Documente Academic
Documente Profesional
Documente Cultură
c !"#$% &' !"#()'# *+(
( ,(+*!$
The term Business Policy may be used interchangeably with Strategic
Management, corporate planning etc. Primarily the term Business Policy means a long-
term planning for the total business ± ³as a whole.
Business Corporate/overall functioning
Policy planning/formulation of strategies
Thus Business policy means a long-term planning of any Organization for the
purpose of its ± ³GROWTH, SURVIVAL, EXPANSION, DIVERSIFICATION ETC
The planning of the overall Business is done by the top-level managers who have the
relevant skills experience and knowledge to take a strategic decision for the overall
corporate.
"" ,'+ ,-. ³Business Policy is the study of the functions and
responsibilities of Senior Management, the crucial problems that affect success in the
total enterprise, and the decision that determine the direction of the Organization and
shape its future.´
From the above definition it may be understood that Business Policy attempts to study
what path the Organization is going to take in future.
"" ,'+ '( ' ' ,# ³A business policy is nothing more than a well
developed statement of directions and goals. Goals involve definitions of precisely what
the business is or should be and the particular kind of company it should be. Direction
guides the action of the firm to accomplish these goals´.
4 5!6 *
,"-.
The study of Business Policy is also concerned with the optimum and mobilization of the
available and the required resources in an organisatio9n for the achievement of the :
´? The learner of business policy have to understand the various concepts involved
like strategy, policies, plans and programmes are encountered in the functional
area courses too.
´? A knowledge of the internal and external environment and how it affects the
functioning of an organization is vital to an understanding of business policy.
´? Information about environment helps in the determination of the mission,
objectives, and strategies of a firm.
,( *)!!
´? The study of BP should enable a student to develop analytical ability and use it to
understand the situation in a given case or incident.
´? The study of business policy should lead to the skills of identifying the factors
relevant in decision making.
´? It increase the mental ability to the learners and enables them to link theory with
practice.
,( *'
´? The attainment of the knowledge and skill objective should lead to the inculcation
of an appropriate attitude among the learners.
,'-.
a) Business Policy seeks to integrate the knowledge gained in various functional areas of
management i.e. Finance, Production, Marketing, and Human Relations etc.
b) All the constraints and complexities of the real life business are studied in the subject
of Business Policy.
c) The study & practice of management becomes more meaning with the integration of
all the functional sub-systems.
,9"8-.
d) Business Policy helps to create an understanding of how policies are formulated
e) The study makes the executives more receptive to the developments in the
environment to pick ideas and suggestion for implementation purpose.
f) Business Policy prepares the executives at middle-level of management for the
understanding of strategic decision ± making.
g) It offers a unique perspective to executives to understand the senior management¶s
viewpoint.
The purpose of business policy:
1.? To integrate the knowledge gained in various functional areas of management.
2.? To adopt a generalist approach to problem-solving .
? To understand the complex interlink ages operating within an organization
through the use of a systems approach to decision making and relating these to the
changes taking place in the external environment.
-
The purpose of the business policy course is to integrate the knowledge gained in various
functional areas, to adopt a generalist approach and to comprehend the complex
interaction taking place within the organization. It is a core subject that integrates all the
knowledge & experience gained for future of the organization.
Q./ ",5 0, " * ,+" (+( ,& ", &+
" (0,8!#'**,!(,+"(+(, "$
´? Business policy and strategic management is about decision making and it deals
with actions which determine whether an enterprise excels, survives or dies. This
process is called ³Strategic Management´
´? The job of the strategic managers is to make the best use of firm¶s resources in a
changing environment.
? Change occurs due to outside pressures such as from Govt. Competitors and
consumers.
? Others developed because the employees and management made decisions to
change the nature of business.
