An Assignment

On
Strategic Financial Management

Topic: Introduction to Strategic Financial Management

Prepared by :
Roll no
MBA sem-3 (SFI)

Submitted to:
Dr.Butalal Ajmera

Department of Business Administration

Bhavnagar University
Bhavnagar

DEFINITION
Strategic Management
Strategic Management is a stream of decisions and actions which
lead to the development of an effective strategy or strategies, to help
achieve corporate objectives.
- Glueck and Jauch

Strategy
The word "strategy" comes from the Greek word for "generalship". Like a
good general, strategies give overall direction for an initiative.
A companys strategy consist of a combination of a competitive moves
and business approaches that managers employ to please customers,
complete successfully and achieve organisational objective.
A strategy is a way of describing how you are going to get things done.
A good strategy will take into account existing barriers and resources
(people, money, power, materials, etc.). It will also stay with the overall
vision, mission, and objectives of the initiative.

Strategic Financial Management

Managing an organization's financial resources so as to achieve its
business objectives and maximize its value. Strategic financial
management involves a defined sequence of steps that encompasses the
full range of a company's finances, from setting out objectives and
identifying resources, analyzing data and making financial decisions, to
tracking the variance between actual and budgeted results and identifying
the reasons for this variance. The term "strategic" means that this approach
to financial management has a long-term horizon.

BREAKING DOWN 'STRATEGIC FINANCIAL MANAGEMENT

At the most fundamental level, financial management is concerned with
managing an organization's assets, liabilities, revenues, profitability
and cash flow. Strategic financial management goes a step further in
ensuring that the organization remains on track to attain its short-term and
long-term goals, while maximizing value for its shareholders.

Strategic financial management also means that short-term goals may

occasionally need to be sacrificed to meet longer-term objectives. A typical
example is when a loss-making company trims its asset base through
factory closures or headcount reduction in order to reduce operating
expenses. While such actions have a detrimental effect on near-term
results because of restructuring costs and other one-time items, it positions
the company to achieve profitability in the longer term.

MEANING OF STRATEGIC MANAGEMENT

Strategic management has evolved as a multidisciplinary field that take a
holistic view of a business enterprise. It involves logical, analytical, futuristic

view point to business situation and designing strategies, then

implementing them, over a period of time.

Strategic management involves the formulation and implementation of the

major goals and initiatives taken by a company's top management on
behalf of owners, based on consideration of resources and an assessment
of the internal and external environments in which the organization
competes.

Strategic management provides overall direction to the enterprise and

involves specifying the organization's objectives, developing policies and
plans designed to achieve these objectives, and then allocating resources
to implement the plans. Academics and practicing managers have
developed numerous models and frameworks to assist in strategic decision
making in the context of complex environments and competitive
dynamics. Strategic management is not static in nature; the models often
include a feedback loop to monitor execution and inform the next round of
planning.

Michael Porter identifies three principles underlying strategy: creating a

"unique and valuable [market] position", making trade-offs by choosing
"what not to do", and creating "fit" by aligning company activities with one
another to support the chosen strategy. Dr.Vladimir Kvint defines strategy
as "a system of finding, formulating, and developing a doctrine that will
ensure long-term success if followed faithfully.

Corporate strategy involves answering a key question from a portfolio

perspective: "What business should we be in?" Business strategy involves
answering the question: "How shall we compete in this business?" In
management theory and practice, a further distinction is often made
between strategic management and operational management. Operational

management is concerned primarily with improving efficiency and

controlling costs within the boundaries set by the organization's strategy.

Strategic management involves the related concepts of strategic

planning and strategic thinking. Strategic planning is analytical in nature
and refers to formalized procedures to produce the data and analyses used
as inputs for strategic thinking, which synthesizes the data resulting in the
strategy. Strategic planning may also refer to control mechanisms used to
implement the strategy once it is determined. In other words, strategic
planning happens around the strategic thinking or strategy making activity.

Strategic management is often described as involving two major

processes: formulation and implementation of strategy. While described
sequentially below, in practice the two processes are iterative and each
provides input for the other.

Formulation
Formulation of strategy involves analyzing the environment in which the
organization operates, then making a series of strategic decisions about
how the organization will compete. Formulation ends with a series of goals
or objectives and measures for the organization to pursue. Environmental
analysis includes the:

Remote external environment, including the political, economic,

social, technological, legal and environmental landscape (PESTLE);

Industry environment, such as the competitive behaviour of rival

organizations, the bargaining power of buyers/customers and suppliers,
threats from new entrants to the industry, and the ability of buyers to
substitute products (Porter's 5 forces); and

Internal environment, regarding the strengths and weaknesses of the

organization's resources (i.e., its people, processes and IT systems).

Strategic decisions are based on insight from the environmental

assessment and are responses to strategic questions about how the
organization will compete, such as:

What is the organization's business?

Who is the target customer for the organization's products and

services?

Where are the customers and how do they buy? What is considered
"value" to the customer?

Which businesses, products and services should be included or

excluded from the portfolio of offerings?

What is the geographic scope of the business?

What differentiates the company from its competitors in the eyes of

customers and other stakeholders?

Which skills and capabilities should be developed within the firm?

What are the important opportunities and risks for the organization?

How can the firm grow, through both its base business and new
business?
How can the firm generate more value for investors?

The answers to these and many other strategic questions result in the
organization's strategy and a series of specific short-term and long-term
goals or objectives and related measures.

