-term consequences. Harvesting
implies a decision of getting out of a business by executing a program of constant cost cutting. Companies
use this strategy when they expect to reduce their cost at faster rate than potential fall in sales. This strategy
is suitable for weak Cash Cows, Question Marks and Dogs. The recommendation for the Dogs is to milk
them and remove them from the market.
Liquidation (Terminate, Divest) - strategy
If a company runs a weak business, it should consider weather to harvest or divest its business units. The
decision of liquidation gives a company the opportunity to reinvest its resources in a more prosperous
business. This strategy is appropriate for the Dogs and the rest of the Question Marks, which are not
financed by the Cash Cows.

https://ceopedia.org/index.php/BCG_growth-share_matrix
https://www.slideshare.net/drnitinzaware/business-portfolio-analysis-70237867

McKinsey matrix
McKinsey matrix (other names: matrix of product attractiveness, market attractiveness matrix, GE matrix)
dates back to the seventies. Is used to determine the success factors of the company in the form
of industry attractiveness and competitive position within the industry.

Assumptions used for creating McKinsey/GE matrix

The main assumptions of the McKinsey matrix structure:

 company should operate in the sector more attractive, while eliminating the products from the less attractive,
 company should invest in products with a strong competitive position, and withdraw from those in which its
competitive position is weak.
The method is also called McKinsey nine-field analysis (9W analysis) of the company's production portfolio.
This matrix consists of two variables:

 attractiveness of the industry,

 assessment of the competitive position and financial strength of the company.

Stages of evaluation of attractiveness of the industry

1. Identification of criteria for the attractiveness of the industry and the market size.
2. Weighing of ratings (sum of the weights of all criteria is 1).
3. Evaluation of each industry on scale from 1 to 5 meaning: 1-unattractive, 5-industry very attractive.
4. Interpretation of the final result of the attractiveness evaluation.

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Stages of evaluation of competitive position
Assessment of the competitive position of the company has following stages:

1. Identification of the factors of success of the company.

2. Weighting of relative factor importance.
3. Evaluation of competitiveness on scale from 1 to 5 meaning: 1-weak competitive position, 5-strong
position.
4. Interpretation of the estimated ratings.

Principles for GE/McKinsey matrix interpretation

On the Y axis, which determines the level of attractiveness, we denote the attractiveness of each of the
industries. X-axis mark strategic positions of the company. The intersection of the two dimensions determine the
point, which is the centre of a circle, meaning the company position (fig. 1.).

Fig. 1 Interpretation of the company's position in the matrix

Circle size is dependent on the size of the production. Inside the circle segments are drawn, which determine the
size of the market share of the product. The distribution of products in the matrix informs us about the strategy
that should be used.

Advantages and disadvantages of GE/McKinsey matrix

Advantages:

 flexibility in assessing the attractiveness of the industry,

 greater possibility of balancing a portfolio of production.
Disadvantages:

 subjective criteria for evaluation (assessment is more focused on the present and not the future competitive
position of the company).

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2. What is management system? They should be designed for the implementation of strategy?
Explain

3. What is internal analysis? Explain the process of internal analysis.

Internal analysis refers to the analysis of the internal resources and capabilities of an organization. It deals
with the identification of the strengths and weaknesses of an organization. This analysis is the process by
which the strategists examine the organization’s marketing and distribution, research development,
production and operations, corporate resources and personnel, finance and accounting factors to determine
where the organization has significant strengths and weaknesses.

Internal analysis is based on the scanning of the internal environment of an organization. It reviews
organizational resources (resource audit), scans organizational activities and links them with creation of
value to the organization (value chain analysis) and identifies the unique strengths and capabilities (core
competences). It determines how to exploit the opportunities and meet the threats the environment is
presenting by using strengths and repairing weaknesses in order to build sustainable competitive advantage.
Internal analysis is also known as organizational analysis.

In conclusion, we can say that, internal analysis is the process by which strategists examine a firm’s internal
resources to determine whether the firm has significant strengths and weaknesses.