Strategic
Control
!(,+"+(, "-
,+" , !
c & ' # ',' 5# ,+" '" ()+ 90! 0, " '
00, " * , '" ()+ " , ,!8 * , ,+"
'" ()+$
. Strategic decision making: Decision making is the most important function of any
manager. Strategic decision making is the primary task of the senior management. The
difference lies in the levels at which they operates, while decision making pertains to all
managerial functions, strategic decision making largely relates to the responsibilities of
the senior management.
Most people agree that decision making is the process of selecting a course of action
from among many alternatives. The process works somewhat like this:
The basic thrust of strategic decision making, in the process of strategic management, is
to make a choice regarding the courses of action to adopt.
The fundamental strategic decision relates to the choice of a Mission. In other words, the
answer to such question as:
Any applied field that combines art and science, you are likely to find two approaches:
? Prescriptive: tell you how things ought to be done.
? Descriptive: tell you how things are done.
00, "* ,'" ()+-
?
!.!#"!'" ()+
? Oldest decision making theory.
? Decision maker is unique actor.
? Behavior is intelligent and rational.
? The actor makes decision in full awareness of all available feasible
alternatives in order to maximize advantages.
/? 8.( !'" ()+-
? Opposite of the rational decision maker is intuitive decision maker.
? Decision maker prefers habit or experience, gut-feeling, reflective thinking
and instinct using the unconscious mental processes.
? Consider a number of alternatives and options simultaneously jumping
from one step in analysis or search to another and back again.
? !"!.58 ,!'" ()+-
? Real decision maker must consider a variety of pressures form other
people affected by their decision.
? Organization interacts with a variety of stakeholders in a series of
interdependent exchange relationships.
? Unions exchange labour for decent wages and job security. Customers
exchange money for products and services.
? Decisions are made when most of the people involved in the process agree
that they have found a solution. They do this by mutual adjustment and
negotiations following the rules of the game.
# " ()+-
´? The human being is a mix of the rational and the emotional.
´? We also know that the environment is a mix of the analyzable and of
chaotic changes and pressures.
´? Strategic management decisions are made in a typically human way- using
the rationally conscious analysis and intuitively unconscious ³Gut´ in the
light of political realities.
´?
(0 *,+"'" .0, "
,+"'" ()+-
1.? Criteria for decision making.
2.? Rationality in decision making.
3.? Creativity in decision-making.
4.? Variability in decision making.
5.? Person-related factors in decision-making.
6.? Individual versus Group decision-making.
c2 **, 5& : ' ","," * + '
( (
-
The essence of vision is forward-looking view ³what an organization whishes to
become´.
Mission is ³what an organization is and why it exists´.
Peter F. Drucker raised important philosophical questions related to business:
±? What is our business?
±? what will it be?
±? what should it be?
The answers are based on the analysis of the
±? Underlying needs of the society that any organization serves to fulfill.
±? Satisfaction of that need.
±? The business of the organization.
Understanding Mission:
Mission is a statement which defines the role that an organization plays in a society.
It refers to the particular needs of the society, for instance, its information needs.
Defining Mission:
±? a particular set of tasks they are called upon to perform in the light of their
individual, national or global priorities.
c3 & " "0 * 8, ( ,+" +($ 0" '
8, (!00,!'!&$
8, (- The term basically means the surroundings: external objectives,
variables, events and circumstances under which someone or something exists. In terms
of Business, Environment refers to the culmination of all conditions, events,
circumstances and situations and the various pressures and influences and surround and
directly and indirectly affects the organization.
5; #("- ue to so many forces operating in the environment the nature of
environment is constantly changing and is thus dynamic in nature.
";!.
"'-The character of the environment is understood by the person who is
observing it. It has got many angles. It ultimately depends upon the perception of the
observer, what he derives out of the development of the events. For example the de-
licensing of the industries may be considered as an opportunity by some who want to
enter the business. However the same may be considered as a threat by those who were
earlier having a monopoly in a particular business.
