Notes of Business Policy & Stretegy 2022 2

DISHA COLLEGE BBA VI SEMESTER
Business Policy and Strategy
BBA-VI SEMESTER
BUSINESS POLICY AND STRATEGY SHIV KUMAR .P (AP)

Business Policy and Strategy (127)
Course Contents:
Unit – I
Nature and Objectives of Business Policy, Defining Business Purpose, Mission and
Objectives, Strategic Intent.
Unit – II
Analysis of External and Internal Environment, SWOT Analysis.
Unit – III
Strategy Formulation; Major Types of Strategies, Determination of Strategic Plan.
Unit – IV
Strategy Implementation; The Process of Strategy Implementation, Resource Allocation

Social Responsibility of Business and Business Ethics.
Unit – V
Evaluation of Strategy and Content
Reference:
1.Azhar Kazmi, Business Policy & Strategic Management TMH, New Delhi. P.K. Ghosh,
Business Policy n- Strategic Planning and Management, Sultan Chand and Sons, New Delhi.
2.VSP Rao, V Hari Krishna,Strategic Management Text and cases
3.Marios I.Katsioloudes,Strategic Management Global Cultural Perspectives for Profit and

Non Profit Organizations.
4.Google educational sites, slideshare.
FREQUENTLY ASKED IMPORTANT QUESTIONS

UNIT-1
Que 1 Define Strategy? Discuss the key role to be played by all levels of Management in
strategy formulations?
Que 2 Explain the Process of Strategic Management?
Que 3 What is Strategy? How it is different from business Policy? Explain Historical
Evolution?
Que 4 What is Strategic Intent? Who is the founder of this concept? Explain the Role of
Mission in Strategic Management?
Que 5 Differentiate between Mission and vision What are the possible pitfalls of not having a
mission of an organization?
Que 6 What are the different aspects of nature of business policy? discuss each type with
suitable example?
UNIT-2
Que 1 Why environment analysis is essential in strategy making process? Explain the
techniques used to analyze the environment with example?
Que 2 Write short note on-
SAP, ETOP, core competency
Que 3 What is internal environment? How does it matter in strategy making process? Explain
different components of internal environment?
Que 4 How to analyze external environment? Explain the outcome of external environment
analysis?
Que 5 Differentiate clearly between the external and external components of environment?
What is the rationale of performing a SWOT analysis?
Que 6 Define External environment? Explain different components of external environment?
UNIT-3
Que 1 Discuss Michael porters approach to defining generic competitive on business

strategies?
Que 2 Explain strategic implication of each of the following types of business in corporate
portfolio:
A) Stars B)Question Mark C) Cash Cow D)Dogs
Que 3 Write short motes on:

a) Mergers and joint venture strategy

b) Turnaround and divestment strategy
Que 4 What is strategic plan? Propose the outline of strategic plan for a medium sized
company.
Que 5 What is corporate level strategy? Discuss the alternate four corporate strategies.
Que 6 What are the 5 competitive forces of an industries identified by Michael porter?
UNIT-4
Que 1What do you mean by social responsibility? How can strategist limit the scope of social
responsibility?
Que 2 Discuss the nature of the interrelationship that exists between the formulation and
implementation of strategies?
Que 3 What is Resource Allocation? How is top-down approach for resource allocation?
Que 4 Write short notes on:
a) Social responsibility of Business
b) Different structural mechanism required to implement a strategy.
Que 5 What is organisation structure? how product based structure is different from customer
based structure?
Que 6 What do you mean by operational implementation? Describe operational

effectiveness?
UNIT-5
Que 1 Describe and explain the application of the techniques for strategies control.
Que 2 Write a descriptive note on the nature and importance of strategic evaluation.
Que 3 Write an exploratory note on the evaluation techniques for strategic control.
Que 4 What is the basic nature of strategy evaluation? Why is strategy evaluation important
in organisation?
Que 5 Why is strategic evaluation important? What are the elements in evaluation process?
Que 6 Describe the following:
a) Strategic control b) operational control
Unit – I

Nature And Objectives Of Business Policy, Defining Business Purpose,

Mission And Objectives, Strategic Intent.
INTRODUCTION
Business is the mainspring of the modern human life. It is the major economic activity in any
society. Each one of us, making some dealing in our day-to-day life with a number of
business concerns. It includes activities concerned with production, trade, banking,
insurance, finance, agency, advertising, packaging, and other related activities. What is
important and what needs emphasis in the term ‘business’ is that the above activities area
being organized and carried on to satisfy the consumers needs
A business policy is: guidelines that facilitate to reach a pre determined objective both in
mode and manner formulated from the top to the lower level management while Objectives
are the endpoints to a plan. The nature and objective of business policy are both formulated
as plans and determined by a business organization. Once established the policy decisions
shape the future of a company channel the available resources along desired lines and
direct the energies of people working at various levels toward predetermined goals. In a
way, business policy implies the choice of purposes, the shaping of organizational identity
and character the continuous definition of what is to be achieved and the deployment of
resources for achieving corporate goals. Objective is the end to a plan while policy is the
mode and manner to reach the objective. Business policy basically deals with decisions
regarding the future of an ongoing enterprise. Such policy decisions are taken at the top
level after carefully evaluating the organizational strengths and weaknesses in terms of
product price, quality, leadership position, resources etc., in relation to its environment.
The origin of business policy can be traced back to 1911, when the Harvard Business School
introduced an integrative course in management aimed at providing general
management capability. Policy making is one of the most important components
of business planning. It provides guidelines as to how objectives of business are to be
achieved. The necessity of guiding the future direction of business arises at some stage in
the course of existence of every company.
Definition
According to Terry, “A business policy is an implied overall guide setting up boundaries that
supply the general limits and direction in which managerial action will take place”.
According to Knoontz,“ Policies define how the company will deal with stock holders,
employees, customers, suppliers, distributors and other important groups. Policies

narrow the range of individual discretion, so that employees act consistently on

important issues”.
As defined by Christensen and Others, business policy is “the study of the function and
responsibilities of senior management, the crucial problems that affect success in the total
enterprise, and the decisions that determine the direction of the organization and shape its
future.”
Scope of Business Policy

No business organization can either survive or grow without definite objectives which can
only be accomplished by applying different policies from time to time, depending upon the
working conditions. Business policies are actually the guidelines for organizational thinking,
behaviour and action. Policies as such are formulated pertaining to different aspects of
business organizations and therefore they enjoy a very wide scope in day-to-day life of any
business unit. Policies in general, have a wide scope as they are concerned with
 Aim and objectives of a business unit

 Organizational structure
 Financial resources available
 Regional traditions and social values
 Fiscal and commercial policy of the government.
Business Policy defines the scope or spheres within which decisions can be taken by the
subordinates in an organization. It permits the lower level management to deal with the
problems and issues without consulting top level management every time for decisions.
Business policies are the guidelines developed by an organization to govern its actions. They
define the limits within which decisions must be made. Business policy also deals with
acquisition of resources with which organizational goals can be achieved. Business policy is
the study of the roles and responsibilities of top level management, the significant issues
affecting organizational success and the decisions affecting organization in long-run.
Features of Business Policy

An effective business policy must have following features-
1. Specific- Policy should be specific/definite. If it is uncertain, then the implementation

will become difficult.
2. Clear- Policy must be unambiguous. It should avoid use of jargons and connotations.
There should be no misunderstandings in following the policy.
3. Reliable/Uniform- Policy must be uniform enough so that it can be efficiently
followed by the subordinates.
4. Appropriate- Policy should be appropriate to the present organizational goal.
5. Simple- A policy should be simple and easily understood by all in the organization.
6. Inclusive/Comprehensive- In order to have a wide scope, a policy must be
comprehensive.

7. Flexible- Policy should be flexible in operation/application. This does not imply that
a policy should be altered always, but it should be wide in scope so as to ensure that
the line managers use them in repetitive/routine scenarios.
8. Stable- Policy should be stable else it will lead to indecisiveness and uncertainty in
minds of those who look into it for guidance.
Objectives of the Business Policy

It is thus essential that we should first state the objectives of business policy and only then
proceed further. The objectives of business policy have been stated by authors such as
Christensen et.al. and Steiner and others in terms of knowledge, skills and attitudes.
These objectives could be derived from the purpose of business policy.
 In Terms of Knowledge.
The learners of business policy have to understand the various concepts involved. Many of
these concepts like strategy, policies, plans and programmes are encountered in the
functional area courses too. It is imperative to understand theses concepts
specifically in the context of business policy.
 A knowledge of the external and internal environment and how it affects the functioning of
an organization is vital to an understanding of business policy. Through the tools of
analysis and diagnosis a learner can understand the environment in which a firm
operates.
 Information about the environment helps in the determination of the mission, objectives,
and strategies of a firm. The learner appreciates the manner in which strategy is formulated.
 In Terms of Skills
 The attainment of knowledge should lead to the development of skills so as to be able to

apply that which has been learnt. Such an application can take place by an analysis of case
studies and their interpretation, and by an analysis of the business events taking place around
us.
 The study of business policy should enable a student to develop analytical ability and use it
to understand the situation in a given case of incident.
 Further, the study of business policy should lead to the skill of identifying the factors
relevant in decision-making. The analysis of the strengths and weaknesses of an
organization, the threads and opportunities present in the environment, and the suggestion of
appropriate strategies and policies from the core content of general management decision-
making.

 In Terms of Attitude
 The attainment of the knowledge and skill objectives should lead to the
inculcation of an appropriate attitude among the learners. The most important attitude
developed through this course is that of a generalist. The generalist attitude enables the
learners to approach and asses a situation from all possible angles.
 By acing in a comprehensive manner, a generalist is able o function under

conditions of partial ignorance by using his or her judgment and intuition.
Typically, case studies provide only a glimpse of the overall situation and a case analyst
frequently faces the frustrating situation of working with less than the required information.
Characteristics of Business Policies
1. Objectivity
2. Relationship to other objectives
3. Complementariness
4. Stability and Flexibility
5. Fairness and Honesty
6. Being known, understood and accepted
7. Policy in writing
8. Simple and free from ambiguity
9. Supplementary to other policies
10. Ethical standards
Nature of Business Policy

Business policy basically deals with decisions regarding the future of an ongoing enterprise.
Such policy decisions are taken at the top level after carefully evaluating the organizational
strengths and weaknesses in terms of product price, quality, leadership position, resources
etc., in relation to its environment. Once established the policy decisions shape the future of a
company channel the available resources along desired lines and direct the energies of people
working at various levels towards predetermined goals. In a way, business policy implies the
choice of purposes, the shaping of organizational identity and character the continuous
definition of what is to be achieved and the deployment of resources for achieving corporate
goals.
Types of policies
There are many types of policies
a. Marketing policies,
b. Financial policies,
c. Production policies
d. Personnel policies

Within each of these areas more specific policies are developed. For example, personnel
policies may cover recruitment, training, promotion and retirement policies. Viewed from a
systems angle, policies form a hierarchy of guides to managerial thinking. At the top of level
policy statements are broad. The management is responsible for developing and approving
major comprehensive company policies. Middle managers usually establish less critical
policies relating to the operation of their sub units. Policies tend to be more specific at lower
levels. The manager’s job is to ensure the consonance of these policies, each must contribute
to the objectives of the firms and there should be no conflict between sub system policies.
Importance of Business Policy Plans

1. Business policies are important and affect everything from legal liabilities to
employee satisfaction and a positive public image.
2. Policies make sure everyone is on the same page when it comes to expectations of
certain things.
3. A business might have policies pertinent to different aspects of the company.
4. There may be safety policies, human resources hiring policies and anti-discrimination
policies.
5. There may also be policies that pertain to employees' dress code, lunch schedules,
time off and holidays.
6. Other policies are relevant to the customer experience including greeting customers,
phone call management and product delivery specifics.
7. All of these policies create a positive work environment. Employees who feel safe at
work from injury or discrimination are happier and more productive.
8. This is an important aspect of productivity that every business owner must consider.
9. When employees have specific directives on dress code, scheduling and requesting
time off, it levels the field and shields employees from favoritism.
Need for Business Policies

It goes without saying that “business policy and administration” is part and parcel of
management. No business enterprise can be managed, controlled and administered effectively
if no definite policies are determined. In fact, it is the policy that guides the course of action
Policies are so framed as to attain the goal of the enterprise and the pre-determined goal can
be achieved only when actions are put into practice.
When the policies are to be implemented, every care should be taken by executives to see that
implementation of policies will have no adverse effects on workers as well as on the
management. Hence, to see that policies are effective as well as fruitful, implementation has
been considered as an important aspect of management. The executives concerned with
policy implementation should execute them in such a manner as would lead to
maximum return on total investment with minimum amount of discontentment among people
in the organization.
Features of Policy

From the above definitions, following features of a policy can be identified
1. A policy provides guidelines to the members of the organization for deciding a course
of action. Policy provides and explains what a member should do rather that what he
is doing.
2. Policy limits an area within a decision is to be made and assures that the decision will
be consistent with and contributive to objectives.
3. Policies are generally expressed in qualitative or general way. The words most often
used in stating policies are to maintain, to continue, to follow, to provide, to assist, to
assure, to employ, to make, to produce or to be etc.
4. Policy formulation is a function of all managers in the organization because some
form of guidelines for future course of action is required at every level.
5. Policies serve an extremely useful purpose. They avoid confusion and provide clear-
cut guidelines at all levels to subordinates; and therefore, they enable the business to
carried on smoothly and often without break.
6. They also lead to better and maximum utilization of resources, human, financial
7. and physical, by adhering to actions for conservation.
8. Decision-making, planning and coordination of any business organization
are exclusively governed and controlled by “Business Policies”.
9. Consistency in the work performance by different members of firm is maintained
because of clear-cut policies chalked out at executive level.
10. Policies normally cover the study of the nature and process of choice about the future
of a business enterprise and are to be handled by responsible executives.
Basis of difference Business Policy Business Strategy

Meaning Strategy is a comprehensive Policy is the guiding
plan, made to accomplish the principle, that helps the
organizational goals. organization to take logical
decisions.
What is it? Action plan Action principle
Nature Flexible Fixed, but they allow
exceptional situations
Related to Organizational moves and Organizational rules for the

decisions for the situations activities which are repetitive
which have not been in nature.
encountered previously.
Orientation Action Thought and Decision
Formulation Top Level Management and Top Level Management
Middle Level Management
Approach Extroverted Introverted
Describes Methodology used to achieve What should be done and
the target. what should not be done.

 On the basis of levels of Management
Business policies are framed at different levels of the management, and accordingly they
may be classified as:
 Top management policies:
These policies are derived from the top management planning. The top
management comprise of the Board of directors, Chairman, Vice-Chairman, Managing
Director, General Manager, etc. The top management policies are concerned with
the long-range such as products election, diversification, acquisitions and mergers,
extent and liability-sales forecasting, etc.
 Middle level management policies:

These policies are the out come of the deliberations of the middle management consist of the
deputy heads to the various sections and functional departments. They frame policies on
employment and training, industrial relations, labour welfare and social security etc. and
these policies are known as middle management policies.
 Lower level management policies:

The lower level management people are men who have direct supervision over the working
force. They chalk out policies for the assignment of the jobs to the best suited persons, the
provision of adequate tools, raw materials, training the workers, issuing of
orders, improving working conditions, etc.
 On the basis of Functional Areas

Policies relating to various functional areas of the management are called functional
policies.
 Production and Purchase policies : The policies for operational are
related to the production system, operational planning and control, and research and

development. The strategy adopted and affects the nature of product also the markets
to be served and the manner in which the markets are to be served.
 Marketing Policies : Policies related to marketing have to be formulated

and implemented on the basis of the marketing mix i.e product, price, place and
promotion.
The major issues and decisions related to these marketing mix factors.
The following are considered as major marketing policies.
Product Policies
Pricing Policies
Promotion Policies
 Physical distribution Policies.
 Financial Policies : These policies may be regarded as the most

important business policies, as the entire success or failure of a business unit
depends upon these. Properly framed financial policies result in prosperity and long
survival, while faulty policies result in the unit’s run. The financial policies of
an organization are related to the availability, usage and management of
funds.
Financial policies have therefore to be determined is the areas of
Sources of Capital Policies
Working Capital Policies
Profit distribution Policies
Depreciation allowances Policies
 Personnel Policies: Personnel policies are the tools for the personnel department to
achieve the objectives of the organization. Personnel policy provides guidelines for
a wide variety of employment relationship in the organization. The personal policy
of the organization should have two types namely
 General Objective : The statement of general objective should express the top
management’s basic philosophy of human resources and reflect its deep
underlying convictions as to the importance of people in the organization.
 Specific objectives: The statement of specific objectives should refer to the various
activities of personnel administration connected with staffing, training, developing, wage
and salary benefits, employee records and personnel research.
The major areas of the personnel policies are
 Recruitment and Selection Policy
 Training and Promotion Policy
 Remuneration and Benefit Policy
 Industrial relation Policy

 On the basis of Expression.
Business policies may be either express or implied, which in turn may be oral or written.
 Oral Policies : Oral policies are those, which are issued or stated by the word of
mouth. Such policies are generally adopted when an organization is small
and face-to-face communication is desired. They are often not remembered for
long and easily forgotten. Therefore, usually oral policies are not in popular use.
 Written Policies : Written policies are those, which are normally put in black and
white and stated in clear terms so that personal whom they are
addressed to easily understand them. For putting the policies in writing, much
care to be taken.
 Implied policies: These are the policies, which are implied from the code of conduct
or from the behaviour of business employees; but they are expressed. They
generally flow from the philosophy of the business, its social values and even
traditions. For example, smoking and drinking may be prohibited not in writing but
it is implied by the conduct of the executives who refrain theses habits while on duty.
 On the basis of nature of Origin :
On the basis of nature of origin business policies can be classified in to three types. They
are as follows
 Formulated Policy: A formulated policy is one, which is specified by the

organization for providing guidelines to its members. Most of the policies in private
sector organizations fall in this category as every organization formulate various
policies on different aspects. This policy may be broad giving general guidance for
the action.
 Appealed Policies: Sometimes, policies may not be clearly stated and the actions of
managers particularly at the higher levels provide guidelines for actions at lower
levels. In such a case, the action of a decision maker, consciously or unconsciously,
depends on his own guidelines. Moreover, in the absence of any specific guidelines,
decision is based on individual interpretation of the situation and consequent actions.
 Imposed Policies: imposed policies arise from the influence of some outside
agencies. Such agencies may be government which provides policies for
all public-sector.Organizations, parent organizations overseas in the case of
multinational companies operating in a country.

 On the basis of scope of Organization
Business policies may also be categorized as basic policies, general policies and specific
policies.
 Basic Policies: These policies are basis of the organization and are framed by the top
management. They spell out the approach of a company to its activities. For
example, marketing policy of a firm may be “consumer-oriented” as against
“product-oriented”, with the main purpose of competing with the products of
competitors.
 General policies: Such policies are generally more specific and apply to large
segments of organization. The middle level management, e.g., mainly frames them
purchasing policy to give first preference to local suppliers.
 Specific or Departmental Policies: A departmental policy is specific in nature.

