Unit 3

Chapter VI
Strategic Planning
Aim
The aim of this chapter is to:

introduce the concept of strategic planning
explain SWOT analysis
explicate the strategic planning process
Objectives
The objectives of this chapter are to:

explain the importance of SWOT matrix
elucidate the use of SWOT analysis
enlist threats of SWOT analysis
Learning outcome
At the end of this chapter, you will be able to:

describe strategic planning
explain strategic planning and it properties
describe SWOT analysis
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Business Environment
6.1 Introduction
Strategic planning consists of a set of decisions which leads to the development of an effective strategy. This
includes matching of external threats and opportunities with strategic advantage factors. Strategic planning also
develops possible alternative strategies and evaluates pros and cons of various alternatives so as to choose the most
appropriate alternative. Strategic planning can be defined as the continuous process of making present entrepreneurial
decisions systematically and with the greatest knowledge of their futurity; organising systematically the efforts
needed to carry out these decisions; and measuring the results of these decisions against the expectations through
organised systemic feedback.Strategic planning is a well organised effort aiming at fulfilling business objectives
in a systematic manner.
6.2 Strategic Planning

Strategic planning is a systematic and disciplined exercise to formulate strategy. It is more comprehensive as it
concentrates on the whole organisation. Strategic planning is a forward-looking exercise which determines the future
posture of the enterprise. Strategic plans help enhancing and sustaining the organisational competitive advantage
based on external and internal variables. It is through this plan an organisation can accomplish its stated goals using
available resources. Strategic planning is an organisations process of defining its strategy or direction, and making
decisions on allocating its resources to pursue this strategy, including its capital and people.
6.2.1 Methodologies
There are many approaches to strategic planning but typically a three step process may be used:

Situation Evaluate the current situation and how it came about.
Target Define goals and/or objectives (sometimes called ideal state).
Path Map a possible route to the goals/objectives.
Alternative approach is called Draw-See-Think

Draw What is the ideal image or the desired end state?
See What is todays situation? What is the gap from ideal and why?
Think What specific actions must be taken to close the gap between todays situation and the ideal state?
Plan What resources are required to execute the activities?
An alternative to the Draw-See-Think approach is called See-Think-Draw

See What is todays situation?
Think Define goals/objectives.
Draw Map a route to achieving the goals/objectives.
6.3 Strategic Planning Process

Formulation of a strategy needs complete analysis of the situation. While discussing the need for strategic formulation,
it is said that business environment provides required information.

The environment includes:

The economy
Technology
Society
Law and political situation
Available resources
Consumers
Information from these associated factors will help the organisation to prepare a workable strategy to handle
a critical situation.
Strategic plan is a long range plan of action in which plan and strategy are integrated.
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Four managerial activities are involved in strategic planning process. These are:
Environmental adaptation
Resource allocation
Internal co-ordination
Organisational awareness
These four activities together help formulating a workable strategy. However, the following broad outline is
given in strategy formulation which takes into account these four managerial activities. The outline includes
the following steps in strategic planning.
Organisational mission and purpose
Setting organisational goals and objectives
Swot analysis
Formulation of strategic alternatives
Selecting the best strategy
Preparing an operational plan
Resource allocation
Co-ordinating internal factors
Integrating strategy and operation plan
Implementing the strategic plan
Evaluation
Redesign the strategy if necessary
6.3.1 Organisation Mission and Purposes

Following is the importance of mission and vision statement in an organisation:

Mission statement: Tells the current position of the organisation. It informs you about the desired level of
performance needed for the organisation.
Vision statement: Outlines what a company wants to be. It concentrates on the future. It is a source of inspiration.
It provides clear decision-making criteria and process.
Values: Main values protected by the organisation during the progression, reflecting the organisations culture
and priorities.
6.3.2 Importance of Vision Statement

Corporate vision is a short, concise and inspiring statement of what the organisation intends to become and to achieve
at some point in the future and is often stated in competitive terms. Vision refers to the category of intensions
that are broad, all-inclusive and forward-thinking. Vision is the image that a business must have about its goals
before it sets out to reach them. It describes aspirations for the future, without specifying the means that will be
used to achieve those goals. The corporate success depends on the vision articulated by the chief executive or the
top management. For a vision to have any impact of the employees of an organisation, it has to be conveyed in a
dramatic and enduring way. The most effective visions are those that inspire, usually asking employees for the best,
the most or the greatest.
6.3.3 Importance of Mission Statement
A mission statement is an organisations vision translated into written form. It makes the leaders view of the
direction and purpose of the organisation concrete. For many corporate leaders it is a vital element in any attempt
to motivate employees and to give them a sense of priorities. A mission statement should be a short and concise
statement of goals and priorities. In turn, goals are specific objectives that relate to specific time periods and are
stated in terms of facts.
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The primary goal of any business is to increase stakeholders value. The most important stakeholders are shareholders
who own the business, employees who work for the business and clients or customers who purchase products and/or
services from the business. Many people may mistake vision statement for mission statement. The vision describes
a future and the mission describes why it will be achieved. A mission statement defines the purpose or broader
goal for being in existence or in the business. It serves as an ongoing guide without time frame. The mission can
remain the same for decades if crafted well. Vision is more specific in terms of objective and future and future state.
Vision is related to some form of achievement if successful. Features of an effective vision statement may include
following points:

Clarity and lack of ambiguity
Paint a vivid and clear picture, not ambiguous
Describing a bright future
Memorable and engaging expression
Realistic aspirations, achievable
Alignment with organisational values and culture
Time bound if it talks of achieving any goal or objective
In order to become really effective, an organisational vision statement must acclimatise into the organisations
culture. Leaders have the responsibility of communicating the vision regularly, creating narratives that illustrate the
vision, acting the vision, and encouraging the vision, creating short-term objectives compatible with the vision, and
encouraging others to craft their own personal vision compatible with the organisations overall vision.
6.3.4 Benefits of Vision
The purpose and outcomes of vision may seem vague and superfluous. The long term benefits are substantial.
However vision:

Breaks you out of boundary thinking.
Provides continuity and avoids the stutter effect of planning.
Indentifies direction and purpose.
Alerts stakeholders to needed change.
Promotes interest and commitment.
Promotes laser-like focus.
Encourages openness to unique and creative solutions.
Encourages and builds confidence.
Builds loyalty through involvement.
Results in efficiency and productivity.
6.3.5 Developing a Mission Statement

The mission statement describes the overall purpose of the organisation. If the organisation elects to develop a
vision statement, the question why the image of the vision exists and its purpose should be raised before the mission
statement is developed. When wording the mission statement, consider the organisations products, services, markets,
values and concern for public images, and maybe priorities of activities for survival. Consider any changes that may
be needed in working of the mission statement because of any new suggested strategies during a recent strategic
planning process. Ensure that wording of the mission is to the extent that management and employees can infer
some order of priorities in how products and services are delivered. When refining the mission, a useful exercise
is to add or delete a word from the mission to realise the change in scope of the mission statement and assess how
concise is its wording.
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6.3.6 Developing a Vision Statement

The vision statement includes vibrant description of the organisation as it effectively carries out its operations.
Developing the vision can be the most enjoyable part of planning, but the part where time easily slips away. Note
that, originally, the vision was a compelling description of the state and function of the organisation once it had
implemented the strategic plan, i.e. a very attractive image toward which the organisation was attracted and guided
by the strategic plan. Recently the vision has become more of a motivational tool, too often including highly idealistic
phrasing and activities which the organisation cannot realistically aspire
6.3.7 Setting Organisational Goals and Objectives
Following are the organisational goals and objectives:

The major outcome of strategic road-mapping and strategic planning, after gathering all necessary information,
is the setting of goals for the organisation based on its vision and mission statement.
A goal is a long-range aim for a specific period.
It must be specific and realistic.
Long-range goals set through strategic planning are translated into activities that will ensure reaching the goal
through operational planning.
Setting objectives involves a continuous process of research and decision-making.
Strategic planning takes place at the highest levels; other managers are involved with operational planning.
The first step in operational planning is defining objectives the result expected by the end of the budget
cycle.
The objectives must be:

focused on a result, not on activity
consistent
specific
measurable
related to time
attainable
Perhaps the very important step in strategy formation is setting objectives and goals. These objectives and goals
are guided by mission and purpose. Factors that influenced the settings of objectives are as follows:
resources of the organisation
past objectives
environmental factors
thinking and value system of the top management
internal power system in the organisation
These objectives are considered while forming the objectives.
The objectives and goals must neither be too rigid nor too flexible.
At various levels of an organisation, nature of goals and objectives may take different forms.
At the bottom level, the objective of manager or any other workers will be narrow and is confined to only his/
her task of production or sales or whatever task one performs.
Once the objectives are set, they need not remain for ever. They may change:
when the objectives do not agree with actual achievement
the desires and aspirations of the top management may cause change in objectives at a later stage of
organisation
when the top management changes goal orientations
when an organisation faces crisis, the objectives change
the life cycle of the product or services can also influence the organisation to change the objectives
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when expansion and diversification take place, or when a collaboration is made, the goals and objectives
change

In the initial stages objectives may be informal and they will be formalised and priorities are given when the
organisation grows.
These objectives help the organisation to take further step in strategy formulation by conducting SWOT
analysis.
6.4 SWOT Analysis

SWOT analysis is a very vital activity in strategy planning. It is concerned with scanning the environment both
internal and external in terms of SWOT i.e. strengths, weaknesses, opportunities and threats. The organisation
should know its strengths and weaknesses and also the threats and opportunities it has. SWOT analysis helps the
firm to formulate a workable strategy. Strengths are positively used for smooth implementation of the plan. When
threats are analysed, solutions are found to overcome such threats from the competitors. Weaknesses are identified
and strategy will be worked out to convert weakness into strength. Opportunities are visualised and seized for the
good of the organisation. With this analysis, entire business environment of the firm will be scanned which will help
formulating successful strategies.
However, SWOT analysis gives a clear picture to formulate sound strategy, and it calls for matching capabilities and
opportunities. SWOT analysis helps the strategic planner to ascertain what the organisation is capable of doing in the
light of its strengths, and what is ought to be done in the context of the external environment in which it operates.
SWOT analysis is a strategic planning tool used to evaluate the strengths, weaknesses, opportunities and threats
involved in a project or in a business venture. It involves specifying the objective of the business venture or project
and indentifying the internal and external factors that are favourable and unfavourable to achieving that objective.
If SWOT analysis does not start with defining a desired end state or objective, it runs the risk of being useless.
A SWOT analysis may be incorporated into the strategic planning model. If a clear objective has been identified,
SWOT analysis can be used to help in the pursuit of that objective. In this case, SWOTs are:

Strengths Attributes of the organisation that are helpful to achieve the objective.
Weaknesses Attributes of the organisation that are harmful to achieve the objective.
Opportunities External conditions that are helpful to achieve the objective.
Threats External conditions that are harmful to achieve the objective.
Identification of SWOTs is essential because subsequent steps in the process of planning for achievement of the
selected objective are to be derived from the SWOTs.
6.4.1 Internal and External Factors
Following are the inetrnal and external factors:

The aim of any SWOT analysis is to identify the key interval and external factors that are important to achieve
the objective.
SWOT analysis groups key pieces of information into two main categories:
Internal factors The strengths and weaknesses internal to the organisation.
External factors The opportunities and threats presented by the external environment.
The internal factors may be viewed as strengths or weaknesses depending upon their impact on the organisations
objectives.
What may represent strengths with respect to one objective may be weaknesses for another objective.
The factors may include personnel, finance and manufacturing capabilities and so on.
The external factors may include macroeconomics matters, technological change, legislation and socio-cultural
changes, as well as changes in the marketplace or competitive position.
The results are often presented in the form of a matrix.
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6.4.2 Avoiding Errors

Following are points to be considered for avoiding errors:

Conducting a SWOT analysis before defining and agreeing upon an objective. SWOTs should not exist in the
abstract. They can exist only with reference to an objective. If the desired end state is not openly defined and
agreed upon, the participation may have different end states in mind and the results will be ineffective.
Opportunities external to the company are often confused with strengths internal to the company. They should
be kept separate.
SWOTs are sometimes confused with possible strategies. SWOTs are descriptions of conditions, while possible
strategies define actions. This error is made especially with reference to opportunity analysis. To avoid this error,
it may be useful to think of opportunities as auspicious conditions.
Use of SWOT analysis

The usefulness of SWOT analysis is not limited to profit-seeking organisations. SWOT analysis may be used in any
decision-making situation when a desired end-state has been defined. SWOT analysis may also be used in pre-crisis
planning and preventive crisis management.
Strengths and weaknesses

Resources: financial, intellectual, location
Cost advantages from proprietary know-how
Exclusive access to high grade natural resources
Favourable access to distribution network
Table 6.1 Strengths and weaknesses of SWOT analysis
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Opportunities and threats

Takeovers
Market trends
Economic condition
Mergers
Joint ventures
Strategic alliances
Expectations of stakeholders
Technology
Public expectations
Competitors and competitive actions
Bad PR
Criticism
Global markets
Environmental conditions
Table 6.2 Opportunities and threats of SWOT analysis
Corporate Planning
Following are the steps in corporate planning:

Set objectives Defining what the organisation is intending to do.
Internal appraisals of the organisations SWOT - This needs to include an assessment of the present situation as
well as a portfolio of products/services and an analysis of the product/service life cycle.
Analysis of existing strategies This should determine relevance from the results of an internal/external appraisal.
This may include gap analysis which will look at environmental factors.
Strategic issues defined Key factors in the development of a corporate plan which needs to be addressed by
the organisation.
Develop new/revised strategies Revised analysis of strategic issues may mean the objectives need to
change.
Establish critical success factors The achievement of objectives and strategy implementation.
Preparation of operational, resource, projects plan for strategy implementation.
Monitoring results Mapping against plans, taking corrective action which may mean amending objectives/
strategies.
Environmental scanning
Human Resources
In SWOT, strengths and weaknesses are internal factors.

Strength could be:

A new, innovative product or services
Quality processes and procedures
Patents
Strong brand names
Good reputation among customers
Cost advantages from proprietary know-how
Exclusive access to high grade natural resources
Favourable access to distribution networks
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Weakness could be:

Lack of marketing expertise
Undifferentiated products or services
Poor quality goods or services
Damaged reputation
Lack of patent protection
A weak brand name
Poor reputation among customers
High cost structure
Lack of access to the best natural resources
Lack of access to key distribution channels
In SWOT, opportunities and threats are external factors.

Opportunities could be:

Developing market such as the internet
Mergers, joint ventures or strategic alliances
Moving into new market segments that offer improved profits
A new international market
A market vacated by an ineffective competitor
An unfulfilled customer need
Arrival of new technologies
Loosening of regulations
Removal of international trade barriers
A threat could be:

A new competitor in your home market
Price wars with competitors
A competitor has a new, innovative product or service
Competitors have superior access to channels of distribution
Taxation is introduced on your product or services
Shifts in consumer tastes away from the organisations products
Emergence of substitute products
New regulations
Increased trade barriers
6.5 The SWOT Matrix

An organisation should not necessarily pursue the more lucrative opportunities. Rather, it may have a better chance
at developing a competitive advantage by identifying a fit between the organisations strengths and upcoming
opportunities. In some cases, the organisation can overcome a weakness in order to prepare itself to pursue a
compelling opportunity. To develop strategies that take into account the SWOT profile, a matrix of these factors
can be constructed. The SWOT matrix is also known as TOWS matrix.
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Strengths
Weaknesses
Opportunities
S-O strategies
W-O strategies
Threats
S-T strategies
W-T strategies
S-O strategies pursue opportunities that are a good fit to the companys strengths.
W-O strategies overcome weaknesses to pursue opportunities.
S-T strategies identify ways that the company can use its strengths to reduce its vulnerability to external
threats.
W-T strategies establish a defensive plan to prevent the companys weaknesses from making it highly
susceptible to external threats.
Simple rules for successful SWOT analysis are as follows:

Be realistic about the strengths and weaknesses of the organisation when conducting SWOT analysis.
SWOT analysis should distinguish between where the organisation is today, and where it could be in the
future.
SWOT should always be specific. Avoid grey areas.
Always apply SWOT in relation to competition i.e. better than or worse than the competition.
Keep your SWOT short and simple. Avoid complexity and over analysis.
SWOT is subjective.
SWOT analysis is an important tool for auditing the overall strategic position of a business and its environment.
6.5.1 Formulating Strategic Alternatives
An adoptable strategic plan can be developed only when alternative strategies are prepared.
Reasonable number of strategic alternatives matching the opportunity profile and the environmental threats in
the context of strategic advantages are to be designed. And then the best strategy amongst the alternatives is to be
selected. While formulating alternatives strategies, company mission, purpose, objectives and goals and environmental
forces have to be considered. The strategies should also know the business conducted by the organisation, what
type of business should it be over coming years, whether the same business should be continued or diversified, what
technology should be adopted, know the type of market the organisation has, the consumers of the organisation, etc.
Considering these factors strategic alternatives have to be evolved and the type strategy has to be decided.
Five types of strategies are identified as follows.
Functional strategies
These strategies are related to functional areas like marketing, finance, production, human resource management,
accounting, etc.
Stability and contingency strategies

Sticking to the same product or services substantially for a long period.
It is a defensive strategy.
There may not be progress but reduces risk.
Contingency strategy refers to the strategy which will be adopted when the firm faces unforeseen
circumstances.
The management may foresee and anticipate contingency situations which may arise during a given period.
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Major and minor strategies

Strategies relating to major objectives like product-strategy, change of business definition, change of mission
and purpose and market strategies.
Low growth or forced growth strategies are minor strategies.
In the period of depression existing activities are monitored, fine-tuned for minor defeats and the operations
move on a low key to save investment, but still they will be effective and managed for maximum cash flows.
Defensive strategies are designed to meet contingency and it is called minor strategy.
Much of the business which leads to dangerous situations will be withdrawn and limited operations are done
and kept under absolute control.
They focus on limited special opportunity.
Strategy in tune with policy

Companies adopt strategies within the framework of their policies, programmes, purpose, mission, etc.
Policies of the corporate enterprises provide the direction in which the strategies are to be formulated.
Strategies formulated in accordance with the policy will have a common language which communicates the
policies to the lower level of management; convince the managers about the relevance of mission, vision and
purpose of the enterprise to implement the strategy and to obtain strategic commitment from all concerned.
Strategies formulated in accordance with policies should be consistent with overall strategies implemented for
various purposes, like meeting competition in the market, create a favourable image for the enterprise in the
market, to tackle extreme competition situation, etc.
Turn-around strategies

Turn-around means changing the whole scenario for the good of the organisation.
In this situation every activity will be restructured for achieving positive results. This will put the company on
a proper track.
The organisations which have turned to loses will be brought back to its successful path, by adopting certain
strategies. This is called turn-around strategy.
There are different types of strategies in this category.

