Strategic Management—Page 1 ASSIGNMENT Q.1 Explain the evolution, role and importance of business policy and strategic management. What would be the role of manager in this age? Answer: Introduction: The term strategic management has been traditionally used. New title such as business policy, corporate strategy and policy, corporate policies is essentially and extensively used which means more less the same concept. Evolution of Strategic Management: 1) In early 1920’s and 1930’s the managers used day-to-day planning methods to perform any task. 2) To anticipate the future, they tried using tools like preparation of budgets and control systems like capital budgeting and management by objectives. 3) The techniques were unable to emphasize the future adequately. 4) The next step was they tried using long range planning which was replaced by strategic planning and later by strategic management. 5) In mid 1930’s, according to the nature of business the planning was done during Adhoc policy making. 6) As many businesses had just started operations and were mostly in a single product line, there arose a need for policy making. 7) As companies grew they expanded their products and they catered to more customer and which in turn increased their geographical coverage. 8) The expansion brought in complexity and lot of changes in the external environment. Hence there was a need to integrate functional areas. 9) This integration was brought about by framing policies to guide managerial action. 10) Policies helped to have pre-defined set of actions, which helped people to make decision. 11) Policymaking was the owner’s prime responsibility. 12) Due to increase in the environment changes, in 1930’s and 40’s policy formulation replaced ad-hoc policy making, which led to emphasis shifted to the integration of functional areas in this rapidly changing environment. 13) Especially after II World War there was more complexity and significant changes in the environment. 14) Competition increased with many companies entering into the market. 15) Policy making and functional area integration was not sufficient for the complex needs of a business. ROLE OF STRATEGIC MANAGEMENT: 1) Due to increase in the competition, in 1960’s there was a demand for critical look at the bane corrupt of business. 2) The environment played an important role in the business. 3) The relationship of business with the environment lead to the concept of strategy. 4) In early sixties, this helped the management to manage between the business and the environment. 5) In early eighties, as many companies were globalised which lead to the competition of the rivals access the world. Strategic Management—Page 2 6) Japanese companies along with other Asian companies unleashed a force across the world and posed a threat for the US and European companies, which led to the current thinking. 7) Strategic management focused on 2 aspects: Strategic process of business. Responsibilities of strategic management. 8) Unlike others, in this phase the role of senior management is vital and of Utmost importance. Their role was important in decision-making like a) Whether a company promotes a joint venture/new decision. b) Decides to go for an expansion. c) Takes other important actions. 9) All these actions and decision had a long-term impact on the company and its future operations, which was the result of senior management decision-making. 10) Strategic management is both about the present and future course of action, which was the prime responsibility senior management. Strategic Management is I. II. III. IV. V. The study of function and responsibilities of senior management A crucial problem that affects success in total enterprise. The decision that determine the direction of the organization and shape of its future Identity and molding of its character Mobilization and their allocation of the resources. Hence as managers had variety of choices, decisions were based on the circumstances, which would take the company in specified directions. IMPORTANCE AND ROLE OF MANAGERS IN STRATEGIC MANAGEMENT: I. Strategic management integrates the knowledge and experience gained in various functional areas. II. It helps to understand and make sense of complex interaction in various areas of management. III. It helps in understanding how policies are formulated and in creating appreciation of complexities of environment that the senior management faces in policy formulation. IV. Managers need to begin by gaining an understanding of the business environment and to in control. Here are few steps Indian managers need to do. a) They should know to manage and understand information technology, which is changing the face of business. b) As public and common investors own and more companies managers need to acquire skills to maximize shareholder value. c) To have/take a strategic perspective, managers should foresee the future and track changes in customer expectation. Intuitive, logic reasoning is required for proper decisionmaking. Strategic Management—Page 3 d) e) f) g) h) Successful companies depend on people. For people, management managers should create capability for imitating and manage things through leadership and should possess qualities like patience, commitment and perseverance. Managers need to provide speed responses to environmental changes through informational systems