Implementation
The second major process of strategic management is implementation,
which involves decisions regarding how the organization's resources (i.e.,
people, process and IT systems) will be aligned and mobilized towards the
objectives. Implementation results in how the organization's resources are
structured (such as by product or service or geography), leadership
arrangements, communication, incentives, and monitoring mechanisms to
track progress towards objectives, among others.
Running the day-to-day operations of the business is often referred to as
"operations management" or specific terms for key departments or
functions, such as "logistics management" or "marketing management,"
which take over once strategic management decisions are implemented.

Characteristics of Strategic Management

Strategic Management is Holistic, fore sight oriented and futuristic

approach.
It is related to beginning with the end in mind.
The senior or top level management is the decision maker.
Senior management designs the future policies through planning.
It is dynamic and continuous process.
It is more proactive than reactive in nature towards environment.
Optimum utilisation of resources within the organisation.

LEVEL OF STRATEGYS

Enterprise strategy can be formulated and implemented at three different

levels:
1. Corporate level
2. Business unit level
3. Functional or departmental level

Corporate Level Strategy

Corporate level strategy occupies the highest level of strategic decisionmaking and covers actions dealing with the objective of the firm, acquisition
and allocation of resources and coordination of strategies of various SBUs
for optimal performance. Top management of the organization makes such
decisions. The nature of strategic decisions tends to be value-oriented,
conceptual and less concrete than decisions at the business or functional
level.
Corporate level strategy fundamentally is concerned with selection of
businesses in which your company should compete and with
development and coordination of that portfolio of businesses.
Corporate level strategy is concerned with:
Reach defining the issues that are corporate responsibilities.
These might include identifying the overall vision, mission, and
goals of the corporation, the type of business your corporation should
be involved, and the way in which businesses will be integrated and
managed.

Competitive Contact defining where in your corporation

competition is to be localized.

Managing Activities and Business Interrelationships corporate

strategy seeks to develop synergies by sharing and coordinating staff
and other resources across business units, investing financial
resources across business units, and using business units to
complement other corporate business activities.

Management Practices corporations decide how business units

are to be governed: through direct corporate intervention
(centralization) or through autonomous government (decentralization).

Business Unit Level Strategy

A strategic business unit may be any profit centre that can be planned
independently from the other business units of your corporation. At the
business unit level, the strategic issues are about both practical
coordination of operating units and about developing and sustaining
a competitive advantage for the products and services that are
produced.

Functional Level Strategy

The functional level of your organization is the level of the operating
divisions and departments. The strategic issues at the functional level are
related to functional business processes and value chain. Functional level
strategies in R&D, operations, manufacturing, marketing, finance, and
human resources involve the development and coordination of resources
through which business unit level strategies can be executed effectively
and efficiently.
Functional units of your organization are involved in higher level
strategies by providing input into the business unit level and corporate
level strategy, such as providing information on customer feedback or
on resources and capabilities on which the higher level strategies can be
based. Once the higher level strategy or strategic intent is developed, the
functional units translate them into discrete action plans that each
department or division must accomplish for the strategy to succeed. 3

IMPORTANCE OF STRATEGIC MANAGEMENT

Strategic management has gained importance as it: Provides a dynamic combination of expertise, experience and
conceptual knowhow
Provides a generalise view encompassing a broader cross-functional
perspective
Offers a logical, analytical, rational and long term orientation in
decision making
Creates harmonious understanding of how policies are created,
reviewed and implemented
Provides more response from the managers as a clear direction is
identified
Facilitates interaction of thinkers and encourages organizational
commitment of decision maker
Focuses on corporate governance and high ethical standards
Facilitates unconventional thinking as it is integral and leads to
creativity
Involves an intuitive and conceptual analysis along with sound
reasoning
Offers a better orientation towards stakeholders interest

The Role of Finance in the Strategic-Planning and

Decision-Making Process
The fundamental success of a strategy depends on three critical factors: a
firms alignment with the external environment, a realistic internal view of its
core competencies and sustainable competitive advantages, and careful
implementation and monitoring. This article discusses the role of finance in
strategic planning, decision making, formulation, implementation, and
monitoring.
Any person, corporation, or nation should know who or where they are,
where they want to be, and how to get there. The strategic-planning
process utilizes analytical models that provide a realistic picture of the
individual, corporation, or nation at its consciously incompetent level,
creating the necessary motivation for the development of a strategic
plan. The process requires five distinct steps outlined below and the
selected strategy must be sufficiently robust to enable the firm to perform
activities differently from its rivals or to perform similar activities in a more
efficient manner.
A good strategic plan includes metrics that translate the vision and mission
into specific end points. This is critical because strategic planning is
ultimately about resource allocation and would not be relevant if resources
were unlimited. This article aims to explain how finance, financial goals,
and financial performance can play a more integral role in the strategic
planning and decision-making process, particularly in the implementation
and monitoring stage.

Characteristics/Features of Strategic Decisions

Operational decisions are technical decisions which help execution of

strategic decisions. To reduce cost is a strategic decision which is achieved
through operational decision of reducing the number of employees and how
we carry out these reductions will be administrative decision. The features
of strategic decision are as follow:a. Strategic decisions have major resource propositions for an
organization. These decisions may be concerned with possessing
new resources, organizing others or reallocating others.
b. Strategic decisions deal with harmonizing organizational resource
capabilities with the threats and opportunities.
c. Strategic decisions deal with the range of organizational activities. It
is all about what they want the organization to be like and to be
about.
d. Strategic decisions involve a change of major kind since an
organization operates in ever-changing environment.
e. Strategic decisions are complex in nature.
f. Strategic decisions are at the top most level, are uncertain as they
deal with the future, and involve a lot of risk.
g. Strategic decisions are different from administrative and operational
decisions. Administrative decisions are routine decisions which help
or rather facilitate strategic decisions or operational decisions.