The foremen and supervisors formulate it. It applies to routine activities in the
department.
 On the basis of Management Functions
The management undertakes functions, viz., planning, organizing, actuating, and

controlling. Accordingly the policies may be planning policies, organizing
policies, actuating or directional policies and controlling policies.
 Planning Policies: These policies are concerned with the path of action, which lead
to company activities and attainment of its objectives. Planning policies
decide the objectives to be achieved; the policies paths that should be followed to
achieve the objectives and how the objectives set are to be achieved through
programs and process.
 Organizing Policies: Organization is another management function, which is

concerned with the division or allocation of necessary competent activities to
members of the group so that through collective efforts, the objectives may be
achieved.
 Actuating Policies : The actuating policies therefore include: providing

effective leadership; integrating people and task and convincing them to assist in the
achievement of the overall objectives; effective communication with the members;
and providing climate for the subordinate’s development and their motivation to
work.
 Controlling policies: Controlling is the process of measuring actual result,

comparing with standard of performance, finding out deviations and taking
corrective action when necessary. Controlling policies involve a series of activities;

continuous observation and study of periodic result of performance in order to

identify potential problems; selection of the best mode of control.
THE CONCEPT OF STRATEGY

The concept of strategy is ancient. Originally, the word ‘strategy’ is derived from the Greek
word ‘Strategeia’ which means ‘the art of the general’. It has been associated with first
determining the position of a military, business or political organization in relation to its
environment and then using the organization’s resources to reach its goals. The Greeks knew
that strategy was more than fighting battles. Effective generals have to determine the right
lines of supply, decide when to fight and when not to fight and manage the army’s
relationship with citizens, politicians and diplomats. Effective general not only had to plan
but had to act as well. These early military roots of strategy have, of course, expanded into
political and business arena a increased competition and environmental change have forced
organizations to plan more carefully for the future. A key aim of both business and military
strategy is to gain competitive advantage. In both, the organizations they try to use their own
strengths to exploit competitors’ weaknesses. The element of surprise provides great
competitive advantages in both military and business strategy.
According to David, a fundamental difference between military and business strategy is that
business strategy is formulated, implemented and evaluated with an assumption of
competition whereas military strategy is based on an assumption of ‘conflict.
BUSINESS STRATEGY
Definition
Business strategy can be understood as the course of action or set of decisions which assist
the entrepreneurs in achieving specific business objectives.It is nothing but a master plan that
the management of a company implements to secure a competitive position in the market,
carry on its operations, please customers and achieve the desired ends of the business.
“Strategy Is the determination of the basic long term Goal and objectives of an organization
and the adoption of the courses of action and the allocation of resources necessary for
carrying out the goals”
Alfred D-Chandler
“A plan or a course of action which is of vital pervasive or continuing importance to the

organization as a whole”
Arthur Sharplin

In business, it is the long-range sketch of the desired image, direction and destination of the
organization. It is a scheme of corporate intent and action, which is carefully planned and
flexibly designed with the purpose of:
 Achieving effectiveness,
 Perceiving and utilizing opportunities,
 Mobilizing resources,
 Securing an advantageous position,
 Meeting challenges and threats,
 Directing efforts and behaviour and
 Gaining command over the situation.
A business strategy is a set of competitive moves and actions that a business uses to attract
customers, compete successfully, strengthening performance, and achieve organizational
goals. It outlines how business should be carried out to reach the desired ends.
NATURE OF BUSINESS STRATEGY

A business strategy is a combination of proactive actions on the part of management, for the
purpose of enhancing the company’s market position and overall performance and reactions
to unexpected developments and new market conditions.
The maximum part of the company’s present strategy is a result of formerly initiated actions
and business approaches, but when market conditions take an unanticipated turn, the
company requires a strategic reaction to cope with contingencies. Hence, for unforeseen
development, a part of the business strategy is formulated as a reasoned response.
LEVELS OF BUSINESS STRATEGY

Levels of Strategy Management of every organization follow some kind of process and can
be viewed in the context of strategic management concept. Different business organizations,
having some similar features, may have some differences according to size that relate to their
strategic behavior. There are also different levels or units within a business entity, and some
of those units can have strategic different from other. In brief, strategies are operated at
different levels in a organization.
 Corporate level strategy

 Business level strategy
 Functional level strategy and Operating strategy.

1. Corporate level Strategy
Corporate level strategy is formulated by top management to oversee the interest and
operations of organization made up of more than one line of business. It occupies the highest
level of strategic decision-making and cover actions dealing with the objectives of firm,
Acquisition and allocation of resources, and coordination of strategies of various units. The
Major questions at this level are as follows –
 What kinds of businesses should the company is engaged in?

 What are the goals and expectations for each business?
 How should resources be allocated to reach these goals?
EXAMPLES of Corporate Strategies
 -Growth Strategies
 -Retrenchment Strategies
2. Business level strategy
Business level strategy is concerned with managing the interests and operations of a
particular line of business. It refers to the managerial game plan for a single business. It is
mirrored in the pattern of approaches and moves crafted by management to produce
successful performance in one specific line of business. It deals with such questions as
 How will the business compete does its markets?

 What products or services should it offer?

 Which customer does it seek to serve?

 How will resources be distributes within the business?
Basically, business level strategy attempts to determine what approach to its market and
business should take and how it should conduct itself, given its resources and the conditions
of the market.
Some Business Strategies are
 Cost Leadership Strategies-Followed By Ratan Tata In NANO car

 Differentiation Strategy-Hindustan Unilever Limited
 Focus Strategy-Rolls Royace(Target Upper Income group)
3. Functional level strategy
It involves decision-making at the operational level with respect to specific functional areas –
production, marketing, personnel, finance etc. In fact, strategy creates a framework for
managers in each function to carry out business unit strategies and corporate strategies.
Decisions at this level are often describes as ‘tactical divisions. These strategies are also
called as lower level strategis and works upon the operations of day to day business.
EXAMPLES of Functional Strategies
 Marketing strategies
 Finance strategies
 Human resource strategy
STRATEGIC MANAGEMENT PROCESS

The Strategic Management Process is a process of relating the organization with its
environment by suitable course of action involving strategy formulation and ensuring that the
strategy has been implemented effectively. The strategic management process begins with
1. Strategic Intent:
An organization’s strategic intent is the purpose that it exists and why it will continue to
exist, providing it maintains a competitive advantage. Strategic intent gives a picture about
what an organization must get into immediately in order to achieve the company’s vision. It
motivates the people. It clarifies the vision of the vision of the company.
 Strategic intent helps management to emphasize and concentrate on the priorities.

Strategic intent is, nothing but, the influencing of an organization’s resource potential
and core competencies to achieve what at first may seem to be unachievable goals in
the competitive environment

 A well expressed strategic intent should guide/steer the development of strategic

intent or the setting of goals and objectives that require that all of organization’s
competencies be controlled to maximum value. Strategic intent includes directing
organization’s attention on the need of winning; inspiring people by telling them that
the targets are valuable; encouraging individual and team participation as well as
contribution; and utilizing intent to direct allocation of resources.
 Strategic intent differs from strategic fit in a way that while strategic fit deals with
harmonizing available resources and potentials to the external environment, strategic
intent emphasizes on building new resources and potentials so as to create and exploit
future opportunities.
COMPONENTS OF STRATEGIC INTENT –VMOSA *Tip to learn
V-VISION
M-MISSION
O-OBJECTIVES
S-STRATEGY
A-ACTION PLANS

 VISION
A vision statement identifies where the organization wants or intends to be in future or where
it should be to best meet the needs of the stakeholders. It describes dreams and aspirations for
future.
For instance
Microsoft’s vision is To empower people through great

software, any time, any place, or any
device
Wal-Mart’s vision is “To become worldwide leader in

retailing”
BSNL vision is “To Become largest telecom service

provider in Asia”
Strokes Eye Clinic “Our Vision is to take care of your

Vision”
Vodafone To be the world’s mobile communication

leader
A vision is the potential to view things ahead of themselves. It answers the question
Where we want to be?

It gives us a reminder about what we attempt to develop. A vision statement is for the
organization and its members, unlike the mission statement which is for the
customers/clients. It contributes in effective decision making as well as effective business
planning. It incorporates a shared understanding about the nature and aim of the organization
and utilizes this understanding to direct and guide the organization towards a better purpose.
It describes that on achieving the mission, how the organizational future would appear to be.
An effective vision statement must have following features-
 It must be unambiguous.
 It must be clear.

 It must harmonize with organization’s culture and values.

 The dreams and aspirations must be rational/realistic.
 Vision statements should be shorter so that they are easier to memorize
In order to realize the vision, it must be deeply instilled in the organization, being owned and
shared by everyone involved in the organization.
BENEFITS
 Help organization to prepare for future

 It reduces the risk taking and experimentation
 It represent integrity
 Provides pathway to the direction of organization
MISSION STATEMENT
Mission statement is the statement of the role by which an organization intends to serve its
stakeholders. It describes
Why an organization is operating and thus provides a framework within which strategies are
formulated.
 It describes what the organization does (i.e., Present capabilities)

 Who all it serves (i.e., stakeholders) and
 What makes an organization unique (i.e., reason for existence)
A mission statement differentiates an organization from others by explaining its broad scope
of activities, its products, and technologies it uses to achieve its goals and objectives. It talks
about an organization’s present (i.e., “about where we are”). For instance,
Microsoft’s mission To help people and businesses

throughout the world to realize their
full potential.
Wal-Mart’s mission “To give ordinary folk the chance to buy

the same thing as rich people.”
Skype “Skype’s mission is to be the fabric of real

time communication on the web”
Ford motors company “The instigator of the manufacturing

revolution of mass production assembly
lines”
Mission statements always exist at top level of an organization, but may also be made for
various organizational levels. Chief executive plays a significant role in formulation of

mission statement. Once the mission statement is formulated, it serves the organization in
long run, but it may become ambiguous with organizational growth and innovations.
In today’s dynamic and competitive environment, mission may need to be redefined.

However, care must be taken that the redefined mission statement should have original
fundamentals/components. Mission statement has three main components-a statement of
mission or vision of the company, a statement of the core values that shape the acts and
behavior of the employees, and a statement of the goals and objectives.
Features of a Mission
 Mission must be feasible and attainable. It should be possible to achieve it.
 Mission should be clear enough so that any action can be taken.
 It should be inspiring for the management, staff and society at large.
 It should be precise enough, i.e., it should be neither too broad nor too narrow.
 It should be unique and distinctive to leave an impact in everyone’s mind.
 It should be analytical, i.e., it should analyze the key components of the strategy.
 It should be credible, i.e., all stakeholders should be able to believe it.
DIFFERENCE BETWEEN VISION AND MISSION
Basis of Difference VISION MISSION
About A vision Statement outlines The term Mission statement

where an organization is the fundamental and
wants to be. enduring purpose of an
It communicates both the organization that sets it
purpose and values of our apart from other
business organization.
Answer It answers the question It answers the question

Where do we aim to be? “What do we do? What
make us different?
Time A vision statement Talks A mission statement Talks

about the future. about the present leading to
its future
Function It list us where we see It list the broad goals for

ourself some years from which the organization is
now.It Inspires us to give formed.its prime function is
our best it shapes our internal to define the key
understanding of why we measure of the
are working here. organizations success
Change It Rarely changes A mission statement may

change,but it shouls still tie

back to our core values,
customer needs and vision
Creation Developed First Developed only when

vision is available
Includes Objectives and values Includes customer products,

markets technology,
concern for survival,
concern for public image
etc
STRATEGIC GOALS
Strategic goals are goals created to identify the intended accomplishment of a business
strategy. When companies create strategic goals, they directly identify what they see as the
outcome of their business efforts. Strategic goals are most commonly created when a
company is mounting a new strategy. For example, if a company adopts a new advertising
campaign in an attempt to draw buyers to their products, they may also create a strategic goal,
or desired endpoint, of their new advertising efforts.
Goal setting is a process of directing what an organization wants to accomplish and devising
a plan to achieve the result we desire. For entrepreneurs, goal setting is an important part of
business planning, business goal should be a part of an overall business plan or objectives,
when we create a business plan it is important to decide what we want our business to be and
how to define our product and target market
Features-
• These are precise and measurable.
• These look after critical and significant issues.
• These are realistic and challenging.
• These must be achieved within a specific time frame.
• These include both financial as well as non-financial components
Example-
• Increasing market share
• Lowering production cost
• Developing new product line
• Increasing the effectiveness of marketing

• Increasing the efficiency of manufacturing
Business Objectives
“Objectives are the end results of planned activity”
A specific result that a person or a system aims to achieve within a time frame and with
available resources. A company objective is an outcome an organization would like to
achieve company objectives are measurable they effectively describe the actions required to
accomplish the task.
Objectives define the techniques an organization will use to achieve sales success, customer
service, financial objective or any other measurable of the company
 TYPES OF BUSINESS OBJECTIVES
 Financial objectives
• Profit Maximization
• Wealth maximization
 Marketing objectives
• Increase sales
• Improve product awareness
• Establish yourself in industry
• Brand management
 Social objectives
• Supply of quality goods at fair prices
• Fair deal to worker
• Fair deal to suppliers and investors
Objectives represent managerial commitment to achieve specified results in a specified

period of time. They clearly spell out the quantity and quality of performance to be achieved.
Objectives are defined as goals that organization wants to achieve over a period of time.
These are the foundation of planning. Policies are developed in an organization so as to
achieve these objectives. Formulation of objectives is the task of top level management.

Effective objectives have following features-
• These are not single for an organization, but multiple.
• Objectives should be both short-term as well as long-term.
• Objectives must respond and react to changes in environment, i.e., they must be flexible.
• These must be feasible, realistic and operational
Example
- To achieve 10% growth in EPS
- To achieve 20.25% return on Equity
- To achieve 27% return on capital employed
DIFFERENCE BETWEEN GOALS AND OBJECTIVES

BASIS OF DIFFERENCE GOALS OBJECTIVES
Meaning A goal is a general direction Objectives are targets an
where a company or an organization wants to achieve
individual wants to go quantitatively and
qualitatively
specificity Goals are general intentions Objectives are specific
towards the attainment of precise actions for
something accomplishment of specific
task
Tangibility Goals are intangible, Goals Objectives may be targeted at
may be directed towards getting measurable things or
achievement of non tasks
measurable things
Time Frame Goals usually have longer Objectives are usually
time frame depanding upon precise targets set for a short
the nature term
Measurement Goals may or may not me Objectives may be
measured measurable
Example  I want to be abetter  A Company want to
ball player increase sales by 10%
 I want to maximize this month.
my professional  To achieve 10%
performance growth in EPS
 Increasing  To achieve 20.25%
effectiveness of return on Equity
marketing  To achieve 27%
 Increasing the return on capital
effectiveness of employed
manufacturing

SUMMARY
VISION Picture of ideal future(What we want to

be?)
MISSION Core Purpose(Why we exist?)
OBJECTIVES Specific Targets (What task we have to

accomplish?)
STRATEGIES Game Plan for success (How we want to

get there?)
HISTORICAL EVOLUTION OF STRATEGIC MANAGEMENT PROCESS
STRATEGIC MANAGEMENT -History and Development
Until the 1940s, strategy was seen as primarily a matter for the military. Military history is
filled with stories about strategy. Almost from the beginning of recorded time, leaders
contemplating battle have devised offensive and counter-offensive moves for the purpose of
defeating an enemy. The word strategy derives from the Greek for generalship, strategia, and
entered the English vocabulary in 1688 as strategie. According to James’ 1810 Military
Dictionary, it differs from tactics, which are immediate measures in face of an enemy.
Strategy concerns something “done out of sight of an enemy.” Its origins can be traced back
to Sun Tzu’s The Art of War from 500 BC.
Over the years, the practice of strategy has evolved through five phases (each phase generally
involved the perceived failure of the previous phase
• Basic Financial Planning (Budgeting)
• Long-range Planning (Extrapolation)
• Strategic (Externally Oriented) Planning
• Strategic Management
Basic Financial Planning (Budgeting)
James McKinsey (1889-1937), founder of the global management consultancy that bears his
name, was a professor of cost accounting at the school of business at the University of
Chicago. His most important publication, Budgetary Control (1922), is quoted as the start of
the era of modern budgetary accounting.
Early efforts in corporate strategy were generally limited to the development of a budget,
with managers realizing that there was a need to plan the allocation of funds. Later, in the
first half of the 1900s, business managers expanded the budgeting process into the future.
Budgeting and strategic changes (such as entering a new market) were synthesized into the

extended budgeting process, so that the budget supported the strategic objectives of the firm.
With the exception of the Great Depression, the competitive environment at this time was
fairly stable and predictable.
Long-range Planning (Extrapolation)
Long-range Planning was simply an extension of one year financial planning into five-year
budgets and detailed operating plans. It involved little or no consideration of social or
political factors, assuming that markets would be relatively stable. Gradually, it developed to
encompass issues of growth and diversification.
In the 1960s, George Steiner did much to focus business manager’s attention on strategic
planning, bringing the issue of long-range planning to the forefront. Managerial Long-Range
Planning, edited by Steiner focused upon the issue of corporate long-range planning. He
gathered information about how different companies were using long-range plans in order to
allocate resources and to plan for growth and diversification.
A number of other linear approaches also developed in the same time period, including
“game theory”. Another development was “operations research”, an approach that focused
upon the manipulation of models containing multiple variables. Both have made a
contribution to the field of strategy.
Strategic (Externally Oriented) Planning
Strategic (Externally Oriented) Planning aimed to ensure that managers engaged in debate
about strategic options before the budget was drawn up. Here the focus of strategy was in the
business units (business strategy) rather than in the organization centre. The concept of
business strategy started out as ‘business policy’, a term still in widespread use at business
schools today. The word policy implies a ‘hands-off’, administrative, even intellectual
approach rather than the implementation-focused approach that characterizes much of
modern thinking on strategy. In the mid-1900s, business managers realized that external
events were playing an increasingly important role in determining corporate performance. As
a result, they began to look externally for significant drivers, such as economic forces, so that
they could try to plan for discontinuities.
Unit – II

Analysis of External and Internal Environment, SWOT Analysis.
THE CONCEPT OF ENVIRONMENT
INTRODUCTION
An organizational environment is composed of forces or institutions surrounding an
organization that affect performance, operations, and resources.
Managers must have a deep understanding and appreciations of the environment in which
they and their organizations function. To illustrate the importance of environment to an
organization consider the analogy of swimmer crossing a wide stream. The swimmer must
assess the current obstacles and distance before setting out. if these elements are not properly
understood the swimmer might end up too far upstream and downstream .The organization is
like swimmer and the environment is like a stream
The environment of the business is the aggregate of conditions, events and influences that
surround and affect it(Davis).since the organization is a part of broader social system it has to
work within the framework provided by the society and its innumerable constituents
Definition of Organizational Environment

Why are organizations affected by their environments? In order to answer this question, let's
look at two very different organizations: Basic Bolt Company and Terrific Technologies.
• Basic Bolt Company sells bolts to large manufacturing companies as components to make
large machines and engines. They face a relatively static environment with few changing
environmental forces. Currently, there are no new competitors in their market, few new
technologies being discovered, and little to no activity from outside groups that might
influence the organization.
• Opposite from this, Terrific Technologies is an internet marketing startup that faces a
dynamic environment with rapidly changing regulations from the government, new
competitors constantly entering the market, and constantly shifting consumer preferences.
These two companies have very different organizational environments. Organizational

environments are composed of forces or institutions surrounding an organization that affect
performance, operations, and resources. It includes all of the elements that exist outside of the
organization's boundaries and have the potential to affect a portion or all of the organization.
Examples include government regulatory agencies, competitors, customers, suppliers, and

pressure from the public.
To manage the organization effectively, managers need to properly understand the

environment. Scholars have divided environmental factors into two parts:

 INTERNAL AND EXTERNAL ENVIRONMENT
1. Internal Environment
An organization's internal environment consists of the entities, conditions, events, and factors
within the organization that influence choices and activities. It exposes the strengths and
weaknesses found within the organization. Factors that are frequently considered part of the
internal environment include the employee behavior, the organization's culture, mission
statement, and leadership styles.
In other words, the internal environment refers to the culture, members, events and factors
within an organization that has the ability to influence the decisions of the organization,
especially the behavior of its human resource. Here, members refer to all those people which
are directly or indirectly related to the organization such as owner, shareholders, managing
director, board of directors, employees, and so forth
Definition: Internal environment is a component of the business environment, which is

composed of various elements present inside the organization that can affect or can be
affected with, the choices, activities and decisions of the organization. It encompasses the
climate, culture, machines/equipment, work and work processes, members, management and
management practices.

In other words, the internal environment refers to the culture, members, events and factors
within an organization that has the ability to influence the decisions of the organization,
especially the behavior of its human resource. Here, members refer to all those people who
are directly or indirectly related to the organization such as owner, shareholders, managing
director, and board of directors, employees, and so forth.
FOR EXAMPLE
The internal environment of Basic Bolt Company is very different from Terrific
Technologies. Basic Bolt Company's leadership is results- and deadline-driven, distant,
detached, and generally unconcerned about their employees' welfare or morale. Their
employees are not especially dedicated to the company and are happy to leave if the
opportunity arises.
Terrific Technologies' leadership style is extremely hands-on using a high degree of

creativity, ingenuity, and imagination in solving organizational problems. Their managers are
concerned about employee morale and welfare and go above and beyond what is necessary to
make their employees feel valued and important. Their employees are very loyal to the
company and are typically happy with their jobs.
FACTORS INFLUENCING INTERNAL ENVIRONMENT

The factors which are under the control of the organization, but can influence business
strategy and other decisions are termed as internal factors. It includes
1. Value System: Value system consists of all those components that are a part of regulatory
frameworks, such as culture, climate, work processes, management practices and norms of
the organization. The employees should perform the activities within the purview of this
framework.