Strategies adopted for sick units to turn them into viable units.
Fire fighting strategy is adopted to infuse new spirit or vigour into the corporate culture or morale or to
improve the image of the company.
Restoration strategy is one that is adopted to restore the original position. In times of contingency, the
organisations drift from original activities and resort to operations which are approved by the market. After
sometime, they feel that they have to get back to the original activity and they adopt strategy to restore the
position. This is called restoration strategies.
Consolidation strategy which is adopted to consolidate a strategy after conducting periodical performance
appraisal of that particular strategy.
6.5.2 Selecting the Best Strategy

After developing the alternatives, selection of a best alternative is the formidable task of the strategies.
While selecting strategy of the alternatives, strategist must look into the possibilities of gaining in the process of
implementation of strategy, at least possible cost. He should give an insight into the problem and find out, which
alternative strategy suits well to the problem. Therefore, selecting a best strategy involves,

Cost effectiveness
Assessing gains from the proposed strategy
Difficulties that may creep in when implemented
How smoothly the strategy manoeuvres the tough situation, etc.?
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The points to be considered for strategic choice are:

Strategy should be clearly identified and be explicit in practice or words
Strategy should be capable of exploiting environmental opportunities
It should sustain threats of environment

It should be consistent with corporate competence and resources.
The risk involved in the strategy should be sustained by the company
It should provide stimulus to the effort and commitment of the organisation and people
Strategy should generate early response from the market and concerned people.
Any strategic choice which considers these factors will be able to project itself to effective operations and identify
priority areas for operation. Choosing a strategy is a very tough job. It is not a subtle activity.
6.5.3 Preparing an Operational Plan
Operational plan is one which provides the details as to how the strategic plan should be implemented. This plan
converts strategy formulations into actions and decisions. Strategic plan is an overall plan prepared in a wider
perspective giving a guideline to overcome several critical situations that may be faced by the organisation.
Organisational plan focuses on current operations. This is a part of long term strategy of the corporate enterprise.
However, strategic planning and operational planning should go hand in hand. There should be harmonious
relationship between the two. Operational plans are the plans formulated by managers at all levels. In well-managed
organisations there will be direct relationship between strategic planning and operational plan. The distinguishing
features of strategic plan and operational plan are as follows:

The strategic plan will have a focus on growth, development and competitive situation of the organisation,
whereas the operational plan will have its focus on operating problems and survival.
Time strategic plan is a long-range plan. But operational plan is a short-range plan.
Strategic plan concentrates on constant growth, future profit and comparative strategy. Whereas operational
plan works for operation success, current profit and short term success.
The strategic plan is adaptive, whereas the operational plan is a contingency plan, real time plan and a shorter
one.
As far as strategy is concerned strategy plan is a stable and a major one. Operational plan adopts contingency
strategy and a minor one.
Strategic planning works for getting reward in the form of potentiality development and constant good corporate
citizenship. Operational plan seeks reward in the form of efficiency, profitability and good corporate image.
Management level: strategy planning is prepared by top executives whereas operational planning is prepared
by operational managers like middle level and lower-level managers.
Decisions are analysed in strategic management. But in operational plan it is immediate and intuitive.
As far as scope is concerned strategic planning concentrates on future opportunities and operational plan works
on current business.
Strategic planning is dynamic and flexible, whereas operational plan is static and functional.
Operational plan is prepared and implemented within the framework of strategic plan. At the operational level two
types of plans are adopted namely, Single-use plan and standard plan. Single-use plans are operated once and not
repeated. It is a specific plan used only once. Standard plans are used for repeat operation and guided by procedures
and rules.
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6.5.4 Resource Allocation

Resources refer to both monetary and non-monetary resources. When strategies are designed, money, technology
and other infrastructure are required for development and implementation. Scarce resources have to be allocated
according to the priorities and needs. While making resource allocation the type of strategy will be considered.
Major and fast-growth strategies need more resources. A major growth oriented strategy requires more funds for
implementation. It also demands more of non-monetary resources. The management cannot overlook the resource
demand of this strategy because it is a strategy which brings more profit and contributes for the growth of market
share.
In case of minor strategies, the resources requirement will be less. Therefore, strategy classification is made. There
are strategic business units which have a high share of low-growth market. These organisations bring in more cash
but need little resources for operation.
The operations are of routine type and do not require growth. But still they are essential products and bring resources
to the organisation. There are also business units with low share of high growth market. In such cases, the management
has to spend money to adopt strategic plan. The business units with share of a low growth market need no allocation
of resources as they will be contemplating to close down the activities. Therefore, resources allocation is a difficult
task in strategy formulation. The type of strategy decides the size of resources required for developing a strategy.
6.5.5 Co-ordinating Internal Factors
Followng are the internal factors:

The success of strategy depends upon how it works with the people inside the organisation.
People concerned in the organisation should understand the strategy and work for its success.
Every activity of the strategy should effectively take place. So that there will not be any disturbing element
which thwarts the strategy.
Co-ordination at every level of activity will help the strategy to be successfully implemented.
Work flow should be smooth and effective. There should not be obstacle in the flow work.
Every employee and every operation should be properly linked and co-ordinated. This facilitates smoothen
implementation of strategy.
Co-ordination of various functional areas is also needed.
Marketing department should work in the close co-operation with production and finance.
Inter-departmental co-ordination is very essential.
Managers at each level in each functional area co-ordinate their work with each other.
A well organised organisational structure helps in effectively co-ordinating the various activities and
strategies.
Operational plans can be very well integrated for the success of strategic planning.
6.5.6 Integrating Strategy and Operational Plan

Both strategy and operation plans are prepared within the framework of objectives. Objectives are the directive
principles to formulate strategy and prepare operating plans. Strategic and operational plans although work
independently, harmony must be achieved between them. Every activity should have objective orientation. To attain
harmony between strategy and operational plan certain operations are to be integrated.
Operational plan should have compatibility with overall strategy of the firm. Therefore, strategies are to be closely
linked to operational plans for their success. Operational plans have current and temporary objectives and to be
performed according to the tasks. Strategic plan is a long-range plan formulated mostly to achieve the objectives
of the organisation. Therefore, these two plans are to be integrated for the success of the organisation. Harmonious
integration of both generates a genuine emotional consensus among the managers as to what they want to do and
how they want to go about achieving success. In the process of integration, continued examination of goals should
take place.
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Continuous discussions relating to strategy and operations at all levels should be done until they are mutually
understood and accepted by the key members of the management and then transmitted to the entire organisation
continuously so that organisations objectives and strategies are imbibed in operational plans. This is the real
integration. When once the integration takes place, execution of the strategy and operational plan becomes easy.
After integrating these two, the controls are to be adopted and implemented.
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Summary

Strategic planning consists of a set of decisions which leads to the development of an effective strategy.
Strategic planning can be defined as the continuous process of making present entrepreneurial decisions
systematically and with the greatest knowledge of their futurity; organising systematically the efforts needed
to carry out these decisions; and measuring the results of these decisions against the expectations through
organised systemic feedback.
Strategic planning is a systematic and disciplined exercise to formulate strategy.
Strategic planning is an organisations process of defining its strategy or direction, and making decisions on
allocating its resources to pursue this strategy, including its capital and people.
Formulation of a strategy needs complete analysis of the situation.
Strategic plan is a long range plan of action in which plan and strategy are integrated.
Mission statement tells the current position of the organisation. It informs you about the desired level of
performance needed for the organisation.
Vision statement outlines what a company wants to be. It concentrates on the future. It is a source of inspiration.
It provides clear decision-making criteria and process.
Values main values protected by the organisation during the progression, reflecting the organisations culture
and priorities.
Corporate vision is a short, concise and inspiring statement of what the organisation intends to become and
to achieve at some point in the future and is often stated in competitive terms.
Vision is the image that a business must have about its goals before it sets out to reach them.
A mission statement is an organisations vision translated into written form. It makes the leaders view of the
direction and purpose of the organisation concrete.
A mission statement defines the purpose or broader goal for being in existence or in the business. It serves as
an ongoing guide without time frame.
Vision is more specific in terms of objective and future and future state. Vision is related to some form of
achievement if successful.
When wording the mission statement, consider the organisations products, services, markets, values and
concern for public images, and maybe priorities of activities for survival.
When refining the mission, a useful exercise is to add or delete a word from the mission to realise the change
in scope of the mission statement and assess how concise is its wording.
Strategic planning takes place at the highest levels; other managers are involved with operational planning.
SWOT analysis is a very vital activity in strategy planning.
SWOT analysis is a strategic planning tool used to evaluate the strengths, weaknesses, opportunities and
threats involved in a project or in a business venture.
Conducting a SWOT analysis before defining and agreeing upon an objective. SWOTs should not exist in the
abstract. They can exist only with reference to an objective. If the desired end state is not openly defined and
agreed upon, the participation may have different end states in mind and the results will be ineffective.
The strategies should also know the business conducted by the organisation, what type of business should it
be over coming years, whether the same business should be continued or diversified, what technology should
be adopted, know the type of market the organisation has, the consumers of the organisation, etc.
Strategies formulated in accordance with the policy will have a common language which communicates the
policies to the lower level of management; convince the managers about the relevance of mission, vision and
purpose of the enterprise to implement the strategy and to obtain strategic commitment from all concerned.
Strategies formulated in accordance with policies should be consistent with overall strategies implemented
for various purposes, like meeting competition in the market, create a favourable image for the enterprise in
the market, to tackle extreme competition situation, etc.
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The business units with share of a low growth market need no allocation of resources as they will be contemplating
to close down the activities.
Every employee and every operation should be properly linked and co-ordinated. This facilitates smooth
implementation of strategy.
Continuous discussions relating to strategy and operations at all levels should be done until they are mutually
understood and accepted by the key members of the management and then transmitted to the entire organisation
continuously so that organisations objectives and strategies are imbibed in operational plans. This is the real
integration.
References

S.W.O.T. Analysis, [Pdf] Available at: <http://www.ciri.org.nz/downloads/SWOT%20Analysis.pdf> [Accessed

