BUSINESS POLICY AND STRATEGY I

BAM 411

TOPIC:

1. NATURE OF POLICY AND STRATEGY IN BUSINESS

2. CONCEPT OF SOCIAL RESPONSIBILITY

3. DYNAMIC OF BUSINESS ENVIRONMENT

4. ASSESSING THE COMPANY’S STRENGTH AND WEAKNESS

5. THE COMPANY’S STRATEGY

6. IMPACT OF PERSONNEL VALUES ON STRATEGY VALUES

7. BUSINESS ETHICS

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 CHAPTER ONE

NATURE OF POLICY AND STRATEGY

EXPLAIN STRATEGY

A strategy consists of the combination of competitive business moves and approaches that
managers employ to please customers, compete successfully, conduct operations and achieve
organizational objectives. A company’s strategy is the game plan management is using to
stake out a market position, attract and please customers, compete successfully, conduct
operations and achieve organizational objectives.

Strategy is the pattern or plan that integrates an organization’s major goals, policies and
action sequences into a cohesive whole.

Strategy answer a set of questions confronting organizations some of which may includes
what type of goods should the organization produce? What is it out to achieve? What
segment of the market should it serve? How does it deals with competition?

A company’s strategy, thus indicates the choices its managers have made among alternative
markets, competitive approaches and ways of operating.

Strategies are used t build competitive advantage. The central thrust of a company’s strategy
is undertaking more to strengthen the company’s long-term competitive position and
financial performance.

A company’s strategy consists of both offensive and defensive elements - some actions
mount direct challenges to competitive edge, others aim at defending against competitive
pressures, the maneuvers of rivals and other developments that threaten the company’s well-
being. What separates a powerful strategy from an ordinary or weak one is management’s
ability to forge a series of moves, both in the market place and internally, that produce
sustainable competitive advantage, a company can have the prospect of winning in the market
place and realizing above-average profitability. Without it a company risks being
outcompeted by rivals and gain poor financial performance.

A company’s strategy typically evolves and re-informs over time, emerging from a blend of
proactive and purposeful actions on the part of company. Manager and as needed reactions to
unanticipated developments and fresh market conditions.

STRATEGIC PLAN

The outcome of strategic planning is strategic plan. Strategic plan of an organization lays out
its vision, mission, objectives, goals and strategy.

A strategic plan is a clear statement of a company’s purpose. It entails the reasons for existing
of a firm.

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A strategic plan is a document used to communicate with the organization the organization’s
goals, the actions needed to achieve those goals.

STRATEGIC PLANNING

Is an organizational management activity that is used to set priorities, focus energy and
resources, strengthen operations, ensure that employees and other stakeholders are working
towards common goals, establish agreement ground intended outcomes and assess and adjust
the organization’s directive in response to a changing environment. It is a disciplined effort
that produces fundamental decisions and actions that shape and guide what an organization is,
who it serves, what it does, and why it does it with a focus on the future.

STRATEGIC MANAGEMENT

Strategic management is the process of galvanizing an organisation’s resources towards

crafting and implementing a strategy. It involves the formulation and implementation of the
major goals and initiatives taken by top organization managers on behalf of owners based on
consideration of resources and an assessment of the internal and external environments in
which the organization operates.

Strategic management provides overall direction to an enterprise and involves specifying the
organizations objectives, developing policies and plans to achieve those objectives and then
allocation resources to implement the plans it has been agreed at various platforms that.

Strategic management is the continuous planning, monitoring, analysis and assessment of all
that is necessary for an organization to meet its goals and objectives.

STRATEGIC MANAGEMENT PROCESS

Strategic management process otherwise called the strategy making process means the
process by which managers make a choice of a set of strategies for the organization that will
enable it to achieve better performance. It is the means of defining the organizations strategy.
The above can be explained as a process of managing, planning and analyzing in order to
reach all organizational goals.

Strategic management is a branch of management is a branch of management that is

concerned with the development of strategic vision, setting out objectives, formulating and
implementing strategies and introducing corrective measures for the deviations (if any) to
reach the organization’s strategic interest. It has two fold objectives

- To gain competitive advantage, with an aim of outperforming the competitors, to

achieve dominance over the market.
- To act as a guide to the organization to help in surviving the changes in the business
environments.

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Strategic management process contains 5 steps that organizations take in the course or
strategic formulation and execution namely:

1. Developing the vision and mission statements

2. Scanning the environment to establish objectives
3. Formulation of strategy
4. Implementation of strategy
5. Strategy evaluation

Developing vision, mission and forms

Forming strategic vision of who’s the company needs to heed. It is a task that provides long
term direction, infuses the organization with a sense of purposeful action and communicates
to stakeholders that management’s application for the companies are. An organization’s
mission is it statement of purpose. It states what the organization is in business to do. An
organization is vision on the other hand is a statement showing its destination what it is out to
achieve. An organizations mission could be, to build chain of supermarkets where everyone
can buy quality customer good at the cheapest price available, an example of a vision could
be to be the world’s leading vehicle manufacturer.

The strategic management process starts with determining the organization vision and
mission and objectives. This is because whatever strategy the organization adopts will be
directed towards achieving its vision, mission and objectives

A strategic vision is a road map of a company’s future, it create a picture of a company’s

destination and provides a rationale for going there. A strategic vision thus delineate
management aspiration for the business, providing a panoramic view of “ where are we
going”. And a convincing rationale for why this destination makes good business sense for
the company. It points on organization in a particular direction charts a strategic path for it to
follow and molds organizational identity strong.

Whereas a strategic vision is chiefly concerned with where we are going and why a
company mission statement usually deals with the company’s present business scope and
purpose “who we are, what we do and why we are here”. Many company’s prefer business
purpose to mission statement but the two terms are conceptually identical and are used
interchangeably. A typical example of a mission statement is the mission of trader Joe’s is to
give our customers the best food and beverage values that they can find everywhere and to
provide them with the information required for informed buying decisions. We provide these
with a dedication to the highest quality of customer satisfaction delivered with a sense of
warmth, friendliness, fun individual pride and company spirit.

The mission statement always stress the company’s present predicts and services and the
type of customer it serves, sometimes, they indicate the company’s present market starting
(whether it is a market leader or the industry’s fastest growing company) as well as the
company’s technological and business capabilities. Rarely do they say much about where the
company headed, the coming changes in its business or its future business aspirations. Hence

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the conceptual distinction between a strategic vision and mission statement is fairly clear-cut.
A strategic vision portrays a company’s future business scope (where are we going ) where a
company’s mission typivally describes its present business scope and business purpose (what
we do, why are we here and where we are new”). Strategic visions become real only when
the vision statement is imprinted in the minds of organization members and then translated
into hard objectives and strategies.