2. Vision, Mission and Objectives: The company’s vision describes its future position,
mission defines the company’s business and the reason for its existence and objectives
implies the ultimate aim of the company and the ways to reach those ends.
3. Organizational Structure: The structure of the organization determines the way in which
activities are directed in the organization so as to reach the ultimate goal. These activities
include the delegation of the task, coordination, the composition of the board of directors,
level of professionalization, and supervision. It can be matrix structure, functional structure,
divisional structure, bureaucratic structure, etc.
4. Corporate Culture: Corporate culture or otherwise called an organizational culture refers

to the values, beliefs and behavior of the organization that ascertains the way in which
employees and management communicate and manage the external affairs.
5. Human Resources: Human resource is the most valuable asset of the organization, as the
success or failure of an organization highly depends on the human resources of the
organization.
6. Physical Resources and Technological Capabilities: Physical resources refer to the

tangible assets of the organization that play an important role in ascertaining the competitive
capability of the company. Further, technological capabilities imply the technical know-how
of the organization.
Internal environmental factors have a direct impact on a firm. Further, these factors can be
altered as per the needs and situation, so as to adapt accordingly in the dynamic business
environment.
2. External Environment
An organization's external environment consists of the entities, conditions, events, and factors
surrounding the organization that influence choices and activities and determine its
opportunities and threats. It is also called an operating environment. Examples of factors
External Forces That Shape Business Activities
Businesses do not operate in a vacuum, and they are influenced by forces beyond their
control. How they respond—and how quickly they respond—to these external forces can
make the difference between success and failure, especially in today’s fast-paced business
climate. We can organize the external forces that affect business into the following six
categories.

1. Economic environment
2. Legal environment
3. Competitive environment
4. Technological environment
5. Social environment
6. Global environment
Businesses operate in all of these environments simultaneously, and factors in one

environment can affect or complicate factors in another.
1. Economic environment
Economy is one of the most determining factors to the success of the company even though it
is an external element. Within the economy, some contributing factors such as the fluctuation
of interest rate, economic crisis, and so on directly and strongly affects the consumption of
buyers, and consequently, the profits of businesses.
No external factors affect business more than an economic condition, which is the present
state of the economy. As the economy goes through expansion and contraction, its condition
changes over time. Positive economy condition can be favorable for business development
and adverse ones may generate negative consequences such as narrow down business scale,
capital shortage or even bankrupt.
There are 7 factors that have direct impacts on business firm.
 Tax rate
 Exchange rate
 Inflation

 Labor
 Demand/supply
 Wages
 Recession
2. Legal Environment
The rules and regulations from local government play an integral role in the development of
the company. There are some countries which their laws prevents the development of some
certain industries. That can be a threat to the company. On the other hand, some industries
receive positive and continuous support from local government via their rules and
regulations. Besides, if the laws allow organization outside the countries invest in local
industries, they will indirectly create an enormous source of financial support for local
business.
3. Technological Environment
Artificial intelligence, smart internet searches, and other high tech functions- all kind of
technology has been at the forefront of much business for ages. For instance, American
Airlines started using a computerized flight booking system and Bank of America took on an
automated check-processing system. No matter what the size of your enterprise is, both
tangible and intangible benefits of technology are well-known.
Because it can help you generate profits and produce the results as your customers’ needs. In
particular, the culture, efficiency and relationships of a business are obviously affected by
technology infrastructure. Furthermore, it also exerts impacts on the security of confidential
information and trade advantages.
Today it is so decisive to entrepreneurs that technology can be their best friend or worst
friend depending on how it is used in the competitive digital business market.
4. Customer demands
One of the most fundamental factors we learn in economics is that satisfying customer
demand is a must for every business survival. It is obvious that your product is served for the
needs of customers then under any circumstance; your business can develop without
following this mission. Beside to be the leading company entrepreneurs should not only
identify but also tailor their customer’s interest.
We all know that what people want, what people need, and what they demand are usually
different from each other. Customers need something to communicate with their family
member outside their countries, they want to a Smartphone which can perform multi-
function; however, they cannot afford that Smartphone with a limited budget. Therefore, their
demand is just a typical phone which can perform basic functions. If your company is not
able to figure out what are your customer demands, you will face difficulty in how to make

your products consumed by customers. (Learn how to build loyal customers for your
business)
In the digital age, the face of customer’s preference has changed dramatically under the
influence of different factors. Having a complete understanding of these factors can help
business man build up an effective strategy in producing and marketing process. Here are
noticeable changes in customer demand:
 Quality is customer’s preference than price

 Sales process is more and more under customer’s control
 Customer’s loyalty decrease
 The rise of middle-income customer spender
 Female consumption power
 Advancement of new technology
 Intergenerational consumption
There is a lot of legwork to be done to recognize customer’s requirements and generate new
trends in the marketplace. Basically, you should carry out research to determine what
consumers’ needs are, establish yourself as a leader in your industry and then repeatedly
demonstrate your products’ quality.
5. Competitive Environment
Competition exists in any field of our life, even in business. When it comes to competition,
entrepreneurs may thrive to be successful or be hurt to lose its position in the marketplace.
For the good side, competition brings about innovation, better customer service,
complacency, core market understanding and understanding of your own business- your
strength and your weakness.
For the downside, if you are not prepared to change in competitive market, your company
may be negatively influenced due to scaring investors, market expectations increase,
competitive price and customer disloyalty.
6. Social Environment
7. Global Environment
ENVIRONMENTAL SCANNING AND ANALYSIS

 INTRODUCTION
The environment of a business is extremely dynamic in nature Environmental Analysis is

described as the process which examines all the components, internal or external that has an
influence on the performance of the organization. The internal components indicate the
strengths and weakness of the business entity whereas the external components represent the
opportunities and threats outside the organization. To perform environmental analysis, a
constant stream of relevant information is required to find out the best course of action.
Strategic Planners use the information gathered from the environmental analysis for
forecasting trends for future in advance. The information can also be used to assess operating
environment and set up organizational goals. It ascertains whether the goals defined by the
organization are achievable or not, with the present strategies. If is not possible to reach those
goals with the existing strategies, then new strategies are devised or old ones are modified
accordingly.
 ADVANTAGES OF ENVIRONMENTAL ANALYSIS
• The internal insights provided by the environmental analysis are used to assess employee’s
performance, customer satisfaction, maintenance cost, etc. to take corrective action wherever
required.
• The external metrics help in responding to the environment in a positive manner and also
aligning the strategies according to the objectives of the organization.
• Environmental analysis helps in the detection of threats at an early stage that assist the
organization in developing strategies for its survival.
• It identifies opportunities, such as prospective customers, new product, segment and

technology, to occupy a maximum share of the market than its competitors.
 IMPORTANT FACTORS FOR ENVIRONMENTAL SCANNING
Before scanning the environment, an organization must take the following actors into
consideration:
• Events – These are specific occurrences which take place in different environmental sectors
of a business. These are important for the functioning and/or success of the business. Events
can occur either in the internal or the external environment. Organizations can observe and
track them.
• Trends – As the name suggests, trends are general courses of action or tendencies along
which the events occur. They are groups of similar or related events which tend to move in a
specific direction. Further, trends can be positive or negative. By observing trends, an
organization can identify any change in the strength or frequency of the events suggesting a
change in the respective area.
• Issues – In wake of the events and trends, some concerns can arise. These are Issues.
Organizations try to identify emerging issues so that they can take corrective measures to nip

them in the bud. However, identifying emerging issues is a difficult task. Usually, emerging
issues start with a shift in values or change in which the concern is viewed.
• Expectations – Some interested groups have demands based on their concern for issues.
These demands are Expectations.
 STEPS INVOLVED IN ENVIRONMENTAL ANALYSIS

1. Identifying First of all, the factors which influence the business entity are to be identified,
to improve its position in the market. The identification is performed at various levels, i.e.
company level, market level, national level and global level.
2.Scanning implies the process of critically examining the factors that highly influence the
business, as all the factors identified in the previous step effects the entity with the same
intensity. Once the important factors are identified, strategies can be made for its
improvement.
3. Analyzing In this step, a careful analysis of all the environmental factors is made to
determine their effect on different business levels and on the business as a whole. Different
tools available for the analysis include benchmarking, Delphi technique and scenario
building.
4. Forecasting After identification, examination and analysis, lastly the impact of the
variables is to be forecasted.
Environmental analysis is an ongoing process and follows a holistic approach that

continuously scans the forces effecting the business environment and covers 360 degrees of
the horizon, rather than a specific segment.
 Important Factors for Environmental Scanning
Before scanning the environment, an organization must take the following actors into
consideration:
• Events – These are specific occurrences which take place in different environmental sectors
of a business. These are important for the functioning and/or success of the business. Events
can occur either in the internal or the external environment. Organizations can observe and
track them.
• Trends – As the name suggests, trends are general courses of action or tendencies along
which the events occur. They are groups of similar or related events which tend to move in a
specific direction. Further, trends can be positive or negative. By observing trends, an
organization can identify any change in the strength or frequency of the events suggesting a
change in the respective area.

• Issues – In wake of the events and trends, some concerns can arise. These are Issues.
Organizations try to identify emerging issues so that they can take corrective measures
However, identifying emerging issues is a difficult task. Usually, emerging issues start with a
shift in values or change in which the concern is viewed.
•Expectations – Some interested groups have demands based on their concern for issues.
These demands are Expectations.
 Importance of Environmental Scanning

1. SWOT Analysis
As we saw previously in the environmental scanning meaning, it is a complex process. The

close study of the internal and external environment of an organization will reveal some very
valuable information, i.e. the strengths, weaknesses, opportunities, and threats of a company.
Let us take a brief look.
• Strength: After analysis of the internal environment of a company, we will be able to

identify the strengths that give the company a competitive advantage. The entrepreneur can
use this information to maximize these strengths and earn more profits.
• Weakness: Study of the internal environment also point out the weaknesses of the
company. For the growth and stability of the company, these identified weaknesses must be
corrected without delay.
• Opportunity: Analysis of the external environment helps with the identification of possible
opportunities. The entrepreneur can prepare to capitalize on these.
• Threats: Analysis of the external environment will also help in the identification of any
business threats from competitors or any other factors. The company can come up with a
strategy to diffuse such threats or minimize its impact.
2. Best Use of Resources
Environmental scanning helps us conduct a thorough analysis and hence leads to the
optimum utilization of resources for the business. Whether it is capital resources, human
resources or other factors of production, their best use and utilization is very important for
any business.
Environmental scanning will help us avoid any wastages and allow for the most effective and
economical use of these resources.
3. Survival and Growth of the Business
It is a very competitive world and for any business to survive and thrive it is a difficult task.
But if the business employs all the techniques of environmental scanning it can gain a
significant advantage.

It will allow the firm to prepare for future threats and opportunities while at the same time
eliminating their weaknesses and improving on their strengths.
4. Planning for Long Term
A business must have a plan for both short term and long term. The planning of long-term
objectives can only occur after proper analysis and environmental scanning meaning. This
will help the entrepreneur plan the necessary business strategy.
5. Helps in Decision Making
Decision making is the choice of the best alternative done by management. Environmental
scanning allows the firm to make the best decision keeping in mind the success and growth of
the business. They point out all the threats and weaknesses. And they also identify the
strengths of the firm.
 TECHNIQUES USED FOR ENVIRONMENT SCANNING
For scanning environment companies often use a number of techniques depending on their
specific requirement in the terms of quantity quality relevance cost etc, some majorly used
techniques for environment scanning are:

1. SWOT ANALYSIS
SWOT (acronym for internal strengths and weaknesses of the firm and the environmental
opportunities and threats facing the firm) analysis helps an organization match its strengths
and weaknesses with opportunities and threats operating in the environment. An appropriate
strategy is one that capitalizes on the opportunities by using organizational resources and
capabilities to the best advantage and neutralizes the threats by minimizing the adverse
influence of weaknesses.
Strengths and weaknesses are an organization’s internal factor while threats and opportunities
are considered as external factors. So, the process of SWOT analysis includes the systematic
analysis of these factors to determine an effective marketing strategy. It is a tool that is used
by the organization for auditing purposes to find its different key problems and issues.
These are identified through internal and external environmental analysis.
Internal environment analysis/ scanning
Different factors are considered while analyzing the internal environment of an organization
like the structure of the organization, physical location, the operational capacity and
efficiency of the organization, market share, financial resources, skills and expertise of
employees, etc.
1. Strengths
The strength of any organization is related to its core competencies i.e. efficient resources or
technology or skills or advantages over its competitors.

For example, the marketing expertise of a firm can be its strength. Apart from this, an
organization’s strength can be:
 Strong customer relations

 Market leader in its product or services
 Sound market image and reputation
 Smooth cash-flows
2. Weaknesses
A weakness or limitation of an organization is related to the scarcity of its resources or skill-

set of staff or capabilities that creates an adverse effect on its performance.
For example, limited cash-flow and high cost are considered as a financial weakness of the
organization. Similarly, other weaknesses can be:
 Poor product quality

 Low productivity
 Unrecognized brand name or poor brand image
External environment analysis/scanning
Different factors that are considered while scanning the external environment of the
organization like Competitors, customers, suppliers, technology, social and economic factors,
political and legal issues, market trends, etc.
3. Opportunities
An opportunity of the organization’s environment is considered as its most favorable

situation. These are the circumstances that are external to the business and can become an
advantage to the organization.
For example, different opportunities for a firm can be:
 Social media marketing

 Mergers & acquisitions
 Tapping new markets
 Expansion in International market
 New product development
4. Threats
Threats of an organization are current or future unfavorable situations that may occur in its
external environment.
For example, below are a few major threats for a firm
 A new competitor in the market

 The slow growth of the market

 Changing customer preferences

 Increase in the bargaining power of consumers
 Change in regulations or major technical changes
Internal capabilities of a firm

1 Strengths
which can be used to gain
competitive advantage over its
rivals
Limitations or constraints
2 Weaknesses
which tend to decrease the
competencies of the firm
particularly in comparison to
its rivals
Major favorable conditions in

3 Opportunities
the firm environment which
help the form strengthen its
position
Major unfavorable
4 Threat
conditions in the firm
s
environment which may
pose risk or damage the
firms position in
comparison to its rivals
 USES OF SWOT ANALYSIS
• Set objectives -Defining what organization is intended to do
• Environment scanning-Assessment of present situation as well as portfolio of products or

services and an analysis of product or service life cycle
• Analysis of existing strategies
• Strategic issues
• Develop new revised strategies
• Establish critical success factors
• Monitoring results
 AIM OF A SWOT ANALYSIS

 Reveal organizations competitive advantages
 Analyze prospects for sales, profitability and product development
 Prepare company for problems

 Allow for the development of contingency plans
A SWOT analysis is a process to identify where an organization are strong and vulnerable
where you should defend and attack. The result of the process is a ‘plan of action’, or ‘action
plan’. The SWOT analysis can be performed on a product, on a service, a company or even
on an individual. Done properly, a SWOT analysis will give you the big picture of the most
important factors that influence survival and prosperity.
 HOW TO DO A SWOT ANALYSIS
Irrespective of whether you or your team are future planning for specific products, work,
personal or any other area, the SWOT analysis process is the same.

• Step 1
Information collection – List all strengths that exist now. Then in turn, list all weaknesses
that exist now.
Organization can conduct one-on-one interviews. Or get a group together to brainstorm. A

bit of both is frequently best.
Prepare questions that relate to the specific company or product that NEEDS TO BE
analyzed.
When facilitating a SWOT – search for insight through intelligent questioning and probing
• Step 2
List all opportunities that exist in the future. Opportunities are potential future strengths.
Then in turn, list all threats that exist in the future. Threats are potential future weaknesses.
• Step 3
Plan of action. Review your SWOT matrix with a view to creating an action plan to address
each of the four areas.
2. ETOP TECHNIQUE
ENVIRONMENTAL THREAT AND OPPORTUNITY PROFILE ANALYSIS

(ETOP)
There are many techniques available for environmental appraisal (assessment), one such
technique suggested by Glueck is ETOP the preparation of ETOP involves dividing the
environment into different sectors & then analyzing the impact of each sector on the
organization. The preparation of an ETOP provides a clear picture to the strategists about
which sectors & the different factors in each sector have a favorable impact on the
organization.
By the means of an ETOP, the organization knows where it ne stands with respect to its
environment.

Obviously, such an understanding can be of a great help to an organizations in formulating

strategies to take advantage of the opportunities & counter the threats in its environment.
MEANING
ETOP is a device that considers environmental information & determines the relative impact
of threats & opportunities for the systematic evaluation of environmental scanning.
ETOP is an environmental analysis results in a mass of information expectations. Structuring

of environmental issues is necessary to make them meaning full of strategy related to forces
in the environment.
They deal with events, trends, issues & formulation. In short, it is a technique to structure
environmental issues. It is the process by which organizations monitor their relevant
environment to identify opportunities & threats affecting their business for p purpose of
taking strategic decision.
WHY ETOP?
 Helps organization to identify O-T
 To consolidate and strengthen organization’s position
 Provides the strategists of which sectors have a favorable impact on the organization.
 Helps organization knows where its stands with respect to its environment.
 Helps in formulating appropriate strategy.
 Helps in formulating SWOT analysis.
PREPARING ETOP
 Dividing the environment in different sector.
 Analyzing the impact of each sector on the organization.
 Subdividing each environmental sector into sub factor.
 Impact of each sub sector on organization in form of a statement.

ETOP, PROFILE INVOLVES:-
The profile is a technique of environment analysis was organizations make of profile of their
external environment. ETOP analysis provides information about environment threats &
opportunities & their impact on strategic opportunities for the company. The profile contains
mainly 3 issues, they are
1] Forecasting:-
Forecasting means predicting the future events & analyzing their impact on present plans
business organizations analyze the environment but applying various techniques to forecast
government is used to formulate business plans & strategies.
2] Verbal Written information:-
Verbal information is collected but hearing & written information is collected by reading
articles, journals, newspaper, newsletters etc.., common sources of information are radio,
television, workforce, outsiders. It informs changes in the environment & prepares business
organization to incorporate than in their business plans & strategies.
3] Management Information System [MIS]:-
It is a formal method of making available to management to management the accurate & timely
information necessary to facilitate the decision making proceeds & enable the organization
planning, control & operational functions to be carried out effectively. It helps in making
decisions based on future environment.
The profile involves,- Environment, Threats & Opportunities Profile
A] ENVIRONMENTAL FACTORS
It presents the impact of each environmental factor like economic, political & social on the
organization. The important factors are as follows,-

ETOP: PROS AND CONS or ADVANTAGES / DISADVANTAGES
Pros
✓ Help to determine the key factor of threats and opportunities.
✓ Good tool to qualify the factors related to company’s strategy.
✓ Can consider many factors for each special case.
✓ It provides a clear of which sector & subsectors have favorable impact on the organization.
✓ It helps to interpret the result of environmental analysis.
✓ The organization can assess its competitive position.

✓ Appropriate strategies can be formulated to take advantage of opportunities & counter the
threat.
Cons
✓ It doesn’t show the interaction between the factors.
✓ It can’t reflect the dynamic environment.
✓ It’s a subjective analysis tool
Environmental scanning is the monitoring, evaluating, and disseminating of information from

the external and internal environment to key people within the corporation or organization.
Business environment analysis is a regular business feature. It results in a quantity of
information related to forces in the environment.
ETOP is a process by which organization monitor their relevant environment to identify

opportunities and threats affecting their business for the purpose of taking strategic decisions
It usually relates to events, trends, issues, natural calamities and expectations.
 ETOP analysis (environmental threat and opportunity profile) is the process of

gathering information about events and their relationships within an organization’s
internal and external environments.
 The basic purpose of environmental scanning is to help management determine the

future direction of the organization. Structuring of environmental issues is necessary
to make them meaning full for strategy formulation.
 ETOP is considered as a useful device that facilitates an assessment of information

related to the environment and also in determining the relative significance of
external environment threats and opportunities to systematically evaluate
environmental scanning. By dividing the environment into different sections, the
ETOP analysis helps in analyzing its impact on the organization. The analysis is
based on threats and opportunities in the environment.