DIFFERENCES BETWEEN
The differences between Strategic, Administrative and Operational
decisions can be summarized as followsStrategic Decisions

Administrative
Decisions

Operational
Decisions

Strategic decisions are

long-term decisions.

Administrative
decisions are taken
daily.

Operational decisions
are not frequently
taken.

These are considered

where The future
planning is concerned.

These are short-term

based Decisions.

These are mediumperiod based

decisions.

Strategic decisions are

taken in Accordance
with organizational
mission and vision.

These are taken

according to strategic
and operational
Decisions.

These are taken in

accordance with
strategic and
administrative
decision.

These are related to

overall Counter
planning of all
Organization.

These are related to

working of employees
in an Organization.

These are related to

production.

These deal with

organizational Growth.

These are in welfare

of employees working
in an organization.

These are related to

production and
factory growth.

Limitation

While strategies are established to set direction, focus effort, define or

clarify the organization, and provide consistency or guidance in response to
the environment, these very elements also mean that certain signals are
excluded from consideration or de-emphasized. Mintzberg wrote in 1987:
"Strategy is a categorizing scheme by which incoming stimuli can be
ordered and dispatched." Since a strategy orients the organization in a
particular manner or direction, that direction may not effectively match the
environment, initially (if a bad strategy) or over time as circumstances
change. As such, Mintzberg continued, "Strategy [once established] is a
force that resists change, not encourages it."
Therefore, a critique of strategic management is that it can overly constrain
managerial discretion in a dynamic environment. "How can individuals,
organizations and societies cope as well as possible with ... issues too
complex to be fully understood, given the fact that actions initiated on the
basis of inadequate understanding may lead to significant regret?" Some
theorists insist on an iterative approach, considering in turn objectives,
implementation and resources. I.e. a "...repetitive learning cycle [rather
than] a linear progression towards a clearly defined final destination."
Strategies must be able to adjust during implementation because "humans
rarely can proceed satisfactorily except by learning from experience; and
modest probes, serially modified on the basis of feedback, usually are the
best method for such learning."
In 2000, Gary Hamel coined the term strategic convergence to explain
the limited scope of the strategies being used by rivals in greatly differing

circumstances. He lamented that successful strategies are imitated by firms

that do not understand that for a strategy to work, it must account for the
specifics of each situation.Woodhouse and Collingridge claim that the
essence of being strategic lies in a capacity for "intelligent trial-and
error" rather than strict adherence to finely honed strategic plans. Strategy
should be seen as laying out the general path rather than precise
steps. Means are as likely to determine ends as ends are to determine
means. The objectives that an organization might wish to pursue are limited
by the range of feasible approaches to implementation. (There will usually
be only a small number of approaches that will not only be technically and
administratively possible, but also satisfactory to the full range of
organizational stakeholders.) In turn, the range of feasible implementation
approaches is determined by the availability of resources.

The Strategic-Planning and Decision-Making Process

1. Vision Statement
The creation of a broad statement about the companys values, purpose,
and future direction is the first step in the strategic-planning process.[6] The
vision statement must express the companys core ideologieswhat it
stands for and why it existsand its vision for the future, that is, what it
aspires to be, achieve, or create.
2. Mission Statement
An effective mission statement conveys eight key components about the
firm: target customers and markets; main products and services;
geographic domain; core technologies; commitment to survival, growth,
and profitability; philosophy; self-concept; and desired public image. The
finance component is represented by the companys commitment to
survival, growth, and profitability. The companys long-term financial goals
represent its commitment to a strategy that is innovative, updated, unique,
value-driven, and superior to those of competitors.

3. Analysis
This third step is an analysis of the firms business trends, external
opportunities, internal resources, and core competencies. For external
analysis, firms often utilize Porters five forces model of industry
competition, which identifies the companys level of rivalry with existing
competitors, the threat of substitute products, the potential for new
entrants, the bargaining power of suppliers, and the bargaining power of
customers.
For internal analysis, companies can apply the industry evolution model,
which identifies takeoff (technology, product quality, and product
performance features), rapid growth (driving costs down and pursuing
product innovation), early maturity and slowing growth (cost reduction,
value services, and aggressive tactics to maintain or gain market share),
market saturation (elimination of marginal products and continuous
improvement of value-chain activities), and stagnation or decline
(redirection to fastest-growing market segments and efforts to be a low-cost
industry leader).
Another method, value-chain analysis clarifies a firms value-creation
process based on its primary and secondary activities. This becomes a
more insightful analytical tool when used in conjunction with activity-based
costing and benchmarking tools that help the firm determine its major
costs, resource strengths, and competencies, as well as identify areas
where productivity can be improved and where re-engineering may
produce a greater economic impact.
SWOT (strengths, weaknesses, opportunities, and threats) is a classic
model of internal and external analysis providing management information
to set priorities and fully utilize the firms competencies and capabilities to
exploit external opportunities, determine the critical weaknesses that need
to be corrected, and counter existing threats.
4. Strategy Formulation
To formulate a long-term strategy, Porters generic strategies model is
useful as it helps the firm aim for one of the following competitive
advantages: a) low-cost leadership (product is a commodity, buyers are
price-sensitive, and there are few opportunities for differentiation); b)
differentiation (buyers needs and preferences are diverse and there are
opportunities for product differentiation); c) best-cost provider (buyers
expect superior value at a lower price); d) focused low-cost (market niches

with specific tastes and needs); or e) focused differentiation (market niches

with unique preferences and needs).
5. Strategy Implementation and Management
In the last ten years, the balanced scorecard (BSC) has become one of the
most effective management instruments for implementing and monitoring
strategy execution as it helps to align strategy with expected performance
and it stresses the importance of establishing financial goals for
employees, functional areas, and business units. The BSC ensures that the
strategy is translated into objectives, operational actions, and financial
goals and focuses on four key dimensions: financial factors, employee
learning and growth, customer satisfaction, and internal business
processes.

