KOSHYS INSTITUTE OF MANAGEMENT STUDIES

DEPARTMENT OF BUSINESS ADMINISTRATION

STRATEGIC
MANAGEMENT

Prof. Sharmila Fernandes

PGDHA MBA(PhD)
Assistant professor

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Module-1 Introduction to strategic management

Strategy (from Greek στρατηγία stratēgia, "art of troop leader; office of general, command,
generalship"[1])

Meaning- A plan of action designed to achieve a long-term or overall aim.

A strategy is an administrative course of action designed to achieve success It is a plan for meeting
challenges posed by the activities of competitors and environmental forces. Strategy is the complex
plan for bringing the organization from a given state to a desired position in a future period of time.
For example, if management anticipates price-cut by competitors, it may decide upon a strategy of
launching an advertising campaign to educate the customers and to convince them of the superiority
of its products.

Strategic management - Definition

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

Note:
1.- Pyramid of statements
1

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Examples:

1. Pricing strategies- offers/discounts/coupons

2. Acquisitions- ex- flipkart acquired myntra and jabong.
3. Product differentiation- competitor analysis ( maggi vs yippee)
4. Incentives- for increasing sales

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 Need for strategic management :

Main Reasons For Need Of Strategic Management For An Organization Are:

1. Increasing Rate Of Changes

2. Higher Motivation Of Employees

3. Strategic Decision-making

4. Optimisation Of Profits

5. Miscellaneous!

1. Increasing Rate of Changes:

The environment in which the business operates’ is fast, changing

Changes might happen due to external environmental factors (PEST). Hence management should
forecast changes well in advance to take advantage of opportunities and reduce risk. A business
concern which does not keep its policies up-to-date, cannot survive for a long time in the market. In
turn, the effective strategy optimises profits over a long run.

2. Higher Motivation of Employees:

The employees (human resources) are assigned clear cut duties by the top management viz. what is
to be done, who is to do it, how to do it and when to do it. ? When strategic management is
followed in any organisation, employees become loyal, sincere and goal oriented and their
efficiency is also increased.

They also get rewards and promotions resulting in higher motivation for the employees. A strategy
must respect human values and duly consider the aspirations of individual members.

3. Strategic Decision-Making:

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Under strategic planning, the first step is to set the goals or objectives of a business concern.
Strategic decisions taken under strategic management help the smooth sailing of an enterprise.
Strategic planning is the overall planning of operations for effective implementation of policies.

4. Optimization of Profits:

An effective strategy should develop from policies of a concern. It takes into account actions of
competitors. It considers future operations in respect of market area and opportunity, executive
competence, available resources and limitations imposed by the Government. An effective strategy
should optimise profits over the long run.

5. Miscellaneous:

Mr. H.N Broom in his book on ‘Business Policy and Strategic Action’ has mentioned that a strategy
has a primary concern with the following:

(a) Marketing opportunity: Products, prices, sales potential and sales promotion.

(b) Available distribution channel and costs.

(c) The scale of company operations.

(d) The manufacturing process required to implement their scale of operations (with an optimal
production cost)

(e) The research and innovation programme.

(f) The type of organisation.

(g) The amounts and proportions of equity and credit capital available to the firm and their
combined adequacy.

(h) The planned rate of growth.

(i) competitive advantage

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Thus, strategy is important because it makes possible the implementation of policies and long range
plans for attaining company goals, creation of effective business strategy requires a basic
knowledge of economic theory, management principles, accounting, statistics, finance and
administrative practice.