ETOP involves dividing the environment into different sectors. Each sector can be
subdivided into sub sectors.
For example oil & gas sector can be broken down into sub-sectors such as exploration &
production, integrated oil & gas, oil equipment & services, pipelines, renewable energy
equipment, alternative fuels producers, oil equipment, services & distribution, alternative
energy etc.
ETOP further analyzes the impact of each sector and sub-sector on the organization.

For example, GE Oil & Gas as an existing organization in this sector requires scanning the
environment from an industry perspective:
O&NG industry is divided into three major sectors – upstream, midstream and downstream.
• The upstream sector is a term commonly used to refer to exploration, recovery and
production of O&NG. In industry jargon it is simply called Exploration and Production
(E&P).
• The downstream sector is a term commonly used to refer to the refining of crude oil and
the selling and distribution of natural gas and products derived from crude oil.
• The midstream industry processes, stores, markets and transports commodities such as
crude oil, natural gas, natural gas liquids (liquefied natural gas such as ethane, propane and
butane) and Sculptun
Organization’s internal environment
consists of the elements within the organization, including current employees, management,
the organization’s culture which is defined by operating procedures and employee behavior.
Though some elements affect the organization as a whole, others affect only the
management. A manager’s philosophical or leadership style directly impacts employees. The
external environment of an organization is those factors outside the company that affect the
company’s ability to function. Some external elements can be manipulated by company
marketing, while others require the organization to make adjustments. Organizations need to
monitor the basic components of a firm’s external environment, and keep a close watch on it
at all times. The external environment consists of customers, government, economy and
competition.

3. PEST Analysis
 What is PEST Analysis & Why Do It
The environment of corporate world is ever changing. No business operates in a vacuum

environment. The corporate environment is something real complex and dynamic. There are
several external factors surrounding a business and influencing it strategy and activities. The
external environment of a company is called macro-environment. So every successful
company need to deeply analyze and understand all macro-environmental forces in order to
achieve the defined goals and objective as well as for the smooth running of a business. For
this purpose company did PEST analysis.
 Definition of PEST
PEST Analysis is abbreviation of “Political, Economic, Social, & Technological analysis”

and it allows companies to make a framework of macro-environmental factors for the
purpose of designing effective environmental strategies.

 4 Factors of PEST Analysis with Examples
The forces or factors of PEST analysis with examples
1. Political Factors
The political factors which influence the external company environment includes consumer
protection laws, employment laws & regulations, competition regulations, environmental
regulations and government taxes etc. so every business needs to operate around these
forces.
Example: Reduction in import duty of floor tiles for ceramic industry can have two types of
impacts. It will be positive to the local ceramic manufacturer as imported tiles are more
costly. However, it will leave negative impact to importers.
Some major examples of political factors are:
1. Taxation policy
2. Employment laws
3. Tariffs & Trade restriction
4. Political stability or instability in operating country and

5. Environmental laws
2. Economic Factors
Economic factors also influence the external environment of a particular company. It affects
the purchasing power of potential customer as well as company’s cost of capital.
Example: Unstable bank interest rate in a particular country affects the stability to the cost of
a business.
The major economic forces include:
1. Economic growth trends and patterns
2. Government expenditure levels
3. Disposable income
4. Unemployment rate
5. Interest rate
6. Exchange rate and
7. Inflation rate
3. Social Factors
Social factors are also very important consideration for every company. Companies needs to
carefully analyze the demographics, fashion & trends, leisure activities, education, living
standards and lifestyle changes etc. these factors actually affects the customer wants and the
size of potential markets.
Major elements of social factors are:
1. Health consciousness
2. Age distribution

3. Population growth rate
4. Education
5. Career attitude and
6. Emphasis on safety
4. Technological Factors
Technological factor is the last step of PEST analysis. These factors lower the barriers to
enter, influence a company outsourcing decision and reduce minimum efficient production
level.
Example: Changes of consumer preference toward advanced technological products which

can be produced with advance technology. The technological factors include:
1. New inventions & discoveries,
2. Research & development activities
3. Automation
4. Technological incentives and
5. Rate of technological change
All of the above factors should be carefully analyzed. Every company should conduct a
thorough PEST analysis because it enables a company to understand these external factors
fully and take advantage of the existing opportunities. Furthermore, it helps a company to
foresee any existing threats. So, PEST analysis is a best strategic tool which helps the
company to make the right decisions by keeping in mind the ever changing external
environment that surrounds the company.
 Why do a PEST analysis?

• Helps to evaluate how strategy fits into the broader environment and encourages
strategic thinking
• Provides an overview of all the crucial external influences on the organization
• Supports more decisive and knowledgeable decision making
• Assists planning, marketing, organizational change initiatives, business and product

development, project management
 Who should use a PEST analysis?
A PEST analysis is useful for any organization that needs to gauge current and future
markets. The significance of each area in PEST Analysis will vary for different industry
sectors. For example, there is likely to be a different emphasis on the technology element for
IT organizations compared with those involved in health, tourism, mining, defense, and
banking.
4. PORTER FIVE FORCE MODEL
 What Are Porter's Five Forces?
Porter's Five Forces is a model that identifies and analyzes five competitive forces that shape
every industry and helps determine an industry's weaknesses and strengths. Five Forces
analysis is frequently used to identify an industry's structure to determine corporate strategy.
Porter's model can be applied to any segment of the economy to understand the level of
competition within the industry and enhance a company's long-term profitability. The Five
Forces model is named after Harvard Business School professor, Michael E. Porter.
 Understanding Porter's Five Forces
Porter's Five Forces is a business analysis model that helps to explain why various industries
are able to sustain different levels of profitability. The model was published in Michael E.

Porter's book, "Competitive Strategy: Techniques for Analyzing Industries and Competitors"
in 1980. The Five Forces model is widely used to analyze the industry structure of a
company as well as its corporate strategy. Porter identified five undeniable forces that play a
part in shaping every market and industry in the world, with some caveats. The five forces
are frequently used to measure competition intensity, attractiveness, and profitability of an
industry or market.
Porter's five forces are
1. Competition in the industry
2. Potential of new entrants into the industry
3. Power of suppliers
4. Power of customers
5. Threat of substitute products
1. Competition in the Industry
The first of the five forces refers to the number of competitors and their ability to undercut a
company. The larger the number of competitors, along with the number of equivalent
products and services they offer, the lesser the power of a company. Suppliers and buyers
seek out a company's competition if they are able to offer a better deal or lower prices.
Conversely, when competitive rivalry is low, a company has greater power to charge higher
prices and set the terms of deals to achieve higher sales and profits.
2. Potential of New Entrants Into an Industry
A company's power is also affected by the force of new entrants into its market. The less
time and money it costs for a competitor to enter a company's market and be an effective
competitor, the more an established company's position could be significantly weakened. An
industry with strong barriers to entry is ideal for existing companies within that industry
since the company would be able to charge higher prices and negotiate better terms.
3. Power of Suppliers
The next factor in the five forces model addresses how easily suppliers can drive up the cost
of inputs. It is affected by the number of suppliers of key inputs of a good or service, how
unique these inputs are, and how much it would cost a company to switch to another
supplier. The fewer suppliers to an industry, the more a company would depend on a
supplier. As a result, the supplier has more power and can drive up input costs and push for

other advantages in trade. On the other hand, when there are many suppliers or low
switching costs between rival suppliers, a company can keep its input costs lower and
enhance its profits.
4. Power of Customers
The ability that customers have to drive prices lower or their level of power is one of the five
forces. It is affected by how many buyers or customers a company has, how significant each
customer is, and how much it would cost a company to find new customers or markets for its
output. A smaller and more powerful client base means that each customer has more power
to negotiate for lower prices and better deals. A company that has many, smaller,
independent customers will have an easier time charging higher prices to increase
profitability.
5. Threat of Substitutes
The last of the five forces focuses on substitutes. Substitute goods or services that can be
used in place of a company's products or services pose a threat. Companies that produce
goods or services for which there are no close substitutes will have more power to increase
prices and lock in favorable terms. When close substitutes are available, customers will have
the option to forgo buying a company's product, and a company's power can be weakened.
5. QUICK ENVIRONMENTAL SCANNING TECHNIQUE ANALYSIS (QUEST)

QUEST is an environmental scanning technique that is designed to assist with organizational

strategies by keeping adheres to change and its implications. Different steps involved in this
technique are as follows:
 The process of environmental scanning starts with the observation of the

organization’s events and trends by strategists.
 After observation, important issues that may impact the organization are considered
using environment appraisal.
 A report is created by making a summary of these issues and their impact.
 In the final step, planners who are responsible for deciding the feasibility of the
proposed strategy, review reports.

Unit – III
Strategy Formulation; Major Types of Strategies, Determination of

Strategic Plan.
STRATEGY FORMULATION
INTRODUCTION
Strategy formulation is the process of determining and establishing the goals, mission and
objectives of an organization, and identifying the appropriate and best courses or plans of
action among all available alternative strategies to achieve them.
DEFINITION
“Strategy Formulation is an analytical process of selection of the best suitable course of

action to meet the organizational objectives and vision”
It is one of the steps of the strategic management process. The strategic plan allows an
organization to examine its resources, provides a financial plan and establishes the most
appropriate action plan for increasing profits. Always, there is an end in sight, and that is the
organizational goals of the firm. The organization anticipates specific results, which they can
only achieve by following a specific route, or acting within the confines or parameters of a
specific framework. That route or framework will be created through strategy formulation.
It is examined through SWOT analysis. SWOT is an acronym for strength, weakness,

opportunity and threat. The strategic plan should be informed to all the employees so that
they know the company’s objectives, mission and vision. It provides direction and focus to
the employees.
Everything you need to know about strategy formulation. Strategy

formulation is the process of offering proper direction to a firm.
Strategy Formulation seeks to set the long-term goals that help a firm exploit its strengths
fully and en cash the opportunities that are present in the environment.
There is a conscious and deliberate attempt to focus attention on what the firm can do better
than its rivals. To achieve this, a firm seeks to find out what it can do best. Once the strengths
are known, opportunities to be exploited are identified; a long-term plan is chalked out for
concentrating resources and effort.

Henry Mintzberg, after much research found that strategy formulation is typically not a
regular, continuous process.
“It is small often an irregular, discontinuous process, proceeding in fits and starts. There are
periods of stability in strategy development, but also there are periods of flux, of grouping of
piecemeal changes and of global change.”
Strategy formulation is as much an art as it is a science. In fact, it is the art of strategy

formulation that drives fast growth and catapults a firm into newer horizons. Leaders should
develop skills and capabilities to sense early opportunities and be quick in making strategic
moves.
Strategy Formulation – Meaning and Modes

Strategy formulation is the process of offering proper direction to a firm. It seeks to set the
long-term goals that help a firm exploit its strengths fully and encash the opportunities that
are present in the environment. There is a conscious and deliberate attempt to focus attention
on what the firm can do better than its rivals. To achieve this, a firm seeks to find out what it
can do best. Once the strengths are known, opportunities to be exploited are identified; a
long-term plan is chalked out for concentrating resources and effort.
Since strategies consume time, energy and resources, they must be formulated carefully.
Strategies, once formulated, must ensure a best fit between goals, resources and effort put in
by people. The ultimate goal of every strategy that is being formulated should be to deliver
outstanding value to customers at all times.
Henry Mintzberg, after much research found that strategy formulation is typically not a
regular, continuous process. “It is small often an irregular, discontinuous process, proceeding
in fits and starts. There are periods of stability in strategy development, but also there are
periods of flux, of grouping of piecemeal changes and of global change.”
Performance results are generally periodic measurements of developments that occur during a
given time period like return on investment, profits after taxes, earnings per share and market
share. Current performance results are compared with the current objectives and with that of
the previous year’s performance results. If the results are equal to or greater than the current
objectives and past year’s results, the company will mostly continue with the current strategy
otherwise, the strategy formulation process begins in earnest.
The strategic managers must evaluate the mission, objectives and policies. In fact, the
strategic managers are evaluated in terms of management style, values and skills by the top
management. Henry Mintzberg has pointed out that a corporation’s objectives and strategies
are strongly affected by top management’s view of the world. This view determines the mode
to be used in strategy formulation.
These modes include:

1. Entrepreneurial Mode:
Strategy is formulated by one powerful individual. The focus is on opportunities rather than
on problems. Strategy is guided by the founder’s own visions of direction.
2. Adaptive Mode:
This strategy formulation mode is characterised by reactive solutions to existing problems

rather than a proactive search for new opportunities.
3. Planning Mode:
Analysts assume main responsibility for strategy formulation. Strategic planning includes
both the proactive search for new opportunities and the reactive solution of existing
problems.
Strategic planning is a systemic and disciplined exercise to formulate strategies. It relates to

the enterprise as a whole or to particular business units (identified as strategic business units
– SBUs) of a divisionalised organisation. It consists of making risk- taking decisions -
entrepreneurial decisions – for the future with the best possible knowledge of their probable
outcome and effects.
In short, strategic planning concerns itself with the formulation of strategic alternatives to
obtain sanctions for one of the alternatives which is to be ultimately interpreted and
communicated in operational terms. Thus, strategic planning is a forward-looking exercise
which determines the future posture of the enterprise with special reference to its products-
market posture, profitability, size, rate of innovation and external institutions.
Strategic planning differs from project planning tactical, planning and operational planning.
Strategic planning is more comprehensive, for strategy is dealt with at corporate level and is
concerned mainly with the long-term aspects of business. It deals with what business the
company wants to be in.
PROCESS OF STRATEGY FORMULATION
Strategy formulation process is an integral part of strategic management, as it helps in

framing effective strategies for the organization, to survive and grow in the dynamic business
environment.
The steps of strategy formulation include the following

1. Establishing Organizational Objectives
This involves establishing long-term goals of an organization. Strategic decisions can be

taken once the organizational objectives are determined.
2. Analysis of Organizational Environment
This involves SWOT analysis, meaning identifying the company’s strengths and weaknesses
and keeping vigilance over competitors’ actions to understand opportunities and threats.
Strengths and weaknesses are internal factors which the company has control over.
Opportunities and threats, on the other hand, are external factors over which the company has
no control. A successful organization builds on its strengths, overcomes its weakness,
identifies new opportunities and protects against external threats.
3. Forming quantitative Goals
Defining targets so as to meet the company’s short-term and long-term objectives .Example,
30% increase in revenue this year of a company.
4. Objectives in context with divisional plans
This involves setting up targets for every department so that they work in coherence with the
organization as a whole.
5. Performance Analysis
This is done to estimate the degree of variation between the actual and the standard
performance of an organization.
6. Selection of Strategy
This is the final step of strategy formulation. It involves evaluation of the alternatives and
selection of the best strategy amongst them to be the strategy of the organization.
LEVELS OF STRATEGY FORMULATION

There are four levels of strategy formulation used in an organization.
Corporate level strategy: This level outlines what an organization want to achieve Growth,
stability, acquisition or retrenchment. It focuses on what business an organization is going to
enter the market. Here top level management take decision and allocate resources
accordingly.
Business level strategy: This level answers the question of how you are going to compete. It
plays a role in that organization which has smaller units of business and each is considered as
the strategic business unit (SBU).
Functional level strategy: This level concentrates on how an organization is going to grow. It
defines daily actions including allocation of resources to deliver corporate and business level
strategies.
Operating strategy Operating strategy is formulated at the operating units of an organization.

A company may develop operating strategy, as an instance, for its factory, sates territory or
small sections within a department. Usually, the operating managers/field-level managers
develop an operating strategy to achieve immediate objectives. .
STRATEGIES AT DIFFERENT LEVELS
Hence, all organizations have competitors, and it is the strategy that enables one business to
become more successful and established than the other.
1. Grand Strategies- CORPORATE LEVEL
2. Generic Strategies-BUSINESS LEVEL
3. Functional Strategies-FUNCTIONAL LEVEL

1. GRAND STRATEGIES
The Grand Strategies are the corporate level strategies designed to identify the firm’s choice
with respect to the direction it follows to accomplish its set objectives. Simply, it involves the
decision of choosing the long term plans from the set of available alternatives. The Grand
Strategies are also called as Master Strategies or Corporate Strategies.
The grand strategies are concerned with the decisions about the allocation and transfer of
resources from one business to the other and managing the business portfolio efficiently, such
that the overall objective of the organization is achieved. In doing so, a set of alternatives are
available to the firm and to decide which one to choose, the grand strategies help to find an
answer to it.
Business can be defined along three dimensions: customer groups, customer functions and
technology alternatives. Customer group comprises of a particular category of people to
whom goods and services are offered, and the customer functions mean the particular service
that is being offered. And the technology alternatives cover any technological changes made
in the operations of the business to improve its efficiency.
There are four grand strategic alternatives that can be followed by the organization to realize
its long-term objectives:

1. STABILITY STRATEGY
The Stability Strategy is adopted when the organization attempts to maintain its current
position and focuses only on the incremental improvement by merely changing one or more
of its business operations in the perspective of customer groups, customer functions and
technology alternatives, either individually or collectively.
Generally, the stability strategy is adopted by the firms that are risk averse, usually the small
scale businesses or if the market conditions are not favorable, and the firm is satisfied with its
performance, then it will not make any significant changes in its business operations. Also,
the firms, which are slow and reluctant to change finds the stability strategy safe and do not
look for any other options.
Stability Strategies could be of three types
1. No-Change Strategy
2. Profit Strategy
3. Pause/Proceed with Caution Strategy
To have a better understanding of Stability Strategy go through the following examples in the
context of customer groups, customer functions and technology alternatives.

• The publication house offers special services to the educational institutions apart from its
consumer sale through the market intermediaries, with the intention to facilitate a bulk
buying.
• The electronics company provides better after-sales services to its customers to make the
customer happy and improve its product image.
• The biscuit manufacturing company improves its existing technology to have the efficient
productivity.
In all the above examples, the companies are not making any significant changes in their
operations; they are serving the same customers with the same products using the same
technology.
1. NO-CHANGE STRATEGY
The No-Change Strategy, as the name itself suggests, is the stability strategy followed when
an organization aims at maintaining the present business definition. Simply, the decision of
not doing anything new and continuing with the existing business operations and the
practices referred to as a no-change strategy.
When the environment seems to be stable, i.e. no threats from the competitors, no economic
disturbances, no change in the strengths and weaknesses, a firm may decide to continue with
its present position. Therefore, by analyzing both the internal and external environments, a
firm may decide to continue with its present strategy.
The no-change strategy does not imply that no decision has been taken by the firm however,
taking no decision can sometimes be a decision itself. There should be a clear distinction
between the firms which are inactive and do not want to make changes in their strategies and
the ones which consciously decides to continue with their present business definition by
scrutinizing both the internal and external conditions.
Generally, the small or mid-sized firms catering to the needs of a niche market, which is
limited in scope, rely on the no-change strategy. This stability strategy is suitable till no new
threats emerge in the market, and the firm feels the need to alter its present position.
2. PROFIT STRATEGY
The Profit Strategy is followed when an organization aims to maintain the profit by whatever
means possible. Due to lower profitability, the firm may cut costs, reduce investments, raise
prices, increase productivity or adopt any methods to overcome the temporary difficulties.
The profit strategy can be followed when the problems are temporary or short-lived and will
go away with time. The problems could be the economic recession or inflation, industry
downturn, worst market conditions, competitive pressure, government policies and the like.
Till then, the firm adopts the artificial measures to tackle these problems and sustain the
profitability of the firm.

If the problem persists for long, then profit strategy would only deteriorate the firm’s overall
financial position. In the crisis, the companies may overcome the temporary difficulties by
selling the assets such as land or building or setting off the losses of one division against the
profits of another division. Also, the firms may offer the outsourcing facilities to those firms
who are in need of it and can realize the temporary cash.
The profit strategy focuses on capitalizing the situation when the obsolete technology or the
old technology is to be replaced with the new one. Here no new investment is made; the same
technology is followed, at least partially with new technological domains.
3. PAUSE/PROCEED WITH CAUTION STRATEGY
The Pause/Proceed with Caution Strategy is well understood by the name itself, is a stability
strategy followed when an organization wait and look at the market conditions before
launching the full-fledged grand strategy. Also, the firm that has intensely followed the
expansion strategy would wait till the time the new strategies seeps down the organizational
levels and look at the changes in the organizational structure before taking the next step.
2. EXPANSION STRATEGY
The Expansion Strategy is adopted by an organization when it attempts to achieve a high

growth as compared to its past achievements. In other words, when a firm aims to grow
considerably by broadening the scope of one of its business operations in the perspective of
customer groups, customer functions and technology alternatives, either individually or
jointly, then it follows the Expansion Strategy.
The reasons for the expansion could be survival, higher profits, increased prestige, economies
of scale, larger market share, social benefits, etc. The expansion strategy is adopted by those
firms who have managers with a high degree of achievement and recognition. Their aim is to
grow, irrespective of the risk and the hurdles coming in the way.
The firm can follow either of the five expansion strategies to accomplish its objectives:
Go through the examples below to further comprehend the understanding of the expansion
strategy. These are in the context of customer groups, customer functions and technology
alternatives.
1. The baby diaper company expands its customer groups by offering the diaper to old aged
persons along with the babies.