and organizational process. As corporate are becoming more integrated with the public life, corporate governance is becoming important which manager may have to practice. Managers should learn to deal with confused and complex situations. They should know to deal with global managers, business protocols and market conditions. In complex and certain situations, managers should have the courage in decisionmaking to make unconventional decisions. i) Managers should possess high ethical standards in business and focus on social responsibility. Conclusion Thus we can say the purpose of strategic management is manifold. To be successful in the business one should possess/have holistic approach and should know to integrate the knowledge gained in various functional area of management. By having generalist approach, a senior manager can understand the complex inter linkages operating within the organization and should have systematic approach in decision-making in relation with the changes which takes place in the environment. Strategic Management—Page 4 Q.2. What is strategy? At what levels is it formulated? Answer: INTRODUCTION: To understand the process of strategic management the concept should be understood and controlled. The term strategy is derived from the Greek word “STRATEGOS” Generalship. The actual direction of military force, as distinct from governing its deployment. The word strategy means “ THE ART OF GENERAL ”. Based on the studies and views by various experts and management gurus Strategy in business has taken various connotations. Definition: William Glueck, a Management Professor defined it as “A unified, comprehensive and integrated plan designed to assure that the basic objectives of the enterprise are achieved”. Alfred Chandler defined Strategy as:“The determination of the basic long term goals and objectives of an enterprise and the adoption of the courses of action and the allocation of resources necessary for carrying out these goals”. Thus strategy is: a. b. c. d. A plan / course of action leading to a direction. It is related to company’s activities. It deals with uncertain future. It depends on vision / mission of the company to reach its current position. STRATEGY: 1. Before making a decision managers have to look into the course of deciding since Strategy involves situations like: a) b) c) d) e) How to face the competition. Whether to undertake expansions/diversification To be focused/ broad based How to chart a turn around Ensuring stability/should we go in for disinvestments etc 2. An establishment and successful company would start to face new threats in the environment. This is due to its success and emergence of new competitors. It has to rethink the course of action it has been following. This is called strategy. 3. With such rethinking and environment analysis, new opportunities may emerge and be identified. 4. To make use of these opportunities, the company might fundamentally rethink and reason the ways and means, the actions it had been following in the past. These are called “ strategies “. Strategic Management—Page 5 5. For a company to survive and to be successful strategy is one of the most significant concepts to emerge in the field of management. According to Alfred chandler the determination of basic long-term goals and objectives of an enterprise and the adoption of the course of action and the allocation of resources for carrying out these goals. William Glueck defines strategy as “a unified, comprehension and integrated plan designed to assure that the basic objectives of the enterprises are achieved”. 6. Michael Porter views strategy as the “ core of general management is strategy”. Managers must make companies flexible, respond rapidly, benchmark the best practices, outsource aggressively, develop core competencies; infact should know how to play new roles everyday. Hyper competition is a common phenomenon that rivals copy very fast. 7. Companies can outperform rivals only if it can establish a difference it can preserve and deliver greater value at a reasonable cost. 8. Strategy rests on unique activities –“ The essence of strategy is in the activities – choosing to perform things differently and to perform different activities than rivals”. 9. Strategy is long term. If company focus is only on operational effectiveness. It can become good and not better. Overemphasis on growth leads to the dilutions of strategy. Growth is achieved by deepening strategy. 10. Strategy is the future plan of action, which relates to the companies activities and its mission/vision i.e. when it would like to reach from its current position. 11. It is concerned with the resource available today and those that will be required for the future plan of action. It is about the trade off between its different activities and creating a fit among these activities. LEVELS OF STRATEGY: 1. When a company performs different business/ has portfolio of products, the company will organize itself in the form of strategic business units (SBU’s). 2. In order to segregate different units each performing a common set of activities, many companies are organized on the basis of operating divisions/decisions. These are known as strategic business units. Strategic Management—Page 6 CORPORATE LEVEL FUNCTIONAL LEVEL SBU1 STRTEGIES [CORPORATE] SBU2 FUNCTIONAL SBU3 (SBU LEVEL) LEVEL STRATEGIES 3) Strategies are looked at Corporate level SBU level 4) There exists a difference at functional levels like marketing, finance, productions etc. Functional level strategies exist at both corporate and SBU level. It has to be aligned and integrated. 