Strategic management process has following four steps:

Components of Strategic Management Process

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1. Environmental Scanning- Environmental scanning refers to a process of collecting,
scrutinizing and providing information for strategic purposes. It helps in analyzing the
internal and external factors influencing an organization. After executing the environmental
analysis process, management should evaluate it on a continuous basis and strive to improve
it. ( SWOT analysis)
2. Strategy Formulation/planning - Strategy formulation is the process of deciding best
course of action for accomplishing organizational objectives and hence achieving
organizational purpose. After conducting environmental scanning, managers formulate
corporate, business and functional strategies.
3. Strategy Implementation- Strategy implementation implies making the strategy work as
intended or putting the organization’s chosen strategy into action. Strategy implementation
includes designing the organization’s structure, distributing resources, developing decision
making process, and managing human resources.
4. Strategy Evaluation- Strategy evaluation is the final step of strategy management process.
The key strategy evaluation activities are: appraising internal and external factors that are
the root of present strategies, measuring performance, and taking remedial / corrective
actions. Evaluation makes sure that the organizational strategy as well as it’s
implementation meets the organizational objectives.

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These components are steps that are carried, in chronological order, when creating a new strategic
management plan. Present businesses that have already created a strategic management plan will
revert to these steps as per the situation’s requirement, so as to make essential changes.

Strategic Decision Making

Introduction :

Managers of successful businesses do more than simply find a way to make money and sell stuff.
Not only do they handle the day to day stuff of selling, they also think of the big picture and make
decisions that will get the company to where it wants to go. This is called strategic decision-
making, where decisions are made according to a company's goals or mission. This type of
decision making guides the choices that are made, aligning them with the company objective. It
requires out of the box thinking as managers need to consider possible future scenarios that may or
may not happen. It is these scenarios that will determine in which direction a company will go.

Meaning:

Strategic Decision making involves choosing better course of action from available alternatives,
each alternative should be evaluated under the financial, social, technological and political
implications and should be implemented followed by evaluation.

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Process of strategic decision making

Step 1: Identify the decision

You realize that you need to make a decision. Try to clearly define the nature of the decision you
must make. This first step is very important.

Step 2: Gather relevant information

Collect some pertinent information before you make your decision: what information is needed, the
best sources of information, and how to get it. This step involves both internal and external “work.”
Some information is internal: you’ll seek it through a process of self-assessment. Other information
is external: you’ll find it online, in books, from other people, and from other sources.

Step 3: Identify the alternatives

As you collect information, you will probably identify several possible paths of action, or
alternatives. You can also use your imagination and additional information to construct new
alternatives. In this step, you will list all possible and desirable alternatives.
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Step 4: Weigh the evidence
Draw on your information and emotions to imagine what it would be like if you carried out each of
the alternatives to the end. Evaluate whether the need identified in Step 1 would be met or resolved
through the use of each alternative. As you go through this difficult internal process, you’ll begin to
favor certain alternatives: those that seem to have a higher potential for reaching your goal. Finally,
place the alternatives in a priority order, based upon your own value system.

Step 5: Choose among alternatives

Once you have weighed all the evidence, you are ready to select the alternative that seems to be best
one for you. You may even choose a combination of alternatives. Your choice in Step 5 may very
likely be the same or similar to the alternative you placed at the top of your list at the end of Step 4.

Step 6: Take action

You’re now ready to take some positive action by beginning to implement the alternative you chose
in Step 5.

Step 7: Review your decision & its consequences

In this final step, consider the results of your decision and evaluate whether or not it has resolved
the need you identified in Step 1. If the decision has not met the identified need, you may want to
repeat certain steps of the process to make a new decision. For example, you might want to gather
more detailed or somewhat different information or explore additional alternatives.

Business Ethics:

Ethics refers to moral principles that govern a person's behaviour or the conducting of an activity/
organisation.

Business is an ongoing activity of buying and selling of goods and services for a value.

Business ethics

Definition: Business ethics, connotes the form of applied ethics, which studies ethical principles,
morals and problems that take place in the business environment. It is nothing but the integration of
day to day morals and ethical norms to business and applies to all types of business.It is the ethical
standards which regulate business persons in performing business activities.