2. The stock broking company offers the personalized services to the small investors apart
from its normal dealings in shares and debentures with a view to having more business and a
diversified risk.
3. The banks upgraded their data management system by recording the information on
computers and reduced huge paperwork. This was done to improve the efficiency of the
banks.
In all the examples above, companies have made significant changes to their customer
groups, products, and the technology, so as to have a high growth.
EXPANSION THROUGH CONCENTRATION
The Expansion through Concentration is the first level form of Expansion Grand strategy that
involves the investment of resources in the product line, catering to the needs of the identified
market with the help of proven and tested technology.
Simply, the strategy followed when an

organization coincides its resources into
one or more of its businesses in the
context of customer needs, functions
and technology alternatives, either
individually or collectively, is called as
expansion through concentration.
The organization may follow any of the

ways to practice Expansion through
concentration:
 Market penetration strategy: The

firm focusing intensely on the
existing market with its present product.
 Market Development type of concentration: Attracting new customers for the existing
product.
 Product Development type of Concentration: Introducing new products in the existing
market.
The firms prefer expansion through concentration because they are required to do things what
they are already doing. Due to the familiarity with the industry the firm likes to invest in the
known businesses rather than a new one. Also, through concentration strategy, no major
changes are made in the organizational structure, and expertise is gained due to an in-depth
knowledge about one or more businesses.
However, the expansion through concentration is risky since these strategies are highly
dependent on the industry, so any adverse conditions in the industry can affect the business
drastically. Also, the huge investments made in a particular business may suffer losses due

the invention of new technology, market

fickleness, and product obsolescence.
EXPANSION THROUGH
DIVERSIFICATION
The Expansion through Diversification is

followed when an organization aims at
changing the business definition, i.e. either
developing a new product or expanding into a
new market, either individually or jointly. A
firm adopts the expansion through
diversification strategy, to prepare itself to
overcome the economic downturns.
Generally, the diversification is made to set off the losses of one business with the profits of
the other; that may have got affected due to the adverse market conditions. There are mainly
two types of diversification strategies undertaken by the organization:
1. Concentric Diversification: When an organization acquires or develops a new product or

service that are closely related to the organization’s existing range of products and services is
called as a concentric diversification. For example, the shoe manufacturing company may
acquire the leather manufacturing company with a view to entering into the new consumer
markets and escalate sales.
2. Conglomerate Diversification: When an organization expands itself into different areas,

whether related or unrelated to its core business is called as a conglomerate diversification.
Simply, conglomerate diversification is when the firm acquires or develops the product and
services that may or may not be related to the existing range of product and services.
Generally, the firm follows this type of diversification through a merger or takeover or if the
company wants to expand to cover the distinct market segments. ITC is the best example of
conglomerate diversification.
EXPANSION THROUGH INTEGRATION
The Expansion through Integration means combining one or more present operation of the
business with no change in the customer groups. This combination can be done through a
value chain. The value chain comprises of interlinked activities performed by an organization
right from the procurement of raw materials to the marketing of finished goods. Thus, a firm
may move up or down the value chain to focus more comprehensively on the needs of the
existing customers.
The expansion through integration widens the scope of the business and thus considered as
the grand expansion strategy. There are two ways of integration

Vertical integration
The vertical integration is of two types:

forward and backward. When an
organization moves close to the ultimate
customers, i.e. facilitate the sale of the
finished goods is said to have made a
forward integration. Example, the
manufacturing firm open up its retail outlet.
Whereas, if the organization retreats to the

source of raw materials, is said to have
made a backward integration. Example, the shoe company manufactures its own raw material
such as leather through its subsidiary firm.
Horizontal Integration
A firm is said to have made a horizontal integration when it takes over the same kind of
product with similar marketing and production levels. Example, the pharmaceutical company
takes over its rival pharmaceutical company.
EXPANSION THROUGH COOPERATION
The Expansion through Cooperation is a strategy followed when an organization enters into a
mutual agreement with the competitor to carry out the business operations and compete with
one another at the same time, with the objective to expand the market potential
The expansion through cooperation can be done by following any of the strategies as explain
1. Merger
The merger is the combination of two or more firms wherein one acquires the assets and
liabilities of the other in the exchange of cash or shares, or both the organizations get
dissolved, and a new organization came into the existence. The firm that acquires another is
said to have made an acquisition, whereas, for the other firm that gets acquired, it is a merger.
2. Takeover

Takeover strategy is the other method of expansion through cooperation. In this, one firm
acquires the other in such a way, that it becomes responsible for all the acquired firm’s
operations. The takeovers can either be friendly or hostile. In the former, both the companies
agree for a takeover and feels it is beneficial for both. However, in the case of a hostile
takeover, a firm tries to take on the operations of the other firm forcefully either known or
unknown to the target firm.
3. Joint Venture
Under the joint venture, both the firms agree to combine and carry out the business operations
jointly. The joint venture is generally done, to capitalize the strengths of both the firms. The
joint ventures are usually temporary; that lasts till the particular task is accomplished.
4. Strategic Alliance
Under this strategy of expansion through cooperation, the firms unite or combine to perform
a set of business operations, but function independently and pursue the individualized goals.
Generally, the strategic alliance is formed to capitalize on the expertise in technology or
manpower of either of the firm.
Thus, a firm can adopt either of the cooperation strategies depending on the nature of
business line it deals in and the pursued objectives.
EXPANSION THROUGH INTERNATIONALIZATION
The Expansion through Internationalization is the strategy followed by an organization when

it aims to expand beyond the national market. The need for the Expansion through
Internationalization arises when an organization has explored all the potential to expand
domestically and look for the expansion opportunities beyond the national boundaries.But
however, going global is not an easy task, the organization has to comply with the stringent
benchmarks of price, quality and timely delivery of goods and services, that may vary from
country to country.
The expansion through internationalization could be done by adopting either of the following
strategies.

1. International Strategy: The firms adopt an international strategy to create value by

offering those products and services to the foreign markets where these are not available.
This can be done, by practicing a tight control over the operations in the overseas and
providing the standardized products with little or no differentiation.
2. Multi domestic Strategy: Under this strategy, the multi-domestic firms offer the
customized products and services that match the local conditions operating in the foreign
markets. Obviously, this could be a costly affair because the research and development,
production and marketing are to be done keeping in mind the local conditions prevailing in
different countries.
3. Global Strategy: The global firms rely on low-cost structure and offer those products and
services to the selected foreign markets in which they have the expertise. Thus, a
standardized product or service is offered to the selected countries around the world.
4. Transnational Strategy: Under this strategy, the firms adopt the combined approach of
multi-domestic and global strategy. The firms rely on both the low-cost structure and the
local responsiveness i.e. according to the local conditions. Thus, a firm offers its standardized
products and services and at the same time makes sure that it is in line with the local
conditions prevailing in the country, where it is operating.
So, in order to globalize, the firm should assess the international environment first, and then
should evaluate its own capabilities and plan the strategies accordingly to enter into the
foreign markets.
RETRENCHMENT STRATEGY
The Retrenchment Strategy is adopted when an organization aims at reducing its one or more
business operations with the view to cut expenses and reach to a more stable financial
position. In other words, the strategy followed, when a firm decides to eliminate its activities
through a considerable reduction in its business operations, in the perspective of customer

groups, customer functions and technology alternatives, either individually or collectively is

called as Retrenchment Strategy.
The firm can either restructure its business operations or discontinue it, so as to revitalize its
financial position. There are three types of Retrenchment Strategies
o further comprehend the meaning of Retrenchment Strategy, go through the following

examples in terms of customer groups, customer functions and technology alternatives.
1. The book publication house may pull out of the customer sales through market
intermediaries and may focus on the direct institutional sales. This may be done to slash the
sales force and increase the marketing efficiency.
2. The hotel may focus on the room facilities which is more profitable and may shut down the
less profitable services given in the banquet halls during occasions.
3. The institute may offer a distance learning programme for a particular subject, despite
teaching the students in the classrooms. This may be done to cut the expenses or to use the
facility more efficiently, for some other purpose.
In all the above examples, the firms have made the significant changes either in their
customer groups, functions and technology/process, with the intention to cut the expenses and
maintain their financial stability.
TURNAROUND STRATEGY
The Turnaround Strategy is a retrenchment strategy followed by an organization when it feels

that the decision made earlier is wrong and needs to be undone before it damages the
profitability of the company.
Now the question arises, when the firm should adopt the turnaround strategy? Following are
certain indicators which make it mandatory for a firm to adopt this strategy for its survival.
These are:
 Continuous losses
 Poor management

 Wrong corporate strategies
 Persistent negative cash flows
 High employee attrition rate
 Poor quality of functional management
 Declining market share
 Uncompetitive products and services
Also, the need for a turnaround strategy arises because of the changes in the external
environment i.e. change in the government policies, saturated demand for the product, a
threat from the substitute products, changes in the tastes and preferences of the customers,
etc.
Example: Dell is the best example of a turnaround strategy. In 2006. Dell announced the cost-
cutting measures and to do so; it started selling its products directly, but unfortunately, it
suffered huge losses. Then in 2007, Dell withdrew its direct selling strategy and started
selling its computers through the retail outlets and today it is the second largest computer
retailer in the world.
DIVESTMENT STRATEGY
The Divestment Strategy is another form of retrenchment that includes the downsizing of the
scope of the business. The firm is said to have followed the divestment strategy, when it sells
or liquidates a portion of a business or one or more of its strategic business units or a major
division, with the objective to revive its financial position.
The divestment is the opposite of investment; wherein the firm sells the portion of the
business to realize cash and pay off its debt. Also, the firms follow the divestment strategy to
shut down its less profitable division and allocate its resources to a more profitable one.
An organization adopts the divestment strategy only when the turnaround strategy proved to
be unsatisfactory or was ignored by the firm. Following are the indicators that mandate the
firm to adopt this strategy:
 Continuous negative cash flows from a particular division
 Unable to meet the competition
 Huge divisional losses
 Difficulty in integrating the business within the company
 Better alternatives of investment
 Lack of integration between the divisions

 Lack of technological upgradations due to non-affordability
 Market share is too small
 Legal pressures
Example: Tata Communications is the best example of divestment strategy. It has started the
process of selling its data center business to reduce its debt burden.
LIQUIDATION STRATEGY
The Liquidation Strategy is the most unpleasant strategy adopted by the organization that
includes selling off its assets and the final closure or winding up of the business operations.
It is the most crucial and the last resort to retrenchment since it involves serious
consequences such as a sense of failure, loss of future opportunities, spoiled market image,
loss of employment for employees, etc.
The firm adopting the liquidation strategy may find it difficult to sell its assets because of the
non-availability of buyers and also may not get adequate compensation for most of its assets.
The following are the indicators that necessitate a firm to follow this strategy:
 Failure of corporate strategy
 Continuous losses
 Obsolete technology
 Outdated products/processes
 Business becoming unprofitable
 Poor management
 Lack of integration between the divisions
Generally, small sized firms, proprietorship firms and the partnership firms follow the
liquidation strategy more often than a company. The liquidation strategy is unpleasant, but
closing a venture that is in losses is an optimum decision rather than continuing with its
operations and suffering heaps of losses.
BUSINESS LEVEL STRATEGIES
GENERIC STRATEGIES
Business-Level Strategies are a mechanism for a business to achieve a competitive

advantage.

1. Cost Leadership: Ensuring you cost less than your competitors.
2. Differentiation: Ensuring you are different from your competitors.
There are also two types of competitive scope than an organization must choose between:
1. Broad market: serving a diverse market.
2. Narrow market: focusing on a niche market.
Plotting all of the above factors on to a matrix gives us five generic business-level strategies
1. COST LEADERSHIP STRATEGY
Cost leadership is a strategy companies use to increase efficiencies and reduce production
costs below the industry average or their closest competitor.
It’s a method to reduce costs and produce the least expensive goods in a market or industry in
an effort to gain market share. The modern business environment is a very complex and
sophisticated one with consumers being aware of the choices available to them. One way
firms differentiate themselves is through competitive pricing. Businesses that have the least
production costs are able to offer the same level of product quality compared to their
competitor for a much lower price.
Consumers are constantly looking to increase their purchasing power and if that cannot be
achieved through an income increment, then buying more at a lower price is the next best
alternative. Businesses who seek to be cost leaders tap into this opportunity to offer the
average consumers great products at great prices.
Example
A company like Payless is a good example of this strategy. They try to limit the number of
employees in their shops and allow customers to serve themselves in an effort to cut

operational costs. These cost cutting measures allow them to offer brands that are of a certain
quality at an affordable price. Their slogan suggests that customers can get the same quality
goods at a lessor price than their competitors.
Wal-Mart is another example of this concept. They have made their operations so efficient
and built such a large distribution network that they are able to get preferential pricing on
goods and sell them to consumers for less than other retailers. For example, a Lego set at
Wal-Mart might sell for 10 percent less than the same set at Target.
This strategy is for organizations that want to compete for a broad customer base based on
price. A misconception about this strategy is that returns are lower. That is not the case. To
maintain above-average returns and provide the lowest price, the organization must focus on
internal efficiencies continually.
Common mechanisms to drive down costs include
• Establishing rigid cost controls.
• Building state-of-the-art facilities to produce at scale at a low cost.
Cost leadership can help defend business against Porter’s 5 forces:
I. Rivalry: Cost leadership means you can still make a profit even after your competitors have
competed away their profit.
II. M Suppliers: Cost leaders can absorb bigger cost increases before those costs need to be
passed on.
III. Buyers: In a competitive market, powerful customers can force you to sell products at a
lower and lower price. However, this can force your competitors to exit the market. If this
happens, then your customers lose their buying power, and you end up in a monopoly
position.
IV. New entrants: By operating at scale and with a continuous focus on cost reduction, you
create a barrier to new entrants.
V. Substitutes: By selling at the lowest cost you can build loyal customers.
Cost Leadership Example
• Amazon is an example of a business using a cost leadership strategy.
• It focuses on attracting a large number of customers. It keeps prices low by using its vast
buying power to buy products cheaply. This is then combined with no physical stores and
state of the art distribution facilities to pass these savings on to consumers but still keep
margins high..
2. DIFFERENTIATION STRATEGY

This strategy is for firms that want a broad customer base based on their uniqueness.
Typically, firms with this strategy will focus on building unique features to win in the
marketplace. They also usually charge a higher price to their customers, to offset the cost of
being unique. Differentiation strategy, as the name suggests, is the strategy that aims to
distinguish a product or service, from other similar products, offered by the competitors in the
market. It entails development of a product or service that is unique for the customers, in
terms of product design, features, brand image, quality, or customer service.
When a firm pursues differentiation strategy, it attempts to become unique in the industry, by
offering those products and services, which have value to the customers. In this strategy, the
firm picks one or more such dimensions that are regarded as important by the customer’s
flock. In this way, the firm succeeds in creating a unique image in the market and gets the
premium price for its uniqueness.
BASIS OF DIFFERENTIATION
1. Product: To have an edge over the competitors, a company can offer innovative products
to its customers that best fulfils their requirements. This may involve a huge cost in research
and development, production and marketing. Nevertheless, the return on investment is more
than the cost involved, as the firm becomes the market leader in offering that product.
2. Pricing: Market forces, i.e. supply and demand decide the price of the product, so it tends
to fluctuate and is greatly affected by product value to the customer. To gain differentiation
through pricing, either a firm can charge the lowest price for its product or gain superiority by
charging maximum prices.
3. Organization: Differentiation can also be based on organization, wherein a firm earns

success through the brand name, location advantage, goodwill and customer loyalty etc.
ATTAINING DIFFERENTIATION
A firm can incorporate the following measures to attain differentiation
 Provide utility to the customers, by offering such product that perfectly matches their
needs and preferences.
 Product innovation
 Increase product performance
 Set the price of the product based on the features of the product and purchasing power of
the customer.
 Create a brand image, by ensuring better quality, services and customer satisfaction.
For example, Tanin (manufacturer of plastic products) can differentiate its round-shape
plastic tea-table by changing its shape to square- size or oval-shape. ‘Red Leaf marker pen
may be differentiated by making it transparent.

Features of a product (such as the exterior finish of a car, fragrance of perfume powder or
color of toothpaste) can be the themes for product differentiation.
Performance quality (low, average, high or superior quality in terms of using the product for
a particular purpose) can be used as the basis of product differentiation. A company may set
its products at a high-quality range and gradually switch down to average or low quality or
switch up to superior quality.
The Goal of Differentiation Strategy
The goal of a differentiation strategy is to achieve a. competitive advantage by offering a

unique product to customers.
When a product becomes unique due to differentiation, it becomes attractive to customers.
However, the differences made in the product must be of value to customers.
A product with differentiated features can command premium prices (prices above the
industry average). Customers are usually to pay premium prices because they value 1he
differentiated features of the product.
Thus, the company that adopts a differentiation strategy can increase profits by charging
higher prices and can’ outperform its competitors.
Themes for differentiating products and services
Themes Examples of applicability
Unique taste Food products such as bread, drink, juice, chocolate, etc.
Automobiles such as Toyota and Mercedes-Benz, and

Multiple features
software such as Microsoft Office.
Wide selection/one-stop shopping Retail chain shops such as Agora, Walmart and Target
Special features Transparent ball pen or soap or halal soap.

Overnight delivery of parcels by a courier service

Superior service
company
56-inches television set or Sony Home Theater; Rolex

Prestige and distinctiveness
watch.
Revlon Company or Max Factor in cosmetics; Philips in

Product reliability
bulbs; Partex in vinyl boards.
Full range of services Hospitals
Availability of spare parts Toyota automobiles, Sony television sets.
A complete line of products Aluminum products.
3. FOCUS STRATEGY
A focus strategy involves offering the niche-customers a product customized to their tastes
and requirements. It is directed towards serving the needs of a limited customer group.
According to Hitt, Ireland, and Hoskisson, a niche strategy/focus strategy is an integrated set
of actions designed to produce or deliver goods and services that serve the needs of a
particular competitive segment. A company usually follows a focus strategy when it can
serve a narrow piece of the market better than competitors.
Coca-Cola Company has introduced ‘diet cola’ to serve the niche market consisting of
diabetic patients. Kohinoor Chemical Company for its Tibet Snow initially used niche
strategy particularly directed towards rural women. Some real-life examples of niche strategy
are given in Table.
Example of Niche Strategies of Various Organizations.
Organizations Market Niches
e-Bay Online auctions

Porsche Sports cars
Nissan Motor
Mid-sized cars
Company
Toyota Motor
Small-sized cars: CAMRY & SOLEIL
Company
Hallmark Greeting cards with distinctive look/contents
Electronic Data
Outsourcing data-processing operations
Systems
Amazon.com Online books
Bisys Group Software for banks
Systematics
Software for universities
Company
Motel 6 Travelers having simple requirements
The focus strategy is very different in terms of the segment the pursuing organization decides
to serve. A limited segment to the complete exclusion of others is served. It is specific to a
very narrow group of buyers.
Let us take the case of a travel company that has chosen to serve a specific segment of
women travelers. The profile of its target travelers is between 30 and 60 years of age,
economically independent, having diverse interests and attitudinally geared to travel and
explore on their own.
The entire value chain is configured to serve this segment.