5) CORPORATE LEVEL STRATEGY: It’s a broad level strategy and all its plan of actions is at corporate level i.e. what the company as a whole. It covers the various strategies performed by different SBU’s. Strategies needs should be in align with the company objective. 6) Resources should be allocated to each SBU and broad level functional strategies. To ensure things there would need to have co-ordination of different business of the SBU’s. 7) For most companies strategies plans are made at 3 levels. a) FUNCTIONAL STRATEGY b) SOCIETAL STRATEGY c) OPERATIONAL STRATEGY FUNCTIONAL STRATEGY: As the SBU level deals with a relatively. Smaller area that provides objectives for a specific function in that SBU environment are marketing, finance, production, operation etc. Strategic Management—Page 7 SOCIETAL STRATEGY: Larger Companies like conglomerates with multiple business in different countries needs larger level strategy. 1) A relatively smaller company may require a strategy at a level higher than corporate level. 2) It’s how the company perceives itself in its role towards the society/ even countries in terms of vision/ mission statement/ a set of needs that strives to fulfill corporate level strategies are then derived from the societal strategy. OPERATIONAL LEVEL STRATEGY: In the dynamic environment & due to the complexities of business strategies are needed to be set at lower levels i.e. one step down the functional level, operational level strategies. There are more specific & has a defined scope. E.g. Marketing Strategy could be subdivided into sales Strategies for different segments & markets, pricing, distribution etc. Some of them may be common & some unique to the target markets. It should contribute to the functional objectives of marketing function. These are interlinked with other strategies at functional level like those of finance, production etc MISSION/VISION LEVEL CORPORATE LEVEL FUNCTIONAL LEVEL SBU1 SBU2 STRTEGIES [CORPORATE] SBU3 (SBU LEVEL) FUNCTIONAL LEVEL STRATEGIES OPERATIONAL LEVEL Strategic Management—Page 8 Corporate level is divided from the societal level strategy of a corporation S.B.U Level are put in to action under the corporate level strategy. Functional Strategies operate under SBU Level. Operational Level is derived from functional level strategies Conclusion: These are the levels at which strategies are formulated. Strategy is a plan or an action leading to a particular direction. We have corporate level Strategy and Strategic Business Unit level to fulfill the objectives of the company. Q.3 What are the Issues in Strategic Decision Making? Explain the role of Various Strategies. Answer: Strategy means General ship. The actual direction of military force Strategy involves decision-making like how to face the competition, how to undertake expansion or diversification etc. Issues in Strategic Decision Making 1. While making a decision the company might have different people at different periods of time. 2. Decision requires judgments; a personal related factors are important in decision-making. Hence decision ma y differs as person change. 3. Decisions are not taken individually, but often there is a task in decisions which could be Individual Vs Group decision making. There will be a difference between the individual and group decision-making. 4. On what Criteria a company should make its decision, for evaluation of the efficiency & effectiveness of the decision making process, a company has to set its objectives which serves as main bench mark. 5. 3 Major Criteria in decision Making are a. The concept of Maximization. b. The concept of satisfying. c. The concept of incrementalism. Based on the concept chosen the strategic decisions will differ. 6. Generally decision-making process is logical and there will be rationality in decisionmaking. 7. When it comes to Strategic decision making point of view there would be proper evaluation & then exercising a choice from various available alternative resource, which leads to attain the objectives in a best possible way. 8. Creativity in decision-making is required when there is a complete situation & the Decision taken must be original & different. 9. There could be variability in decision-making based on the situation & Circumstances. Strategic Management—Page 9 Various Roles of Strategic Management. Senior management plays n important role in Strategic Management. Role of Board Of Directors: Board of Directors is the supreme Authority in a company. They are the owners/ shareholders/ lenders. They are the ones who direct and responsible for the governance of the company. The Company act and other laws blind them and their actions & they sometimes do get involved in operational issues. Professionals on the B.O.D help to get new ideas, perspectives & provide guidance. They are the link between the company and the environment. Role of C.E.O: Chief Executive Officer is the most important Strategist and responsible for all aspects from formulations/Implementation to review of Strategic Management. He is the leader, motivator & Builder who forms a link between company and the board of directors