2. Environmental scamming

For strategies to be formulated an analysis of the internal and external environment is

necessary to gather information necessary to craft objectives. Objectives are an organization’s
performance targets – the results and outcomes its wants to achieve, they function as
yardsticks for tracking an organization’s performance and progress

In analysis the internal and external environment, SWOT analysis will be carried out, SWOT
stands for strength, weakness, opportunities and threats. External environmental is analyzed
to identify factors that constitute opportunities and threats to the organization opportunities
are positive trends in the external environments that help in the realization of firm’s
objectives threat are negative trends to the organization found in the external environment
analysis will avail the organization to determine its strengths and weaknesses. Strengths are
activities that an organization does well, while weaknesses are negative activities and
indignities within an organization. Environmental scanning analysis will help the firm to
understand what is happening both inside and outside the organization and to increase the
profitability that the organization strategies developed will appropriately neglect the
organizational environment. This stage of the process is necessary because there are rapid
changes taking place in the environments that has a great impact on the working of the
business firm. Analysis of business environment helps to identify SWOT. SWOT analysis is
necessary for the survival and growth of every business enterprise

3. Formulation of strategy

At this stage, the identified strength, weakness, opportunities and threats will be used to
formulate strategies that will lead to the achievement of firms objectives. Crafting strategy is
concerned with searching for opportunities to do new things in new ways formulated strategy
is concerned with searching for opportunities to do new things or to do existing things in new
ways formulated strategies will exploit the organizations strength and opportunities and
protects the organization from external threats while also correcting critical weakness the
task of stitching a strategy together entails addressing a series of how, how to grow the
business , how to please customers, how to outcompete rivals, how to respond to changing
market condition, how to manage each functional piece of the financial objectives.
Companies usually have a wide degree of strategic freedom in addressing the how of
strategy. They can diversify broadly or narrowly, into related or unrelated industries, via
acquisition, joint ventures, strategic alliance, or internal start-up. Crafting ethical strategy is
important. A strategy is ethical if all its pieces are consistent with the basic laws and all
ethical duty management has to owners/shareholders, employees, customers, suppliers and
the community at large. Every company manager participates in crafting a company’s
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strategy. The CEO chief executive office is the captain of the ship and carry the mantles of
chief objectives setter, chief strategy maker and chief strategy implemental for the total
enterprise. Ultimate responsibility of leading the strategy making, strategy executing process
rests with the CEO. In some enterprise the CEO or owner functions as strategic visionary
and chief architect of strategy personally deciding which of several strategic options to
pursue, although other may well assist with data gathering and analysis and the CEO may
seek the advice of other senior managers and key employees on which way to go

4. Implementation of strategy.

Adequate and proper implementation of strategy is a prerequisite to an effective strategic

management process. Improper implementation may lead to failure of a very good strategy
for a good strategy to be impactful, proper implementation is essential managing the
implementation of strategy is an operations-oriented activity aimed at shopping the
performance of core business activities. Converting strategic plans into actions and results is
the most demanding and time consuming part of the strategy management process. In most
situations, the implementation of strategy includes but not united to the following aspects.

- Staffing the firm with the needed skills and expertise

- Developing budgets that steer ample resources into those activities critical to strategic
execution success.
- Ensuring that policies and operating procedure facilitate rather than impede effective
execution.
- Using the best-known practices to perform core business activities and pushing for
continuous improvement
- Installing information and operating system that enable company personnel to better
carry out their strategic roles day in and day out.
- Motivating people to pursue the target objectives energetically modifying their duties
and job behavior to better fit the requirements of successful strategy execution
- Typing rewards and incentives directly to the achievement of performance objectives
and good strategy execution.
- Creating a company culture and work climate conducive to successful strategy
implementation and execution
- Exerting the internal leadership needed to drive implementation forward and keep
improving on how the strategy is being executed

Good strategy execution requires creating strong fit between strategy and organizational
capabilities, between strategy and reward structure between strategy and internal operating
systems and between strategy and the organizations work climate and culture. The stronger
these fits-that is, the more that the company’s capabilities, reward structure, internal
operating systems and culture facilitates and promote proficient strategy execution- the better
the execution and the higher the company’s odds of achieving its performance targets.

Strategy evaluation:

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Evaluation provides the means of determining the impact of implemented strategies. The
purpose of evaluation is to establish whether the strategy is working and whether adjustments
are necessary. This stage is concerned with evaluating to company’s performance initially
corrective adjustment. This evaluation may trigger deciding whether continue or change the
company’s vision, mission, objectives or strategy execution methods so long as the
company’s direction and strategy seen well matched to industry and competitive conditions
and performance targets are being met, company executives may well decide to stay the
course. Simply fine-turning the strategy plan and continuing with efforts to improve strategy
executives are sufficient whenever a company encounter disruptive changes in its
environment, question need to be raised about the appropriateness of its direction and
strategy.

A company’s direction, objectives and strategy have to be revisited anytime external or

internal conditions warrant. It is to be expected that a company will modify its strategic
vision, direction, objectives and strategy over time.

Developing a strategic vision, mission, setting objectives, formulating strategy are the basic
direction setting tasks that together constitute a strategic plan for coping with industry and
competitive conditions, the action of rivals and the challenges and issues that stand as
obstacles to the company’s success.

Crafting and executing strategy are core responsibilities/management functions. Whether a

company wins or losses in the market place is directly attributable to the caliber with which it
performs the fine tasks that compromise the strategy-making, strategy-executing process.

Types of Organization’s Strategy

A company’s overall strategy is a collection of strategic initiatives and actions devised by

managers and key employees up and down the whole organizational hierarchy. The larger
and more diverse the operations of an enterprise, the more points of strategic initiative it has
and the more manager and employees at more levels of management that have a relevant
strategy making role.

Strategy making involves four types or levels of strategy namely: corporate strategy, business
strategy, functional strategy and operating strategy.

1. Corporate strategy: this consists of the kinds of initiatives the company uses to
establish business positions. It is usually crafted by directors and CEO’S to boost the
[performance of the setoff businesses the company has diversified into and the means
of capturing cross business synergies .corporate strategy spells out clearly the current
and future business interest of an organization and what it hopes to achieve with those
businesses. Major strategic decision like, vision, mission, objectives are mode,
reviewed and approved of this level by the company’s board of directors.

2. Business strategy: It concerns the actions and the approaches crafted to produce
successful performance in one specific line of business. These are actions and
approaches crafted to produce successful performance in specific line of business.

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 The key focus is crafting responses to changing market circumstances and initially
actions to strengthen market position, build competitive advantage and develop strong
competitive capabilities business land strategy is the responsibility of the general
managers of each of the organization lines of business. Business level heads has to
concern itself with seeing that lower-level strategy are well conceived, consistent and
adequately matched to the overall business strategy and getting major business level
strategic moves approved by corporate – level officers and keeping them informed of
emerging strategic issues. The strategies at this level should should conform to
corporate level objectives and strategies.

3. Functional Strategy: These are actions and approaches used by an organizations

functional department to support the business strategy. It concerns actions,
approaches and practices to be employed in managing particular functions or business
process within a business. Functional strategies add specifics to the how’s business
level strategy. The primary role of a functional strategy is to support the company’s
overall business strategy ad competitive approach.