The process of internal analysis consists of the following steps:-

Define
Strength Identificat Identify
vision, Locate
and ion of core
mission, strategic
weakness unique competenc
goals and advantage
analysis resources y
strategies

Figure: Internal Analysis Process

1. Define vision, mission, goals and strategies
In the first stage of internal analysis, the organizational vision, mission, objectives and strategies are
analysed. Vision is the future aspiration of an organization. Mission is the reason of the organizational
existence. Goals are the desired outcomes. Strategies are the means through which the goals are achieved.
Clear definitions of the above components help assess resource requirement of an organization.

2. Strength and weakness analysis

In the second stage of internal analysis, the resource and capability of the firm are analysed to assess the
relative strength and weakness. Strength is the resource or capability controlled by or available to a firm that
gives it an advantage relative to the competitors. On the other hand, a weakness is a limitation or deficiency
in one or more of a firm’s resources or capabilities relative to its competitors that creates a disadvantage to
the firm. Strength and weakness of a firm reside in functional areas as production, marketing, and human
resource.

3. Identification of unique resources

After the assessment of strength and weakness, the unique resources of an organization are identified and
analysed. Unique resources of an organization are identified and analysed. Unique resources are valuable,
difficult to imitate, non-substitutable and rare. They help develop core competency that leads the
organization towards sustainable competitive advantage.

4. Identify core competency

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After the identification of unique resources, the core competency is analysed. A core competency is the sum
of competencies that is widespread within the organization. It is something that the organization can do
exceedingly well. Core competencies are the firm’s most important sources of competitive advantage. They
reside in functional areas as production, marketing, and human resource.

5. Locate strategic advantage

In the final stage of corporate resource analysis, the strategic advantage of the firm is located. Strategic
advantage is the advantage over the competitors. It is the result of match between core competency and
product market conditions. Locating strategic advantage helps an organization to achieve the strategic goal.

4. What are the methods of identifying the competitive advantage? Discuss the illustrations.

Unit 2: Establishing Company Direction

Brief Answer Questions

1. 2074 Q.No. 7 Define vision and mission. [2]
A vision statement describes what the organization would like to become in future.
OR,
Vision is the picture of desired future state of an organization. It specifies the direction that a
company intends to follow in developing and strengthening its business.

Mission is the reason of organizational existence. It defines the business interms of customers,
employees, suppliers and the community.

It tells what the company is providing to society, either a service or a product.

A well-conceived mission statement:

 defines the fundamental, unique purpose that sets a company apart from other firms of its type and
 identifies the scope of the company’s operations in terms of products and services offered and
markets served.

2. 2073 Q.No. 7 State two characteristics of mission. [2]

Two characteristics of mission are:

1. Board in scope: The mission of an organization determines its scope. It answers what is our
business? In other words, it clears about the product and market of the business. It also provides
base for the formulation of goal and strategies.
2. Precise: A mission statement is always presented in a precise way. Normally, it includes not
more than 250 words.

3. What do you mean by company mission? Give one example. [2]

The mission of a company is the unique purpose that sets it apart from other companies of its type
and identifies the scope of its operations. The mission describes the company’s product, market, and
technological areas of emphasis in a way that reflects the values and priorities of the strategic
decision makers.
OR,
Mission is the company’s broad sense of purpose and often defines the industry the firm competes in.

For example:-
1. Asian paints “Leadership through excellence.”
2. British Airways seeks to be “The world’s favorite airplane.”
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3. Khwopa College, Bhaktapur “To access higher education to people of all economic and
social strata.”

4. Define objective with an example. [2]

Objectives are the expected outcome of an organization. They reflect managerial commitment. It
serve as the centre of an organization.
5. Enlist any four importance of mission. [2]
Any four importance of mission are:

1. Brings uniformity: mission statement brings uniformity within the organization. It builds
synergy for goal achievement.
2. Base of resource allocation: It provides base for the resource allocation to different business or
units of an organization.
3. Develops organizational culture: a mission statement inspires all stakeholder of an organization
and helps to develop organizational culture that supports the organizational goals.
4. Enhances employee ownership: Mission statement enhances employee ownership in the
organization and also increases their commitment to organizational success.
5. Defines the Business: A mission statement defines the business in terms of products and
customers.
6. Organizational Responsibility: Mission statement reflects responsibility of organization
towards its stakeholders.
7. Philosophy: A mission statement clarifies organization’s operating philosophy in terms of
quality, image and self-concept.