and responsible for managing the external environment and its relationship. Role Of Entrepreneur: They are independent in thought and action and they set / start up a new business. A Company can promote the entrepreneurial spirit and this can be internal attitude of an organization. They provide a sense of direction and are active in implementation. Role of Senior Management: They are answerable to B.O.Directors & The C.E.O as they would look after Strategic Management a responsible of certain areas / parts of terms. Role of SBU – Level Executives: They Co-ordinate with other SBU’s & with Senior Management. They are more focused on their product / burners line. They are more on the implementation role. Role of Corporate Planning Staff: It provides administrative support tools and techniques and is a Co-ordinate function. Role of Consultant: Often Consultants may be hired for a specified new business or Expertise even to get an unbiased opinion on the business & the Strategy. Role of Middle Level Managers: They form an important link in strategizing & Implementation. They are not actively involved in formulation of Strategies and they are developed to be the future management. Conclusion: These are the issues in strategic decision-making and the role in Strategic Management. Thus we have different issues in Decision making as to how it is made. Decision-making is not easy. Creativity is required. We have different important roles to be played by different Strategists in Strategic Management, which is essential for the welfare of the company. Strategic Management—Page 10 Q.4) What is Strategic Management Process? Explain each step briefly. Answer: Here are few definitions of Strategic Management Process. 1) According to Glueck it’s a stream of decisions and actions that lead to the development of an effective strategy/ Strategies to help achieve Corporate Strategies. 2) According to Hofer it’s the process, which deals with fundamental Organizational, renewal & growth with the development of strategies, Structures and Systems necessary to achieve such renewal and growth and with the organizational systems needed to effectively manage the strategy formulation and implementation process. 3) Ansoff defines it as “ The Systematic approach & important responsibility of general management to position and relate the firm to its environment in a way that will assure its Continued Success and make it secure from surprises”. 4) Sharplin defines as the formulation & implementation of plans and Carrying out activities related to the matters, which are vital, and of continuing importance to the total organization. 5) According to Harrison & St John – Strategic Management is the process through which organization learn from their internal & external environment, establish strategic decision create strategies that are intended to help achieve establish goals & execute there strategies achieve Establish goals and execute there Strategies all in an effort to satisfy key organizational stake holders. COMPANY VISION &MISSION/ REQUIREMENTS OF MAJOR STOCK HOLDERS STRATEGIC INTENT EXTENAL & INTERNAL ANALYSIS / SWOT ENVIRONMENT ANALYSIS DEFINE STRENGTHS/WEAKNESS/ CORE COMPENTENCIES GENERATE STRATEGIC ALTENATIVES/ EVALUATE & SELECT IMPLEMENT/ FEEDBACK/CONTROL From the above block diagram it states that Strategic Management is a process, which leads to the formulation of Strategy/ Set of Strategies & managing thru Organizational System for the achievement of Vision, Mission Goals and Objectives. Strategic Management—Page 11 Company Vision / Mission 1) 2) 3) Company Vision is What a Company Wishes to become or aspire to be. Company Mission is what the Company is and why it exists James Parras & James Collins divides Vision/Mission into 2 Parts. Vision/ Core Ideology Core Values Core Purpose Mission Envisioned Future Audacious Goals Vivid Description Core Ideology: Is the unchanging part of organization. It is the character of an organization, this would not change for a longer time even it were disadvantage. Core Values: what it believes in. Core Purpose: Existence of Organization and that goes far behind Envisioned Future: Are the goals to be reached. It is classified into: Audacious Goals: These are the goals that the company would like to achieve. They are tough needs extraordinary commitment and effort. Vivid Description: These Goals are put into words that evoke a picture of what it would be like to achieve the Audacious Goals. SWOT Analysis: External & Internal Analysis: 1. The External Environment is made up of all the Factors, Conditions & influences outside the organizations. 2. it gives rise to opportunities which can be exploited or it may give rise to threats which can weaken / cause problem to the organization. STRENGTHS/WEAKNESS/CORE COMPETENCIES Strengths: it’s always in relation to the environment. It’s an unborn capacity, which needs to fulfill two conditions. 