The Role of Finance

Financial metrics have long been the standard for assessing a firms
performance. The BSC supports the role of finance in establishing and
monitoring specific and measurable financial strategic goals on a
coordinated, integrated basis, thus enabling the firm to operate efficiently
and effectively. Financial goals and metrics are established based on
benchmarking the best-in-industry and include:
1. Free Cash Flow
This is a measure of the firms financial soundness and shows how
efficiently its financial resources are being utilized to generate additional
cash for future investments. It represents the net cash available after
deducting the investments and working capital increases from the firms
operating cash flow. Companies should utilize this metric when they
anticipate substantial capital expenditures in the near future or followthrough for implemented projects.
2. Economic Value-Added
This is the bottom-line contribution on a risk-adjusted basis and helps
management to make effective, timely decisions to expand businesses that

increase the firms economic value and to implement corrective actions in

those that are destroying its value. It is determined by deducting the
operating capital cost from the net income. Companies set economic valueadded goals to effectively assess their businesses value contributions and
improve the resource allocation process.
3. Asset Management
This calls for the efficient management of current assets (cash, receivables,
inventory) and current liabilities (payables, accruals) turnovers and the
enhanced management of its working capital and cash conversion cycle.
Companies must utilize this practice when their operating performance falls
behind industry benchmarks or benchmarked companies.

4. Financing Decisions and Capital Structure

Here, financing is limited to the optimal capital structure (debt ratio or
leverage), which is the level that minimizes the firms cost of capital. This
optimal capital structure determines the firms reserve borrowing capacity
(short- and long-term) and the risk of potential financial
distress. Companies establish this structure when their cost of capital rises
above that of direct competitors and there is a lack of new investments.
5. Profitability Ratios
This is a measure of the operational efficiency of a firm. Profitability ratios
also indicate inefficient areas that require corrective actions by
management; they measure profit relationships with sales, total assets, and
net worth. Companies must set profitability ratio goals when they need to
operate more effectively and pursue improvements in their value-chain
activities.
6. Growth Indices
Growth indices evaluate sales and market share growth and determine the
acceptable trade-off of growth with respect to reductions in cash flows,
profit margins, and returns on investment. Growth usually drains cash and
reserve borrowing funds, and sometimes, aggressive asset management is
required to ensure sufficient cash and limited borrowing. Companies must
set growth index goals when growth rates have lagged behind the industry
norms or when they have high operating leverage.

7. Risk Assessment and Management

A firm must address its key uncertainties by identifying, measuring, and
controlling its existing risks in corporate governance and regulatory
compliance, the likelihood of their occurrence, and their economic impact.
Then, a process must be implemented to mitigate the causes and effects of
those risks. Companies must make these assessments when they
anticipate greater uncertainty in their business or when there is a need to
enhance their risk culture.
8. Tax Optimization
Many functional areas and business units need to manage the level of tax
liability undertaken in conducting business and to understand that
mitigating risk also reduces expected taxes. Moreover, new initiatives,
acquisitions, and product development projects must be weighed against
their tax implications and net after-tax contribution to the firms value. In
general, performance must, whenever possible, be measured on an aftertax basis. Global companies must adopt this measure when operating in
different tax environments, where they are able to take advantage of
inconsistencies in tax regulations.
Empirical studies have shown that a vast majority of corporate strategies
fail during execution. The above financial metrics help firms implement and
monitor their strategies with specific, industry-related, and measurable
financial goals, strengthening the organizations capabilities with hard-toimitate and non-substitutable competencies. They create sustainable
competitive advantages that maximize a firms value, the main objective of
all stakeholders.

SCOPE AND INTER-LINKAGES IN STRATEGIC

DECISION MAKING
The scope of strategic management in decision making is extensive. The
inter-linked environs, where substantial strategic action can be devised in
an organization by business leaders to avail best opportunities available,
may constitute the following:

1. Top managements general decision making:

It relates to taking decision for the organization as a whole strategic
management takes a holistic view of what the business is and how it
can achieve its purpose and vision. This requires having a detailed
understanding of the organization and the environment in which it
exists, including their dynamic relationship. Various decision making
tools and techniques are available with the top management for this.
The decisions taken by top management are then integrated with the
functioning of the various departments across the enterprise so that
the activities of all the departments are helpful in achieving the
desired result The top management decides the future course of
action over a long period of time. However, it is also involved in shortterm issues, as when the situations demand, to make the required
changes in each of the components of the enterprise to achieve the
result.
2. Finance-oriented decision making:
This relates to taking decisions about arranging and utilizing funds in
order to maximize profitability and value of the firm. This area takes
into consideration all the aspects related to sourcing funds, investing
funds, maintaining cash levels, increasing profit margins, managing
costs and enhancing the value of the shares in the market. It includes
both long-term and short-term decision making. The strategic or longterm purview is essential. Strategic financial management relates to
long-term planning and designing of financial policy to achieve crucial
strategic goals in consonance with the companys vision and mission.
The financial decisions are inter-linked with other departments of the
company as their inputs and activities usually require funding. So
financial decisions are connected with the financial status and wellbeing of a company. If a company wishes to expand its operations in
future, it is necessary to make the required changes funds
accordingly.
3. Research and development-oriented decision making:

This relates to exploration of the potential of the organizations

capability by investing in research and development, which could
give a distinctive edge to the company in the competitive markets.
The constraint here is that the company may have to keep investing
funds and resources over a period of time as the new findings may
take a long time, and it can reap benefits from them only after a
breakthrough is achieved. Research is especially important in highly
innovative and competitive industries like computers, technologyoriented sectors, education, pharmaceuticals, entertainment,
FMCGs, defence services, etc.
4. Human resources-oriented decision making:
The potential and talents present in the human capital are the force
that enhances optimal utilization of other resources and capabilities
present in the organization. The expertise, skill, talent, and brainware will decide the future of the organization in a competitive
environment.
5. Operations-oriented decision making:
It relates to production or manufacturing of goods. An input as raw
material is run through a process and an output as a consumable
product is given. The decisions are not just restricted to this process.
Manufacturing and production decisions are short-term as well as
long-term. The long-term decisions may involve capacity expansion,
new production techniques, equipment requisition, innovative
material inputs, layout designing, etc. while the short-term decisions
may relate to day-to-day operations of the manufacturing unit.
6. Marketing-oriented decision making:
It relates to decision making pertaining to customer satisfaction,
consumer needs, making available the products and services through
optimized distribution networks, segmenting and targeting of markets,

positioning products, promotion and publicity, etc. The strategic

decisions involve product or service brand equity, market expansions,
targeting, positioning, market analysis based on research,
commercialization of products and improvising the existing, mapping
consumer behaviour and taking strategic marketing decisions in
consonance with the companys vision.
7. Information-oriented decision making:
It relates to the availability of information, as and when required, that
has the capability of generating commercial value, In the era of
information and competition, there should be a proper flow of
information as facts and data are required for decision making. So,
there are constant advancements in information and technology,
online resources, various Enterprise Resource Planning (ERP)
software and equipment. The level of investment and what should
reach whom decisions are important, Constant up gradation is also
required and a dynamic information system is necessary.
8. Innovation-oriented decision making:
Business leaders of companies need to be aware of the innovation
that exists and the potential that it holds. Innovation can be
multidimensional, usually arising out of human brain-ware. It is
essential to harness the potential in day-to-day as strategic context
through proper development. It may be exhibited in intelligence, skill,
processes, techniques, inputs, outputs, etc.
All these areas are of great importance, but general management
decision making and financial decision making are the integral means
of support for all other functions. Their criticality must not be ignored.
So, let us understand the strategic or general management and
financial management in the chapters to follow.

Constraints to Strategic Management

Strategic management offers a wide arrays of benefits over a wide
arrays of benefits over a long period of time, but it also suffers from
certain constraints that creep up either out of the strategic
management process, resource constraint, or the given environment.
The prominent constraints are as follows:
Concept of shared vision
In practical business situation, vision may not have sharing as it
is advocated in the theoretical concepts. Usually, the vision is
formulated at the top level and is required to follow that without
much scope for reasoning.
Biases and preconceived notions of strategists
An unbiased and analytical approach is endorsed by strategic
management discipline, but it overlooks the human tendency
towards inclination and subjectivity. The strategist may become
a victim of biases, prejudices, pre-conceived notions,
presumptions, etc. while making decision and may not even
realise it. This can suppress innovation and radical thought
processes. This is myopic and detrimental in consequences.
Psychological factors
The strategic thinking is pertaining to the mind and the
psychology of the decision makers. The human psychology is a
complex matter. The conscious and subconscious mind may
come into play while making decision and natural human
instincts may overpower analytical thinking. This is a constraint
as humans are involved in strategic thinking.

 Inclination towards specialization

The decision makers may opt to compartmentalise the
organization and exhibit intense inclination towards the aspects
related to their own field of speciality. This will defy the holistic
approach and will turn the strategist into a specialist and not a
generalist, while being a generalist is a prerequisite for
strategic planning.
Faulty planning
The impetus for the strategic management process is planning.
If the foundation, i.e. planning is not done properly, then the
whole process loses its character. There will be huge wastage
of resources and capabilities.
Strategic management- a process or an event
There is a difference between seeing strategic management as
a process or as an event. If there is an episodic approach to
strategic management, it may not bear fruitful results. Instead,
it should be imbibed into the natural course of working of the
business and its impacts should be exhibited at functional
levels. Therefore, it is a mistake to see strategic management
as a one-time event.
Paralysis by over-analysis
It is said that excess of good thing is also bad if the strategist is
thinking more than actually doing, then it is a trap. There can be
overload of information that can paralyse the strategist, and he
loses the courage to take decisions. This can allow valuable
opportunities to slip away.
Inadequate understanding

Though understanding the field and the organization is a must,

the inability to do so may do more harm than good, as the
proverb goes, little knowledge is a dangerous thing. A detailed
orientation is mandatory for a proper analysis.
Other constraints
There may be other constraints while implementing the
strategy. Each level in the organization offers new challenges.
Integration is a must at all levels. A disoriented leader can be
destructive and counterproductive.
Although these constraints are a potential threat to the strategic
decision making process, they have been enumerated to help
the strategist identify them and spontaneously attempt to
overcome them. These can be countered if the strategist ideally
follows the strategic decision making process with an open
mind.