Lead responsibility for functional strategy within a business is normally delegated to

the heeds of the respective functions with the general manager having final approval
and perhaps even exerting a strong influence over the content of particular precise of
the strategies.

Examples of functional strategy like marketing strategy, production strategy, finance

strategy, human resource strategy, customer service strategy, product development
strategy should be compatible and mutually reinforcing rather than each serving its
own narrow purposes. They must be deduced from the business objectives

4. Operating Strategy: These are approaches for managing key operating units(plants,
distribution services, geographical units) and specific operating units with strategic
significance e.g. Advertising , campaigns, the management of specific brands online
sales etc.) the approaches fashioned out by a specific plant manager to accomplish
plant objectives, the company’s advertising manager’s strategy for getting maximum
audience exposure are example operating of strategies lead responsibilities for
operating strategies is usually delegated to frontline managers, subject to review and
approved by higher ranking managers even though operating strategy is at the bottom
of the strategy making hierarchy, its importance should not be downplayed. A major
plant that fails in its strategy to achieve production volume, unit cost and quality
target can underrate the achievement of company sales and profit or objectives and
wreak havoc with strategic effort to build a quality image with customers. Frontline
managers are important part of an organizations strategy- making team because many
operating units have strategy critical performance targets and need to have strategic
action plans in place to achieve them one cannot reliably say that the strategic
importance of a given action simply by the strategy level or location within the
managerial hierarchy where it is initiated in single- business company, the corporate
and business levels of strategy making merge into one level of strategy because the

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 strategy to the whole company involves only one line of business. A single business
firm of has three levels of strategy i.e. business strategy for the firm as a whole,
functional-strategies for each main function are of business and operating strategies
undertaken by lower level managers to flesh –out significant aspect for the company’s
business and functional are strategies proprietorships, micro businesses and owner-
managed firms can have one or two strategy levels since their strategy making and
executing can be handled by one or a few people.

Then just respond and react to its environment

Allows organization to take advantage of key environmental opportunities, to minimize the

impact of external threats and to capitalize upon internal strength and to overcome internal
weaknesses.
 Declining revenues, declining profits, or even bankruptcy are often avoided.
 It helps to avoid company demise.
 It helps to improve understanding of competitors strategies.
 R4ffReduces resistance to change.
 Clearer understanding of performance and reward relationship.

Strategic Management Process

It encompasses strategic planning, implementation and evaluation.

This can be broken down into

 Identifying the organization vision, current mission, objectives and strategies

 External analysis of opportunities ad threats i.e. social, economic, political
 Internal analysis of strengths and weakness
 Formulating strategies
 Implementing strategies
 Evaluating results.

Key Terms In The Study Of Strategic Management

1. VISION: this is a desirable and possible future a business believes in and strive to
attain

A strategic vision is a ROADMUP of a company’s future, providing specific about

technology and customer focus, the geographical and product market to be pursued, the
capabilities, it plans to develop and the kind of company that management is trying to create.

It thus reflect the management aspirations to the organization and its business, providing a
panoramic view of where we are going and given specifics about its future business plans.

It spells out long term business purpose and moulds organizational identity.

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Why A Vision Statement Is Necessary

One of the reasons why a vision is necessary is that a vision generally has much greater
direction–setting on a strategy working value.

There is an ever present managerial imperative to look beyond today, think

strategically absent the impact of

 New technology on the horizon.

 How customer needs and expectations are changing
 What it will take to overtake or over-run competitors
 Which marketing opportunities are out to be aggressively pursued
 And all the external and internal factors that drives the company need to be doing to
prepare for the future.
Managers cannot succeed as organizational leaders or strategy makers with first
drawing reasoned about the wind of change and then making some fundamental
chores about which of several strategic policy to take.
Armed with clear vision managers have a beacon to guide resource allocation and a
basis for coming up with a strategy to get the company where it need to go.
A company who’s a manger neglects the task of thinking strategically about the
company’s future path or who are indecisive in committing the company to one
direction instead of another are prone to drive and lose any claim to being a leader.

2. Mission/Mission Statement
While the vision is brief statement of direction and intent, the mission goes further.
The mission adds substance to the broad theme of the vision, it define more clearly,
the aim, scope and direction of the business.
A mission statement is usually broad in scope for at least two major reasons:
 A broad mission statement allows generation and consideration of a range of
feasible alternative objective and strategies without unduly stifling
management creativity. Excess specificity would limit the potential of
creative growth for the organization.
 A mission statement must be broad to effectively reconcile. Mission statement
is sometimes called CREED STATEMENT.

Difference among organization diverse stakeholders.

The Different Between Vision And A Mission Statement

The chief concern of a vision is with ‘where we are going’ while the terms mission
statement tends to deals with a company’s present business scope “who we are and what
we do”.

The cooperate mission was defined as an enduring statement of purpose that distinguish one
organization from other similar enterprise” A mission statement is the declaration of an

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organizations reason for being A mission statement is sometimes called creed statement , a
statement of purpose, a statement of business principles, or a statement defining our business.

Reason for developing a mission (KING AND CLELAND)

1. To ensure unanimity of purpose within the organization

2. To provide a basis of motivating the use of organizational resources
3. To develop a basis or standard of allocating organizational; resources

4. To establish a general one or organizational climate.

5. To specify organization purpose and the translation of this purpose into

goals.

Component of Mission Statement

1. Customers: who are the enterprise customers?

2. Products or services: what are the firms major product or services?
3. Markets: what does the firm compete geographically?
4. Technology: what is the firm basic technology?
5. Concern for survival growth and profitability: what is the firm attitude towards
the economics goal?
6. Philosophy: what are the fundamental beliefs, values, aspirations and
philosophical priorities of the firm?
7. Self- concept: what are the firm major strengths and competitive advantage?
8. Concern for public image: what is the firm desirable public image?
9. Reconciliatory effectiveness: does the mission statement effectively address
the desires of key stakeholders?
10. Inspiring Quality: does the mission statement motivate and stimulate its reader
to action?

3. Internal Strengths
This refers to activities within organization that are performed especially well.
Management, marketing, finance, production, and research and development function
s of a business should be audited periodically or examined to identify and evaluate
key internal strengths, successful enterprises pursue strategies that capitalize on
internal strengths.

4. Inetrnal Weaknesses
This refers to activities within an organization that performed not so good or not well.
Those management, marketing, production and research, finance and develop
activities that limit or inhibit an organization overall success. A firm should strive to
pursue strategies that will effectively improve internal weakness

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5. Core Competencies
This is a capability or skills running through a firms business that are identified
nurturing and employed throughout the firm and become a basis for strong
competitive advantage.
It is also a competitively internal activity that a company performs better than other
competitively important internal activities.
Core competencies is an organizations value creating skills, capabilities and resources
that determine its competitive advantage

6. External Opportunities
These are trends in the external environment factor, this term refers to economic,
social, political, technological and competitive trends and events that could
significantly benefit an organization in the future.