6. Write any two limitations of SWOT analysis. [2]

Any two limitations of SWOT analysis are given below:
1. It generates a lengthy lists of environmental components.
2. It does not use weights to reflect priorities.
3. The same factor can be place in two categories (e.g. strength may also be a weakness or an
opportunity may also be a threat).
4. The opinions are not verified with data or analysis which may reduce the reliability of the SWOT
analysis.
5. It does not show any logical link to strategy implementation.

Descriptive Answer Questions

1. 2074 Q.No.14 What is SWOT analysis? Enumerate its importance in strategic management.
[10]
SWOT Analysis, also known as the SWOT matrix, is an acronym for:
 Strengths: positive characteristics that give an advantage in it’s being;
 Weaknesses: critical characteristics that give an disadvantage in it’s being;
 Opportunities: a set of circumstances that makes it possible to do something in advantage;
 Threats: a set of circumstances that could have an negative influence on the desired goal.

It is a strategy method that can be used to evaluate these focus areas involved in a project or organization
for strategic planning.

The SWOT Analysis is also an type of analysis that can be used on evaluating the Marketing mix: 4P’s
(Product, Price, Place and Promotion), an organization or even a person or team. It is about the management
objectives of the organization or project and the identification of internal and external factors that are
favourable and/or unfavourable to achieving the external objectives.

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The first fundamentals of the SWOT Analysis was developed by Edmund P. Learned et al. (1969). This
method was further developed by Albert Humphrey in the 1970s, and was based on the research of data
from the Fortune 500 companies in the United States. In order to create a SWOT Analysis, users must ask
and get answers, to generate meaningful information to fill in the main four focus areas.

Internal and external factors

This powerful strategy tool identifies the internal and external factors. The internal factors are the strengths
and weakness of the evaluation. Some examples of internal factors are financial resources, company’s
location, employees, software systems, legal elements like patents and copyrights and business processes. A
useful management tool that help you to identify the internal factors is the 7S Frameworkby McKinsey, a
powerful organization analysis tool. The external factors are the opportunities and threats, mostly
environmental. Examples of external factors are market, demographic and economic trends, relationships
with suppliers and business partners and regulations.

Two useful management tools that we can recommend are the PEST Analysis and DESTEP Analysis. Both
are great to provide an inside on the external factors. The general results are often presented in a SWOT
Matrix.

Its importance in strategic management is highlighted below:

1. Strategic fit: SWOT analysis ensures strategic fit between external opportunities and internal
strengths while working around external threats and internal weaknesses. Strategic fit provides
strategic advantage to the organization. An organization attempts to gain strategic firt through
effective strategy.

2. Analyse opportunities: as mentioned earlier, opportunities are the favourable condition in the
environment. SWOT analysis helps to anlayse the opportunities that the organization is likely to
exploit. The opportunities may be exploited through proper plan and resources. They lead an
organization towards competitiveness and finally goal achievement.

3. Analyse threats: Threats refer to economic, social, cultural, demographic, environmental, political,
legal, technological, and competitive trends and events that could significantly harm the organization
in the future. There are certain components that pose threats to a business like increase in the number
of competitors, introduction of new regulations, low growth of market, high power of consumers and
suppliers. Business efforts are directed towards reduction or elimination of threats for maximizing
competitiveness. SWOT analysis helps to identify and analyse the effects of threats on business and
possible strategies to mitigate them.

4. Analyse strength: Strengths are the capabilities of an organization to perform efficiently and
effectively. They reside in the management, marketing, finance/accounting, production/operations,
research and development, and management information system. Identifying and evaluating
organizational strengths in the functional areas of a business is an essential strategic management
activity. Organizations formulate strategies that capitalize on strengths. SWOT analysis helps to
analyse the strengths.