The offering of destination, boarding, lodging, travel, entertainment and shopping after hours
are designed specifically for this segment. The destination will be offbeat; service will be
marked by precision, punctuality, and efficiency.
Each year a few destinations are developed according to the requirements of the select target
and at a time only ten women travel together.
The focus is on creating a unique travel experience for the patrons. Word of mouth and
references are the basis of publicity and entry into the travel group.
Most travel operators cannot serve the segment as their strategic choice tends towards larger
groups going to destinations that have been tested and tried.
At times the opportunity for focus is created because conventional business models are not
able to cater to the needs of some segments.
In a nutshell, it can be said that the focus strategy:
 Serves a limited segment by choice.
 The segment is understood and targeted.
 The organization has the resources, skill, and competence to serve the segment.
The organization can opt to offer a low cost or a high differentiation advantage to the served
segment.
Types of Focus Strategy
Focused Low-Cost Strategy
The focused low-cost strategy of entering into a niche market at a low cost with a unique type
of product that has a special need among the customers in the niche market.

This strategy is targeted to those via so desire to have unique products at a low cost. the
company that follows this strategy competes against the cost leader in the niche market where
it has a cost advantage. With this strategy accompany concentrates on small volume custom-
built products for which it has a cost advantage. The company may adopt this strategy to
serve a buyer segment whose needs can be satisfied with less cost compared to the rest of the
market.
Focused Differentiation Strategy
‘Focused Differentiation Strategy’ is the strategy of operating a business with a differentiated

product in a chosen niche market. When a company pursues a focused strategy based on
differentiation, it concentrates on a harrow buyer-segment and offers customized attributes in
products better than competitors’ products.
Here, the focuser company competes against competitors not based on low-cost, rather based
on product differentiation. Since the focuser company knows the needs of niche customer-
groups, it can successfully differentiate its products
For example, Alam Soap Company competes against other soap producers in the ‘laundry bar
soap’ segment of the soap market, not in the perfume-soap or liquid-soap markets. Its strategy
is a focused differentiation strategy.
Integrated Cost Leadership/Differentiation Example IKEA is a great example of a business

with an integrated cost leadership and differentiation strategy. It sells unique products that
you can’t get elsewhere. It invests in its own designers to achieve this. It also sells it’s
products at a low price. It invests in automation and logistics to do this.
FUNCTIONAL LEVEL STRATEGY
Functional Level Strategy can be defined as the day to day strategy which is formulated to
assist in the execution of corporate and business level strategies. These strategies are framed
as per the guidelines given by the top level management.
Functional Level Strategy is concerned with operational level decision making, called tactical
decisions, for various functional areas such as production, marketing, research and
development, finance, personnel and so forth.
As these decisions are taken within the framework of business strategy, strategists provide
proper direction and suggestions to the functional level managers relating to the plans and
policies to be opted by the business, for successful implementation.
Role of Functional Strategy
 It assists in the overall business strategy, by providing information concerning the

management of business activities.
 It explains the way in which functional managers should work, so as to achieve better
results.

Functional Strategy states what is to be done, how is to be done and when is to be done are
the functional level, which ultimately acts as a guide to the functional staff. And to do so,
strategies are to be divided into achievable plans and policies which work in tandem with
each other. Hence, the functional managers can implement the strategy.
Functional Areas of Business
There are several functional areas of business which require strategic decision making,
discussed as under
1. Marketing Strategy
Marketing involves all the activities concerned with the identification of customer needs and
making efforts to satisfy those needs with the product and services they require, in return for
consideration. The most important part of a marketing strategy is the marketing mix, which
covers all the steps a firm can take to increase the demand for its product. It includes product,
price, place, promotion, people, process and physical evidence.
For implementing a marketing strategy, first of all,

the company’s situation is analyzed thoroughly by
SWOT analysis. It has three main elements, i.e.
planning, implementation and control.There are a
number of strategic marketing techniques, such as
social marketing, augmented marketing, direct
marketing, person marketing, place marketing,
relationship marketing, Synchro marketing,
concentrated marketing, service marketing,
differential marketing and demarketing.
2. Financial Strategy
All the areas of financial management, i.e. planning, acquiring, utilizing and controlling the
financial resources of the company are covered under a financial strategy. This includes
raising capital, creating budgets, sources and application of funds, investments to be made,
assets to be acquired, working capital management, dividend payment, calculating the net
worth of the business and so forth.
3. Human Resource Strategy
Human resource strategy covers how an organization works for the development of
employees and provides them with the opportunities and working conditions so that they will
contribute to the organization as well. This also means to select the best employee for
performing a particular task or job. It strategizes all the HR activities like recruitment,
development, motivation, retention of employees, and industrial relations.
4. Production Strategy

A firm’s production strategy focuses on the overall manufacturing system, operational

planning and control, logistics and supply chain management. The primary objective of the
production strategy is to enhance the quality, increase the quantity and reduce the overall cost
of production.
5. Research and Development Strategy
The research and development strategy focuses on innovating and developing new products
and improving the old one, so as to implement an effective strategy and lead the market.
Product development, concentric diversification and market penetration are such business
strategies which require the introduction of new products and significant changes in the old
one.
For implementing strategies, there are three Research and Development approaches:
1. To be the first company to market a new technological product.
2. To be an innovative follower of a successful product.
3. To be a low-cost producer of products.
Functional level strategies focus on appointing specialists and combining activities within the
functional area.
BCG MATRIX [BOSTON CONSULTING GROUP]

BCG means Boston Consulting Group, Matrix is developed by Bruce Henderson of the
Boston Consulting Group in the early 1970’s. It is also called as the “Growth Share Matrix”.
This is the most popular & simplest matrix to describe the corporation’s portfolio of
businesses or products.
According to this technique, business or products are classified as low or high performance
depending upon their market growth rate & relative market share.
The BCG matrix helps to determine priorities in a portfolio in a product portfolio. Its basic
purpose is to invest where there is growth from which the firm can benefit, & divest those
businesses that have low market & low growth prospects.
 Enhances multi-divisional firm in formulating strategies
 Autonomous divisions = business portfolio
 Divisions may compete in different industries
 Focus on market-share position & industry growth rate

To understand the Boston Matrix you need to understand how market share & market growth
interrelated. Each of the products or business units is plotted on a two dimensional matrix
consisting of -
 Relative Market Share (RMS)
 Market Growth Rate (MGR)
1. Relative Market Share (RMS)
Market share is the percentage of the total market that is being serviced by your company
measured either in the revenue terms or unit volume terms. It is ratio of the market share of
the concerned product or business unit in the industry divided by the share of the market
leader. The higher your market share, the higher proportion of the market you control.
RMS = Business Unit Sales this year
Leading rival sales this year
2. Market Growth Rate
Market Growth is used as a measure of a market’s attractiveness. It is the percentage of

market growth, by which sales of a particular product or business unit has increased. Markets
experiencing high growth are ones where the total market share available is expanding &
there is plenty of opportunity for everyone to make money.
MGR = Individual Sales this year – Individual sales last year
Individual Sales last year
WHY BCG MATRIX
To asses
 Profile of product /business
 Cash demands of products
 The development cycle of product
 Resource allocation & divestment decisions
MAIN STEPS OF BCG MATRIX

 Identifying & dividing a company into SBU
 Assessing & comparing the prospects of each SBU according to two criteria
1) SBU’s relative market share

2) Growth rate of SBU’s industry
 Classifying the SBU’s on the basis of BCG matrix
 Developing strategic objective for each SBU
ANALYSIS OF THE BCG MATRIX
It is portfolio planning model which is based on the observation that company’s business unit
can be classified in to four categories. It is based on the combination of market growth &
market share relative to the next based competitor. BCG matrix is thus a snapshot of an
organization at a given point of time & does not reflect businesses growing over time.
The matrix reflects the contribution of the products or business units to its cash flow. Based
on this analysis, the products or business units are classified as -
 Stars
 Cash cows
 Question Marks
 Dogs

1) STARS (HIGH MARKET GROWTH, HIGH MARKET SHARE)
Stars are products that enjoy a relatively high market share in a strongly growing market.
They are potentially profitable & may grow further to become an important product or
category for the company. The firm should focus on & invest in these products or business
units.
 High market growth rate means they need heavy investment
 High market share means they have economics of scale & generate large amount of cash
but they need more cash than they generate
The general features of stars are –
 Stars are leader in business
 They also require heavy investment to maintain its large market share.
 It leads to large amount of cash consumption & cash generation.
 Attempts should be made to hold the market share otherwise the star will become a cash
cow.
STRATEGIC CHOICES: Vertical integration, horizontal integration, market

penetration, market development, product development
2) CASH COWS ( LOW MARKET GROWTH, HIGH MARKET SHARE)

These are the product areas that have high relative market share but exist in low growth
markets. The business is mature & it is assumed that lower levels of investment will be
required. On this basis, it is therefore likely that they will be able to generate both cash &
profits. Such profits could then be transferred to support the stars. If it lose market share it
may become as dogs
 Low market growth rate means market is no longer growing, no efforts or investments are
necessary to maintain the status quo.
 High market share means may have a relatively high market share & bring in healthy
profits.
The general features of cash cows are -
 They are foundation of the company & often the stars of yesterday.
 They generate more cash & profits than required
 The business is mature & needs lower levels of investment.
 Profits are transferred to support stars/ question marks.
 They extract the profits by investing as little cash as possible
 They are located in an industry that is mature not growing or declining
 The danger is that cash cows may become under supported & begin to lose their market.
STRATEGIC CHOICES: Product development, diversification, divestiture, retrenchment
3) QUESTION MARKS (HIGH MARKET GROWTH, LOW MARKET SHARE)
It is also called as Problem Children or Wild Cats. These are products with low relative
market share in high growth markets. These businesses are called question marks because the
organization must decide whether to strengthen them or to sell them.
 High market growth rate means that considerable investment may still be required.
 The low market share will mean that such products will have difficulty in generating
substantial cash & compete in high growth industry. The decision to strengthen (intensive
strategies) or divest.
The general features of Question Marks are -
 Cash needs are high
 Cash generation is low

 Most business start of as question marks
 They will absorb great amount of cash if the market share remains unchanged (low)
 Question marks have potential to become star & evenly cash cow but can also become dog.
 Investment should be high for question marks.
STRATEGIC CHOICES: Market penetration, market development, product development,

divestiture
4) DOGS (LOW MARKET GROWTH, LOW MARKET SHARE)
These products are that have low market shares in low growth businesses. These products
will need low investment but they are unlikely to be major profit earners. In practice, they
may actually absorb cash required to hold their position. They are often regarded as
unattractive for the long term & recommended for disposal.
Turnaround can be one of the strategies to pursue because many dogs have bounced back &
become viable & profitable after asset & cost reduction. The suggested strategy is to drop or
divest the dogs when they are not profitable.
 Low market growth rate means market is no longer growth & regarded as unattractive for
the long term disposal & they tries to absorb cash.
 The low market share means products will have decline in generating substantial cash.
The general features of Dogs are -
 Dogs are the cash traps
 Dogs do not have potential to bring
 High cost – Low quality
 Business is situated at a declining stage
 They are not profit earners
STRATEGIC CHOICES: Retrenchment, liquidation, divestiture
BENEFITS
 BCG matrix is simple, easy to perform & easy to understand
 It is quantifiable
 It draws attention to the cash flows
 It draws attention to the investment needs

 It helps to quickly & simply screen the opportunity open to you, & help you think about
how you can make the most of them.
 It is used to identify how corporate cash resources can best be used to maximize
company’s future growth & profitability.
 Helps to understand the strategic positions of business portfolio.
 It’s a good starting point for further more thorough analysis.
LIMITATION
 BCG matrix uses only two dimensions relative market share & market growth rate.
 It is too simplistic
 Problem of getting data on market share & market growth is not strong
 High market share does not mean profits all time.
 Business with market share can be profitable too.
 Business can only be classified to four quadrants;
 Does not include other external factors that may change the situation completely.
 It denies that synergies between different units exist.
Unit – IV
Strategy Implementation; The Process of Strategy Implementation, Resource Allocation

Social Responsibility of Business and Business Ethics.
STRATEGY IMPLEMENTATION:
INTRODUCTION:
Strategy implementation is the translation of chosen strategy into organizational action so as

to achieve strategic goals and objectives. Strategy implementation is also defined as the
manner in which an organization should develop, utilize, and amalgamate organizational
structure, control systems, and culture to follow strategies that lead to competitive advantage
and a better performance.

Organizational structure allocates special value developing tasks and roles to the employees
and states how these tasks and roles can be correlated so as maximize efficiency, quality, and
customer satisfaction-the pillars of competitive advantage. But, organizational structure is not
sufficient in itself to motivate the employees.
An organizational control system is also required. This control system equips managers with
motivational incentives for employees as well as feedback on employees and organizational
performance. Organizational culture refers to the specialized collection of values, attitudes,
norms and beliefs shared by organizational members and groups.
Strategy implementation refers to various activities involved in executing the strategies of an

organization. In simpler words, strategy implementation puts an organization’s strategies into
action through various procedures, plans and programs. Strategy implementation involves
actions and tasks that are needed to be performed after the formulation of strategies.
It is influenced by management’s perspective, as management sets the strategies that are

executed in the implementation stage. An effective implementation of strategy is significant
for an organization’s growth, whereas failure in effective strategy implementation may have
negative consequences for an organization.
What is Strategy Implementation?
Strategy implementation is a procedure through which a chosen strategy is put into action.
Strategies are only a means to an end i.e., achievement of organization’s objectives which
have to be activated through implementation. This is because both strategic formulation and
strategic implementation process are intervened into each other.
Strategy formulation and implementation are interconnected though skills and levels of skills
are dissimilar. The relationship between the two can be better understood in terms of forward
and backward linkages. Forward linkage means elements in strategy formulation influence
strategy implementation.
Even formulation process is influenced by factors influencing implementation. This

interdependence is termed as backward linkage. Forward linkages are more and stronger as
compare to backward linkages. The linkage between formulation and implementation.
Again strategy formulation is merely though while strategy implementation is an action

oriented one. Both are different in many respects but closely interlinked into each other.
Strategy implementation is the sum total of the activities and choices required for the
execution of a strategic plan. It is the process by which objectives, strategies, and policies are
put into action through the development of programs, budgets, and procedures. In a simple
way, strategy implementation can be defined as a process through which a chosen strategy is
put into action.
Strategy Implementation – Definitions and Concept

According to Glueck, “Strategy implementation is the assignment or reassignment of

corporate and Strategic Business Unit leaders to match the strategy. The leaders will
communicate the strategy to the employees. Implementation also involves the development of
functional policies about the organization structure and climate to support the strategy and
help achieve organizational objectives”.
Steiner, Miner and Gray have defined strategic implementation as “Implementation of

strategies is concerned with the design and management of systems to achieve the best
integration of people, structure, processes and resources in reaching organizational purposes”.
Implementation of strategy is the process of activating the chosen strategy. You may have a
vehicle which you have put in neutral gear after “kick-start” or “push button-start”. It is good
that you have put the vehicle in neutral gear from its inactive position. However, you cannot
continue to go ahead longer with neutral gear unless you put into gear one, then two and so
on to give movement or locomotion to the vehicle.This is called as activisation or
implementation, put in simple terms.
According to George A. Steiner, John B. Miner and Edward R. Gracy, “The

implementation of policies and strategies is concerned with the design and management of
systems to achieve the best integration of people, structures, processes, and resources, in
reaching organisational purposes.”
Concept of Strategy Implementation:
Strategy implementation refers to various activities involved in executing the strategies of an

organization. In simpler words, strategy implementation puts an organization’s strategies into
action through various procedures, plans and programs. Strategy implementation involves
actions and tasks that are needed to be performed after the formulation of strategies.
It is influenced by management’s perspective, as management sets the strategies that are

executed in the implementation stage. An effective implementation of strategy is significant
for an organization’s growth, whereas failure in effective strategy implementation may have
negative consequences for an organization.
Need for Strategy Implementation
As we know,the concept of the 7-S framework, popularly known as the Mckinsey 7-S model.
The seven key factors, viz., strategy, structure, systems, staff, skills, style and shared value
must be compatible with each other in order to ensure that the organisation implements its
strategy effectively, and in the process achieves the excellence needed to survive and grow.
Each of these seven factors influence the choice of the other, thereby affecting the overall
organisational effectiveness.
There is, thus, a need to find the optimum mix of strategy and the other six factors to ensure
the smooth implementation of strategy. It must be remembered that there is nothing like the

‘best’ strategy in absolute terms. Rather, whenever there is a need to reposition a firm, the
emphasis has to be on developing a new combination of strategy and the other six factors.
The new combination enables the firm to respond properly to the emerging compulsions of
the environment and also helps it to maximise the total value created by the firm.
Strategy implementation is necessarily concerned with:
1. Determining the right organisational structure;
2. Designing appropriate management systems for planning and control, capital expenditure,
information and reporting, review and follow-up, training and development, rewards and
punishment, career progression, delegation of power, procedures, rules, etc.;
3. Choosing a right mix of employees;
4. Choosing a right mix of skills and competencies;
5. Adopting a right style of management in both strategic and operating areas;
6. Inculcating right values and culture within the organisation.
Needless to say, action in each of the above areas should be taken after duly considering the
requirement of the strategy being pursued, and the compatibility of all the seven factors
(including strategy) with each other.
Key Leadership Theories for Implementation Strategy
Leadership theories guide how executives think about the world and their organization’s
place in it. A couple important, related theories are discussed below.
Tipping Point Theory
• What It Is: The nce a critical mass of people gets behind something, it spreads quickly.
Malcolm Gladwell’s 2000 book, The Tipping Point, provides many examples of this theory
in action, from the changes in the Bill Bratton-led NYPD in the 1990s that resulted in a
dramatic drop in crime, to the way Hush Puppies shoes became popular again once key
people in the fashion world started wearing them. The makeup of a critical mass will vary by
organization: It could be a majority, or it could be a small group of influential people.
• How It Can Help with Strategic Implementation: While implementing a strategy, executives
can identify what constitutes a critical mass in each business unit, and work to get those
people invested in the strategy. Once those team members are on board, they’ll bring the rest
of the team along.
Blue Ocean Theory

• What It Is: It sprang out of a marketing theory with the same name, which posits that
companies should create opportunities in market areas where there isn’t much competition to
provide greater growth opportunities. For example, Southwest Airlines became a major
player by combining customer-focused service, low prices (partly achieved by flying from
secondary airports and partly by using only a single aircraft), and flying to underserved areas.
As a leadership theory, Blue Ocean tasks leaders with undertaking the activities that increase
team performance, listening to feedback from all parts of their organization, and developing
leaders at all levels.
• How It Can Help with Strategic Implementation: Having leaders at many levels focus on
activities that increase team performance and listen to every level, the strategies they develop
will be easier to implement. This method helps the leaders generate some built-in buy-in. By
walking the leadership walk, others are more likely to follow along.
What Is Involved in the Implementation Process

 After formulating and finalizing a strategy, it’s time to share it with the organization.
Next, you may need to make changes to the organization in preparation for the
execution phase. The steps to take are as follows:
 Communicate: Everyone in the organization, and some outside, must learn about the
strategy, how it affects them, and what changes they’ll need to make to support it. As
you cascade the strategy throughout the organization, different groups will need to be
made aware of the parts that are important to them. Sales and marketing teams will
want to hear more about the sales goals, while IT will be more concerned about
changes to the network and new required software. A vendor will need to know what
changes they’ll need make to the materials they provide.
 Engage Stakeholders: After communicating the goals, managers and staff (as well as
any contractors or vendor affected) need to understand the importance of the strategic
goals, their role in strategy execution, their responsibilities, and the impact of meeting
or not meeting the goals or fulfilling their responsibilities. Using stakeholders
throughout the organization to be champions of the coming changes will make the job
easier.
 Align Initiatives with Strategy: You’ll likely need to update processes, swap out
tools, and make other changes to ensure company activities are contributing to the
KPIs laid out in the strategy.
 Allocate Resources: What needs to be bought or moved to prepare for execution?
What funding needs to be allocated to strategic, operational, and capital expense
budgets?
 Make Structural Adjustments: Do you need to hire new people? Will there be a
round of layoffs? Will you need to change any reporting structures? Are new vendors
or contractors required? This is the hardest part of the implementation to perform.
 Create a Strategic Evaluation: Implement repeatable processes that will check
progress toward the goals, and provide data to executives and managers to determine
what changes need to be made to the strategy or it’s execution to keep the
organization on track to meeting the goals.