7. Threats

These are negatives trends in the external environment factors. These consist of
economic, social, political, technological and competitive trends and events that are
potentially harmful to an organizations present or future competitive position.

8. Objectives
The purpose of setting objectives is to convert managerial vision and business mission
into specific performance targets. Objectives are an organization performance target,
the result and outcomes, it want to achieve. They function as yardsticks for tracking
organizational performance and progress.
a. Financial objectives: concern with the financial results and outcomes that
management wants the organization to achieve. They signal commitment to
such outcome as
 Earning in growth
 An acceptable return on investment
 Dividend growth
 Stock price appreciation
 Good cash flow
 Credit worthiness
b. Strategic objectives: aim at result that reflects increased competitiveness and a
stronger business position, outcomes such as :
 Winning or additional market share
 Overtaking key competitor on product quality or customer service
 Product innovation
 Achieving lower overall cost than rivals
 Boasting the company’s reputation with customers
 Winning a stronger foothold in the international markets
 Execrating technological leadership
 Gaining a sustainable competitive advantage

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  Capturing attractive growth opportunities

Objectives are vital to organizational success because it provide direction, aid in evaluation,
create synergy, reveal priorities, allow coordination, and are essential for effective planning,
organizing, motivating and controlling activities.

Characteristics of Objectives

 Challenging
 Measurable
 Consistent
 Reasonable
 Clear

9. Strategies
Company strategies consist of the competitive effort and business approaches that
managers employ to please customers, compete successfully and achieve
organizational objectives.
Strategies could also be defined as scheme, methods maneuvers which management
hopes to display in order to move the organization from its present position to arrive
at its target goal by the end of a specified period, recognizing that during the
intervening period a host of changes are going to take place in the environment.
Also general electric company sees strategy as a statement of what resources are
going to be used to take advantage of which opportunities and to minimize threats and
to produce a desired result.
Strategy making brings into play the critical managerial issues of ‘HOW’ to achieve
the results in light of the organizations situation and prospects
Objectives are the ‘ENDS’ and strategy is the ‘MEANS’. A company’s strategies
represent answers to such fundamental business question as
1. Whether to concentrate on a single business or build a diversified group of
business
2. Whether to [pursue a competitive advantage based on low cost or product
superiority or unique organizational capabilities
3. Whether to cater for a broad range of customers or focus on a particular
market.
4. How to response to changing buyer reference
5. How to react to newly emerging market and competitive conditions.
6. How to grow the enterprise over long term
7. Whether to develop a wider or narrow productive

In summary a company’s strategy is concerned with how to grow the business,

 satisfy the customer ,
 compete rival ,
 responds to change in conditions ,

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  manage each functional piece of the business and develop
organizational capabilities
 Achieve strategic and financial objectives

Strategic Making Pyramid

In dividend enterprise strategies are initiated at four (4) organizational levels:

1. Corporative Strategy
These consist of the move made to establish business position in different
industries and the approaches used to manage the company’s group of business. It’s
usually the responsibility of corporate level manager
2. Business Strategy
This is for each separate business the company has diversified into, the central trust of
business strategy is how to build and strengthen the company’s long term competitive
position in the market place. It’s the responsibility of business level general managers.

3. Functional Strategy
Refers to the gone plan for a particular functional activity, business process or key
department within a business e.g. FORD manufacturing, marketing, finance, human
resource. It is the responsibility of head of major functional activities within a
business or division.

4. Operating Strategy
Concern the narrow strategic initiative and approaches for managing key operational
units. It is the responsibility of plant manager’s geographic unit managers, and
managers of trend line operating units.

Factors That Shape a Company Strategy

 Societal, political, regulatory and citizenship considerations

 Competitive conditions and overall industry attractiveness
 The company market opportunities and external threats
 Company resource strengths , competencies and competitive capabilities
 The personal ambitions, business philosophies and ethical beliefs of managers.

The influence of shared values and company culture on strategy

Type of Strategy
There is no classification of strategies that is generally accepted. The following grouping are
given to clarify some dimensions of strategies (STEMER, 1969)
1. Based on scope
2. Based on organizational level
3. Based on material or non-material resource
4. Based on purpose of function

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 5. Personal strategy of manager.

TACTICS;
Tactics are detailed statement of means or activities that will be used to achieve short term
objectives and established competitive advantage.

Tactics set out intentions of long range plan in a way which makes action possible
Prevention is better than curing.

CHAPTER TWO

CONCEPTS OF SOCIAL RESPONSIBILITY

Definition of social responsibility

This refers to the firm’s consideration of and response to issues beyond the narrow economic
technical and legal requirements of the firm. It is the firm’s obligation to evaluate in its
decision making process the effect of its decision on the external social system in a manner
that will accomplish social benefit along with the traditional economics gains.
It means that social responsibility begin where the law ends. a requirement of the law because
this is the what any good citizen would do, a profit maximizing firm under the rules of
classical economies would do as much, social responsibility goes one step further. It is a firm
acceptance of a social obligation beyond the requirements of the law
Social responsibilities of business refer to the obligation of business enterprise to adopt
policies and plan of actions that are desirable in terms of the expectations, values and interest
of the society.

The concept of social responsibilities deals with the corresponding obligations that
organizations have towards society. According to Griffin (2004), social responsibility is the
set of obligation an organization has to protect and enhance the society in which it functions.

Areas of social responsibility

According to schemerhors (1989) managers should take particular attention to their social
responsibility in the following areas:

(a) Ecology and environmental Quality

i. Pollution cleanup and prevention of damage to the natural

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 environment
ii. Dispersion of spread of industries
iii. Land use and beautification
(b) Consumption
i. Fair and true in lending, advertising and business operation
ii. Product warranty and service
iii. Control of harmful products

(c) Community needs

i. Uses of expertise to solve local problems
ii. Aids with health care facilities and education
(d) Government relations
i. Lobbying
ii. Control of business through political action
(e) Minorities and backward communities
i. Training of unemployed
ii. Equal employment opportunity
iii. Locating plants and offices in minority areas
iv. Purchasing from backward community
(f) Labour relations
i. Improved occupational health and safety
ii. Creation of employment opportunities
(g) Shareholders relations
i. Improved corporate governance
ii. Improved financial disposure
(h) Corporate philanthropy
i. Financial support for art and culture
ii. Special scholarships and gifts to education
iii. Financial support for charity
Social responsibility is also examined in terms of economic, legal, ethical and philanthropic
responsibilities

Changing Concept of Social Responsibility

As the arguments for and against Social responsibility suggests, the concept of Social
responsibility has evolved over time. There are different stakeholders in the business
enterprise but management has not always felt it was responsible to all of them.

At the early stage of Social responsibility, the focus was on the owners of the business the
shareholders. To management, the task was to maximize profit and stiasfy the expectations
of shareholders through dividend pay-out.