17 May 2013].
Mamoria, 2001. Business Planning and Policy. Himalaya Publishing House.
Steiner, G. A., 2010. Strategic Planning. Kindle edition. Free Press.
2012. What is Strategic Planning, Really?, [Video online] Available at: <http://www.youtube.com/
watch?v=mLJ34L5UW4E> [Accessed 17 May 2013].
2012. Overview of the Strategic Planning Process, [Video online] Available at: <http://www.youtube.com/
watch?v=sU3FLxnDv_A> [Accessed 17 May 2013].
SWOT analysis -an introduction, [Pdf] Available at: <http://gametlibrary.worldbank.org/FILES/907_How%20

to%20do%20SWOT%20analysis.pdf> [Accessed 17 May 2013].
Recommended Reading

Smith, R. D., 2004. Strategic Planning. 2nd ed.,. Routledge.
Abell, D. F., 1980. Defining the Business: The Starting Point of Strategic Planning. Prentice Hall.
Thompson, J. L., 1997. Strategic Management: Awareness and Change. 2nd ed., International Thompson
Business Press, London.
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Self Assessment
1. Which of the following statements is false?
a. Strategic planning is a forward-looking exercise which determines the future posture of the enterprise.
b. Strategic plans helps in enhancing and sustaining the organisational competitive advantage based on external
and internal variables.
c. Strategic planning is a well organised effort aiming at fulfilling business objectives in a systematic
manner.
d. Strategic management is a well organised effort aiming at fulfilling business objectives in a systematic
manner.
2. __________ is a long range plan of action in which plan and strategy are integrated.
a. Strategic management
b. Strategic plan
c. Business strategy
d. Business policy
3. _________ tells the current position of the organisation. It informs you about the desired level of performance
needed for the organisation.
a. Mission statement
b. Value statement
c. Vision statement
d. Business statements
4. Which of the following statements is true?
a. Corporate mission is a short, concise and inspiring statement of what the organisation intends to become
and to achieve at some point in the future and is often stated in competitive terms.
b. Corporate value is a short, concise and inspiring statement of what the organisation intends to become and
c. Corporate vision is a short, concise and inspiring statement of what the organisation intends to become and
d. Corporate strategy is a short, concise and inspiring statement of what the organisation intends to become
and to achieve at some point in the future and is often stated in competitive terms.
a. The most effective visions are those that inspire, usually asking employees for the best, the most or the
greatest.
b. A mission statement should be a short and concise statement of goals and priorities.
c. Vision is more specific in terms of objective and future and future state.
d. Value is more specific in terms of objective and future and future state.
6. What describes the overall purpose of the organisation?
a. Mission statement
b. Value statement
c. Vision statement
d. Business statements
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7. What helps the firm to formulate a workable strategy?

a. Strategic planning
b. Strategic management
c. SWOT analysis
d. Mission statement
8. _________ is a strategic planning tool used to evaluate the strengths, weaknesses, opportunities and threats
involved in a project or in a business venture.
a. Strategic planning
b. SWOT analysis
c. Mission statement
d. Strategic management
9. _________ of the corporate enterprises provide the direction in which the strategies are to be formulated.
a. Policies
b. Strategies
c. Planning
d. Corporate planning
a. While selecting policy of the alternatives, strategist must look into the possibilities of gaining in the process
of implementation of strategy, at least possible cost.
b. While selecting strategy of the alternatives, strategist must look into the possibilities of gaining in the process
c. While selecting strategy of the alternatives, strategist must look into the possibilities of losing in the process
d. While selecting strategy of the alternatives, strategist must look into the possibilities of gaining in the process
of implementation of policy, at least possible cost.
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Chapter VII
Implementation of Strategy
Aim

explain strategy implementation
explicate BCG matrix
elucidate various aspects of implementation
Objectives
The objectives of this chapter are:

explain issues in strategy implementation
enlist aspects of strategy implementation
elucidate the steps in implementation of strategy
Learning outcome

explain strategy implementation in detail
describe BCG matrix
identify issues and aspects of strategy implementation
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7.1 Activating Strategy

After designing strategies to be adopted in plans and finalising them, the top management should take necessary steps
for implementing the designed strategy. The best policies and plans do not produce results until they are translated
into action. Many strategies fail to produce desired results because of the failure of the proper implementation of
the selected strategy. The management should have the will to adopt itself to changes. All the designed policies
and strategies should be effectively communicated in measurable lower levels. Necessary resources, both monetary
and non-monetary, are to be provided to the concerned departments for implementations.
7.2 Strategy Formulation vs. Strategy Implementation

Following points illustrates the difference between strategy formulation and strtaegy implementation:

Strategy formulation and implementation are intertwined. They are not separate activities.
Business organisation is not static. It constantly interacts with the external environment and its own internal
environmental changes.
According to the situation, organisation should modify the existing strategy or formulate new competitive
strategy and implement them at the right time and in the right direction.
Strategy formulation is concerned with the development of long-term plans for effective management of
environmental opportunities and threats, in the light of the organisational strengths and weaknesses.
It defines corporate mission, specify achievable objects, developing strategies and formulating policies.
Strategy implementation is the process by which strategies and policies are out to action through the development
of programs, budgets and procedures.
Implementation requires changes in the culture, structure and management system to the entire organisation.
Strategy formulation is the thinking process implementation is the doing process.
Primary function of an organisation is to formulate workable and competitive strategy for the overall growth
of the organisation, after considering both internal and external factors.
Strategy implementation is the secondary function of the organisation. This is based on the strategy
formulated.
Implementation is an administration task which ensures that the strategy formulated is executed in the right
direction to achieve objectives stated at the strategy formulation stage.
Necessary adjustments may have to be made to execute the strategy.
Success of an organisation is dependent on how the strategy is implemented rather than how the policy is
formulated.
Implementation of strategy requires arrangement and allocation of resources. While implementing strategy,
organisation may either adopt forward linking approach or backward linking approach.
Forward linking Under this approach, organisation conducts internal and external analysis. Analysis may
need the organisation to modify strategies, organisation structure, modification of behavior, etc. this helps
the organisation to decide what changes are needed to be made in the future while implementing the new
strategies.
Backward linking Instead of modifying the existing facilities entirely, organisation can think of concentrating
on the existing one and making an additional effort to explain opportunities and comfort threat. This advocates
organisation to go for incremental changes instead of changing right from the root. Organisation can adopt
these changes that can be implemented using the present resources with an additional effort.
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7.3 Aspects of Strategy Implementation

Strategy implementation includes the following:

Strategies
Policies
Procedures
Programs
Rules
Methods
Budgets
7.4 Steps in Implementation of a Strategy

Following are the steps in implementation of a strategy:
Resource allocation
The organisation should provide both monetary and non-monetary resources.
Fixing key tasks and priorities
The top management, when finalises the operational plan should incorporate in each operational plan the task to be
performed by the manager and the work to be carried out according to priority.
Assigning the tasks
As per the operational plan, the tasks have to be assigned to concerned managers and their work force for successful
implementation.
Authority delegation

For the smooth running of each strategic operational plan, the concerned managers and the key workforce like
managers, have to be delegated with certain authority and power. This is required for smooth execution of the
plans.
It will be still good, if they are properly defined in the operational plan itself.
This will facilitate the workforce to work uninterruptedly within the framework of company objectives.
Formulating methods

The co-ordination between various operations within the same task is very essential for smooth discharging of
the task.
Every operation should be cohesive and work flow from one operation to another should be smooth.
There should not be back tracking.
The task should be completed within the time period.
The co-ordination takes place through the scientific operational methods to be formulated.
Each operation should have uninterrupted system, methods and procedure.
Policies, goals, MIS and feedback

After designing the methods and procedure for implementing the strategic plan, what task the concerned manager
has to perform, what goal he has to achieve, etc. have to be informed to him for successful methods to provide
necessary information to the manager for successful implementation of the plan.
The manager has to be supported by proper data to perform his/her task.
The management has to develop management information system including feedback methods to provide
necessary information to the manager and to get a feed back about the operations.
Each manager assigned with the task of implementing a strategic task should get relevant information to take
decisions.
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There is a necessity of decision support system. The quality of decision depends on understanding the
circumstances surrounding an issue and knowing the available alternatives and states of nature.
Management Information System (MIS) reduces risk and uncertainty in decision-making.
Arrangements has to be made to provide relevant and just required information which converts raw data into
information that strategist can actually use. This is what Decision Support System (DSS) does.
DSS shapes the information to management needs which is provided by MIS.
MIS should be a two way system. This means that while top management provides information to the strategist,
another system should provide feedback to the top management regarding operations.
Thus, feedback should be the part of MIS which helps in completing the circuit of operation i.e. assigning the task
by the top management, performance of the task and feedback to the top about results of the task performed.
Rewards and incentives

Strategies also include the rewards and incentives as a part of the operational plan.
Those who succeed in successfully implementing the strategic plan should get the reward.
This is a motivational factor. To motivate the people at work, certain incentives and rewards are to be
instituted.
It should be a part of the strategic plan and should be awarded when particular tasks are fully performed. This
reinforces the behavior of workers to new systems.
Training the trainers

Another important aspect of strategic implementation is that the trainers and the workforce should be updates
and maintained through workshops, seminars, inbuilt continuing training programmes.
This is another vital aspect to be looked after, while implementing the strategic plan.
Thus, managerial talents are developed and managers are educated in values and styles of the organisation.
Implementation

After undergoing all the steps discussed earlier, the plan will be systematically implemented.
Every operation will be monitored.
Results are analysed and compared with the strategies formulated for the success of the operation.
It is not sure that strategies and plans do match with the actual results
There will be little difference between the actual and planned programmes. This has to be closely observed and
the deviations have to be informed to the top management through a sound feedback system.
There should be an inbuilt evaluation system, incorporated in the strategy implementation.
Restructuring the strategy

On analysing the operations, the manager notices the changes in result, if any, compared to original operational
plan, reports to the top management regarding such deviations.
The management then takes a decision to restructure the policies and strategies to make the operational plan
perfect and achieve the desired result. In this process action is taken for removing the defects in the strategy
formulation noticed at the time of implementation, changing the workplace who implements the strategy, reallocation of resources, etc. are to be carefully done.
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7.5 Issues in StrategyImplementation

Successful implementation of a strategy depends on how efficient the organisation is in allocating resources, designing
suitable structure, formulating functional strategies, etc. It should be noted that the objectives give rise to issues; issues
lead to plans and plans result in different projects and programmes. It may include modernisation of existing facilities
or installation or new or additional plants, etc. Important issues relating to strategy implementation are as follows:

Project implementation
Procedure implementation
Resource allocation
7.5.1 Project Implementation

Project implementation involves decision regarding the project to be undertaken in future and to see that they are
properly executed. Following are the different phases pertaining to project implementation:
Conceptual stage

Environmental scanning reveals various potential opportunities to the organisation. These opportunities are to
be categorised into various projects.
The organisation may not be in a good position to take up all these activities simultaneously. Therefore, assigning
priorities to these projects is vital in project implementation.
Priority helps organisation to choose an appropriate alternative for further development.
Analysing stage