';
,.,"+(0"-he developments and events shaping the environment have a
far reaching influence on the operations of a business. For example any change in the
tastes & linking of customers affect the growth & profitability of a firm. For any business
organization the study of environment is of utmost important to be able to adjust itself to
the latest developments and to be able to reap the benefits of the opportunities arising in
the market. The complexities of any environment may be understood by dividing it into
different categories.
;
:
- The internal environment of a business consists of
various factors existing within an organization which results into building its strengths &
weaknesses. "!'-. Employees & their skill base. Level of Technology available
Availability of various resources like finance, infrastructure etc. Process Organizational
design and structure Organizational work culture- Procedures ± policies.
;<
:
-.The external environment of a business includes
all the factors outside the organization. It is this set of factors which provide an
opportunity or pose threats to the organization. It includes
; ,) 8, (- (, needs preferences, attitudes, perception,
bargaining & purchasing power, satisfaction etc. , '"- features, functions,
ingredients, image, price, differentiation, availability, substitutes, services etc.
,)+,(',#-Channel, levels, costs, logistics, delivery, service & financial
schemes etc. (0 , ,!' *" ,-types & number of competitors, entry & exit
of competitors, nature & strategy of competition.
; 00!, 8, (-. Cost, availability & continuity of supply of raw
materials, parts & components. Cost & availability of finance, energy, human resources,
machinery, spare parts & after sales service. Infrastructural support & ease of
availability. Bargaining power of suppliers & existence of substitutes.
8; " (" 8, (-. Stage of economic development of the country.
Structure of economy- Capitalist/Socialist/Mixed Economic policies- industrial, monetary
& fiscal Economic planning Economic indicates like national income, GNP per capita
income, savings & investment. Balance of payments, value of exports & investment.
8;
+! ,# 8, (-. Constitutional framework, Directive principles,
fundamental rights, division of powers. Policies related to licensing, monopoly, foreign
investment, financing etc. Policies related to distribution & pricing Policies related to
imports & exports other policies related to the public sector, small scale industries,
environmental pollution, consumer protection etc.
8; !"!8, (-The political system and its features, political parties.
The political structure Political processes like party system, elections, economic &
industrial promotion & regulation. Political philosophy, governments¶ role in business
etc.
8; , ! 8, (-. Globalization, global blocks Global HR, Global
information system Global markets & competitiveness Global legal system
; ,! 8, (- A wider perception of the environment includes all the
aspects of the external environment e.g. National/ international Economic Social/
Demographic Technological Political etc. together constitute the general environment.
The general environment affects the business someway or the other and thus all business
houses are concerned about it. The general environment offers a common set of
opportunities and poses a common set of threats to all the players in the industry.
However, the organization may not be influenced by each factor of the general
environment.
;
!8 8, (-. Every business organization is concerned with a set of
environment aspects, which have a direct, or an immediate affect on the business. This
part of the general environment which is of an immediate concern to the business is
termed as relevant environment. What constitutes a relevant environment depends upon
the perception & working of the business and the industry a firm is in.
Strategic planning aims at knowing what we are and where we want to go so that
environmental threats and opportunities can be exploited, given the strengths and
weaknesses of an organization.
The appraisal of the external environment of a firm helps it to think of ³what it might
choose to do´. The appraisal of the internal environment, on the other hand, enables a
firm to decide about ³what it can do´.
? Organizational Resources
? Organizational behavior
? Synergetic Effects
? Competencies
? Organizational Capability
? Strategic Advantage
Strategic Advantage
Organizational Capability
Competencies
Synergistic Effects
1.? Financial capability: financial capability factors relate to the availability, usage, and
management of funds, and all allied aspects that have a bearing on an organization¶s
capacity and ability to implement its strategies.
? High-profile advertising
Personnel Capability:
Personnel capability factors relate to the existence and use of human resources
and skills.
? Control, reward and incentive system for top managers geared to the
achievement of objectives
The factors that affect organizational appraisal relate to the strategists, the
organization, and to the internal environment.
The approaches adopted for preparing organizational appraisal may range from
highly systematic to an Ad hoc one.