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 With time, managers saw the needs to attract, retain and motivate employees. Hence in
addition to meeting the expectations of shareholders, management sought to meet the
expectation of employee by providing improved working conditions, recognizing employee
rights and demands for job security, safe/healthy work environment and human dignity

The next stakeholders to attract the attention of management are customers, suppliers
distributors etc. the thrust of Social responsibility to these stakeholders were fair prices, high
quality good s and services, safe and healthy products, establishment of good relationship to
ensure long term sustainable partnership that is mutually beneficial.

The last stage is responsibility to society. At this stage, management recognizes and accepts
responsibility to be at the forefront of the advancement of public good, protection and
greening of the environment, support for social and cultural activities and advancement of
equity and justice.
Argument for Social Responsibility
1. Long –run self interest
2. Public image
3. Viability of business
4. Avoidance of government regulation
5. Social culture norms
6. Stakeholders interest
7. Let business try
8. Business has the resource
9. Problem can become profit

Argument Against Social Responsibilities

 Profit maximization
 Cost of social involvement
 Lack of social skills
 Dilution of business primary purpose
 Weakened international balance of payment
 Business has enough power
 Lack of accountability
 Lack of broad support

The stakeholder approach to company responsibility.

It is possible for business today to please their customer and still not meet the needs of the
community in which they operate. As an example, in their effort to please employees and
customers firm may take action that pollutes the environment such as outcome or by-product
is regarded as undesirable in the present day business environment.

17
In defining or redefining the company’s mission, strategic managers must recognize the
legitimate right of the firm claimants therefore a mission statement must be broad to
effectively reconcile difference among organization diverse. ‘STAKEHOLDERS’
Who are these stakeholders?
Stakeholders are the people who can effect or are affected by the achievement of an
organization objectives.
Also a stakeholders could be a person or group that has some claim on or expectation of how
a business should operate
Stakeholders are individual and group of person who have a specific stake or claim on the
capacity.
Stakeholders include employees, managers, shareholders, board of directors, customers,
suppliers distributors, creditors governments, (local, state, federal ) union, competitors,
special interest and general publics.

CATEGORIES OF STAKEHOLDERS

PRIMARY STAKEOLDERS
These are those stakeholders when a business affect and interact with most directly these
stakeholders include the owner of the firm, the firm customers and employers
SECONDARY STAKEHOLDERS
These are when the business affects in an indirect or limited way. These include suppliers,
community, unions, competitors, government, special interest, group, general public’s former
employees and other business

STAKEHOLDERS AND THEIR NATURE OF CLAIM

 STOCKHOLDERS
Participation in destination of profits, additional stock offering, assets on liquidation.
STRATEGIES IN DEALING WITH STAKEHIOLDERS

1. CONFRONTATIONAL STRATEGY
This involve the use of court or engaging in public relation or why against
legislation.
2. DAMAGE CONTROL STRATEGY
This is often used when a company decides it may have made mistake and want to
elevate it public image and improve its relationship with the stakeholders.

18
3. ACCOMODATION STRATEGY
This is used when management decide to accept social responsibility for business
decision after pressure has been exerted by stakeholders group.

4. PROACTIVE STRATEGY
This is used when a company has decided to go beyond the stakeholder’s expectation.
Proactive company form partnership with stakeholders and cooperate with them.

RIGHT OF PRIMARY STAKEHOLDERS

 Customers have the right to be fully informed about the product and services they
purchased.
 Employees have the right to save working conditions, to fair compensation for the
working they perform and to be treated in a just manner by managers.
 Shareholders have the right to timely and accurate information about their
investments (in accounting statement).

HOW A MANAGER CAN BE SOCIALLYU RESPONSIBLE IN THE SOCIETY

1. Organizational resources: an organization has a diverse pool of resources in forms of

men, money, competencies and functional expertise what an organization has these
resources in hand, it is in better position to work for societal goals.

2. Precautionary measure: if an organization linger on dealing with the social issue now,
it would land up putting out social fires so that no time is left for realizing its goal of
producing goods and services. Practically it is more cost, efficient to deal with the
social issues before they turn into disaster consuming a large part if management time.
3. Moral obligation: the acceptance of manager’s social responsibility has been
identified as a morally appropriate position. It is the moral responsibility of the
organization to assist solving or removing the social positions.

4. Efficient and effective employee: recruiting employees becomes easier for socially
responsible organization. Employees are attracted to contribute for more socially
responsible organization, for instance tobacco companies have difficulty recruiting
employees with best skills and competencies.

5. Better organization environment: the organization that is most responsive to the

betterment of social quality of life will consequently have a better society in which it
can perform its business operations. Employee hiring would be low rate of employee
would of a superior quality , there would be low rate of employee turnover and
absertecism. Because of all the social improvements, there will be a low crime rate
consequently less money would be spent in form of taxes and for protection of land .
thus an improved society will create a better business environment

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 CHAPTER THREE

PREDICTING THE DYNAMIC ENVIRONMENT

The environment of business is the pattern of all the external conditions and influences that
affect its life and development. These external factor influence a firm’s “chance of direction
and action” and ultimately its “organizational structure and internal processes”

Definitions

Environmental analysis is the process by which strategist monitor, the macro environment,
the industry environment and task operating environment. Factors to determine opportunities
and threats.

Things you get when you analyze an environments

 Analysis is tracing an opportunity a threat to a source

 To a strategist the process of analysis help to,
i. Identify the current strategy: the firm uses to relate to the environment what are the
assumptions, prediction about the environment on which current strategy is based.
ii. Predict the environment : are the assumptions and predicting the same
iii. Diagnose : assess the significance difference in current and future environment for
the firm, what changes in strategy appears useful to consider

Why do we do environmental analysis

1. The environment changes so fast that managers used to systematically analyse and
diagnose to
Some years ago copies of document were made by typing stands, they were put in
duplicating machines , Xerox, IBM and alters cane with a new product captured, the
market from the manages need to search the environment
i. To determine what factors in the environment “present threats” to the
company’s present strategy and objectives accomplishment.
ii. To determine what factors in the environment “present opportunities” for
greater accomplishment of objectives by adjusting the company strategy

Firm which systematically analyse and diagnose the environment are effective than those
which don’t

Environment analysis and diagnose allows strategist time to anticipate opportunities and plan
to take optimal responses to these opportunities.

It also help as an early warning system to “present the threats” or to help strategies, which
can turn the threat to the firms advantage.

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Characteristics of Environment

The concepts of business environment could be further understood by working at some of its
characteristics. These are:

1. Complexity: the business environment consist of condition and influences which are
from different sources, these external element affect different strategies at different
time and with carrying strength
2. Dynamics: the environment changes so fast.
3. Interactive: the impact of any single element cannot be wholly disassociated from the
impact of other elements.
4. Multi-facet: a change or development in the environment may be perceived as an
opportunity by a company while the same change or development may be perceived
as threat in other company.

The Environment

These are large number of factors which affect the firms in the environment and these
factors interact with each other.