Conclusion

It provides a holistic view as well as techniques to understand details such

that proper decision making can be done to achieve desire goal and Helpful
for future planning and current analysis of business. The approach should
be followed with due caution, keeping the opportunities as well as the
constraints under consideration
The scope of SFM is expanding. SFM works as an academic discipline as
well as a practical technique in business in order to increase the need to
manage funds more effectively and efficiently, to generate optimum returns
in future. Recently, the business economic conditions have been
challenging and strategists tried to safeguard the interests of their
shareholders by utilizing superior management techniques wherever
possible. In such a business environment, sound management of
resources is crucial. For this, foresight and proactive approach are the
facilitators that form an integral part of strategic financial management.

DEPARTMENT OF TELECOMMUNICATIONS
MINISTRY OF COMMUNICATION &
IT GOVERNMENT OF INDIA
INTRODUCTION

The Indian Telecom sector has come a long way since

liberalization started with New Telecom Policy (1999). Telecom
sector has witnessed exponential growth especially in the
wireless segment in the last few years. Telecom has evolved as
a basic infrastructure like electricity, roads, water etc. Total
number of telephone subscribers have increased from mere 76
million in 2004 to more than 764.77 Million in 30th November
2010.

The telecom sector is one of the major drivers of the growth of the
Indian economy. It is the fastest growing telecom sector in the world
with more than 16 million subscribers being added every month.
1.3 The auction of 3G and BWA spectrum in June 2010 has opened
the gates for the availability of the latest technology and innovations
for Indian consumers.
1.4 The total tele-density is now 64.34% as on 30th Nov 2010 and the
telecom sector is one of the significant contributors to the
Government revenue.
1.5 Although, the progress of the past few years has been
spectacular, there are several areas of deficit and concern for which a
well thought out strategy has to be evolved for the development of
this sector.
1.6 In order to further boost the growth in Telecom sector,
Government has decided to draft a Strategic Plan of Department of
Telecommunications, for next five years.

Vision, Mission, Objectives and Functions

Vision:
To provide to the people of India, reliable and affordable tele-connectivity
capable of delivering tele-services anytime, anywhere.

Mission:

To develop a strong, vibrant, secure state-of-the-art

telecommunication network providing seamless coverage with
special focus on rural and remote areas and bridging digital divide .
Promote Research and Development and Product Developments in
cutting edge technologies and services for domestic and worldwide
markets
Promote Development of new standards and generate IPRs to make
India a leading nation in the area of telecom standardization,
especially among Asia Pacific countries.
To create knowledge based society through proliferation of broad
band facilities in every part of the country.
Make India a global hub, for telecom services and telecom
equipment manufacturing.

Objectives
To facilitate inclusive growth of telecommunications by formulating
coherent policies in the following areas, for,:
Optimum utilization of scarce spectrum resource.
Ensure security in telecom networks and adopt effective measures to
deal with cyber threats.
Grant of telecom licenses in an objective and transparent manner.
Promotion of robust competitive Market for telecom services.
Convergence of technologies, services and harmonization of
regulatory framework

Functions:

 Policy, Licensing and coordination matters relating to Telegraphs,

Telephones, Wireless Data, Facsimile, Telemetric services and other
like forms of telecommunications.
Promotion of standardization, research and development in
telecommunications.
Promotion of private investment in telecommunications.
Financial assistance for the further research and study in
telecommunication technology and for building up adequately trained
manpower for telecom programmed including assistance to
institutions and to universities for advance scientific study and
research.
Promotion of indigenous telecom equipment manufacturing for
domestic market as well as for export.
To promote deployment of secure indigenous equipment for
strategic, security and government networks.

STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREAT

(SWOT) ANALYSIS
1.Strengths
I. Fastest growing telecom market.
II. Progressive reform process.
III. Forward looking approach of the Government.
IV. Technology neutrality.
V. Formulation of policies in tune with the growth requirement.
VI. Fast adaptation of technological development i.e. Mobile Number
Portability (MNP), Next generation Network (NGN), 3G and Broadband
Wireless Access(BWA), IPv6 etc.

2 Weaknesses
I. Lack of indigenous Telecom Manufacturing and R&D
II. Comparatively slower growth of Telecom services in rural/remote areas.
III. Low Broadband penetration in the country
IV. Lack of local content/application development.
V. Low profitability of Telecom PSUs.
VI. Non availability of adequate spectrum
VII. Utilization against the available corpus of USOF.

3 Opportunities
I. For developing a new comprehensive Telecom policy.
II. For accelerating the growth of teledensity in the country.
III. For creation of telecom infrastructure in rural and remote areas by
utilization of the USO Fund.
IV. For laying of Optical Fibre Cable (OFC) to uncovered areas and
effective utilization of the existing resources to provide backhaul
connectivity.
V For huge Broadband potential in the country.

4 Threats
I. Non availability of adequate spectrum for telecom services
II. Underperformance of PSUs resulting in industrial unrest and erosion of
value of government equity.
III. Dependence on foreign telecom equipment suppliers.
IV. Cyber threats on ICT networks, leading to security concerns.
VI Obsolesce of existing network elements due to fast changing telecom
technologies.