Internal Analysis:
<-The Boston Consulting Group (BCG) a leading management-consulting
firm developed and popularized a growth share matrix. The matrix comprises of four
quadrants each describing the size and position of the strategic business unit owned by an
organization.
On the vertical axis is the Market Growth rate of the market in which the business
operates. A market growth rate above 10 percent is considered to be high. On the
horizontal axis is the Relative Market Share. It refers to the Strategic Business Units
market share as compared to the firm, which is its largest competitor in the segment
under consideration. The relative market share serves a measure of the company¶s
strength in the market segment. The two axis are divided into high & low. The growth
matrix is divided into four cells each indicating a different type of business profile.
c (,)-These are Businesses that operate in high- growth markets but have
low relative market shares. A question mark requires a lot of cash because the company
has to spend money on plant, equipment and personnel to keep up with the fast growing
market and because it wants to overtake the market leader. The company has to think
hard about whether to keep on investing money into this business or put an end.
/ ,- It is a market leader in a high growth market. A star does not necessarily
produce a positive cash flow for the company. The company must spend substantial funds
to keep up with the high market growth an to fight off competitor attacks. A star is a
potential business which has the competitive advantage to be a market leader in an
industry that is growing fast.
" &- Stars with a falling growth rate that still have the largest relative market
share and produce a lot of cash for the company is called a cash cow. The company does
not have to finance expansion because the markets growth rate has slowed because the
business is the market leader it enjoys economies of scale and higher profit margins. The
company uses its cash cows to pay bills and support other business.
2 + Businesses that have weak market shares in low-growth markets are in the dog
category. The company should consider whether they are expecting a turn around in the
market growth rate or a new chance for market leadership else they should divest this
business. It would be fruitless to spend and money on this matrix business.
<-
A refined version of the BCG Matrix is the one pioneered by General Electric. An
SBUs appropriate objectives cannot be determined solely by its position I the growth
share matrix. If additional factors are considered the growth-share matrix can be seen as a
special case of multifactor portfolio matrix. Each business is rated in terms of two major
dimensions ± market attractiveness and business strength. Companies are successful to
the extent that they enter attractive markets and posses the required business strengths to
succeed in the markets. If one of these fact is missing the business will not produce
outstanding results. Neither a strong company operating in an attractive market will do
very well. To measure the two dimensions, strategic planners must identify the factors
underlying each dimension and find a way to measure them and combine them. Market
attractiveness varies with the markets size, annual market growth rate, historical profit
margins etc. business strength varies with the companys market share, share of growth,
product, quality etc. While the BCG matrix considers only two factors, the GE portfolio
matrix helps the strategic planners to look at more factors in evaluating an actual or
potential business than the BCG model does. As against the BCG matrix the GE matrix is
divided into nine cells, which in turn falls into zones. The three cells in the upper left
corner indicates strong SBUs in which the company should invest or grow. The diagonal
cells stretching from the lower left to the upper right indicate SBUs that are medium in
overall attractiveness. The company should pursue selectively and manage for earnings.
The three cells in the lower-right corner indicate SBUs that are low in overall
attractiveness. The company should give serious thought to harvesting or divesting these
business units. Apart from the BCG and GE portfolio matrix, three more portfolio matrix
are used to evaluate the strength of business units and facilitate strategic planning.
A) Direction Policy
B) Space Matrix
- Portfolio models have helped managers to think more strategically, to
understand the economics of their businesses better, improve the quality of their plans,
improve communication between business and corporate management, eliminate weaker
businesses & strengthen their investment in more promising businesses. However, portfolio
models must be used cautiously. They may lead the company to place too much emphasis
on market-share growth and entry into high growth businesses or to neglect its current
businesses because may end up in the same cell position though differ greatly in underlying
ratings & weights.
- % concept of Strategy is central to understanding Business Policy and
Strategic Management. The term ÄStrategy is derived from the Greek word ÄStrategos
which means generalship. The term Strategy means the art of the managing or adopting a
course of action. A course of action may be:
- To take advantage of opportunities
- To devise ways to counter threats etc.