There are many ways to organize these factors for analysis and diagnosis. These external
factor could be divide into three categories

i. Macro environment
ii. Industry environment
iii. Operating or Task environment
These are factors that originate beyond the control of an organization
Its single firms operating situation. These factors include:
i. Economic
ii. Social cultural
iii. Political/legal/government
iv. Technological
v. Physical/natural
vi. International

i. Economic: this is concerned with the nature and direction of the economy in which a
firm operates. If monetary policy is frightened funds for needed start additions may
be too costly or unavoidable.
Tax policies can reduces attractiveness of investment in the industry or reduces the
after tax incomes of consumers who lower their spending habits.
ii. Political/ government /legal: these factors consist of attitudes and actions of political
and government leaders and legislators which the change with the flow of social
demands and beliefs.
iii. Legal factors on the other hands consist of complex lows, regulations and
government agencies and their actions which affect all kinds of enterprises in varying
degrees.

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 The direction and stability of political factors are major consideration for managers
when formulating a firm’s strategy. Political /legal factors define the legal and
regulatory parameters within which firms must operate
Political constraint are placed on firms through four trade decisions
 Antitrust laws
 Tax programs
 Minimum wage legislation
 Pollution pricing policies

These and all other actions aimed at protecting employees, consumers, the general public and
the environment.

When some of the laws are restrictive same are designed to benefit and protect the
business such actions include “patent laws” “government subsidies” and “product research
greats”

iv. Technological: technology is used to denotes the application of scientific principles

to solve industrial problems or the sum total of knowledge, we have in ways to do
things. It includes invention techniques vast of organized knowledge of doing things.
Mechanically rather than manually. Technological change affect factor of production
as well as neint product and services, which ,must be complete substitute for present
product and services.
Therefore, there is need to search the environment for changes in technology
affecting
i. The firm current raw materials
ii. Product method and processes
iii. Product and services
iv. To avoid obsolescence and promote innovation a firm must be aware of
technological changes that might affect the industry.
v. Physical environment: this deals with the availability and type of land, climate conditions
minerals resources, water, infrastructural facilities and so on.
vi. International environment: this involves assessing each non domestic market on the same
factors that are used in a domestic assessment. Such factors includes

a. Economy

 Level of economy development

 Population
 Gross national product
 Per capital income
 Literacy level
 Social infrastructure
 Natural resources
 Member of regional economic like ECOWAS
 Monetary and fiscal policies
 Wages and salary levels
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  Nature of competition currency

b. Legal

 Legal tradition effectiveness of legal system, treaties with foreign nations,

patent trademark laws, laws affecting business firms

c. Political system

 Forms of government, political strategy, stability of government, strength of

opposition, [parties and groups, political strife and insurgency, government
attitude towards foreign firms, foreign policy

d. Cultural environment

 Customs, norms, values, beliefs, language, attitudes, motivations, social

institutions, status symbols, religious beliefs.

Industry environment
The strangest competitive force or forces determine not only the profitability
of an industry but they are also of great importance in the formulation of
strategy.
Every industry has an underlying structure or a set of fundamental economic
and technical characteristics that give rise to thses competitive forces.
A few characteristics that are critical to the strength of each competitive force
are discussed below

A. ENTRY BARRIERS : with the following sources

 Economies of scale
 Product differentiation brand identity
 Capital requirements
 Absolute cost advantage, arising from proprieting /learn curve including
technology, access to necessary /host materials, government subsidies and
favorable locations.
 Access to distribution channel
 Government policy through licensing requirement
 Expected relationship from existing competitors through the use of substantial
resources, unused borrowing capacity, productive capacity
 Switching costs
B. POWERFUL SUPPLIER
The power it each supplier depends on a number of characteristics or determinants;
 Differentiation of input in term of uniqueness or least differentiated
 Switching cost of suppliers and firms in the industry
 Presence of substitute inputs.
 Supplier concentration , is it dominated by a focus

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 Companies or is it more concentrated that the industry itself

Threat of forward integration relative to threat of backward integration by firms in the

industry

C. BUYERS
The following are the determinants of powerful buyers
 Buyer volume
 Buyer switching cost
 Buyer information
 Substitute products
 Buyer profits
 Impact on quality performances
 Brand identity
 Price
 To backward integrate
D. SUBSTITUTE PRODUDCTS
These threat of substitute products are determined by the following
 Relative price performance of substitute
 Switching costs
 Buyer property to substitute
E. RIVALRY AMONG COMPETITORS WHICH IS DETERMINED BY
 Industry growth
 Intermittent capacity: if the capacity can be augmented in large increment
 Product differences e.g brand identity and switching cost.
 Concentration / balance of competitors number and size and power of
competitors
 Diversity of competitors in strategies, origins and personalities
 Fixed costs

OPERATING / TASK ENVIRONMENT

This comprises of factors in the competitive situation that affect the firm’s success in
acquiring needed resources or in profitability marketing its goods and services

Among the most important of these factor are the:

i. The firms competitive position

ii. Customer profiles
iii. Suppliers
iv. Creditors
COMPETITIVE POSITION : The competitor profile could be determined through
the following criteria, some of them include market share, capacity and productivity
caliber of personnel union relations etc.
CUSTOMER PROFILE: the process of developing a profile of a firms present and
prospective customer’s improve the ability of its managers to plan strategic

24
 operations, to anticipate changes in the size of the market and to reallocate resources
so as to support forecast or demand patterns. The traditional approach is to segment
customers in terms, geographic, demographic, psychographic and behavioral.

SUPPLIERS: in assessing its relationship with the suppliers, the firm should address
the following questions.

 Are the suppliers prices competitive?

 Do the suppliers often attractive quantities discount?
 How costly are the transporting and shipping charges?
 Are suppliers competitive in terms of production standards?
 Are the supplier dependent on the firm?
CREDITORS: with regards to its competitive position, with it creditors, the following
important question should be considered;
 Do the creditors fairly value and willingly accept the firms stock as collateral?
 Do the creditors perceive the firm as having an acceptable record of past payment?
 Are strong working capital position wide or no upgrade?
 Are the creditors loan terms compatible with the firm’s profitability objectives?
 Are the creditors able to extend the necessary lines of credit?
Giving the right answers to those related question’s would help affirm forecast the
availability of resources it will need to implement and sustain its competitive
strategies.
HUMAN RESOURCES: a firm’s ability to attract and hold capable employees is
essential to its success. A firm access to needed personnel is affected primarily by
these factors;
i. The firm’s reputation as employer in terms of performance in the community,
competitive in its compensation patronage, concerned with the welfare of employees
and if it respected for its product a services and appreciated tor its overall contribution
to the general welfare.
ii. Employment Rate: the readily available supply of skilled and experienced personnel
may vary considerably with stage of community growth.
iii. Availability of labor

TECHNIQUES FOR ASSESSING THE ENVIRONMENT

In our discussion of the strategic management process and strategic management terms, we
discussed the importance of assessing the organization environment

Also at the beginning of this topic we give detailed analysis of business environment. In this
section we will look at some techniques to help managers to do proper assessment of the
environment

These techniques are;

1. Environmental scanning

25
2. Forecasting
3. Benchmarking

1. Environmental scanning: how can managers become aware of significant changes in

the environment such as new law. ,managers in both small and large organization use
environmental scanning
DEFINATION
Environmental scanning is the scanning of large amount of information to anticipate
and interpret changes in the environment on daily basis.
Extensive environmental scanning is likely to reveal issues and concerns that could
affect on organizations current and planned activities. Research as shown that
companies with advanced environmental systems have increased their profits and
revenue growth
One of the fastest growing areas of environmental scanning is
COMPETITORS INTELLIGENCE (SPYING)

COMPETITORS INTELLIGENCE (SPYING): this is a process by which

organization gather information about their competitors and get answers to question
such as;
 Who are they? (your competitors)
 What are they doing?
 How will what they are doing affect our organizations?