5. Analyse weakness: Weaknesses may be defines as the poor capability of an organization relative to
the key competitors. Lack of resources, plans and skills create weaknesses. Organizations formulate
strategies that always reduce weaknesses. SWOT analysis helps to analyse and eliminate internal
weaknesses.

2. 2074 Q.No.14 What is SWOT analysis? Explain its components. [10]

SWOT analysis is the primary stage of strategic planning and concentrates on collecting information from
the environment. It stands for strengths, weaknesses, opportunities and threats that an organization has to

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face and capitalize on. It is a process of matching organizational strengths and weaknesses with
environmental opportunities and threats to determine the organizational right place and position. It focuses
on organizational mission and objectives. Top management needs to collect information from the
environment before formulating a strategic plan for the organization.

SWOT analysis helps answer the following questions:-

 Will the current strength matter as much in the future as well?
 Should the existing resources gaps be filled?
 Are new types of competitive capabilities to be developed?
 Which resources and capabilities need to be emphasized greater?

The components of SWOT analysis are given below:-

1. Strengths
Strength is the competitive strong position of the organization in terms of resources. Resources consist of
capital, skilled manpower, brand image, advance technology, market leadership and business alliances of the
organization. Strength gives advantages to an organization as compared to its competitors in business. The
strength position be capitalized on to meet the organization objectives.
OR,
A “strength” is a positive characteristic that gives a company an important capability. It is an important
organizational resource which enhances a company, competitive position. Some of the internal strengths of
an organization are:
 Distinctive competence in key areas
 Manufacturing efficiency
 Skilled workforce, adequate financial resources Superior image and reputation
 Economies of scale
 Superior technological skills
 Insulation from strong competitive pressures
 Product or service differentiation
 Proprietary technology

2. Weaknesses
A “weakness” is a condition or a characteristic, which puts the company at disadvantage. Weaknesses make
the organization vulnerable to competitive pressures. These are competitive liabilities and strategic
managers must evaluate their impact on the organization’s strategic position when formulating strategic
policies and plans. Weaknesses require a close scrutiny because some of them can prove to be fatal. Some of
the weaknesses to be reviewed are:
 No clear strategic direction
 Outdated facilities
 Lack of innovation is Complacency
 Poor research and developmental programs
 Lack of management vision, depth and skills
 Inability to raise capital
 Weaker distribution network
 Obsolete technology
 Low employee morale
 Poor track record in implementing strategy
 Too narrow a product line
 Poor market image
 Higher overall unit costs relative to competition

3. Opportunities
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An “opportunity” is considered as a favourable circumstance, which can be utilized for beneficial purposes.
it is offered by outside environment and the management can decide as to how to make the best use of it.
Such an opportunity may be the result of a favourable change in any one or more of the elements that
constitute the external environment. It may also be created by a proactive approach by the management in
moulding the environment to its own benefit. Some of the opportunities are:
 Strong economy
 Possible new markets
 Emerging new technologies
 Complacency among competing organizations
 Vertical or horizontal integration
 Expansion of product line to meet broader range of customer needs
 Falling trade barriers in attractive foreign markets

4. Threats
A “threat” is a characteristic of the external environment, which is hostile to the organization. Management
should anticipate such possible threats and prepare its strategies in such a manner that any such threat is
neutralized. Some of the elements that can pose a threat are:
 Entry of lower cost foreign competitors cheaper technology adopted by rivals
 Rising sales of substitute products
 Shortages of resources
 Changing buyer needs and preferences
 Recession in economy
 Adverse shifts in trade policies of foreign governments
 Adverse demographic changes

3. What do you mean by strategic vision? Why development of vision is important in modern
organization? [10]
A vision which is also known as strategic vision describes what the company is to become in the (long-term)
future. It can be defined as a path through which we can reach to our mission. There may be several paths to
attain mission. Vision selects the best way for attaining organizational mission.

A Vision statement outlines what the organization wants to be, or how it wants the world in which it
operates to be. It concentrates on the future. It is a source of inspiration. It provides clear decision-making
criteria.