STRATEGY PLAN
FOR
MINISTRY OF MINES
1

STRATEGIC PLAN DOCUMENT MINISTRY OF MINES

1 VISION
Achieve optimal utilization of India's mineral resources through
scientific, sustainable and transparent mining practices, exploration and
geo-scientific research & development
2 OBJECTIVE
Reworking legislative framework for transparent, safe, scientific &
sustainable mining and effective regulation
(i) Facilitating techno-economic and scientific development in the
mineral sector.
(ii) Strengthening mechanisms for regulation of mining and curbing
illegal mining
(iii) Bringing about improvement in the functioning of GSI
(iv) Bringing about improvement in the functioning of IBM
(v) Effective supervision of mineral concession system
(vi) Monitoring and improving performance of PSUs
(vii) Promoting R&D projects
(viii) Accelerating partnerships with resource rich countries.
(ix) Survey & exploration of sea bed minerals up to Exclusive
Economic Zone (EEZ).
(x) Human Resource Development & Capacity building for Central &
State Government and other stakeholders.
3 FUNCTIONS
3.1 Legislation for regulation of mines and development of minerals
within the territory of India, including mines and minerals underlying the
ocean within the territorial waters or the continental shelf, or the
2

exclusive economic zone and other maritime zones of India as may be

specified, from time to time by or under any law made by Parliament.
3.2 Regulation of mines and development of minerals other than coal,

lignite and sand for stowing and any other mineral declared as
prescribed substances for the purpose of the Atomic Energy Act, 1962
(33 of 1962) under the control of the Union as declared by law,
including questions concerning regulation and development of minerals
in various States and the matters connected therewith or incidental
thereto.
3.3 All other metals and minerals not specifically allotted to any other
Ministry/ Department, such as aluminium, zinc, copper, gold, diamonds,
lead and nickel.
3.4 Planning, development and control of, and assistance to, all
industries dealt with by the Ministry.
3.5 Administration and management of Geological Survey of India.
3.6 Administration and management of Indian Bureau of Mines.
4 GLOBAL TRENDS IN THE MINERAL SECTOR
Globally, three trends have emerged in the minerals sector in recent
years:
(i) Rising demand relative to supply and increasing cost of mining
has led to an increase in commodity prices. The mineral demand is
likely to increase at an even faster pacethe demand for iron-ore is
likely to grow at 2 to 5 per cent globally over the next 10 years. At the
same time, replenishing mineral reserves has only become more
difficult due to declining ore grades and additional challenges such as
inadequate infrastructure and human capital, critical to support the
growth of the sector.
3

(ii) Consequently, we see heightened exploration activity

companies are increasingly getting into new geographies like
Africa: Exploration spend has increased four times with the share of
juniors increasing from 30 per cent to nearly 50 per cent in the last
decade.
(iii) Governments worldwide are adopting progressive policy
measures to boost mining in their countries: The Indian
government, too, has initiated several measures to reform the
mining sector, e.g., MMDR Act, Sustainable Development
Framework.
5 NATIONAL TRENDS IN THE MINERAL SECTOR
5.1 Performance on output parameters
Contribution of mining sector to Indias GDP has been stagnant at
around 1.2 per cent over the last decade. The Indian mining sector grew
at a CAGR of 7.3 per cent in the last decade compared to 22 per cent in

China for the same period. The mining sector employs a smaller
percentage of Indias population (0.3 per cent as compared to 3.8 per
cent in South Africa, 1.4 per cent in Chile, and 0.7 per cent for China). In
addition, employment in the Indian mining sector has grown at a rate of
about 3 per cent per annum over the last 10 years.
5.2 Performance on input parameters
Indias spend on exploration projects is at 0.3 per cent of the global
spend (compared to 19 per cent for Canada and 12 per cent for
Australia). Exploration in India is mostly restricted to a depth of 50 to 100
metre vs. as deep as 300 metre in countries such as Australia.
4

5.3 Opportunities
Despite this scenario, India is in a good starting position to transform its
mining sector. This is due to Indias large reserve base of coal, iron ore,
bauxite manganese, etc., and also the push towards progressive policy
measures initiated by the Ministry, such as the MMDR Act, and IBM/GSI
reforms.
6 ASSESSMENT OF SITUATION
6.1 Mining and metals sectors can play a critical role in the economic
development, attracting investment and employment generation in the
country. The demand for various metals and minerals will grow 4-5
times over the next 15 years (9-11% growth per annum) against a
backdrop of globally dwindling and increasingly scarce resources.
There will be huge demand for the metals in view of the rapid
urbanization and growth in the manufacturing sector in India as shown
below in Figure 1. The mineral sector needs to prepare for facing the
challenges in view of increasing demand and reducing resources world
over.
Figure 1. Metals demand in India will increase 4 to 5 times over 15 years
2010
Steel demand
Million tons

Aluminum demand
Million tons
275
60
2025

8.5
1.6
2010 2025

Copper demand
Million tons
2010

2.4
0.6
2025

6.2 With the mineral potential in India, the contribution of the mining

sector in the GDP should aspire to around 7-8% over 20 years. The
mining sector needs to play a major role if India has to realize the
potential growth of 9% per annum in the coming years.
6.3 Development of the minerals potential could also help
in mainstreaming the local communities (including tribal communities )
by sharing the economic benefits of mining related activities with them
in a fair and equitable manner through mechanism that give them
choices and enable them to adopt changes at a pace of their choosing .
Most of the mineral potential areas are in the interior tribal areas of
India , where the development is the lowest .The mineral sector can
potentially change the situation by providing much needed
employment and infrastructure creation needs. The per capita GDP in
these mineral rich, tribal dominated states vs. the India average and a
similar comparison in other countries indicates the strategic need to
unlock the potential of the mineral sector.
7 TRANSFORMINING THE INDIAN MINERALS SECTOR
SIX PRIORITIES
7.1 The vision of the Ministry of Mines is to promote optimal utilisation of
Indias mineral resources for its industrial growth and create economic
surplus using scientific exploration and sustainable mining practices. The
key objectives of the Ministry are to:
(i) Define a legislative and non legislative framework to
Promote scientific exploration for expanding the mineral
reserves in India to its full potential (onshore and offshore)
Ensure globally best, fair, transparent, and efficient process
for the mineral concession system
Enable sustainable mining
Address the needs of key stakeholders (states, industry,
concerned ministries and departments, local communities)
6

Define the mandate for the key agencies under the Ministry
viz, Indian Bureau of Mines (IBM), Geological Survey of
India (GSI), PSUs.
(ii) Develop geo-scientific partnerships with the state government,
industry and other stakeholders for the management of mineral
resources and development of mineral based industries.
(iii) Support the Indian industry in accessing the mineral resources
internationally to ensure raw material security.
(iv) Position the Ministry as a techno-economic policy formulator
and promoter of sectoral scientific activities.