%
D@4/;³A Strategy is the determination
of the basic long- term goals and objectives of an enterprise and the adoption of the
courses of action and the allocation of resources necessary for carrying out these goals.´
D@=/; ³A Strategy is a unified,
comprehensive and integrated plan designed to assure that the basic objectives of the
enterprise are achieved.´ By combining the above definitions we understand that a
Strategy is a plan or course of action or a set of decision rules forming a pattern or
creating a common thread related to the organizations activities which are derived from
its policies, objectives and goals.
Apart from the three levels mentioned, many a times a strategy may be designed at higher
levels. Such strategies may be called the Societal Strategies. The strategies may be set at
levels lower than the functional level, which are called Operational Strategies. B
,( * '" ' " &" !' '8! 0( * **"8
,+# ,,+ !0"8" ,0 , 57"8C-!")D@>2;Strategy
is the most significant concept in Business policy and Strategic Management. It guides
the functional and operational decisions by defining the broad course of action. For
example, for an old and very well established company, which had been the market
leader for several years, suddenly faces threat from the emergence of competitors has e.g.
Bajaj Scooters faced competition from LML scooters. A course of action may involve
strategies like expansion diversification, focus, turn around, stability or divestment
phases in the Strategic Management. Strategists are individuals or groups who are
primarily involved in the formulation, implementation and evaluation of strategy. For
different levels of managers and sometimes even outside experts are involved.
; ,' *," ,-The Board of Directors are the ultimate legal authority which is
elected by the owners of the organization. The board is responsible for providing
guidance and establishing the directives. There may be difference between the role
played by the Boards of different Organizations. 5 ,'"8"!'-To direct
Discuss matters of technology collaboration New product development Senior
management appointments Reviewing and screening executive decisions Setting and
accomplishing objectives Reviewing and evaluating organisational performance
5; * 9"8 **",-. A CEO may be designated as the Managing Director,
Executive Director, President or General Manager. He is chief Strategist and plays a
major role in decision-making. He is responsible for- Execution of functions of strategic
importance Setting the mission, objectives & goals of the organization Organizational
leader, Organizer, Implementer, Coordinator and controller.
";
! *,0,,-An Entrepreneur is the person who starts a new business and
has a high level of ³achievement-motivation´. Since the entrepreneurs are the initiators
and owners they provide a sense of direction to the organization and set objectives and
formulates strategies to achieve them. An entrepreneur usually play all strategic roles
simultaneously.
'; , +(- The Senior Management consists of managers at the highest
level of the managerial hierarchy. Managers at the senior level may serve the Board of
Directors on rotational basis, may be as a part of executive committees formed to deal
with new project. They look after: Modernization Technology up-gradation
Diversification & expansion Plan implementation & communication New product
development Assisting the board & the CEO in the formulation, implementation &
evaluation of strategy.
; !- There may be Organizations, which do not have corporate planning
department because of small size, infrequent requirements, financial constraints etc. Such
organisations hire external consultants for strategic planning they may be. Individuals
Academicians Consultancy companies etc. They provide professional service by specially
trained & experienced persons to advise and assist managers & administrators to improve
their performance & effectiveness of their Organizations. E.g. A.F.Ferguson, McKinsey
& Co.
"! -Thus there are various parties involved in the strategy Formulation, Implementation
& evaluation. Strategies give a direction to the company. They coordinate the efforts of all
functions & all levels towards a predetermined common organizational purpose. It facilitates an
optimum resource allocation & helps programming all organizational activities in advance.
c , '**, #0 * ,+ ', ,0 ,. !8! ,+ D;
5!#D5;90 D";
,"(D'; (5 "'8+E
''8+
-
1 :
- Corporate level strategies are basically about
choice of direction that a firm adopts in order to achieve its objectives. These strategies guide
decision ± making related to allocating resources among the different businesses of a firm,
transferring resources from one set of business to others and managing & nurturing a portfolio of
businesses in such a way that the overall corporate objectives are achieved. There are different
types of grand strategies.