A Vision Statement defines what your business will do and why it will exist tomorrow and it has defined
goals to be accomplished by a set date.

A Vision Statement takes into account the current status of the organization, and serves to point the direction
of where the organization wishes to go.

Examples of Vision:
 Amazon: Our vision is to be earth's most customer centric company; to build a place where people
can come to find and discover anything they might want to buy online.

 Nike: To bring inspiration and innovation to every athlete* in the world.

(*If you have a body, you are an athlete.)

 Nepal Investment Bank: Our vision is to be the most preferred provider of Financial Services in
Nepal.

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 Chaudhary Group: We strive to be a global leader in customer value.

 BMW: To become most successful premium manufacture in the car industry.

The development of vision is important in modern organization due to following reasons:-

1. Provides direction
Strategic vision provides long-term direction to the organization. It prepares the organization for
future.
2. Guides for decisions
Strategic vision reflects intent of the organization. Hence, it guides strategic decisions.
3. Shapes strategy
Strategic vision is the future aspiration of an organization. Strategic management always focuses on
strategic vision. Hence, strategic vision shapers strategy.
4. Sets priority
Strategic vision sets organizational priority. It further guides planning..
5. Aligns people and activities
Strategic vision aligns people and activities across the organization. It enhances organizational
effectiveness.
6. Reflects core values and belief
Strategic vision reflects the core values and beliefs which the overall management system of the
organization.
7. Empowers reflects
Employee motivation, commitment, and empowerment are vital for organizational success. Strategic
vision aims employee empowerment to focus their efforts towards it.
8. Brings change
Strategic vision intends to bring changes in the organization. It also acts as the centre of hope in the
organization.

OR,
1. Good visions are inspiring & exhilarating (generate excitement)
2. Good visions help in the creation of a common identity and shared sense of purpose.
3. Good visions are competitive, original and unique. They make sense in the marketplace as they are
practical.
4. Good visions foster risk taking and experimentation.
5. Good visions foster long-term thinking.
6. Good visions represent integrity: they are truly genuine and can be used to the benefit of people.

4. What do you mean by mission? Mention the characteristics of mission. [10]

A mission statement defines the business in terms of the customers, employees, suppliers and the
community. It reflects every facet of the business: the range and nature of the products the business offers,
pricing, quality, service, marketplace position, growth potential, use of technology, and the relationships
with the customers, employees, suppliers, competitors and the community. It also helps clarify the scope and
objectives of the business. It reflects the business special niche.
According to Fred R. David “A mission statement reveals the long term vision of an organization in terms
of what it wants to be and whom it wants to serve.”
“One-sentence statement describing the reason an organization or program exists and used to help guide
decisions about priorities, actions, and responsibilities.”

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A well conceived mission statement defines the fundamental and unique purpose that sets a company apart
from other firms of its type and identifies the scope of the company’s operations in terms of products offered
and markets served.

“Mission express/states the doing part of the vision.”

Examples of mission statements:
 Asian paints “Leadership through excellence.”
 British Airways seeks to be “The world’s favorite airplane.”
 DHL “Deliver your promise.”
 Google “To organize the world’s information and make it universally accessible and useful.”
 Khwopa College, Bhaktapur “To access higher education to people of all economic and social
strata.”

The characteristics of mission are given below:-

Broad in
Scope

Components
Precise
of Strategy

Characteristic
s of Mission

Distinctive Inspiring

Multi-
Components

Figure: Characteristics of Mission

1. Broad in Scope: the mission of an organization determines its scope. It answers what is our
business? In other words, it clears about the product and market of the business. It also provides base
for the formulation of goal and strategies.

2. Precise: A mission statement is always presented in a precise way. Normally, it includes not more
than 250 words.

3. Inspiring: A mission statement inspires all the stakeholders and encourages them to involve in the
organization in a rigorous way.

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4. Multi-Components: A mission statement involves many components as customer, product or
services, market, technology, concern for survival, philosophy, self-concept, concern for public
image, and concern for employees.