Though competitors intelligence experts suggest a good percentage of what managers

need to know about competitors can be found out from their employees , suppliers and
customers.
It must be noted that competitor intelligence does not necessarily have to
involve spying but advertisements, promotional materials, press release, reports filed
with government agencies, annual reports, newspaper reports, want advert can
advertisement in a newspaper specifying goods, property, employment etc. required by
the advertiser and industry studies are examples of readily accessible source of
information
Attending trade shows and debriefing the sales force are also other good source of
competitors information. Many firm’s regularly buy competitors products and have
their own engineers study them (through a process called reverse engineering)to learn
about new technical innovations.
Another type of environmental scanning is termed Global scanning

B. Global Scanning:

Because world markets are complex and dynamic, managers have expanded the scape of
their scanning efforts to gain vital information on global forces that might affect their
organizations. The value of global scanning to managers is dependent on the extent of the
organizations global activities

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 2. FORECASTING
The second techniques that managers can use to assess the environment is
FORECASTING. Forecasting is an important part of organizational and manager
used forecast that will allow them to predict events effectively and timely manner.

Environmental scanning estabalishes the basis for forecasts. Forecasts are predictions of
customers. Virtually any component of the external environment can be forecasted. Managers
need to forecast such factors as;

1. The Economy: the economy and the possible impact of the economic changes can be
assessed in a number of ways, economic growth, inflation, government spending,
interest rates, exchange rates, the money supply, investment and taxation may all be
influential.
Demographic influences such as changes in demographic which can readily forecast,
while changes in tasks and values are more difficult, categorizing people into socio-
economic or house type grouping has often been used to try and understand demand
patterns.
Political influences relate to changes in governments and their priorities and
programmes.
Technological forecasting covers changes in technology generally and possible
impact of innovations which result from research and development by an organization
by its competitors and by other firms with which it is involved in some way.

Forecasting techniques
Forecasting techniques falls into two categories
i. Quantitative
ii. Qualitative
i. Quantitative forecasting: applies a set of mathematical rules to a series of past data
to predict outcomes. These techniques are preffered when managers have
sufficient data that can be used.
ii. Qualitative forecasting: use the judgment and opinion of knowledgeable
individual to predict outcomes. Qualitative forecasting is the forecasting that uses
the judgment and opinion of knowledgeable individuals to predict outcomes.

27
 i. Quantitative techniques.
TECHNIQUE DESCRIPTION APPLICATION
1. Time series analysis fits a trend line to a predicting next quarters
mathematical equation & sales on the basis of four
project into the future years of previous sales
by means of the equation. Data
2. Regression models predict one variable on the setting factors that will
Basis of known or assumed predict a certain level of
Other variables sales for price,
Advertising, expenditure
3. Econometric Models uses a set of regression predicting change in car
Equations to stimulate sales as a result of
Segment of the economy change in tax laws.
4. Economic indicators use one or more economic using change in GNP to
Indicators to predict a future predict discretionary
State of the economy income
5. Substitution Effect uses a mathematical formula predicting the effect of
To predict how, when, and DVD player on the sales
Under what circumstances and of VHS.
Technology or product will
Replace an existing one
B. Qualitative techniques.
There are six (6) fundamental qualitative approaches to forecasting future environmental
conditions. They are
Sales force estimate
Juries of executive opinion
Anticipatory forecast
Delphi techniques
Brainstorming
Qualitative or judgmental forecast are particularly useful when historical data is not available or
when constituent variable are expelled to change significantly the future.
SALES FORCE ESTIMATE: represents a bottom up approach to forecasting of aggregation
salesperson’s forecasts concerning various products, suppliers, distributors and customers.
JURIES OF EXECUTIVE OPINION: this approach involve joint preparation of and/or averaging
of forecasts by marketing, production, finance and research and development executives.
i. ANTICIPATORY SURVEYING OR MARKET RESEARCH: consist of developing and
administering telephone or written questionnaire and analyzing respondent answer. Theses
qualitative forecasting techniques are commonly used for competitive forecasting
ii. SCENARIO : can be described as alternatives set of possible future occurrences . the impact
of various scenario on an organization is anticipated.
Possible happenings and event are considered by working at potential customers from
particular causes and seeking to explain why things might occur.

28
 The value is in increasing awareness by explaining possibilities and asking and attempting
to answers, what it questions.
CHAPTER FIVE

THE COMPANY’S STRATEGY

Forward Integration

This is gaining ownership or increased control over distributors retailers.

Guidelines when forward integration is most effectives.

i. When an organization’s present distributors are especially expensive or
unreliable or incapable of meeting the firm’s distribution needs.
ii. When availability of quality distributors is so limited and offer a competitive
advantage to those firms that migrate forwards
iii. When present distributors or retailers have high profit margins
iv. When an organization has both the capital and human resources needed to
manage the new business of distributing its own products

Backward Integration

Its seeking ownership or increased control over suppliers

Guidelines when this is most effective.

i. When an organization’s present suppliers are especially expensive or unreliable or

incapable of meeting the firm’s needs for parts, components, assemblies or raw
materials.
ii. When the number of suppliers is few and the number of competitors is many
iii. When an organization competes in an industry that is growing rapidly, this is a factor
because integrative-type strategies reduce an organization’s ability the diversity in a
declining industry.
iv. When the average of stable price are partimately important

Horizontal Integration

This is seeking ownership or increased control over competitors.

Guidelines for when its most effective.

i. When an organization can gain monopolistic characteristic characteristic in a

particular area are region of being challenged by the federal government for
“trending substantially” to reduce competition.
ii. When an organization competes in a growing industry.
iii. When increased economies of sales provide major competitive advantages.
iv. When competitors are paltering due to a lack of managerial expertise or a need a
particular resources which your organization possesses; note that horizontal

29
 integration would not be appropriate if competitors are doing poorly because
overall industry sales are declining.
v. When an organization has both the capital and human talent needed to
successfully manage an expanded organization.

Market Penetration

This is seeking increased market share for present produces in present markets high greater
marketing efforts.