7.1.2 Given the starting position of the Indian mining sector, global trends
in the industry, as well as the overall vision and objectives of the Ministry
of Mines, targeted action is required on five key initiative areas while
working closely with the stakeholders.
7.2 Expanding resource and reserve base by stepping up
exploration and aiding international acquisition of strategic
minerals. The sector needs to systematically invest towards:
7.2.1 Exploring and expanding the resource and reserve base
for minerals having adequate potential in India (iron ore, bauxite,
lead, zinc, etc.). The following initiatives are necessary to enhance
mineral exploration in India:
The current geological survey efforts of the GSI should be
increased further. GSI should coordinate with concerned agencies
Geological Programming Board.
GSI should digitise and make the baseline data (existing data and
additional data generated by GSI and private sector
reconnaissance) publicly available on its internet portal to enable
exploration companies in their exploration effort.
GSI is planning four major programmes in the next 10 years
7

including online GIS, national geochemical mapping and national

aeromagnetic mapping.
GSI and progressively, the State Directorates, should step up
regional resource assessment activities to identify known
mineralisation areas.
In addition, GSI should coordinate with the Ministry of Earth
Sciences to assess mineral potential in offshore areas (including
exclusive economic zone, territorial waters, international waters)
and create a plan to enable exploration and development of
resources.
7.2.2 Internationally acquiring strategic minerals with low
availability. These include cobalt, nickel, fertiliser minerals, etc. that
have low reserve base, lower likelihood of future finds in India and
scarce supply/consolidated market structure globally.
The acquisition of these key minerals will require to conduct a 25-year
demandsupply analysis for India and prioritise the resources to be
acquired, and to prioritise the geographies to be targeted for
resource acquisition / supply.
7.3 Reducing permit delays to create a more favourable policy
environment: With the passing of new MMDR Bill, 2011 in the next

few months and then to put in place the structural mechanisms for
reducing permit delays.
7.4 Setting up core enablers for mininginfrastructure, human
capital and technology: A set of core enablers across infrastructure,
human capital and technology are necessary to support the growth of
the mining sector.
7.4.1 India needs to develop infrastructure capacity to support the
mining sector: Developing infrastructure capacity to support the mining
sector will require collaboration with railways, ports and surface
transport ministry to pursue the top 50 infrastructure projects (railway
sidings, trunk lines, doubling of track, use of better equipment) for the
mining sector.
8

7.4.2 To take steps to bridge the impending shortage of human

capital in mining, especially for mining engineers, diploma holders
and skilled/semi-skilled labour. This will require:
increase in the mining engineering seats by around 4,000 over 10
years (three times the current number) in relevant institutes.
to include mining-specific courses at ITIs in the six major mining
states.
to include mining as a priority sector in the National Skill
Development Corporation (NSDC) charter to facilitate private
sector participation in skill development for the mining sector.
In the long-term, create an ecosystem to support joint research
programs by GSI, IBM with participation from academic institutions,
industry players and foreign research agencies.
7.5 Ensuring sustainable mining and development: Draft
sustainability development framework (SDF) is progressive and is
tailored to the unique national context. To enforce the overall framework,
the following additional measures are required:
Enforce critical components of sustainability through regulatory
changes e.g., increase financial commitment for mine closure and
link it to post-closure rehabilitation cost (e.g., financial guarantee in
Quebec is 70 per cent of the post-closure cost).
Once SDF is accepted, clearly define the activities required to
implement SDF principles, provide best-practice case studies and
flesh out concepts for implementation.
7.6 Creating an information, education and communication plan
7.6.1 The Indian mining sector has seven key stakeholders: local
community, public representatives (NGOs, MLA, panchayats), central

government bodies (Planning Commission, PMO, etc.), related

ministries (MOEF, Railways, etc.), State Governments, mining sector
ecosystem (mining and associated legal/financial companies) and the
international community. To communicate three key themes to its
stakeholders:
9

The mining sector is critical for the country in terms of GDP growth,
tax, employment, and as an enabler of industrialisation.
Mining activity can be stepped up in a responsible and sustainable
manner while generating benefits for and addressing concerns of
all stakeholders.
The transformation agenda for the Indian mining sector needs to be
developed keeping in mind the unique challenges and context.
7.6.2 This will require active participation of all concerned
stakeholders. The above themes are to deliver through an
Information, Education and Communication (IEC) plan based on four
design principles:
Prioritising themes by stakeholders: For instance, central
government bodies and other ministries need to understand the
significance of mining in India, and the international community
needs to be informed about the unique realities of India and the
progressive measures adopted by the Ministry of Mines.
Choosing the right medium of communication: This is important
to reach various stakeholders. For example, meetings with NGOs
and local panchayats can address the concerns of local
community; setting up mining parks will educate the broader
community on the benefits of mining, etc.
Multiple stakeholders must drive communication efforts:
These include the Ministry of Mines, state governments, as well as
mining companies.
Bring about tangible, visible change through relevant
stakeholders: This would be the most credible element of the IEC.
10