STEPS IN STRATEGY IMPLEMENTATION
To ensure an effective and successful implementation of strategies, it’s a good idea to have a
system to go about it. Take a look at the steps to ensure that happens.
Step #1: Evaluation and communication of the Strategic Plan
The strategic plan, which was developed during the Strategy Formulation stage, will be
distributed for implementation. However, there is still a need to evaluate the plan, especially
with respect to the initiatives, budgets and performance. After all, it is possible that there are
still inputs that will crop up during evaluation but were missed during strategy formulation.
There are several sub-steps to be undertaken in this step.
1. Align the strategies with the initiatives. First things first, check that the strategies on the
plan are following the same path leading to the mission and strategic goals of the
organization.
2. Align budget to the annual goals and objectives. Financial assessments conducted prior
will provide an insight on budgetary issues. You have to evaluate how these budgetary issues
will impact the attainment of objectives, and see to it that the budget provides sufficient
support for it. In the event that there are budgetary constraints or limitations, they must first
be addressed before launching fully into implementation mode.
3. Communicate and clarify the goals, objectives and strategies to all members of the
organization. Regardless of their position in the organization’s hierarchy, everyone must
know and understand the goals and objectives of the organization, and the strategies that will
be employed to achieve them.
Step #2: Development of an implementation structure
The next step is to create a vision, or a structure, that will serve as a guide or framework for
the implementation of strategies.
1. Establish a linking or coordination mechanism between and among the various

departments and their respective divisions and units. This is mainly for purposes of
facilitating the delegation of authority and responsibility.
2. Formulate the work plans and procedures to be followed in the implementation of the
tactics in the strategies.
3. Determine the key managerial tasks and responsibilities to be performed, and the
qualifications required of the person who will perform them.
4. Determine the key operational tasks and responsibilities to be performed, and the
qualifications required of the person who will perform them.

5. Assign the tasks to the appropriate departments of the organization.
6. Evaluate the current staffing structure, checking if you have enough manpower, and if they
have the necessary competencies to carry out the tasks. This may result to some
reorganization or reshuffling of people. In some cases, it may also require additional training
for current staff members, or even hiring new employees with the required skills and
competencies. This is also where the organization will decide if it will outsource some
activities instead.
7. Communicate the details to the members of the organization. This may be in the form of
models, manuals or guidebooks.
Step #3: Development of implementation-support policies and programs
Some call them “strategy-encouraging policies” while others refer to them as “constant
improvement programs”. Nonetheless, these are policies and programs that will be employed
in aid of implementation.
1. Establish a performance tracking and monitoring system. This will be the basis of
evaluating the progress of the implementation of strategies, and monitoring the rate of
accomplishment of results, or if they were accomplished at all. Define the indicators for
measuring the performance of every employee, of every unit or section, of every division,
and of every department.
2. Establish a performance management system. Quite possibly, the aspect of performance

management that will encourage employee involvement is a recognition and reward structure.
When creating the reward structure, make sure that it has a clear and direct link to the
accomplishment of results, which will be indicated in the performance tracking and
monitoring system.
3. Establish an information and feedback system that will gather feedback and results data, to
be used for strategy evaluation later on.
4. Again, communicate these policies and programs to the members of the organization.
Step #4: Budgeting and allocation of resources
It is now time to equip the implementers with the tools and other capabilities to perform their
tasks and functions.
1. Allocate the resources to the various departments, depending on the results of financial
assessments as to their budgetary requirements.
2. Disburse the necessary resources to the departments, and make sure everything is properly
and accurately documented.
3. Maintain a system of checks and balances to monitor whether the departments are
operating within their budgetary limits, or they have gone above and beyond their allocation.

Step #5: Discharge of functions and activities
It is time to operationalize the tactics and put the strategies into action, aided by strategic
leadership, utilizing participatory management and leadership styles.
Throughout this step, the organization should also ensure the following:
• Continuous engagement of personnel by providing trainings and reorientations.
• Enforce the applicable control measures in the performance of the tasks.
• Evaluate performance at every level and identify performance gaps, if any, to enable
adjusting and corrective actions. It is possible that the corrective actions may entail changes
in the policies, programs and structures established and set in earlier steps. That’s all right.
Make the changes when necessary.
Basically, the results or accomplishments in Step #5 will be the input in the next step, which
is the third stage of Strategic Management: “strategy evaluation”.
Some argue that implementation of strategies is more important than the strategies
themselves. But this is not about taking sides or weighing and making comparisons,
especially considering how these two are important stages in Strategic Management. Thus, it
is safe to say that formulating winning strategies is just half the battle, and the other half is
their implementation.
• Clarify: Avoid high-level statements that only resonate with the C-suite. Write your
strategy in a way that connects with front-line employees and managers.
• Communicate: Spread the message in as many ways as you can. Connect the strategy to
each group's’ core purpose.
• Cascade: Translate the strategy into actions through the organization. Managers at every
level will be the ones who handle this.
5 Changes That Support Successful Implementation

Another lens to look through is, “What changes need to be made to implement the strategy?”
You can divide the answer into five groups:
1. People: Train or hire the right (and the right number of) individuals to implement plans.
Ray Mckenzie advises, “Build a team of people who are key and can help you move your
strategy forward.”
2. Resources: Get funding and sufficient time to implement required changes.
3. Organization: Restructure the company to support the strategic goals.
4. Systems: Acquire the tools needed to perform the required processes.

5. Culture: Work to create an environment that prioritizes the actions needed to reach the
stated goals.
McKinsey 7S Framework
The McKinsey 7S framework is an organizational tool developed at the McKinsey &
Company consulting firm in the 1980s, by Robert H. Waterman and Tom Peters. The
framework can be used in many ways, including determining how well an organization is
prepared to change in order to implement a strategy.
Here are the 7Ss:
1. Strategy: What needs to be implemented?
2. Structure: The chain of command
3. Systems: The tools used to perform tasks and complete processes
4. Skills: What employees can do?
5. Style: How the leaders lead
6. Staff: The employees
7. Shared Values: The core values, expressed through the corporate culture.
These can be divided into the hard Ss (Strategy, Structure, Systems), which are tangible, and
the soft Ss (Skills, Style, Staff, Shared Values), which are intangible. In order to ensure
smooth implementation, align each of these categories.
Examples of Successful and Unsuccessful Implementation Strategies
As previously mentioned, because strategy formulation, implementation, and execution are

intertwined, it may difficult to know which phase is the cause of strategic failure. Here are
some quick examples of success and failure where implementation is key.
Wal-Mart: The corporation became the retail giant they are by having low prices. They
made lower margins by having high volume. In order to do that, they implemented a supply
chain strategy that reduced operating costs. As they grew, their strategy was to use their size
as a bargaining chip with suppliers to get even lower prices.
J.C. Penney: Penney’s was a major retailer in the U.S. for many years, but when the
landscape changed, they kept doing the same things. When the company finally brought in
new leadership in 2011, they implemented a strategy that eliminated coupons that customers

used and lowered their regular prices. They also changed their retail mix. When sales began
to fall, they maintained their implemented strategy without adjusting. If they had taken
advantage of the data from strategic evaluations and had responded appropriately, they might
have been able to salvage the parts of their strategy that were working.
Apple: In the late 1990s, Apple was close to going out of business. They had many products
that didn’t sell. When Steve Jobs returned, he implemented a strategy that reduced the
number of products, and worked to develop new ones. This approach eventually led to the
invention of the iPod. The iPod was not the first MP3 player, but it was the first to catch on
because of its ease of use and storage capacity. This, in essence, was an application of the
Blue Ocean theory: Apple found a market segment that wasn’t very competitive, and created
a product that was better than what was available. For a long time, Apple was the dominant
player in that market segment.
Google: While Google is successful in most ventures (search, email, maps), they have had
some notable stumbles. One is Google Glass, the company’s wearable computer. While the
idea was good, the device was very expensive, was not easy to use, there were concerns about
privacy, and was an unattractive pair of glasses. Mostly, there was no real compelling reason
to use it. Google Glass was a failed application of the Blue Ocean theory, and also another
failure to adapt to data from strategic evaluations.
Following are the main steps in implementing a strategy:
1. Developing an organization having potential of carrying out strategy successfully.

2. Disbursement of abundant resources to strategy-essential activities.
3. Creating strategy-encouraging policies.
4. Employing best policies and programs for constant improvement.
5. Linking reward structure to accomplishment of results.
6. Making use of strategic leadership.
Excellently formulated strategies will fail if they are not properly implemented. Also, it is
essential to note that strategy implementation is not possible unless there is stability between
strategy and each organizational dimension such as organizational structure, reward structure,
resource-allocation process, etc.
Strategy implementation poses a threat to many managers and employees in an organization.

New power relationships are predicted and achieved. New groups (formal as well as
informal) are formed whose values, attitudes, beliefs and concerns may not be known. With
the change in power and status roles, the managers and employees may employ confrontation
behaviour.
Resource Allocation – Introduction and Meaning

Resources are a must to implement a strategy. A given strategy, however it is effective or

sound, has no meaning unless the organisation has the required resources. It depends not only
of having those resources but the correct allocation and utilisation of these resources.
Many firms have failed because of inappropriate and non-judicious allocation and ineffective
use of resources. What is needed is a strict discipline in the areas of resource procurement,
allocation and actual use. The resources include funds, facilities and equipment’s, materials,
supplies and services and manpower.
Allocation of resources is both a one-time and a continuous process. The implementation of a

project would require the allocation of resources. An on-going business concern would also
require a continual infusion of resources. Strategy implementation deals with both types of
resource allocation.
The process of resource allocation deals with several issues such as resources to be tapped,
factors affecting resource allocation, different approaches of resource allocation and finally
the difficulties faced in resource allocation.
The allocation of resources may take place at the corporate level i.e. by the Board of
Directors and /or the CEO. This is known as the top-down approach. In the bottom-up
approach resources are allocated after seeking recommendations from operating
personnel/functional departments. A third approach involves allocating resources through the
budgeting process in which allocations are drafted, modified and finalized jointly.
Resources are the means or instruments used by an organisation to make available goods and
services of right quality, in right quantity, at right place, time and price. This is a value
addition function as it is a conversion process.
The success of an organisation is determined by the quality and quantity and hence, the cost
of the available resources, the resource conversion policy and the sound decisions allocating
the resources. Decisions bearing on the allocation of resources have vivid and vital
importance in the process of strategy implementation.
Resource Allocation – Definition
Resource allocation is defined as the allocation or division of resources that are used in the
implementation of strategy in an organization.
According to Churchman, “In organizations, the decision-making Junction is the

responsibility of management.In order to execute its responsibility, an organization’s
management requires information about the resources available to it and their relative
effectiveness for achieving organization’s purpose. Resources are acquired, allocated,
motivated and manipulated under the manager’s control. They include people, materials,
plant and equipment, money and information.”

A project and a procedure would be successfully implemented only if the adequate amount of
resources is allocated to them. Efficient allocation of resources, such as – financial, human,
and technical, is imperative for strategy implementation. However, allocation of resources
does not ensure that strategies will be successful. The efficient plans, projects, and procedures
are the main drivers of success. It can be said that resources are required to take action.
Strategy implementation deals with two types of resource allocation, namely one-time
resource allocation and continuous resource allocation. A one-time resource allocation
implies that resources are allocated and employed in a process only once; while a continuous
resource allocation demands a constant inflow of the required resources.
For example, equipments and technologies are implemented only once; thus, it is one-time
resource allocation. On the other hand, financial and information resources are needed at the
regular interval of time to run the organization. This is an example of continuous resource
allocation.
SOCIAL RESPONSIBILITY OF BUSINESS
Introduction:
A business should function to earn money in such where that it fulfill the expectation of the
society. Every person living in society has some obligation towards it. They have to followed
social values and norms of behavior. A business is permitted by society in order to carry on
commercial or industrial activities wit help of that earn profit. But it is obligatory on the side
of business that not to do anything, that is undesirable from point of view of society. The
manufacture and sale of adulterated good, not paying due tax, doing deceptive, polluting
environment works exploitation are some examples of undesirable practice in the point of
view society. Which may increase the enterprise’s profits but on other hand have adverse
effect on society at large? Unlike to this, supplying good quality product, having healthy
working condition paying taxes honestly, installing pollution controlling devises or
prevention of pollution and sincerely solve customer complaints are some examples of social
desirable activities which improve of business as well as make them profitable. Business can
get durable success though social responsible ethically upright behavior.
Meaning of Social Responsibility
According to concept of Social Responsibility of business the objective of managers for

taking decision related to business is not only to maximize profit or shareholder value but
also to serve and protect the interest of other members of its society like consumer, worker
and community as a whole.
Business and Society
Business and Society are correlated with each other. As business fulfill the needs of society
and society gives business the resources required to it. The different businesses operating in
society play our important role in functioning of society in different ways like business
provide employment to various people of society.

The basic objective of business enterprise is to develop, produce and supply goods and
service to customer. This need to be done in such a way which allowed companies to make
profit, that in turn demands far more than just skills in companies on fields and processes.
The social skills of owners of companies, together with maintain relationship with customers,
suppliers and business people, are always important if companies want be run well and
developed with view to future.
Benefits by companies to society
1. Supply goods and service which customer can’t or do not want to produce themselves.
2. Creating jobs for suppliers, co-workers, customer and distributor. This people make
money to support themselves as well as their families, use their wages to purchase goods and
service and pay taxes.
3. Continually developing new process. Goods and service.
4. Investment in new technologies as well as in the skills of employees.
5. Building up as well as spreading international standards, for example environmental

practice.
6. Developing good practice in different areas such as environment and workplace safety.
The role of business in societal development can be measure in many ways. If company
wants to progress and develop, it must nurture relation with its stakeholder, of which there
may be plenty. Some have a strong influence and are of fundamental importance for the
survival of the business; this includes customer, suppliers and employees. The authorities,
media, local resident and trade union are others stakeholders with a vital influence. The role
of business in society as well as accompanying responsibility that transpire from that role is
highly contentious and debated topic.
The long term survival of companies is partly dependent on maintaining the relationship of
trust. The economist Milton Friedman famously contended that the “business of business is
business” and because of which it has only one responsibility and that is to generate profit for
shareholder. In the contrary of that argument is thinking that recognizes business as a system
in society which affected by and affects other system in society, for example government
body, natural environment, surrounding community other types of organization etc. Thus,
business required to work with this system to attain its economic goals. In a way that will also
benefit the society as whole.

Concept of Social Responsibility
The evolution of the concept of social responsibility of business has passed through different
stages of struggle. Business began merely as an institution for the purpose of making money.
As long as a man made money and kept out of jail, he was considered successful. He felt no
particular obligation and acknowledged no responsibility to the public. As an owner of his
business, he thought that he had a perfect right to do with it what he pleased. Social norms
and attitudes had very little influence on the practice of business.

1. Economic Responsibility
What is a business? The business itself is an economic activity. Its main function is to earn
profits. To earn profits means to understand the needs and demands of consumers whether it
is regarding the quality of the product or its price.
While understanding the perspective of the consumer and meeting their needs and demand to
earn a profit is the economic responsibility of a business. When a business earns a profit, it
also means that the employees earn the profit in terms of incentives. The economic growth of
a business is not restricted to it but affects the society as a whole.
2. Legal Responsibility
Legal responsibilities are not only liable to the individuals in the society but also to the
businesses in the society. As business is an entity itself, it must also follow laws and rules.
Every business has a responsibility to operate within the boundaries set by the various
commissions and agencies at every level of the government. These rules and regulations are
set for maintaining balance and the greater good of the society.
A law-abiding enterprise is a socially responsible enterprise as well. The business is free to

do business however it wants but only within the boundaries of regulations of various laws
such as labour law, environmental law and criminal law. For example, it’s a business’s duty
to pay taxes to the government and keep its account books clean as it helps the government to
track the economic state of the company.
3. Ethical Responsibility
Ethical responsibilities include the behaviour of the firm that is expected by the society but
not codified in law. The factors of ethical responsibility include that the business must be
environmentally friendly. The business should always be aware of its activities and how do
they affect the environment. It is the moral and ethical responsibility of every human and
every business.
4. Philanthropic Responsibility
Business is one the most important pillar of the society. And therefore it should support and
improve the society whenever it can. If a business is making significant profits it is the
business responsibility that it should be philanthropic towards the society by donating funds
or its goods and services.
It’s the philanthropic responsibility of the business to help different groups of the society. It
should also work towards providing free education by opening educational institutes and
training institutes or helping the people affected by natural calamities such as floods and
earthquakes. It is the responsibility of the company management to safeguard the capital
investment by avoiding speculative activity and undertaking only healthy business ventures
which give good returns on investment.
Importance of Social Responsibility

A growing body of evidence has identified a company’s role in its community as a factor in
increasing profitability, promoting company image, reducing costs, and elevating employee
morale and customer loyalty, among other benefits.
Interesting aspect of social responsibility in the modern era is that, being socially responsible
is not a matter of choice to a very large extent. It has become a business compulsion.
Behaving in a socially responsible manner gives business benefits to organizations. It may
involve costs in short run but has proved beneficial in the long run.
For companies operating on a multinational basis, community involvement can be helpful in

supporting efforts to enter new markets, attract potential employees, and establish or
strengthen the reputation of the company, its brand and products.
Social responsibility of business is important from the following point of view.
1. From employees’ point of view: with the help of companies employment and healthy
working condition, social responsibility of business is important for employees.
2. From Customer point of view: under social responsibility, business follows ethical practice
and manufacture the product which is as per expected quality and reasonable price.
3. From investor point of view: business who understand value of social responsibility is
provide protection to the investor fund with help of development and growth of its business
as well as expected return to investors with profit earn by it.
4. From Suppliers point of view: the importance of social responsibility is also require to
perform in case of suppliers as they are one to provide raw material to business as well as
other required material. When they are paid on time as well as reasonable demands of them
are satisfied company, suppliers are loyal to business.
5. From government point of view : when business pay regular taxes, follow the norms of
government then it is consider as social responsibility of business which is duly fulfill by it.
6. From Society point of view: business need to work in society, some importance of social
responsibility is also define from society point of view. The business provide good product,
try to maintain clean environment, provide opportunity to participate to business as well as
work for the overall development of society, these are the some example of it.
CORPORATE SOCIAL RESPONSIBILITY

Corporate social responsibility (CSR) is how companies manage their business processes to
produce an overall positive impact on society. It covers sustainability, social impact and
ethics, and done correctly should be about core business - how companies make their money -
not just add-on extras such as philanthropy.