5. Distinctive: A mission statement makes the organization different to others. It helps in image
building.

6. Components of Strategy: It involves the strategic components that are likely to be adopted by the
business. It provides early signal about the strategy that the business is likely to pursue.
5. Write the components of objective. You are also required to show the difference between
financial and strategic objectives. [10]
Concept of Objective:-
The expected outcomes of an organization are known as objectives. They convert the strategic vision into
specific performance targets. Objectives show the managerial commitment towards performance
achievement. In other words, they are the end result of planned activity. Each and every organization is
established for achieving certain objectives. Hence, the organizational activities are directed towards their
achievement. Objectives may be formulated for a long as well short term. Similarly, they may also be
formulated in different levels as corporate, business, operational and individual. Determination of objective
is an integral part of strategic management.

In the words of Wheelen and Hunger, “Objectives are end results of planned activity.”
According to Azhar Kazmi, “Objectives are the ends that states specifically how the goals shall be
achieved.”
In the words of Johnson & Scholes, “Objectives are statements of specific outcomes that are to be
achieved.”

In conclusion, we can say that, objectives are what the organization wants to have or become at some point
in the future. Because they are strategic in nature, they focus more on position to be attained than on specific
accomplishments. They define success at a point in the future, allowing you to work backward and identify
interim steps along the way. They take the company strategy one more step toward action level. They are
visionary and broad in scope.

Examples of objectives: Profitability, Survival, Growth, Efficiency, Leadership, Social Responsibility,

Reputation, Employee relation and development etc.
The components of objective are shown in below diagram:-

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Specific
Congurent
across Measurable
Department

Hierarchical Achievable
Components of
Objectives

Flexible Realistic

Motivating Timely

Figure: Components of Objective

1. Specific: An objective must be specific. A specific objective can be understood very easily. For
example the objective “Revise website based on client feedback” isn’t very specific. “Change to new
colour scheme and headers” of the website is more specific

2. Measurable: An objective should be clearly measurable. If an objective is not measurable, it cannot

be accomplished. For example, objective like “make sale calls” is not measurable. However, the
measurable objective would be “make 10 new calls per day”.

3. Achievable: An objective must be achievable in a given period of time. It means objective should be
set with due consideration of the organizational resources and capability. For example, for a local
business to expand globally within a limited time would not be achievable. However, increase its
market share by 205 would be achievable.

4. Realistic: An objective must be based on reality. For it to be realistic, it needs to be something that
the business actually does. To be realistic, it should be based on the organizational as well as external
situations.

5. Timely: An objective must cover a certain period of time. For example, increase the sales by 20% is
not timely. However, increase the sales by 20% over the period of 1 years is timely.
6. Motivating: People are the most important resource of an organization. Their activities largely
determine the achievement of objectives. Hence, objective should be such that motivates the people
in the organization.

7. Flexible: Objective should be able to address the changes in the firm’s environment. For this, it
should be flexible. In other words, objective must have sufficient ground of adjustment as per the
changes in environment.

8. Hierarchical: An objective should be hierarchical. For this, it should be set for different levels of an
organization. They are corporate level, business level, functional level and individual level.

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9. Congruent across departments: Objective should be congruent across different departments and
units of an organization. It helps to bring synergy and remove unnecessary conflicts between the
departments.

The differences between financial and strategic objectives are presented below:-
S.N. Bases of Financial Objectives Strategic Objectives
Difference
1 Meaning Financial objectives are the instrument Strategic objectives may concern with
for monitoring progress towards products or service, market,
achieving strategic objectives. competition, social responsibility,
introduction of technology, public
image, etc.
2 Time They are the expected outcome of an They are the expected outcome of an
organization in short range normally organization in long range normally
within or below 1 year. above 5 years.
3 Expression They are expressed in quantitative They are expressed in qualitative
terms. terms.
4 Support They support the strategic objectives. They support the strategic vision.
5 Scope They are narrower than the strategic They are broad in nature.
objectives.

Analytical Answer Questions

1. “Development of vision, mission and objective is the most important function of strategic
management.” Elaborate this statement. [15]

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