It is a strategy, which aims at an incremental improvement of its functional performance. It may
aim at marginally changing any one aspect of the business:- Customer segment Alternative
Technology Product mix etc. A stability strategy is adopted because It is less risky Environment
faced is relatively unstable. Expansion may not be suitable. There may be three types of stability
strategies.
;? ."+,+#-
It involves a conclusions decision to do nothing new and to continue with the present
business.
5;, *,+#-
There may be a situation when the firm tries to sustain its profitability by reducing
investments, cutting costs, raising prices, increasing productivity etc.
5;? ,+#-
It is a strategy to give a pause to the blasting expansion strategy in the past or toe move
cautiously before moving into a new business aspect.
:
- Acts as a testing ground, before entering into a new venture
- Gives a period of rest if the company had been pursuing aggressive expansion.
- Suitable when any expansion may be threatening
<
This strategy aims at high growth by substantially broadening the scope of one or more of its
businesses. It aims at the improvement of its overall performance in business.
;? 90 , +" ", -
It is also called as intensification, focus or specialization strategy. It involves
concentration of resources on one or more of a firm business so that it leads to expansion
5;? 90 , ++, -
Integration means combining activities related to present activity of a firm. It is an
expansion strategy which involves integrating to any business activity in the value chain
ahead or backwards existing business of an organization.
) 8,-.
It is a strategy where an attempt is made by one firm to acquire ownership or control over
another firm against the wishes of the latters management.
' 8,-.
It is a strategy where two or more companies combine to form a new company in order
to make use of the strengths of the partners to gain access to a new business. Eg. Maruti-
Suzuki.
,+"!!"-.
Two or more firms unite to pursue a set of agreed upon goals but remain independent
subsequent to the formation of the alliance.
%
Retrenchment strategy is followed when organisation aims
at a contraction of the scope of business. It may involve a total or partial withdrawal from an
existing business. A firm may adopt this strategy when faced with adverse external environment
eg. Shrinking market share, diminishing profitability, falling sales, emergence of substitute
products, adverse government policies, tougher competition, changing customer need &
preferences etc. It involves strategies like.
It is strategy adopted by an organization as a mixture of Stability, Expansion & Retrenchment
either at the same time in its different businesses or at different times in the same business with
the aim of improving its performance. In practice it is very difficult to find any organization that
has run its business on a single strategy.
Big organization facing complex environment cannot run a single strategy. An organization has
different business. Each business lies in different industry requiring a different response.
-. Thus, the above discussion shows that there exists various strategic
alternatives before a strategist. Depending on the
- Type and nature of business
- Growth & future of business
- Nature and number of competitors
- External environmental variables
- Overall philosophy of the top-management
- Internal strengths & weaknesses etc; a given strategy or a combination is adopted
? ( '! 5 0, 0 ' " + * *8 " (08 * ,". ,#? , *
5 ?5,++0 &, *5#,?5,++0 &, *00!,?',8!,#
( + ",, " (0 ,. ',( # * ',# " (0
'0, *5!#
%
%
;? , * ,# i) The economies of scale ii) Brand identification iii) Govt.
Limitations (License requirement)
;? ; &,*!#,-.When buyer can force down prices.
;? ; &,*!00!,-When Suppliers can force buyers to pay higher prices
8;? 8; 5 , '"-. By placing a ceiling on the price it can change to
substitute products or services and limit the potential of an industry.
8;? :;' ")#+* , -.The strongest forces which influence the profitability of
a firm become the determining factors in strategy formulation. *! *
',#!#-.
',#,"8
(08
The minimum efficient scale of production. Buyers switching costs.
6. ',# ,""-. Product Policy Pricing Strategies Promotion Policy Distribution Policy
etc.
].
,", -.Change in consumer Preferences Product innovations Entry or exit of firms
in a market. Rate of growth etc.