After a project is identified, detailed analysis has to be made regarding possibility and feasibility.
Examination of technical, financial, marketing, ecological, economical and legal aspects are to be made.
Project feasibility report has to be prepared to decide whether the project can be taken up or not for further
action.
Planning stage

Once it is decided that the project idea is feasible and workable, the organisation should begin planning and
organising the project.
Plan should mention in detail about the infrastructure, finance, manpower, etc. needed for the accomplishment
of the proposed project.
Implementation stage

Activities needed to accomplish the project are put to action at this stage.
Test trials are undertaken to ensure that the project is ready for the final take-off.
Launching stage

Implementation stage ensures that the project is ready for the operation.
At the launching stage, project is handed over for the actual execution to those involved in its operation.
7.5.2 Procedure implementation

Procedure is a regularity framework within which the management is supposed to implement its plans, projects and
policies as per government approval. These government regulations affect strategy formulation and implementation
in the company. Following are the various government regulations
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Licensing procedures

Licensing procedure indicates the permission to be obtained from the government. Industries Development and
Regulation Act, 1951 (IDRA) provides licensing system for the industries.
According to the Act, industries are divided into three categories.
Industries which are under the direct control of the government are included under the first category.
Second category includes those industries promoted by government and supported by private sector.
All industries under private sector are covered under third category. Secretary of Industrial Approval scrutinises
the application for license and issue a license only if the stipulated conditions are complied with.
SEBI requirements

SEBI Act was passed in the year 1992 to replace Capital Issues Control Act, 1956 (CICA).
SEBI has three objectives, which are as follows:

protection of the interests of investors in securities
to develop security market
to regulate securities market
SEBI issues guidelines from time to time to supervise matters under its control.
These guidelines influence those companies to collect their required funds from the capital market.
Foreign collaboration policy

Foreign collaboration, in a way, is a partnership between home and foreign industrialist for the establishment
of joint venture in the home country.
It is an agreement under which industrially leading country provides machinery, technical assistance, financial
assistance, etc.
Expansion and diversification may need sophisticated equipment technology, huge amount of capital investment
and know-how.
Foreign collaboration certainly needs government approval.
Government allows foreign investment and collaboration selectively.
FEMA requirements

Foreign Exchange Management Act (FEMA) was introduced in the year 2000 to replace FERA.
Several rules are formulated to facilitate foreign exchange by increasing Indian exports.
The objective of exchange control is to regulate the demand for foreign exchange within the limits set by the
available supply.
MRTP requirements

Monopolies and Restrictive Trade Practices (MRTP) Act, 1969 aims at preventing monopolistic, unfair, restrictive
trade practices and concentration of economic power in the hands of big industrialists.
The Act aims at curbing price discrimination, selling goods below cost to beat completion, restricting a dealer
to sell products in selected areas, restricting a dealer to sell companys product only, etc.
While formulating strategies, company must be careful enough to see whether the decisions taken lead unfair
or restrictive trade practices.
Business Incentives

The central and state governments offer incentives for the promotion of industries in the country.
Strategies cannot ignore such incentives while formulating strategies.
Some of the incentives offered by the government are infrastructural incentives, promotional incentives, smallscale industries, incentives, backward area incentives, etc.
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Import and export requirements

Common tendency of modern business unit is to go global. This necessitates modernisation, diversification or
expansion strategies.
If an organisation is engaged in international trade, import and export activities become a regular
phenomenon.
Import may involve import of capital goods, raw materials, etc.
There may be restrictions on such imports.
In the same manner, government may restrict export of certain scarce products from the country. Therefore, it
is essential that the strategy makers understand the prevailing export and import requirement while formulating
relevant strategies.
Labour legislation

Labour constitutes a vital resource for a company.
Government formulates policies to safeguard the interests of the labour. These legislative rules certainly influence
strategy formulation.
There are several laws related to labour working in different industries. Therefore, strategists must be aware of
the labour legalisation applicable to his/her industry and company.
Patenting requirements

Organisation will always be on the look out of continuous development and innovations. They wish to patent
their products and ideas.
There are formulations to be followed while patenting their products or ideas. Strategies must know the procedure
and practice involved in getting patent right to the organisation.
It has been a proven fact that the organisation with a string patent right can gain competitive advantage more
quickly than its competitors.
7.5.3 Resources Allocation

Following are the points illustrated in resource alloctaion:

To accomplish stated objectives, organisation requires various resources like physical, financial and human
resources.
Organisation must utilise scarce resources for the maximum benefit of the organisation. Therefore, resource
allocation is the process of investment decision based on cost benefit theory.
Resource allocation process is continuous and complex.
Success of the project largely depends on the timely availability of resources.
Strategists should prioritise activities for the optimum utilisation of available resources.
It is advised to take co-operation of departmental and operational heads at the time of resources allocation to
avoid conflict later.
Basically, three important resources are identified for the success of the organisation namely, men, material
and money.
Of all resources, money plays a vital role.
Proper arrangement of this resource enables the organisation to acquire all the short-term funds.
Identification of proper sources of supple is also crucial.
Based on the requirement suitable source must be identified.
To the extent possible, organisation must use internal financial resources created by way of retained earning.
There are three different approaches adopted for resource allocation mentioned as follows:
Tip-down approach
Bottom-up approach
Mixed approach
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Under top-down approach, discretion regarding resource allocation lies with the top management. They start
allocating available resources from top level to the lowest level of operation. In such allocation, some operation
departments may or may not receive expected amount of resources. If any of the operational areas suffer, the
whole strategic process gets affected.
Under bottom-up approach, allocation of resource starts from the operating departments. It is due to the fact
that the success of the organisation is based on the performance of these operational areas. Flow of allocation
of resource allocation more viable and flexible.
Under the mixed approach, allocation is made with mutual consent between different levels of management.
This approach makes resource allocation more viable and flexible.
7.6 Importance of Organisational Structure

Following points illustrates the importance of organisational Structure

It determines the nature of work to be done by different people in the organisation.
It establishes relationship between various activities in the organisation.
It establishes an effective communication system in the organisation.
It ensures proper delegation of authority and responsibility.
It ensures smooth functioning of the organisation.
It ensures co-ordination among workers.
It helps in effective use of human resource of the organisation.
It encourages creativity.
It helps in measuring performance of people in the organisation.
7.6.1 Structural Considerations

Organisation structure is not a mere graphical representation of activities and people responsible for various activities.
It covers various activities like:

Identification of different activities needed to accomplish the strategy under consideration
Group the activities based on the skill required
Establish proper authority and responsibility
Establish effective information system and administration of the same
Designing and administration of motivation
Designing and administration of appraisal system
For the success of structure of an organisation, following principles are to be borne in mind:

Principle of activity Structure must be formulated to suit the basic objective of the organisation. The structure
should not contradict the basic objective.
Principle of span of control Span of control refers to the number of persons an individual can effectively
control. Span of control is based on several factors like ability, the nature of job, etc. these factors must be
carefully considered before deciding the structure.
Principle of exception Only exceptional matters should be referred to the executives and the routine matters
should be decided by the subordinates themselves.
Principle of specialisation Fundamental division of activities should take place and tasks must be assigned to
an individual based on his/her specialisation.
The scalar principle In order to make management effective, there must be clear line of authority from top
to bottom.
The principle of unity of command According to this, each subordinate should have only one supervisor
and dual subordination should be avoided.
Principle of delegation Organisation structure should provide for delegation of authority at every level.
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Principle of responsibility According to this principle superiors are not allowed to avoid responsibility
by delegating responsibilities to their subordinates. Superiors are held responsible for the acts of their
subordinates.
Principle of flexibility The organisation structure must be flexible so that it can be adaptable to the changing
circumstances. If the structure is rigid, modification is not possible and expansion becomes difficult.
Principle of simplicity Organisation structure must be simple both in its expressions and constitution. It
should have minimum number of levels. People must be in a position to understand the system clearly.
Principle of continuity An organisation has got perpetual existence. So long the organisation exists,
organisation structure exists. Structure must be dynamic and should be adoptive to the changing
circumstances.
Principle of unity of direction The group acting towards the same objective must have one plan and
direction. If different plans are given to different people in the group, co-ordination cannot be achieved.
Principle of efficiency Structure must facilitate effective functioning of the organisation with minimum
cost and effort.
Principle of balance Human, technical and financial factors must be properly balanced towards the
accomplishment of the objectives.
7.7 Other Important Strategies

Product life trategy

All products and services have certain life cycles. The life cycle refers to the period from the products first
launch into the market until its withdrawal.
The life cycle is split up into different phases. During this period significant changes are made in the way that
the product is behaving in the market.
Since an increase in profits is the major goal of a company that introduces a product into a market, the products
life cycle management is very important.
Some companies use strategic planning and others follow the basic rules of the different life cycle phase that
are analysed later.
The understanding of a products life cycle can help a company to understand and realise when it is time to
introduce and withdraw a product from a market, its position in the market compared to competitors, and the
products success or failure.
7.8 BCG Matrix

The BCG matrix method is the most well-known portfolio management tool. The BCG method is based on the
product life cycle theory that can be used to determine what priorities should be given in the product portfolio of a
business unit. Companies that are large enough to be organised into strategic business units, face the challenge of
allocating resources among those units. To ensure long-term value creation, a company should have a portfolio of
products that contains both high growth products in need of cash inputs and low growth products that generate a
lot of cash. There are two dimensions, market share and market growth.
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Relative Market Share
Market Growth Rate
High
High
Low
Low
Fig. 7.1 BCG matrix

The basic purpose of using matrix is that the higher the market share a product has, the higher the growth rate and
the faster the market for that product grows. The BCG growth share displays the various business units on a graph
of the market growth rate vs. market share relative to competitors.
7.8.1 Market Growth
Executives develop and organise the companys strategic infrastructure, the corporate configuration that produces
the companys distinctive or core competencies and provide the resources necessary to satisfy customer wants. This
often means dividing the business into functional units and determining which core competencies to develop.
The idea is to provide the products, services and talents necessary to satisfy customer needs and create customer
value. One of the tools used in analysing market scenario and strategic decisions concerning product mix is the
portfolio analysis. Portfolio techniques help marketing managers evaluate alternative strategies and allocate resources
across a number of business and markets. There are two major portfolio analysis that are used in marketing planning.
They are as follows:

The Boston Consulting Group Approach (BCG)
The General Electric Approach (BG)
7.8.2 The Growth Share Model and Cash Position

Following are the features of the Growth share model and cash position:

The theory behind the growth-share model makes specific assumptions about market growth rate and relative
market share.
Market growth rate is assumed to indicate market maturity.
High market growth indicated emerging markets with a promising future, low market growth indicates mature
markets with limited future potential and negative growth indicates declining markets.
Relative market share are considered strong competitors, and business with low relative market share are
considered weak competitors.
The theory behind the growth-share model also assumes that an organisation must generate cash flows from
business with a strong competitive position in mature markets and invest these funds in business with high
future potential.
Stars are highly desirable business because they have a high market growth rate and high relative market share.
But because they are in high competitive industries, they require large investments to sustain their position, and
they consequently produce low profit.
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Dogs are low market share, low growth business that drain capital and produce little or zero profit. The organisation
should consider liquidating or divesting such business.
Cash cows are dominant business in low growth industries that require little investment to maintain their market
share and consequently produce substantial profits. Because they are no longer growing, these businesses should
be milked for funds to invest in stars and question marks.
Question marks are business in industries that are doing well, but where the specific business unit is not doing
as good as the industry. They are called question marks because they are an unknown for management.
In general the theory suggests that, given the proper investment in product development, plant capacity, and
marketing, the business can gain market share and become stars, but without proper investment the business
eventually go into decline and become dogs.
The level of proper investment for each business, however, is industry and business specific, and the growth
share model is not helpful at that level of decision making.
Cash Cow
A business unit that has a large market share in a mature, slow growing industry. Cash cows require little investment
and generate cash that can be used to invest in other business units. Keep investments low, while keeping profits
high. Profits and cash generation should be higher because of low growth. (high market share, low growth)
Star
A business unit that has a large market share in a fast growing industry. Stars may generate cash, but because the
market is growing rapidly they require investment to maintain their lead. If successful, a star will become a cash
cow when its industry matures. Invest further in these- they incur high costs, but they are market leaders and should
also generate lots of cash. (high market share, high growth)
Question Mark (or Problem Child)
A business unit that has a small market share in a high growth market. These business units require resources to
grow market share, but whether they will succeed and become stars in unknown. These have poor cash inflow, but
have high demands and low returns due to low market share. Efforts should be made to change market share. If this
is not possible, this will likely turn into a dog as growth slows down. (low market share, but high growth)
Dog
A business unit that has a small market share in a mature industry. A dog may not require substantial cash, but it
ties up capital that could better be deployed elsewhere. Unless a dog has some other strategic purpose, it should be
liquidated if there is little prospect for it to gain share. Avoid and reduce the number of dogs. (low market share,
low growth)
7.8.3 Uses and Benefits of the BCG Matrix
Following are the uses and benefits of the BCG matrix:

BCG model is helpful for managers to evaluate balance in the firms current portfolio of Stars, Cash Cow,
Question Marks and Dogs.
BCG method is applicable to large companies that seek volume and experience efforts.
The model is simple and easy to understand.
It provides a base for management to decide and prepare for future actions.
7.8.4 Limitations of the BCG Matrix

Following are the limitations of BCG matrix:

It neglects the effects of synergy between business units.
High market share is not the only success factor.
Market growth is not the only indicator for attractiveness of a market.
Sometimes Dogs can earn even more cash as Cash Cows.

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The problems of getting data on the market share and market growth.
There is no clear definition of what constitutes a market.
A high market share does not necessarily lead to profitability all the time.
The model uses only two dimensions market share and growth rate. This may temp management to emphasise
a particular product, or to divest prematurely.
A business with low market share can be profitable too.
The model neglects small competitors that have fast growing market shares.
7.9 G. E. Multi Factorial Analysis

The GE matrix is a technique used in brand marketing and product management to help a company decide what
products to add to its product portfolio, and which market opportunities are worthy of continued investment. The
business portfolio is the collection of businesses and products that make up the company. The optimal business
portfolio is one that fits perfectly to the companys strengths and helps to exploit the most attractive industries or
markets. The best business portfolio is one that fits the companys strengths and helps exploit the most attractive
opportunities.
7.10 Factors Affecting Market Attractiveness

Following are the factors affecting market attractiveness
Market Attractiveness
Business Strengths
Market size
Market share
Market growth
Customer & Market knowledge
Market profitability
Customer satisfaction
Competitive pressure
Cost efficiency
Government regulations
Technology
Environmental factors
Product quality
Prices levels
Financial strength
Social factors
Promotional activities
Overall risk of returns in the industry
Brand image
Opportunity to differentiate products and services
Distribution channels
R&D
Managerial skill
Material supplies
Segmentation
Table 7.1 Business attractiveness and business strengths
7.11 PEST Analysis

The acronym PEST is used to describe a framework for the analysis of the macro-environmental factors. A PEST
analysis fits into an overall environmental scan. PEST analysis helps scanning the external macro environment in
which the firm operates.
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Your
business
Political forces
Technological forces
Social forces
Economic forces
Fig. 7.2 PEST analysis

Political factors
Political factor includes government regulations and legal issues and define both formal and informal rules under
which the firm must operate.
Economic factors
Economic factors affect the purchasing power of potential customers and the firms cost of capital.
Social factors
Social factors include the demographic and cultural aspects of the external micro-environment. These factors affect
customer needs and the size of potential markets.
Technological factors

Technological factors can lower barriers to entry. Reduce minimum efficient production levels, and influence
outsourcing decisions.
The PEST analysis is a useful tool for understanding market growth or decline, and as such the position, potential
and direction for a business.
A PEST analysis is a business measurement tool.
PEST is an acronym for political, economical, social and technological factors, which are used to assess the
market for a business or organisational unit.
PEST analysis is similar to SWOT analysis, it is simple, quick and uses four key perspectives.
As PEST factors are essentially external, completing a PEST analysis is helpful prior to completing a SWOT
analysis.
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Summary

After designing strategies to be adopted in plans and finalising them, the top management should take necessary
steps for implementing the designed strategy.
Necessary resources, both monetary and non-monetary, are to be provided to the concerned departments for
implementations.
Strategy formulation and implementation are intertwined. They are not separate activities.
Strategy formulation is concerned with the development of long-term plans for effective management of
Strategy implementation is the process by which strategies and policies are out to action through the development
of programs, budgets and procedures.
For the smooth running of each strategic operational plan, the concerned managers and the key workforce like
managers, have to be delegated with certain authority and power. This is required for smooth execution of the
plans.
The co-ordination between various operations within the same task is very essential for smooth discharging of
the task.
There is a necessity of decision support system. The quality of decision depends on understanding the
circumstances surrounding an issue and knowing the available alternatives and states of nature.
Management Information System (MIS) reduces risk and uncertainty in decision-making.
There will be little difference between the actual and planned programmes. This has to be closely observed and
the deviations have to be informed to the top management through a sound feedback system.
Successful implementation of a strategy depends on how efficient the organisation is in allocating resources,
designing suitable structure, formulating functional strategies, etc.
Environmental scanning reveals various potential opportunities to the organisation. These opportunities are to
be categorised into various projects.
Implementation stage ensures that the project is ready for the operation.
Licensing procedure indicates the permission to be obtained from the government. Industries Development and
Regulation Act, 1951 (IDRA) provides licensing system for the industries.
SEBI issues guidelines from time to time to supervise matters under its control.
Foreign collaboration, in a way, is a partnership between home and foreign industrialist for the establishment
of joint venture in the home country.
The objective of exchange control is to regulate the demand for foreign exchange within the limits set by the
available supply.
Government formulates policies to safeguard the interests of the labour. These legislative rules certainly influence
strategy formulation.
Customers are the central focus of any activity of an organisation.
Strategists should prioritise activities for the optimum utilisation of available resources.
Organisation structure is not a mere graphical representation of activities and people responsible for various
activities. All products and services have certain life cycles. The life cycle refers to the period from the products
first launch into the market until its withdrawal.
The BCG method is based on the product life cycle theory that can be used to determine what priorities should
be given in the product portfolio of a business unit.
Market growth rate is assumed to indicate market maturity.
Cash cows are dominant business in low growth industries that require little investment to maintain their market
share and consequently produce substantial profits.
Question marks are business in industries that are doing well, but where the specific business unit is not doing
as good as the industry.
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BCG model is helpful for managers to evaluate balance in the firms current portfolio of Stars, Cash Cow,
Question Marks and Dogs.
The GE matrix is a technique used in brand marketing and product management to help a company decides what
products to add to its product portfolio, and which market opportunities are worthy of continued investment.
The acronym PEST is used to describe a framework for the analysis of the macro-environmental factors.
Technological factors can lower barriers to entry. Reduce minimum efficient production levels, and influence
outsourcing decisions.
References

The BCG Growth-Share Matrix, [Online] Avaialble at: <http://www.netmba.com/strategy/matrix/bcg/> [Accessed

17 May 2013].
PEST Analysis [Pdf] Available at: <https://depts.washington.edu/oei/resources/toolsTemplates/PEST_analysis.

pdf> [Accessed 17 May 2013].
Jeffs, C., 2008. Strategic Management, SAGE.
Katsioloudes, M., 2006. Strategic Management, 2nd ed., Routledge.
2012. BCG MATRIX, [Video online] Available at: <http://www.youtube.com/watch?v=RVJ7Gc0yIL4> [Accessed