1) 2) Requirement for success. It gives the Strategic Advantage. It has strengths more than the competitor; it could gain more than the Competitor. E.g. Superior research where new products & Innovations are required. Weakness: It’s something required for success is missing/inherent inadequacy. It gives strategic disadvantage to the Organization. E.g. Over dependence on a single product line in a mature market. Core Competencies: Is developed over a period of time, using these competencies exceeding well, it develops a fine art of Competition with its rules. This capacity of exerting turns them to core competencies. General Strategic Alternatives / Evaluate & Select. It means that there is a proper evaluation and exerting a choice from various alternative available resources in such a way it may lead to the achievement of company’s objective. Strategic Management—Page 12 Q.5) Explain Core Competencies, Strategic Intent, Stretch Leverage & Fit. Answer: For an effective strategic intent one has to develop effective strategy, rather than focusing at the resourcefulness of Competition & their pace at which they are building competencies one has to focus on existing position. Core competencies are the collective learning of an Organization, especially how to coordinate diverse production skills and integrate technologies in the organization of work and delivery of value. It is communication, deep involvement and commitment to work across organization at all levels and functions. Core competence is for eg. A company is compared to a tree. Trunk and limbs are core products and leaves; fruits and flowers are end products. The things, which are not visible, are the roots, which are very important for the sustenance, nourishment and stability. So, here the roots act as core competence. Core competencies bind existing businesses and guide market. They can be identified by three tests. They are: 1. It provides across to wide variety of markets. 2. It contributes to the benefits of end products. 3. It is a complex harmonization of technologies and production skills. By not building competencies in emerging markets, the chance of competing in emerging markets may be lost. It is very important to maintain competencies in the markets. Core products serve as a link between core competence and the end products. Core competencies are the wellspring of new businesses. Strategic Intent is something more than the unfettered ambition. It’s not a soft target. According to Prahlad & Gray: 1) It foresees a desired leadership position and establishes the criteria the organization will chart it’s progress. 2) It Captures the essence of winning & is stable over time. 3) It requires personal effort, Commitment and bit of luck to achieve the target. 4) The Important thing that a company asks for is not “How Well Next Year be different”? But they ask, “ What must we do differently next year to get closer to our strategic intent?” a) Most companies look at change and innovations in isolation b) Innovations come from everywhere & top Management role is to add value to it. c) Strategic intent leaves room for creativity, innovation & top Management directs it. 5) There must be a balance between resources as a Constrain Vs Resource as leverage so as to reduce risk. Former is done through building a balanced portfolio of cash generating and cash consuming business and in the latter a well balanced and sufficiently broad portfolio/ collection of advantages is assured. Strategic Management—Page 13 6) It implies a servable stretch for an organization. 7) Since the current capabilities & resources are not------- it will force inventiveness and the management will keep on involving challenges and they give time to digest one challenge before launching another. 8) One important parameter is reciprocal responsibility - Which means equal blame & credit for both operating levels & top management. 9) Companies with good strategic intent know the importance of documenting failure but instead of blame fixing and nailing people they are more interested in the management reasons and the orthodoxy, that may have led to future. Stretch: To Achieve strategic intent one has to stretch forward and has to look at the resourcefulness instead of looking at resources. One has to make use of Innovation and resources. Stretch leads to leverage. Leverage: Refers to concentrating on the resources to achieve strategic intent, accumulating, learning, experiences & Competencies in a manner to meet the aspirations by stretching the scarce resource that an organizational resource to the environment. Instead of allotting the competitors blindly & taking their head companies must leverage the resources. Fit: Strategic fit is the traditional way of looking at strategy. Strategic fit is conservative and seems to be more realistic but u may not be aware of the potential. Under stretch & leverage Strategic extent could be impossible, idealistic but under fit strategic something far beyond possibilities and look at the potential possibilities. Conclusion Thus Strategic intent is what the organization strives for e.g. Canon wanted to beat Xerox. It’s an obsession to an organization & it is to win at all levels of the organization, sustaining that obsession is in quest for global leadership. Strategic Management—Page 14 Q.6 Write a detailed note on Goals and Objectives. Answer: Goals are set to achieve good results for the Organization they are undertaken in order to fulfill the objectives of the company. Goals Meaning: Goals are the targets or destination that an Organization wants to accomplish in future. Goals set are of different types depending on their nature. The Characteristics of Goals are: Goals are clear and unambiguous, qualitative. General Goals, which are laid down by the organisation, should be clear. There should not