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In finer terms, it implies the good or bad, right or wrong behaviour, in pursuing business, determined
on the basis of expected behaviourapproved by the society.
E.g. Charging reasonable prices from customers, just and fair treatment to workers, earning a legitimate
profit, providing a good environment to employees, etc

1. Stop business malpractices : Some unscrupulous businessmen do business malpractices

by indulging in unfair trade practices like black-marketing, artificial high pricing,
adulteration, cheating in weights and measures, selling of duplicate and harmful products,
hoarding, etc. These business malpractices are harmful to the consumers. Business ethics
help to stop these business malpractices.
2. Improve customers' confidence : Business ethics are needed to improve the customers'
confidence about the quality, quantity, price, etc. of the products. The customers have
more trust and confidence in the businessmen who follow ethical rules. They feel that
such businessmen will not cheat them.
3. Survival of business : Business ethics are mandatory for the survival of business. The
businessmen who do not follow it will have short-term success, but they will fail in the
long run. This is because they can cheat a consumer only once. After that, the consumer
will not buy goods from that businessman. He will also tell others not to buy from that
businessman. So this will defame his image and provoke a negative publicity. This will
result in failure of the business. Therefore, if the businessmen do not follow ethical rules,
he will fail in the market. So, it is always better to follow appropriate code of conduct to
survive in the market.

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4. Safeguarding consumers' rights : The consumer has many rights such as right to health
and safety, right to be informed, right to choose, right to be heard, right to redress, etc.
But many businessmen do not respect and protect these rights. Business ethics are must to
safeguard these rights of the consumers.
5. Protecting employees and shareholders : Business ethics are required to protect the
interest of employees, shareholders, competitors, dealers, suppliers, etc. It protects them
from exploitation through unfair trade practices.
6. Develops good relations : Business ethics are important to develop good and friendly
relations between business and society. This will result in a regular supply of good quality
goods and services at low prices to the society. It will also result in profits for the
businesses thereby resulting in growth of economy.
7. Creates good image : Business ethics create a good image for the business and
businessmen. If the businessmen follow all ethical rules, then they will be fully accepted
and not criticised by the society. The society will always support those businessmen who
follow this necessary code of conduct.
8. Smooth functioning : If the business follows all the business ethics, then the employees,
shareholders, consumers, dealers and suppliers will all be happy. So they will give full
cooperation to the business. This will result in smooth functioning of the business. So, the
business will grow, expand and diversify easily and quickly. It will have more sales and
more profits.
9. Consumer movement : Business ethics are gaining importance because of the growth of
the consumer movement. Today, the consumers are aware of their rights. Now they are
more organised and hence cannot be cheated easily. They take actions against those
businessmen who indulge in bad business practices. They boycott poor quality, harmful,
high-priced and counterfeit (duplicate) goods. Therefore, the only way to survive in
business is to be honest and fair.
10. Consumer satisfaction : Today, the consumer is the king of the market. Any business
simply cannot survive without the consumers. Therefore, the main aim or objective of
business is consumer satisfaction. If the consumer is not satisfied, then there will be no
sales and thus no profits too. Consumer will be satisfied only if the business follows all
the business ethics, and hence are highly needed.
11. Importance of labour : Labour, i.e. employees or workers play a very crucial role in the
success of a business. Therefore, business must use business ethics while dealing with the
employees. The business must give them proper wages and salaries and provide them
with better working conditions. There must be good relations between employer and
employees. The employees must also be given proper welfare facilities.
12. Healthy competition : The business must use business ethics while dealing with the
competitors. They must have healthy competition with the competitors. They must not do
cut-throat competition. Similarly, they must give equal opportunities to small-scale
business. They must avoid monopoly. This is because a monopoly is harmful to the
consumers.

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Example of unethical practices in business:

1. maggi lead content

2. Facebook
3. Satyam scam
4. 2g spectrum scam

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 Module-2 Environmental appraisal

A business organisation does not exist in a vacuum. It is in fact dependent on the external and
internal environment. Business environment may offer opportunities for the firm or threats to the
firm. A business firm is also affected by a number of internal factors, which are forces inside the
business organisation. While the policy makers and the managers on the top are concerned with the
external environment, the middle level and lower level management are more concerned with the
internal environment.