17 May 2013].
2013. BCG MATRIX, [Video online] Available at: <http://www.youtube.com/watch?v=TXKU7gVnBqs>

[Accessed 17 May 2013].
Recommended Reading

Ghosh, P. K., 1996. Business policy strategic planning and Management. 2nd ed., Sultan Chand & Sons.
Litman, J., 2008. Driven: Business Strategy, Human Actions, and the Creation of Wealth. 1st ed., Strategy &
Execution, LLC.
Saloner, G., Shepard, A. & Podolny, J., 2008. Strategic Management, 2nd ed., John Wiley & Sons.
97/uts
Self Assessment
1. ___________ and implementation are intertwined.
a. Strategy formulation
c. Strategic planning
d. Strategic implementation
a. Business organisation is not static. It constantly interacts with the external environment and its own internal
environmental changes.
b. Strategy implementation is concerned with the development of long-term plans for effective management
of environmental opportunities and threats, in the light of the organisational strengths and weaknesses.
c. Strategy formulation is concerned with the development of long-term plans for effective management of
d. Strategy implementation is the process by which strategies and policies are out to action through the
development of programs, budgets and procedures.
3. What is the secondary function of the organisation, based on the strategy formulated?
a. Strategy formulation
d. Strategy implementation
4. What reduces risk and uncertainty in decision-making?
a. Management Information System (MIS)
b. Decision Support System (DSS)
c. Industries Development and Regulation Act(IDRA)
d. Capital Issues Control Act, 1956 (CICA)
5. _______ shapes the information to management needs which is provided by MIS.
a. MIS
b. IDRA
c. DSS
d. CICA
a. Successful implementation of a strategy depends on how efficient the organisation is in allocating resources,
designing suitable structure, formulating functional strategies, etc.
b. Environmental scanning does not reveal potential opportunities to the organisation.
c. Priority helps organisation to choose an appropriate alternative for further development.
d. Environmental scanning reveals various potential opportunities to the organisation. These opportunities are
to be categorised into various projects.
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a. SEBI requirement indicates the permission to be obtained from the government.
b. Foreign collaboration indicates the permission to be obtained from the government.
c. Licensing procedure indicates the permission to be obtained from the government.
d. Business incentives indicate the permission to be obtained from the government.
8. _________, in a way, is a partnership between home and foreign industrialist for the establishment of joint
venture in the home country.
a. Foreign collaboration
b. Business incentives
c. Licensing procedure
d. SEBI requirement
9. What must be formulated to suit the basic objective of the organisation?
a. Principle of span of control
b. Principle of activity structure
c. Principle of specialisation
d. Principle of exception
10. In ____________, human, technical and financial factors must be properly balanced towards the accomplishment
of the objectives.
a. principle of efficiency
b. principle of unity of direction
c. principle of continuity
d. principle of balance
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Chapter VIII
Social Responsibility
Aim

introduce the concept of social responsibility
explain various responsibilities of an organisation towards society
elucidate social audit
Objectives
The objectives of this chapter are:

enlist the characteristics of social responsibility
explain the components and areas of social responsibility
elucidate the importance of business ethics
Learning outcome

explain social responsibility in detail
describe social audit
explain components of social responsibility
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8.1 Introduction
The social responsibility of a business refers to such decisions and activities of a business firm which provide for the
welfare of the society as a whole along with the earning of profit for the firm. The business firm functions and acts
in such a way that it will accomplish social gains along with the traditional economic gains in which the business
firm is interested. The concept of social responsibility is based on the idea that a business functions in the society
and uses the physical and human resources of the society for its operations and hence it is under the obligation to
serve the society. The concept of social responsibility is also based on the idea that anything good done by a business
firm for the society is good for the business itself in the long run.
8.2 Characteristics of Social Responsibility

Following are the characteristics of social responsibility:

The concept of social responsibility of a business applies to all business organisations both in private and public
sectors which have been established for earning profits.
Social responsibility of a business is continuous process as business is a regular and an on-going activity.
The concept of social responsibility of business lays emphasis on the all-round development of all the sectors
of the business.
The concept of social responsibility of business is the basis of the success of business. Today, the business cannot
survive without the active support of the society.
8.3 Components and Areas of Social Responsibility

Following are the components of social responsibility:
8.3.1 Towards Owners of Enterprise
The responsibilities of business enterprises towards their owners are:

Payment of a fair rate of dividend regularly.
Maximisation of the net present value of the business through effective management.
Ensuring full participation of owners in the management of the affairs of the enterprise.
Supplying of accurate and comprehensive reports giving full information on the working of the company.
Disclosing of financial information and clarifying doubts, if any.
Accessibility of chairman and directors to the owners for getting information relating to the company.
8.3.2 Towards Workers

Some of the responsibilities of a business enterprise towards its workers are:

Security of job with fair wages, bonus, profit-sharing, etc.
Fair promotional practices.
Equal opportunity for growth and development within the organisation.
Facilities for training and opportunity to the workers for improving their skill.
Encouraging participative management in the company.
Providing employee welfare and social security and better working facilities.
Protecting workers from occupational hazards.
Encouraging the development of good trade union leadership.
Change in the attitude of management towards workers and realise the fact that the management is the management
of men and not machines.
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8.3.3 Towards Consumers

The responsibilities of business enterprise towards consumers of its products are:

Ensuring availability of products in the right quantity, at the right place and at the right time.
Supplying products of high quality.
Charging reasonable prices for its products.
Using correct measures.
Providing good after sales services.
Avoiding restrictive trade practices and other undesirable methods to exploit the consumers.
Encouraging the formation of associations of consumers and consumers advisory councils and maintaining
close links with them.
Developing appropriate products and services for satisfying the needs of the consumers.
Taking such measures which would promote consumer satisfaction and welfare.
8.3.4 Towards the Society

The obligations of a business to the society are:

Optimising the use of resources.
Producing goods and services efficiently and contributing to the economic well-being of the society.
Providing public amenities and avoiding the conditions of slum and congestion.
Maintaining environmental ecology and adopting anti-pollution measures.
Participating in social welfare programmes, such as adopting villages for their all-round development, providing
for medical facilities, sanctioning educational scholarships to deserving student, constructing shelters at the bus
stops, contributing to funds meant for the benefits of the society, etc.
Ensuring that the gains of improved production of the enterprises are shared by all the constituents of the society
namely, management, shareholders, workers and consumers.
8.3.5 Toward the Government

The obligations of business enterprise to the government are:

Strictly observing the provisions of the various laws and enactments.
Paying taxes and other dues to the government regularly and honestly.
Extending full support to the government in its efforts to solve national problems such as unemployment, food,
inflation, regional imbalance in economic development, etc.
8.3.6 Toward the Weaker Section of Society

The obligations of business enterprise to the weaker section of the society are:

Helping the weaker sections by providing them opportunity for growth.
Encouraging voluntary organisations and agencies engaged in improvement of the weaker section.
8.3.7 Towards the Economic Policy of State

The obligations of a business enterprise towards the economic policy of State are:

Encouraging development of small business, import substitution and self-reliance and dispersal of economic
activity.
Producing goods to meet the needs of the various sections of society.
Helping the government in its efforts to hold the price lines.
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8.4 Arguments Against Social Responsibility of Business

Social responsibility is an additional responsibility. Business enterprise has economic responsibility of maximising
profits to serve the interests of the owners, employees and creditors. Assumptions of two responsibilities simultaneously
are certainly not in the best interest of the business.
The concept of social responsibility is quite vague. What welfare activities are regarded as activities undertaken in
discharging their social responsibilities are not specifically mentioned.

Business units have already rendered great services to the society by providing goods at lower prices.
Business concern is not accountable for the poor welfare service rendered by it.
The social welfare is the responsibility of the Government and not that of business concerns.
Business concern should justify its basic objective of economic performance. It is not concerned with any other
obligations including social responsibility.
8.5 Importance of Business Ethics

Following points illustrates the importance of business ethics:

They determine business objectives.
They contribute to better management decisions.
They compel business units to meet basic human needs.
They increase goodwill of the enterprise. The business unit which is ethical in its activities will be respected
by the society.
They act as tool for evaluating the business practices of a concern.
8.6 Social Responsibility for Economic Growth

Organisations draw inputs from the society in which it operates. These inputs are converted into products or services
which serve the society the most. Organisations must not concentrate only on the principle of profit maximisation.
Consideration of economic growth of the society is vital. Organisations must utilise available opportunities in the
environment for the economic development of the society. Undertaking new ventures, organisation can bring in
more revenue into the organisation. This also leads to generation of new employment opportunities to the people of
the society. Employment opportunities increase standard of living of the people. Following are the ways in which
social responsibility helps developing economy:

Optimum utilisation of resources: Resources are limited in nature. By following social responsibilities, an
organisation is expected to use resources in a justified way. Resources are to be used for the productions of
those goods and services which are not detrimental to the interest of the society. Organisation is not expected
to produce unnecessary and unwanted goods. Production of such goods not only reduces national resources,
but also encourages people to spend on unnecessary consumption.
Producing goods and services efficiently and contributing to the economic well-being of society: Organisations
are expected to produce goods without wastage. Organisations are expected to practice business process
reengineering. This helps the organisation to identify new and improved ways of doing improvement in the
product. Product safety is also taken care of. All these factors contribute to the economic well-being of the
society.
Providing public amenities and avoiding the conditions of slums and congestion: Organisations are expected
to protect the surrounding environment. It cannot handover this responsibility to the government. If
healthy environment exists, the organisation takes initiative to avoid slums and congestion and pollution of
surroundings.
Maintain environmental ecology and adopting anti-pollution measures.
Helping the weaker section of the society by providing them an opportunity for growth.
Encouraging development of small business, import substitution and self-reliance and dispersal of economic
activity.
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8.7 Outcomes of Social Responsibility

Following are the outcomes of social responsibility:

Their environment concerns may enable them to charge premium prices and gain brand loyalty.
Their trustworthiness may help them generate enduring relationships with suppliers and distributors.
They can attract outstanding employees who prefer to work for a responsible job.
They are more likely to be welcomed into foreign country.
They can utilise the goodwill to take advantage of government support when needed.
They can get capital more easily from the investors.
8.8 Social Audit

Every organisation obtains critical inputs from the environment and converts them into products and services to
be used by the society at large. Hence, it should not be money making machine alone; it has to take care of society
interest in all its operations. It is not, therefore, supposed to pollute the environment, discriminate in employment,
make money through illegal means, resort to misleading advertising, offer products of dubious quality, etc. whenever
an organisation tries to exploit customers through immoral ways, society of large comes out with certain checks
and balances. The customers may protest violently, seek justice through courts and press the government to put an
end to such unlawful operations.
8.9 Need for Social Audit