be any confusion and doubt. Company can do its work effectively and efficiently depending on Goals. Moreover they are qualitative. Goals are broad:Targets set should not be narrow in nature. It has to cover the total objectives of the company. An organization could set goals on turnover, profits, return on assets / equity. It could also have market share, customer satisfaction, and employee satisfaction as its goals. Goals are limited and manageable:Goals have to be limited. If there are unlimited goals, the company may be in an ambiguous situation, whether to fulfill, which Goals. That is why there should not be numerous goals. Thus the company may fail to fulfill its objectives, as it could not be manageable easily. Thus Goals are of different types:Financial, Non-Financial, Qualitative and Quantitative. Goals: - Goal – Target It’s a target that a company wants to achieve in a future period of time. An organization sets a combination of goals, which might be Qualitatively, Quantitative, and Financial & Non Financial. These Goals must be clear and unambiguous. c) On an organizational level goals are broad in nature and they could set goals on turnover, profits, returns on assets/equity, market share, Customer satisfaction, Employee satisfaction. d) Goals should be limited, manageable, and clear& Consistent with each other, otherwise it may lead to confusion & Contradictions. e) Goals may be Qualitative, Quantitative in specification. a) b) Strategic Management—Page 15 OBJECTIVES:TEXT & Meaning:Objectives are the ends that state specifically how the goals shall be achieved. They are concrete and specific in contrast to Goals. While Goals are qualitative, objectives are quantitative. So they are clearly measurable and comparable. Objectives are framed with the vision / mission of the organization. They are set in relationship with the environment. They define what the organization has to achieve for its employer, shareholders, customers. Characteristics of Objectives:1.Understandable:Objectives set are to be understood easily. There should not be any complexities in it. Every one i.e. the employees, customers, outsiders should find it easy in understanding them without any confusion in their minds. Clearly defined time frame and specific:- Objectives should be specific, clearly defined. There should be some specific or certain time, interval in which the objectives have to be accomplished. 1.Measurable and Controllable:Objectives should not be abstract. They have to be measurable quantitatively and should be controllable. Objectives are challenging, actionable. Objectives: a) Objectives are the ends that specify how the goals shall be achieved. b) They are concrete and specific and they are in contrast with the goals. c) Objectives make the goals operational and tend to Quantitative in specifications. d) Objectives are set in a way that what the organization has to achieve for its employees, shareholders, customers etc., e) Objectives are in relation with the environment. They are the brains of Strategic Decision Making. f) They are framed in line with the vision/mission of the organization and it helps to pursue them. g) Objectives are invariably Quantitative and provide clear measures and standards for performance. h) It helps to see whether the Organization is in right track or not. i) Objectives should be concrete, specific, and understandable & should have clearly defined time frame. j) It must be measurable, actionable, challenging but controllable. Strategic Management—Page 16 k) There must be co-relation with other objectives. l) While setting objectives these are the factors to be evaluated. It should be specific at the level, which it is being set. It should not be either too narrow or too broad. m) There need to be multiplicity of objectives. n) It should be formulated at different time frames like short term, medium term, and long term & should be linked & consistent. o) Since its in relation with the environment it needs to check whether they are fulfilling the needs of customers, share holders etc., p) It should be In reality with the organizational resources and internal constraints, including policies & lower relationship. Conclusion: Thus an organization is set up to make Prompt and Accurate decision. Hence goals & objectives are set for the accomplishment of an organization. Strategic Management—Page 17 Q.7.) What is Environment? How is it Changing? Explain the process of SWOT analysis? Elaborate what you would study in the environment? Answer Introduction : Environment means the surrounding. It includes both internal and external objects, factors & influences under which someone/something exist. Environment : 1) The Environment of an organization is the aggregate/total of all conditions events that influences itself & it’s Surroundings, 2) The dynamic & has relationships with each other. 3) The factors in environment may affect the company and visa versa. 4) It has a great impact on the company. Environment – Changes: According to Michael Hommer and James Chapey. 1) An Organisation must be flexible enough to adjust quickly with this changing environment. 2) The Efficiency of the company comes at the expenses of the efficiency of the company as a whole. 3) It requires co-operation & Co-ordination within the organization. 