According to European Union commission, “CSR is a concept whereby companies

integrate social and environment concerns in their business operations and in their interaction
with their stakeholder on a voluntary basis.”
According to Forbes (2010), corporate social responsibility works in two ways. The
company gives back to the society, in turn, people get to know about the company who
helped them most and cater to their products and services.
According to Infosys founder, Narayan Murthy, “Social responsibility is to create maximum

shareholders value, working under the circumstances, where it is fair to all its stakeholders,
workers, consumers, the community, government and the environment.”
Potential business benefits of CSR:
The scale and nature of the benefits of CSR for an organization can vary depending on the
nature of enterprise, and are difficult to quantify, though there is large body of literature
exhorting business to adopt measures beyond financial ones. The business case for CSR
within a company will likely rest on one or more of these arguments.
 Human resources: A CSR programmed can be an aid to recruitment and retention,

particularly within the competitive graduate student market. Potential recruits often
ask about a firm‘s CSR policy during an interview, and having a comprehensive
policy can give an advantage.
 Risk management managing risk is a central part of many corporate strategies.
Reputation as take decades to build up can be ruined in hours through incident such as
corruption scandals or environmental accident. These can also draw unwanted
attention from regulators, courts, governments & media. Building a genuine culture of
‗doing the right thing‘ within a corporation can offset these risk.
 Brand differentiation in crowded market places, company‘s striving for a unique
selling proposition. That can separate them from the competition in the minds of

consumers. CSR can play role in building customer loyalty based on distinctive
ethical values.
 License to operate corporation are keen to avoid interference in there business through
taxation. By taking substantive voluntary steps, they can pursuit governments that
they are taking issues such as health & safety, diversity, or the environment seriously
as good corporate citizen with respect to labor standards and impacts on the
environment
BUSINESS ETHICS
Business ethics is nothing but the application of ethics in business. Business ethics is the
application of general ethical ideas to business behavior. Ethical business behavior
facilitates and promotes good to society, improves profitability, fosters business
relations and employee productivity. The concept of business ethics has come to mean
various things to various people, but generally it‘s coming to know what it right or
wrong in the workplace and doing what‘s right - this is in regard to effects of products/
services and in relationships with stakeholders. Business ethics is concerned with the
behavior of a businessman in doing a business. Unethical practices are creating problems
to businessman and business units. The life and growth of a business unit depends upon
the ethics practiced by a businessman. Business ethics are developed by the passage of
time and custom. A custom differs from one business to another. If a custom is
adopted and accepted by businessman and public, that custom will become an ethic.
Business ethics is applicable to every type of business. The social responsibility of a
business requires the observing of business ethics. A business man should not ignore the
business ethics while assuming social responsibility. Business ethics means the
behaviour of a businessman while conducting a business, by observing morality in his
business activities.
According to Wheeler Business Ethics is an art and science for maintaining harmonious
relationship with society, its various groups and institutions as well as reorganizing the
moral responsibility for the rightness and wrongness of business conduct.
According to Rogene. A. Buchholz , ―Business ethics refers to right or wrong behaviour in

business decisions ―.
Business Ethics or Ethical standards are the principles, practices and philosophies that
guide the business people in the day today business decisions. It relates to the behaviour
of a businessman in a business situation. They are concerned primarily with the impacts of
decisions of the society within and outside the business organizations or other groups who
keep interest in the business activities. Business ethics can be said to begin where the law
ends. Business ethics is primarily concerned with those issues not covered by the law, or
where there is no definite consensus on whether something is right or wrong

IMPORTANCE OF BUSINESS ETHICS
There may be many reasons why business ethics might be regarded as an increasingly
important area of study, whether as students interested in evaluating business activities,
or as managers seeking to improve their decision-making skills. It is generally viewed that
good business ethics promote good business.
1 The power and influence of business in society is greater than ever before. Business
ethics helps us to understand why this is happening, what its implications might be, and how
we might address this situation.
2 Business has the potential to provide a major contribution to our societies, in terms
of producing the products and services that we want, providing employment, paying
taxes, and acting as an engine for economic development and thereby increases the goodwill.
3 Business malpractices have the potential to inflict enormous harm on individuals, on

communities and on the environment. Through helping us to understand more about the
causes and consequences of these malpractices, business ethics helps to create mutual
trust and confidence in relationship.
4 The demands being placed on business to be ethical by its various stakeholders are
constantly becoming more complex and more challenging. Business ethics provides the
means to appreciate and understand these challenges more clearly, in order that firms
can meet these ethical expectations more effectively.
5. Business ethics can help to improve ethical decision making by providing managers with
the appropriate knowledge and tools that allow them to correctly identify, diagnose,
analyse, and provide solutions to the ethical problems and dilemmas they are confronted
with.
6 A business can prosper on the basis of good ethical standards and it helps to
retain the business for long years.
7 Business ethics can provide us with the ability to assess the benefits and problems
associated with different ways of managing ethics in organizations.
8 In the age of complexity in business fileds , competition is increasing day by day Good
ethical standard helps the business to face the challenges

CHARACTERISTICS OF BUSINESS ETHICS
The following are the important features of business ethics:-
1. Business ethics are the principles, which govern and guide business people to
perform business functions and in that sense business ethics is a discipline
2. It is considered both as a science and an art.
3. It continuously test the rules and moral standards and is dynamic in nature
4. It is based on theological principles such as sincerity, human welfare, service, good

behavior etc.
5. It is based on reality and social customs prevailing in business environment.
6. It studies the activities , decisions and behavior which are related to human beings
7. It has universal application because business exists all over the world
8. Many of the ethical principles develop the personal dignity
9. Business ethics keeps harmony between different roles of businessman, with every
citizen, customer, owner and investors.
PRINCIPLES OF BUSINESS ETHICS
The Principles of business ethics developed by well known authorities like Cantt, J.
S.Mill, Herbert Spencer, Plato, Thomas Garret, Woodrad, Wilson etc are as follows
1. Sacredness of means and ends: The first and most important principles of business ethics
emphasize that the means and techniques adopted to serve the business ends must be sacred
and pure. It means that a good end cannot be attained with wrong means, even if it is
beneficial to the society.
2. Not to do any evil: It is unethical to do a major evil to another or to oneself, whether this
evil is a means or an end.
3. Principle of proportionality: This principle suggests that one should make proper judgment
before doing anything so that others do not suffer from any loss or risk of evils by the
conducts of business.
4. Non co-operation in evils: It clearly points out that a business should with any one for
doing any evil acts.
5. Co-operation with others: This principles states that business should help others only in
that condition when other deserves for help

6. Publicity: According to W. Wilson, anything that is being done or to be done,

should be brought to the knowledge of everyone. If everyone knows, none gets
opportunity to do an unethical act.
7. Equivalent price: According to W. Wilson, the people are entitled to get goods equivalent
to the value of money that he will pay.
8. Universal value: According to this principle the conduct of business should be done on the
basis of universal values.
9. Human dignity: As per this principle, man should not be treated as a factor of production
and human dignity should be maintained.
10. Non violence: If businessman hurts the interests and rights of the society and exploits the
consumer by overlooking their interests this is equivalent to violence and unethical act.
Business Ethics – 10 Major Determinants of Business Ethics

The major determinants of business ethics may be listed thus:
Determinant # 1. Family, School and Religion:
The formation of ethics begins early in life. As a child one learns about what is good and bad
from parents. Through their reinforcing actions, (rewarding good behaviours), parents incul-
cate high or low ethical standards among children. Schools and Religion also greatly
influence the formation of ethical values (such as truthfulness, honesty, sincerity, tolerance,
etc.) at an early age.
Determinant # 2. Peers, Colleagues and Superiors:
In the company of good friends, the child realises the importance of high ethical standards in
life. If he wishes to make friends with peers who steal, smoke and use drugs, he will probably
accept those behaviours as ethical. Colleagues in an organisation, too, shape the value system
of an individual. He adopts the attitudes, beliefs and values of the group to which he belongs.
Likewise, most people yield to pressure from superiors in doing things that many consider
unethical otherwise.
Determinant # 3. Experiences in Life:
Experiences in life teach many lessons. These could be bitter or sweet, depending on the
ability of a person to reach goals. If a person is not given a ‘pat on the back’ for good
behaviour while others earn rewards for bad behaviour, the person will probably alter both,
ethical standards and behavioural responses, in future.
Determinant # 4. Values and Morals:

People who value material possessions in life may not have strong ethical standards regarding
behaviours that lead to accumulation of personal wealth. On the other hand, people who place
a premium on quality of life will probably have strong ethics while competing with others for
various things in life.
Determinant # 5. Threatening Situations:
An employee threatened with losing a permanent job may resort to unethical acts to save his
job. To meet pre-determined targets, many Bank managers sanction loans to individuals with
practically no creditworthiness. A housewife may practically beat a thief to death, when
threatened with the prospect of losing her ornaments or child. Situations like these, force
people to change their ethics and respond in an unexpected manner.
Determinant # 6. Organisational Demands:
There is growing research evidence to show that managers at top, middle and first level have
compromised their personal principles to meet an organisational demand. Corporate goals are
paramount and exert considerable pressure on executives to change their ethical views.
Determinant # 7. Legislation:
Laws are generally passed in response to social demands. Factors, such as low ethical
standards, corruption in public life, absence of social responsibility, exploitation, sexual
harassment, etc., often force people to demand legislative protection. A practice can be made
illegal, if society views it as being unethical. For example, if contributions to political parties
by companies are being viewed as excessive and unethical, the practice can be banned.
Determinant # 8. Government Rules and Regulations:
Government regulation regarding product safety, working condition, statutory warnings (on
cigarettes and other harmful products), etc., are all supported by laws. These offer guidelines
to managers in determining what are the acceptable standards and practices.
Determinant # 9. Industry and Company Ethical Codes of Behaviour:
Many times specific guidelines are provided to managers by the company’s ethical codes of
behaviour. One important question in such cases is whether individuals within the
organisations are really governed by the code of ethics or provide only lip service to the
guidelines.
Determinant # 10. Social Pressures:
Social forces and pressures have considerable influence on ethics in business. Society, in the
recent past, has demonstrated how a special status can be conferred on backward castes;
boycotted products, and severe action to prevent the construction of nuclear power plants.
Such actions by different groups in society may, in fact, force management to alter certain de-
cisions by taking a broader view of the environment and the needs of society.

Unit – V
Evaluation of Strategy and Content

STRATEGIC EVALUATION
Strategic evaluation and control is the last phase in the process of strategic management by
which the managers compare the results of the strategy with the level of achievement of the
objectives and corrective actions are taken for strategic effectiveness. It is a continuous process
though which an organization ensures whether it is achieving its objectives
CONCEPT OF STRATEGIC EVALUATION
Strategic evaluation refers to the measurement and testing the efficiency of strategic decisions
and the effective implementation of business strategy to achieve desired business objectives. It is
advisable to identify the corrective steps and actions to achieve business efficiency. It is
considered as the final step of strategy management process. Strategic management concentrates
on formulating organisational objectives based on an analysis of the business (internal and
external) environment, formulating the plans and policies, controlling and implementing the
action plans to achieve the business results.

Continous evaluation and monitoring is essential requirement of strategic management process.

The strategic evaluation and controlling process indicates the organization whether the
organizational objectives are achieved or not. The evaluation system concentrates on three main
aspects of strategy such as appropriate strategy, consistency and feasibility of strategy.
Strategy should be appropriate to achieve desired objectives of then organization and it should
be formulated as per the available resources and analyses of the internal and external business
environment. It should be feasible which implies easy implementation of the strategic decision
with available resources of the organization. Strategic management is continuous nature of
management process. Strategic evaluation is considered as the last stage under the strategy
management process. If there is difference between desired objectives and achieved objectives,
controlling process indicates steps for corrective actions. Strategic evaluation and control
process provides the right paths and directions to achieve desired organisational goals. The
controlling process makes sure about corrective strategies and actions are required to achieve
organisational target.
According to Glueck, “Evaluation of strategy is that phase of the strategic planning processes in
which the top mangers determine whether their strategic choice in its implemented form is
meeting the objective of the enterprise”. It is a process by which the managers compare the
results of the strategy with the level of achievements of the objectives.
IMPORTANCE OF STRATEGIC EVALUATION
Most of the time, strategists have only concentrated their efforts to formulate strategic decisions
and implementation. They might ignore or overlook the strategic evaluation and control process
until situation warns. It is essential to measure the strategic decisions effectiveness and
controlling process to ensure the right directions of strategic plans and policies. The importance
of strategic evaluation process may be described with the following points:
1.The strategic evaluation identifies the corrective steps and actions to achieve business
efficiency and effectiveness.
2. The strategic evaluation is not only focused to measure the result but also provides the right
paths and directions to achieve desired organizational goals.
3. The output of strategic evaluation is feedback which provides essential inputs for the future
strategic decisions or plans and polices of the organization.
4 The strategic evaluation is also related with performance appraisal system for reward and
recognitions which leads the motivation of employees and boosts the morale of the employees in
the organization.
5. Stratrgic evaluation process is beneficial for all organizations whether small, medium, or
large.

PROCESS OF STRATEGIC EVALUATION
The process of strategic evaluation starts with formulation of strategic decisions and plans as per
the available resources and analysis of the business environment to achieve the desired
organisational objectives. After the formulation of strategic plan the next step is effective
implementation of strategic plans within available resources to achieve desired result within
stipulated time. The process is shown below:
Strategic evaluation process is to measure the efficiency and effectiveness of strategic decisions.
It identifies the desired results achieved by the strategic decisions. The controlling process
makes sure about corrective strategies and actions that are required to achieve organisational
goals.
Why Strategy Evaluation- SIGNIFICANCE
The significance of strategy evaluation lies in its capacity to co-ordinate the task performed by
managers, groups, departments etc, through control of performance.
Criteria for Evaluation and the Evaluation Process
Glueck has suggested the following four steps which are required in evaluation process:
i) The motivation to evaluate.

ii) A feedback system to provide the data for evaluation.
iii) Criteria for evaluation.
iv) Decisions about the outcome of the strategic evaluation.
Evaluation of strategy ultimately depends on individual organizational members, particularly

key managers. And motivating and rewarding good performance by individuals and
organizational units are key ingredients in effective strategy evaluation. Glueck feels that ‘top
managers must want to evaluate the performance. This motivation develops if they realize the
strategy can fail and if they are reward for their performance relative to objectives’.
The process of Strategy Evaluation consists of following steps-
1. Fixing benchmark of performance - While fixing the benchmark, strategists encounter

questions such as - what benchmarks to set, how to set them and how to express them. In order
to determine the benchmark performance to be set, it is essential to discover the special
requirements for performing the main task. The performance indicator that best identify and
express the special requirements might then be determined to be used for evaluation. The
organization can use both quantitative and qualitative criteria for comprehensive assessment of
performance.
2. Measurement of performance - The standard performance is a bench mark with which

the actual performance is to be compared. The reporting and communication system help in
measuring the performance. If appropriate means are available for measuring the performance
and if the standards are set in the right manner, strategy evaluation becomes easier. But various
factors such as manager’s contribution are difficult to measure. For measuring the performance,
financial statements like - balance sheet, profit and loss account must be prepared on an annual
basis.
3. Analyzing Variance - While measuring the actual performance and comparing it with
standard performance there may be variances which must be analyzed. The strategists must
mention the degree of tolerance limits between which the variance between actual and standard
performance may be accepted. The positive deviation indicates a better performance but it is
quite unusual exceeding the target always. The negative deviation is an issue of concern because
it indicates a shortfall in performance. Thus in this case the strategists must discover the causes
of deviation and must take corrective action to overcome it.
4. Taking Corrective Action - Once the deviation in performance is identified, it is essential to

plan for a corrective action. If the performance is consistently less than the desired performance,
the strategists must carry a detailed analysis of the factors responsible for such performance.

TECHNIQUES OF STRATEGIC EVALUATION AND CONTROL
Strategic evaluation is referred to the process of the measurements and testing the efficiency and
effectiveness of strategic decisions to achieve business objectives and taking the corrective steps
and actions if desired objectives not achieved.
Techniques of Strategic Evaluation are stated below:
1. Gap Analysis: This is one of the techniques which can identify the gap between the actual
achieved performance and expected performance of the organization as per the management
strategy. With the various business tools and ratio analyse, it can easily indentify the gap
between actual and expected performance. Under the Financial measures the gap identify with
the help of various ratio, relationship of business variables to each others such as Net Sales to
Working Capital ,Current Ratio, Net profit to net sales ratio, etc. Under marketing measures, the
gap identify with the analyses of Sales, Market share, Competitors performance, etc.
2. SWOT Analysis: This is one techniques of strategic evaluation to actual monitor the
performance of strategic decisions. SWOT describes as organization’s strengths, weaknesses,
opportunities and threats. The business environment is complex and dynamic nature and consists
of internal and external environment. It is an Unpredictable about the future and accuracy of
business environment. Internal Environment consists of organization’s strengths, weaknesses
and on other side external environment is only being provided only opportunities and threats.
The Evaluation system should analyse the internal and external environment of business and
plan organization’s strengths, weaknesses, opportunities and threats for the effectively
applicable business resources to achieve desired results.
3. PEST Analysis: This is one of the techniques used for the evaluation system of strategy. The
business atmosphere is highly sensitive and complex in nature. PEST denotes Political,
Economical, Social and Technological factors directly impact on the business. These are
essential factors should be considered while framing the strategy. The success of strategic
decisions is mainly depending on these factors. Political factors are considered rules and
regulation, legislatures, and environmental norms etc. Economical factors exhibits the economic
conditions prevailed in the market to identify opportunity and threats for the business. Social
factors show the behavior of customers, demographic pattern of customers and about the values
and tradition of people for adopted best suitable strategy. Technological factors are highly
sensitive and dynamic in nature. Today technology will be stale for tomorrow exhibits the
flexible or changing pattern of technology. Due to rapid changes in technology cause the
obsolete our plans and business strategies, these factors should consider while framing the
strategy of management.
4. Benchmarking: It is technique of strategic evaluation to identify whether the organization is

achieved the expected results or not. If it is failed to achieve the expected result, then what is the
difference between actual result and expected result. The organization must set the Standard
performance is benchmark for the measuring actual performance. The regular monitoring and
measuring the performance of strategic plan and collection of data that indicates actual result of
the given activity and set the benchmark of activity.

CONCLUSION
Strategic evaluation process is to measure the efficiency and effectiveness of strategic decisions.
It identifies the desired results achieved by the strategies decisions are not. It is being provided
the right paths and directions to achieve desired organisational goals. The strategic evaluation
and Controlling process indicates the organization whether achieved or not the organizational
objectives. The evaluation system has concentrate of three mainly aspect s of strategy such as
Appropriate strategy, Consistency and feasible of strategy. Strategy should be appropriate to
achieve desired objectives of the organization and it should frame and formulate as per the
available resources and analyses the internal and external business environment.
The controlling process makes sure about corrective strategies and actions are required to
achieve organisational target. It is related two concepts, one is Strategic management set desired
organisational goals and the other one is controlling process for the accomplishment of
management goals. Operational control is part of Management control system. It is designed to
monitor and regular checking of day to day business operation to ensure the consistency and
quality in production as per the established objectives of the organization. It is mainly focused
on latest occurrence or events in the organization for the smooth functioning of business
activities. If the desired standard or quality of business is matched as per the standards then
corrective action should be taken

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DISHA COLLEGE BBA VI SEMESTER

Business Policy and Strategy

BUSINESS POLICY AND STRATEGY SHIV KUMAR .P (AP)

Business Policy and Strategy (127)

Analysis of External and Internal Environment, SWOT Analysis.

Strategy Formulation; Major Types of Strategies, Determination of Strategic Plan.

Strategy Implementation; The Process of Strategy Implementation, Resource Allocation

Evaluation of Strategy and Content

2.VSP Rao, V Hari Krishna,Strategic Management Text and cases

3.Marios I.Katsioloudes,Strategic Management Global Cultural Perspectives for Profit and

4.Google educational sites, slideshare.

FREQUENTLY ASKED IMPORTANT QUESTIONS

BUSINESS POLICY AND STRATEGY SHIV KUMAR .P (AP)

Que 2 Explain the Process of Strategic Management?

Que 2 Write short note on-

SAP, ETOP, core competency

Que 6 Define External environment? Explain different components of external environment?

Que 1 Discuss Michael porters approach to defining generic competitive on business

A) Stars B)Question Mark C) Cash Cow D)Dogs

Que 3 Write short motes on:

BUSINESS POLICY AND STRATEGY SHIV KUMAR .P (AP)

a) Mergers and joint venture strategy

Que 4 Write short notes on:

a) Social responsibility of Business

b) Different structural mechanism required to implement a strategy.

Que 6 What do you mean by operational implementation? Describe operational

Que 6 Describe the following:

a) Strategic control b) operational control

BUSINESS POLICY AND STRATEGY SHIV KUMAR .P (AP)

Nature And Objectives Of Business Policy, Defining Business Purpose,

BUSINESS POLICY AND STRATEGY SHIV KUMAR .P (AP)

narrow the range of individual discretion, so that employees act consistently on

Scope of Business Policy

 Aim and objectives of a business unit

Features of Business Policy

1. Specific- Policy should be specific/definite. If it is uncertain, then the implementation

BUSINESS POLICY AND STRATEGY SHIV KUMAR .P (AP)

Objectives of the Business Policy

These objectives could be derived from the purpose of business policy.

 The attainment of knowledge should lead to the development of skills so as to be able to

BUSINESS POLICY AND STRATEGY SHIV KUMAR .P (AP)

 By acing in a comprehensive manner, a generalist is able o function under

Characteristics of Business Policies

Nature of Business Policy

BUSINESS POLICY AND STRATEGY SHIV KUMAR .P (AP)

Importance of Business Policy Plans

Need for Business Policies

BUSINESS POLICY AND STRATEGY SHIV KUMAR .P (AP)

From the above definitions, following features of a policy can be identified

Basis of difference Business Policy Business Strategy

Related to Organizational moves and Organizational rules for the

BUSINESS POLICY AND STRATEGY SHIV KUMAR .P (AP)

 On the basis of levels of Management

 Middle level management policies:

 Lower level management policies:

 On the basis of Functional Areas

BUSINESS POLICY AND STRATEGY SHIV KUMAR .P (AP)

 Marketing Policies : Policies related to marketing have to be formulated

 Financial Policies : These policies may be regarded as the most

BUSINESS POLICY AND STRATEGY SHIV KUMAR .P (AP)