For any strategist to plan for a policy for future requires a complete internal as well as external
analysis. In the external environmental analysis special effort is put on Industry Analysis. The
analysis of the Industry includes the overall variables of the industry includes the overall
variables of the industry incorporating its size, nature, performance, attractiveness, relative
market share etc. by analysing the industry, a Strategist can very well evaluate whether it should
enter into a given business with investments or refrain from going ahead.
Ans. Definition:- Competitive Advantage ± a situation in which there is a match between the
distinctive competencies of a firm and the factors critical for success within its industry that
permits the firm to out per form competitors. Competitive Advantage profiles a statement
showing competitive position of an organization in the market place. It is also known as Strategic
Advantage. Dynamics of National Competitive Advantage:- National Competitive Advantage:-
Competitive advantage to a country in relation to other countries. Like each organization, each
country is known in terms of its competitive advantage. For ex.:- USA of computers, credit
cards, Japan for electronic & automobiles, Germany for printing Presses, Switzer land for
pharmaceuticals and India for software professionals. The question is what factors have
contributed to generate advantage to these countries in specific areas? The answer of this
question is important for the purpose of generating competitive advantage at the global level.
According to M.Parter have categories various national attributes in four groups.
1. Factor Condition: Factor that provide base for undertaking various business activities.
These resources can be dividing into five broad categories-human resources, knowledge
resource, physic resource, capital resource & infrastructure.
2.? Demand Condition: The nature of demand conditions for an organization¶s or industry¶s
product services in the country is important because it determines the rate of and nature
of improvement & innovation by the organizations. These factors either train
organizations for world-class competitive or fail to adequately prepare them to competent
in the global market place
3.? Related & supporting Industries: Apart from the main industry in which context
competitive advantage is talked about, the conditions of related & supporting industries
also determine industry¶s competitive advantage. However the Long run , the relationship
between main industry & related & supporting industries becomes reciprocal. For ex.:- If
the main Industry is developed, the relate industries will also develop with a time lag. In
the same way, the related industries will provide support to the further development of
the main industry.
4. Firm strategy, structure & Rivalry: Differences in strategy, structure & rivalry create
advantages or disadvantages to firms. Competing in different types of industries in a
nation. The aggregate of these determines national competitive advantage. The way
different firms shape their strategy- ranging from a broad outlook and long-term
profitability to narrow range and short term profitability-determine how the nation will be
competitive. For ex.:- US companies rank return on investment, share price increase, &
market share in that order.
III. Bench marking: - It is another tool which can be used to generate competitive
advantage. It is a process of identifying, understanding, and adapting outstanding
practices from within the same organization or from other business to help improve
performance. Types of Benchmarking:-
1. Product Benchmarking
2. Competitive bench marking
3. Process bench marking
4. Strategic benchmarking
5. Global benchmarking.
IV. Synergic Approach:- can be used as a means do generating competitive advantage
to an organization if the managers are sufficiently aware about how synergistic effect is
developed. Synergy is the process of putting two or more elements together to achieve a
sum total greater than the sum total of individual elements separately. This effect is
described as 2+2=5 effect. Areas of synergistic effect:-
- Production synergy
- Marketing synergy
- Research development synergy
- Financial synergy
- General management synergy
c2 " ' * , ) !', ,! 0 (+($ ! '",5
"F *) !',G!#$
Stakeholders are the individuals and groups who can affect and are affected by, the
strategic outcomes achieved and who have enforceable claims on a firm¶s performance.
±? Identify the stakeholders who are most important from the organization¶s
perspective
c3 ",5 (7 , " ", * *"!? (,)+? 0, ? 0, ! '
* ,( (+( 0! ' 0 !" +*"" * " *" !
,0!'0 !"* ,,+#(0!( $
? In term of the levels of strategy formulation, functional strategies operate below the SBU
or Business level strategies. Within functional strategies there might be several sub-
functional areas.