4) Few Companies are rigid, non-competitive, inefficient and losing money because they are not able to adjust themselves with the changing environment. 5) In 1776 Adam Smith described in his book, “The Wealth of Nations.” The Principle of division of labour for increasing the productivity and there by reducing the cost of goods. American Companies became best in the world after applying the principles. 6) But in today’s world, nothing is constant or predictable & these principles don’t work. 7) Market growth, customer demand, the rate of technological change, and nature of competition keeps changing. 8) The three forces that drives company are Customers Competition & Change. Customers : Earlier days, Customers had little choice they used to buy the product that was offered to them. These days customers come with more specifications and they demand for customized products and they want individual attention. Hence customers have upper hands these days. It’s difficult for an organization to survive in the long run unless they satisfy customers needs. Competition : As many companies emerges, the competition rises. They offer good quality of products at lesser price and consumers prefer such products. Earlier the company could get into market with an acceptable product/service at the best price would go to sell. But these days customers prefer high quality at lowest price. The Company, which offers these at best price, goes high quality and best service becomes standard of all the competitors. Strategic Management—Page 18 Changes : Changes has become both pervasive and persistent because companies face a greater competitors and each one introduces a product and service innovation to the market with the globalisation of the economy. Hence the companies need to move fast in pace with the changing environment otherwise it’s difficult to move. CONCLUSION: In today’s environment nothing is constant and predictable hence for a company to survive in the long run, it has to satisfy customer needs and cope with the changes in the environment at a faster rate. INTRODUCTION The external environment is made of factors, conditions that influences outside the organization. The external environment gives rise to opportunities, which can be accomplished, or it may cause problems to the organization. SWOT ANALYSIS: The internal environment refers to all factors within the control of and within the organization. These factors may impart strengths that can be utilized by the organization or cause weakness, which becomes threat to the organization. S – Strength W – Weakness O- Opportunity T – Threats Strength: –It is an inherent capacity that is in relation to the environment. For an organization to be a success it requires strength and it gives strategic advantage to gain more than the competition. E.g. Innovation and new products are required for superior research and development facilities. Weakness: - It is an inherent inadequacy that is again in relation to the environment. It gives strategic disadvantage and something that required for success is missing. It leads to competition where weakness can be used to gain more due to inherent limitation / constraint/inadequacy. E.g.1) In a mature market over dependence on a single product line. 2) Lack of capabilities for the development of new product, which is potentially risky for a company during the time of crisis. OPPORTUNITY: can be accomplished and can help to consolidate and strengthen the organization. It’s a favorable condition for an organization in its environment. E.g. Due to better GDP growth a company provides increase in demand for the products/services. It helps in strengthening its position. THREATS: when the opportunities are not utilized properly it can cause problem to the to the organization which causes threat. It is unfavorable condition for the organization. It causes risk/damage to an organization. E.g. Due to opening up of economy, the emergence of multinational companies, which are stronger and has good resources, offers stiff competition to the existing companies in an industry. Strategic Management—Page 19 CONCLUSION An understanding of both internal and external environment in terms of opportunities, threat, strength, weaknesses important for existence, growth and profitability of an organization. A systematic approach and understanding the environment is SWOT analysis all about. Environment to be studied 1) Events: Is some specific occurrence that takes place in different environmental sectors. E.g. Bilateral agreement between 2 countries in which the company is operating and facing competition from local companies. 2) Trends: is the way the environment is shaping up. They are he course of action along which events take place like global warming, nuclear families etc. 3) Issues: are the current concerns that arise in response to events and trends. E.g. Pollution Control, Business ethics after scams. 