Business may postpone investments in social areas, while trying to maximise profits, and expect others to take the
initiative. This way, it is hoped, the organisation would be able to price its products much cheaper and get ahead
of competition. The general public, government and social activists, such organisations may not pursue socially
responsible actions in the longer interest of society. Business is a part of society. It receives various inputs from
society, obtains benefits from the government and services only when both these external agencies welcome its products
positively. While converting the crucial resources into useful products, it must, therefore, behave responsible without
using its power in any unfavorable way.
8.10 Types of Social Audit

Following are the types of social audit.
8.10.1 Social Process Audit
It tries to measure the effectiveness of those activities of the organisation which are largely taken up to meet certain
social objectives. Corporate executives in this vase try to examine what they are doing and how they are doing it.
The method involves four steps:

Find circumstances leading to the commencement of the social audit programme.
List goals of the social programme.
State how the organisation is going to meet such goals.
Quantitatively evaluate what is actually done as against what has been planned.
8.10.2 Financial Statements Format Social Audit

In this type, the financial statements show conventional financial information plus information regarding social
activities. The balance sheet should show a list of social assets on one side and social commitments, liabilities and
equity on the other side. The income statement should reveal social benefits, social costs and the net social income
provided by the company operations to the staff, community, general public and clients.
8.10.3 Macro-Micro Social Indicator Audit
This type of audit requires evaluation of a companys performance in terms of social measures against macro social
measures. The macro social factors include the social goals expected by society in terms of health, safety, education,
housing, accidents, pollution control measures, etc. The micro social indicators are measures of the performance of
the company in those areas measured by macro social indicators.
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8.10.4 Social Performance Audit

In developed countries, several interest groups including church groups, universities, mutual funds, consumer
activists regularly measure, evaluate and rank socially responsible companies on the basis of their social performance.
Regular opinion polls are carried out to find companies that initiate social efforts in a proactive manner and earn
the goodwill of the general public.
8.10.5 Partial Social Audit
In this case, the company undertakes to measure a specific aspect of its social performance because it considers that
aspect to be very important or because its social efforts for the time being are confined to that area only.
8.11 Uses of Social Auditing

Following are the uses of social auditing:

To monitor the social and ethical impact and performance of the organisation.
To provide a basis for shaping management strategy in a socially responsible and accountable way, and to inform
marketing and other strategies.
To facilitate organisational learning about how to improve social performance.
To facilitate the strategic management of institutions.
To inform the community, public, other organisations and institutions in the allocations of their resources (time
and money), this refers to issues of accountability, ethics and marketing.
105/uts
Summary

The social responsibility of a business refers to such decisions and activities of a business firm which provide
for the welfare of the society as a whole along with the earning of profit for the firm.
The concept of social responsibility of business applies to all business organisations both in private and public
sectors which have been established for earning profits.
The responsibility of business enterprises towards their owners is payment of a fair rate of dividend regularly.
Social responsibility is an additional responsibility. Business enterprise has economic responsibility of maximising
profits to serve the interests of the owners, employees and creditors.
Business units have already rendered great services to the society by providing goods at lower prices.
Business concern should justify its basic objective of economic performance. It is not concerned with any other
obligations including social responsibility.
Organisations must utilise available opportunities in the environment for the economic development of the
society.
Every organisation obtains critical inputs from the environment and converts them into products and services
to be used by the society at large.
Business may postpone investments in social areas, while trying to maximum profits, and expect others to take
the initiative. This way, it is hoped, the organisation would be able to price its products much cheaper and get
ahead of competition.
The macro social factors include the social goals expected by society in terms of health, safety, education,
housing, accidents, pollution control measures, etc. The micro social indicators are measures of the performance
of the company in those areas measured by macro social indicators.
References

Thomas, G., Corporate Social Responsibility: A definition, [Pdf] Available at: <http://business.curtin.edu.au/
local/docs/GSB_Working_Paper_No._62_Corp_Social_Resp_A_definition_Thomas___Nowak.pdf> [Accessed
13 May 2013].
WHAT IS CORPORATE SOCIAL RESPONSIBILITY?, [Pdf] Available at: <http://www.pathfinder.org/

publications-tools/pdfs/CATALYST-What-is-Corporate-Social-Responsibility-8-Questions-and-Answers.pdf>
[Accessed 13 May 2013].
Harrison, J. S., 2009. Foundation in Strategic Management. 5th ed., South-Western College Pub.
Robinson, R. B. & Pearce, J., 2007. Strategic Management: Formulation, Implementation, and Control. 10th
ed., McGraw-Hill.
2011. Social Responsibility: What is social responsibility?, [Video online] Available at: <http://www.youtube.
com/watch?v=_F8IYViE04M> [Accessed 17 May 2013].
2008. Corporate Social Responsibility, [Video online] Available at: <http://www.youtube.com/

watch?v=iXsaYR1Izqw> [Accessed 17 May 2013].
Recommended Reading

Hitt, M. A., 2010. Strategic Management: Concepts and Cases: Competitiveness and Globalization. 9th ed.,
South-Western College Pub.
David, F. R., 2008. Strategic Management: Concepts and Cases. 12th ed., Prentice Hall.
Hoskisson, R. E., 2006. Strategic Management Concepts. 7th ed., South-Western College Pub.
106/uts
Self Assessment
a. The business firm functions and acts in such a way that it will accomplish social gains along with the
traditional economic gains in which the business firm is interested.
b. The concept of social responsibility is based on the idea that a business functions in the society and uses
the physical and human resources of the society for its operations and hence it is under the obligation to
serve the society.
c. The concept of social responsibility is also based on the idea that anything good done by a business firm for
the society is good for the business itself in the long run.
d. The concept of social welfare is also based on the idea that anything good done by a business firm for the
society is good for the business itself in the long run.
2. The concept of ___________ of business applies to all business organisations both in private and public sectors
which have been established for earning profits.
a. business strategy
b. social responsibility
c. strategic planning
d. strategic formulation
3. The responsibility of business enterprises towards their _________ is ensuring full participation of owners in
the management of the affairs of the enterprise.
a. workers
b. society
c. owners
d. consumers
4. Developing appropriate products and services for satisfying the needs of the consumers, towards who is this
responsibility of the business enterprise?
a. Workers
b. Society
c. Owners
d. Consumers
a. Business concern is accountable for the poor welfare service rendered by it.
b. The social welfare is the responsibility of the Government and not that of business concerns.
c. Business concern should justify its basic objective of economic performance. It is not concerned with any
other obligations including social responsibility.
d. Business concern is not accountable for the poor welfare service rendered by it.
a. Organisations draw outputs from the society in which it operates. These outputs are converted into products
or services which serve the society.
b. Organisations must not concentrate only on the principle of profit maximisation.
c. Organisations draw inputs from the society in which it operates. These inputs are converted into products
or services which do not serve the society.
d. Organisations must concentrate only on the principle of profit maximisation.
107/uts
7. Which type of audit tries to measure the effectiveness of those activities of the organisation which are largely
taken up to meet certain social objectives?
a. Financial statements format social audit
b. Macro-micro social indicator audit
c. Social process audit
d. Social performance audit
8. _________ type of audit requires evaluation of a companys performance in terms of social measures against
macro social measures.
a. Financial statements format social audit
b. Macro-micro social indicator audit
c. Social process audit
d. Social performance audit
a. Organisations must utilise available opportunities in the environment for the economic development of the
society.
b. Organisations must concentrate only on the principle of profit maximisation.
c. Organisations must not utilise available opportunities in the environment for the economic development of
the society.
d. Organisations must not concentrate only on the principle of profit minimisation.
10. _______ is not accountable for the poor welfare service rendered by it.
a. Business concern
b. Business strategy
d. Strategic implementation
108/uts

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Chapter VI

introduce the concept of strategic planning

explain SWOT analysis

explicate the strategic planning process

explain the importance of SWOT matrix

elucidate the use of SWOT analysis

enlist threats of SWOT analysis

describe strategic planning

explain strategic planning and it properties

describe SWOT analysis

6.2 Strategic Planning

Situation Evaluate the current situation and how it came about.

Target Define goals and/or objectives (sometimes called ideal state).

Path Map a possible route to the goals/objectives.

Alternative approach is called Draw-See-Think

Draw What is the ideal image or the desired end state?

Plan What resources are required to execute the activities?

An alternative to the Draw-See-Think approach is called See-Think-Draw

See What is todays situation?

Think Define goals/objectives.

Draw Map a route to achieving the goals/objectives.

6.3 Strategic Planning Process

The environment includes:

6.3.1 Organisation Mission and Purposes

6.3.2 Importance of Vision Statement

Clarity and lack of ambiguity

Paint a vivid and clear picture, not ambiguous

Describing a bright future

Memorable and engaging expression

Realistic aspirations, achievable

Alignment with organisational values and culture

Time bound if it talks of achieving any goal or objective

Breaks you out of boundary thinking.

Provides continuity and avoids the stutter effect of planning.

Indentifies direction and purpose.

Alerts stakeholders to needed change.

Promotes interest and commitment.

Promotes laser-like focus.

Encourages openness to unique and creative solutions.

Encourages and builds confidence.

Builds loyalty through involvement.

Results in efficiency and productivity.

6.3.5 Developing a Mission Statement

6.3.6 Developing a Vision Statement

A goal is a long-range aim for a specific period.

It must be specific and realistic.

Setting objectives involves a continuous process of research and decision-making.

The objectives must be:

These objectives are considered while forming the objectives.

6.4 SWOT Analysis

Opportunities External conditions that are helpful to achieve the objective.

Threats External conditions that are harmful to achieve the objective.

The results are often presented in the form of a matrix.

6.4.2 Avoiding Errors

Use of SWOT analysis

Resources: financial, intellectual, location

Cost advantages from proprietary know-how

Exclusive access to high grade natural resources

Favourable access to distribution network

Table 6.1 Strengths and weaknesses of SWOT analysis

Opportunities and threats

Set objectives Defining what the organisation is intending to do.

Preparation of operational, resource, projects plan for strategy implementation.