Guidelines for when its most effective.

i. When current market are not saturated with your particular product or services.
ii. When the usage rate of present customers could be significantly increased.
iii. When the market share of major competitors have been declining while total
industry sales have been increasing.
iv. When increased economies of scale provide major competitive advantage

Market Development

This is introducing present produces into new geographic areas

Guidelines for Its Effectiveness

i. When new channel of distribution are available that are reliable in expensive and
of good quality
ii. When an organization is successful at what it does.
iii. When new untapped or unsaturated market exists
iv. When an organization has excess production capacity.
v. When an organization basic industry is rapidly becoming global in scope

Product Development

Its seeking increased sales by improving or modifying (developing). Present product.

Guidelines for Its Effectiveness

i. When an organization successful products that are in the maturity stage of product
life cycle.
ii. When an organization competes in an industry that is characterized by rapid
technological development.
iii. When an organization competes in a high-growth industry.
iv. When an organization has especially strong research and development
capabilities.

Conglomerate Diversification

This is a type of strategy of adding new, unrelated product

30
Guidelines for Its Effectiveness

i. When an organization’s basic industry is experiencing declining profits.

ii. When an organization has the capital and managerial telent needed to compete
successfully a new industry.
iii. When the organization has opportunity to purchase an unrelated business that is an
attractive investment opportunity.
iv. When there exists financial synergy between the acquired and acquiring firm’ that
a key difference between conglomerate diversification is that the former should be
based on some commonality in markets, products, or technology, whereas, the
latter should be based be based more on profit considerations.
v. When existing markets for an organization’s present products are saturated.
CONCENTRIC DIVERSIFICATION
This is adding new, but related, products.

GUIDELINES FOR ITS EFFECTIVENESS

i. When an organization competes in a no growth or a slow growth industry

ii. It would significantly enhance the sales of current products.
iii. When new, but related products could be offered at highly competitive
prices.
iv. When new, but related, products have seasonal sales levels that
counterbalance organization’s existing peaks and valleys.
v. When an organization’s product are currently in the decline stage of
product life cycle.

HORIZONTAL DIVERSIFICATION.

This means adding new, unrelated products for present customers

GUIDELINES FOR ITS EFFECTIVENESS

i. When revenues derived from an organization’s products or service would

significantly increase by adding the new, unrelated products.
ii. When an organization competes in a highly competitive and/or no growth industry
as indicated by low industry profit margins and returns.
iii. When an organization present channel of distribution can be used to market new
products to current customers.
iv. When the new products have countercyclical sales patterns compared to a
organization’s present product.

JOINT VENTURE

This is a situation where one company is working with another on a special project.

31
 GUIDELINES FOR ITS EFFECTIVENESS

i. When the distinctive competencies of two or more firms complement each

other especially well.
ii. When some project is potentially very profitable, but requires overwhelming
resources and risks
iii. When two or more smaller firms have trouble competing with a large firm
iv. When there exists an need to introduce a new technology quickly.

RETRENCHMENT
A company regrouping through cost and asset reduction in order to reverse
and declining sales.

LIQUIDATION
This means selling all of a company’s assets, in parts, for their tangible worth.
Guidelines for situations when this strategy is most effective.

i. When an organization has pursued both a retrenchment strategy and a

divestiture strategy and neither has been successful.
ii. When an organizations only alternative is bankruptcy; liquidation represent
orderly and planned means of attaining the greatest possible cash for an
organizations assets.
iii. When the stockholders of a firm can minimize their losses by selling the
organization assets.

STRATEGY IMPLEMENTATION

The strategic management process does not end when top managers decide which strategy to
pursue, or strategies, there must be a translation of strategic thought into strategic action.
Strategy implementation can be contrasted with strategy formulation in the following ways;

i. Strategy formulation focuses on effectiveness

Strategy implementation focuses in efficiency.
ii. Strategy formulation is primarily on intellectual action
Strategy implementation is primarily on operational process.

GUIDELINES FOR ITS EFFECTIVENESS

i. When an organization has a clearly distinctive competence, but has

failed to meet its objectives and goals consistently overtime.
ii. When an organization is one of the weakest competitors in a given
industry.
iii. When an organization is plagued by inefficiency, low profitability, poor
employee morale and pressure from stockholders to improve
performance.

32
 iv. When an organization has failed to capitalize on external opportunities,
minimize external threats, take advantage of internal strengths and
overcome internal weakness overtime, that is when the organizations
strategic managers have failed.
v. When an organization has given so large so quickly that major internal
reorganization is needed.

DIVESTITURE

This is selling a division or part of an organization

GUIDELINES FOR ITS EFFECTIVENESS

i. When an organization has pursued a retrendment strategy and it failed to

accomplish needed improvement.
ii. When a division needs more resources to be competitive than the company can
provide.
iii. When a division is a misfit with the rest of an organization; this can result
from radically different markets, customers, managers, employees, values or
needs.
iv. When a large amount of cash is needed quickly and cannot be reasonably
obtained from other sources
v. When government antitrust action threatens an organisation.

Combination: This is a type of strategy when an organization pursuing two or more

strategies simultaneously.

Strategy implementation is an operationally oriented process because goals and policies must
be established and resources allocated throughout the otganization.

Successful strategy implementation can require the following types of changes;

i. Reallocating resources to department

ii. Setting performance standards
iii. Installing information systems
iv. Establishing rewards systems
v. Altering an organizations structure
vi. Establishing new sales territories
vii. Training new employees and managers
viii. Motivating individual
ix. Obtaining new capital
x. Developing new advertising strategies
xi. Segmenting new markets
xii. Developing budget and programs,
In small organizations the transition from strategy formulation to strategy
implementation requires a shift of responsibility from corporate managers to
divisional and functional managers. Implementation problems can arise because of

33
 this shift in responsibility. Especially when strategy formulation decisions come
as a surprise to middle and lower level managers. Divisional and functional
managers should be involved as much as possible in the strategy formulation
process and corporate managers should be involved as much as possible in the
strategy implementation process

Strategy Evaluation

In many organizations, strategy evaluation is simply appraisal of how an organization

performs. Have the firms asset increased? Has there been increase in profit.

Strategies can be categorized into four major groups

1. Intensive: market penetration, market development and product development

2. Integrative: forward integration, backward integration & horizontal integration
3. Diversified: concentric diversification, conglomerate diversification and horizontal
diversification
4. Other joint venture, retrenchment, divestiture, liquidation and combination.

INTENSIVE STRATEGY
Market penetration is a strategy that means increasing the number of salesmen
increasing publicity effort.
Market development is a geographic expansion into new areas
Product development usually entails large research and development expenditures.
OTHER TYPES OF STRATEGIES
 Retrenchment strategy is often called turnaround or reorganization strategy, it is
designed to fortify an organizations basic distinctive competence
 Retrenchment entails selling off land and buildings to raise needed cash, pruning
product lines, closing marginal businesses, closing obsolete factories, automating
processes reducing the number of employees and instituting expense control systems.

34