? within the textile division, there might be functional areas such as marketing, production,
research and development, etc.
? Functional mangers need guidance from the business strategy in order to make decisions.
? There is a basis available for controlling activities in the different functional areas of
business.
? The time spent by functional managers in decision-making is reduced as plans lay down
what is to be done and policies provide the discretionary framework within which decisions
need to be taken.
Source of Funds:
±? Plans and policies related to the sources of funds deal with financing or capital mix
decisions.
±? The major factors regarding which plans and policies have to be made are: Capital
structure, procurement of capital and working capital borrowing, reserve and surplus
as sources of funds, and relationship with lenders, banks and financing institutions.
Usage of Funds:
±? Plans and policies for the usage of funds deal with investment or asset-mix
decisions.
±? The important factors regarding which plans and policies are to be made are:
dividend decisions and relationship with stakeholders.
Management of Funds:
? Product:
? Pricing:
? Place:
? Promotion:
Operations plans and policies:
? Production system:
Personnel System:
±? Plans and policies related to the personnel system deal with factors like
manpower planning, selection, development, compensation,
communication, and appraisal.
±? The importance of such plans and policies lies in the role that personnel
system play in providing and maintaining human resources.
Industrial Relations:
±? Functional tasks are derived from the key activities that have to be
performed for the implementation of a strategy. The functional areas in
any organization are, therefore, based on the segregation of the key
activities.
±? Consideration in Integration:
±? and workers,
c4 & ' # ',' 5# ,+" 8! " ,? (0 ," '
"F$
? Strategic evaluation and control constitutes the final phase of strategic management.
±? At the strategic level, we are concerned more with the consistency of strategy
with the environment.
±? At the operational level, the effort is directed at assessing how well the
organization is pursuing a given strategy.
M? chief executives
M? financial controller.
Barriers in Evaluation:
? Limits of Control.
? Difficulties in management.
? Resistance to Evaluation.
? Short-termism.
Strategic Control: Strategic controls take into account the changing assumptions that
determine a strategy, continually evaluate the strategy as it is being implemented and take
the necessary steps to adjust the strategy to the new requirements.
Premise control:
Premise control is necessary to identify the key assumptions and keep track of any
change in them so as to assess their impact on strategy and its implementation.
For example, a company may base its strategy on important assumptions related
to environment factors (Favorable government policies), industrial factors
(changing nature of competition) and organizational factors (expected
breakthrough in R&D).
´? Premise control serves the purpose of continually testing the assumptions to find
out whether they are still valid or not.
´? This enables the strategists to take corrective action at the right time rather than
continuing with a strategy based on erroneous assumptions.
Implementation Control:
´? it is felt that the commitment of resources to a plan, programme or project would not
benefit the organization as envisaged, they have to revised.
Strategic surveillance:
´? The premise and implementation types of strategic controls are specific in nature.
? The last of the strategic control systems is the special alert control, which is based on
a trigger mechanism for rapid response and immediate reassessment of strategy in the
light of sudden and unexpected events.
Operational Control:
Process of evaluation:
±? Measurement of performance.
±? Analyzing variances.
",# * , ,+ 8 ' "F * ,+"
8! ' " , ! ,', () " " *, ( ( + (# 8!5!
' (
±?
0 5!#" , !",-
±? ',!#+""*" ,
±? ,",+
±? ,+"(+(
±? ,+"*!'!#
±? #(G( '!+
±? ",
? Strategic evaluation and control constitutes the final phase of strategic management.
±? At the strategic level, we are concerned more with the consistency of strategy
with the environment.
±? At the operational level, the effort is directed at assessing how well the
organization is pursuing a given strategy.
³ strategic evaluation and control could be defined as the process of determining the
effectiveness of a given strategy in achieving the organizational objective and taking corrective
action wherever required.´
M? chief executives
M? financial controller.
Barriers in Evaluation:
? Limits of Control.
? Difficulties in management.
? Resistance to Evaluation.
? Short-termism.