4) Expectations: are the demands made by interested groups in light of their concern. Like corporate governance, greater transparency, stricted auditing norms. Strategic Management—Page 20 Q.10 Write a note on Integration and Diversification? Answer Integration and Diversification are learnt in the expansion Strategies. Expansion strategies aim at the growth of the company. Integration:All those activities performed by an organization from the procurement of Raw materials to marketing of finished products to the consumers is value chain. So Integration is combining activities on the basis of value chain related to present activity of a company. Integration helps in increasing the scope of Business some industries such as steel; Textiles deal with products with value chain extending from Raw materials to consumers. Reliance is the best example. A company adopts Integration Strategies only under certain conditions. The condition is “Make or Buy”. If the cost of making is less then the cost of procurement than the company moves up the value chain to make the items itself. If the cost of selling finished products is lesser than the price paid to the seller, then it is profitable for the company to move down on the value chain. In these cases, company adopts an Integration Strategy. There are two types of Integration. Vertical Integration:Again it is of two types, Backward and Forward Integration. Backward integration is becoming your own supplier and forward integration is becoming your own customer. Thus any activity undertaken either for supplying inputs or serving outputs is vertical integration. Eg. Titan, Automobile Company. Horizontal Integration:When a company starts serving the same customers with additional products that are different from the earlier in any of the terms of their customer needs functions, either singly or jointly, it is Horizontal integration. Eg. A Hardware manufacturer starts supplying software also. DIVERSIFICATION:Diversification is one among the expansion strategies. It is the drastic change in the business in terms of customer functions, customer groups or alternative technologies of one or more of a company’s business in separation or in combination. Diversification Strategy is important as : a. They minimize the risk, by spreading b. They strengthen the organization and minimize the weaknesses. There are different types of Diversification Strategies:Concentric Diversification:- When an Organization takes up an activity which is related to the existing business, it is Concentric Diversification. Conglomerate Diversification:- When an organization takes up activities which are unrelated to the existing business, it is conglomerate diversification. CONCLUSION Integration results in increasing the scope of the business definition of a company. Integration is also a part of Diversification Strategies as it is doing something different from what the company has been doing previously. Thus Integration and Diversification are aimed at improving and increasing the scope of the business. Strategic Management—Page 21 Q.14 What do your understand by Strategic Evaluation and control? Answer Strategic Evaluation is to estimate the usefulness or powerfulness of strategy in achieving the organizational objectives. Control is required to keep track of any changes. Strategic Evaluation:It is the process of “determining the effectiveness of a Strategy in achieving Organisational objectives and taking corrective action whenever required”. Importance of Strategic Evaluation:- a) Coordination:It helps to coordinate the tasks performed by Managers, Divisions of SBUs, through their performance. b) Act as Feed back, check, Appraisal and Reward:It helps to check the validity of Strategic choice. It provides feed back on the relevance of the Strategic choice made during the formulation phase. There are many participants involved in Strategic Evaluation. They are the Board of Directors, the Strategic Business Units (SBUs), Chief Executives, Audit and Executive committees, Corporate planning department. But we have many barriers in evaluation of Strategy: a. The limits of control:As we know, control is a check on any changes in evaluating strategy, control acts as check, which creates unnecessary problems. a) Difficulties in measurement b) Resistance to evaluation etc. CONTROL:- In control, we have four different types. They are a. Premise control b. Implementation control c. Strategic Surveillance control d. Emergency Alert Control a. Premise Control:Strategy is based on certain assumptions about environment and organizational factors. Premise control is necessary to identify these assumptions and keep track of any change in them. It helps the strategists to take correct action at correct time. b. Implementation Control:It is aimed at evaluating whether the plans programmes and projects are guiding the organisation towards its objectives or not. It can be put into practice through the identification and monitoring of Strategic thrusts. Strategic Management—Page 22 c. Strategic Surveillance Control:It monitors events inside and outside the company, which threaten the firms strategy. Broad based, general monitoring on the basis of information sources to uncover events that affect the Strategy of an Organization. d. Emergency Alert Control:It helps in Signal detection. It is based on mechanism for immediate response and reassessment of Strategy under unexpected events. It can be exercised through the formulation of contingency Strategies and assigning the responsibility or handling unforeseen events. Organizations may some times under crises. This system of control helps crisis management by following steps such as Signal Detection, Preparation, Prevention, and recovery leading to organizational learning. CONCLUSION Thus Strategic Evaluation and control process are useful to test the effectiveness of Strategy.