External Micro- Environment

Micro environment includes those players whose decisions and actions have a direct impact on the
company. Production and selling of commodities are the two important aspects of modern business.
The various constituents of micro environment are as under:

a. Suppliers of inputs : An important factor in the external micro environment of a firm is the
supplier of its inputs such as raw materials and components.

b. Customers : The people who buy and use a firm’s product and services are an important part of
external micro environment. Since sales of a product or service is critical for a firm’s survival and
growth, it is necessary to keep the customers satisfied.

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c. Marketing intermediaries : In the firm’s external micro environment, marketing intermediaries
play an essential role of selling and distributing its products to the final customers. Marketing is an
important link between a business firm and its ultimate customers.

d. Competitors : Different firms in an industry compete with each other for sale of their products.
This competition may be on the basis of pricing of their products and also non- price competition
through competitive advertising such as sponsoring some events to promote the sale of different
varieties and models of their products.

e. Publics : Finally, publics are an important force in external micro environment. Public, according
to Philip Kotler, “is any group that has an actual or potential interest in or impact on the company’s
ability to achieve its objective.” Environmentalists, media groups, women’s associations, consumer
protection groups, local groups, citizens association are some important examples of publics which
have an important bearing on the business decisions of the firm.

B. External macro environment :

Apart from micro environment, business firms face large external environmental forces. An
important fact about external macro environmental forces is that they are uncontrollable by the
management. Because of the uncontrollable nature of macro forces a firm has to adjust or adapt it to
these external forces. These factors are:

a. Economic Environment : Economic environment includes all those forces which have an
economic impact on business. Accordingly, total economic environment consists of agriculture,
industrial production, infrastructure, and planning, basic economic philosophy, stages of economic
development, trade cycles, national income, per capita income, savings, money supply, price level
and population.

b. Political-legal Environment : The political- legal environment includes the activities of three
political institutions, namely, legislature, executive and judiciary which usually play a useful role in
shaping, directing, developing and controlling business activities. In order to attain a meaningful
business growth, a stable and dynamic political-legal environment is very important.

c. Technological Environment : Technology implies systematic application of scientific or other

organised knowledge to practical tasks or activities. Business makes it possible for technology to
reach the people in proper format. As technology is changing fast, businessmen should keep a close
look on those technological changes for its adaptation in their business activities.

d. Global or International Environment : The Global environment plays an important role in

shaping business activity. With the liberalisation and globalisation of the economy, business
environment of an economy has become totally different wherein it has to bear all shocks and
benefits arising out of global environment.
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e. Socio-cultural Environment : Finally, the social and cultural environment also influences the
business environment indirectly. These includes people’s attitude to work and wealth, ethical
issues, role of family, marriage, religion and education and also social responsiveness of business.

f. Demographic environment : The demographic environment includes the size and growth of
population, life expectancy of the people, rural-urban distribution of population, the technological
skills and educational levels of labour force. All these demographic features have an important
bearing on the functioning of business firms.

g. Natural Environment : The Natural environment influences business in diverse ways. The
natural environment is the ultimate source of many inputs such as raw materials and energy, which
firms use in their productive activity. In fact, the availability of natural resources in the region or
country is the basic factor in determining business activity in it. The natural environment which
includes geographical and ecological factors such as minerals and oil reserves, water and forest
resources, weather and climatic conditions and port facilities are all highly significant for various
business activities. For example, steel producing industries are set up near the coal mines to save
cost of transporting coal to distant locations. The natural environment also affects the demand for
goods. For example, in places where temperatures are high the demand for coolers and air
conditioners are high. Similarly, weather and climatic conditions influence the demand pattern for
clothing, building materials for housing etc. Natural calamities like floods, droughts, earthquake
etc. are devastating for business activities.

h. Ecological environment : Due to the efforts of environmentalists and international organisations

such as the World Bank the people have now become conscious of the adverse effects of depletion
of exhaustible natural resources and pollution of environment by business activity. Accordingly,
laws have been passed for conservation of natural resources and prevention of environment
pollution. These laws have imposed additional responsibilities and costs for business firms.

Internal Environment : The factors in internal environment of business are to a certain extent
controllable because the firm can change or modify these factors to improve its efficiency.
However, the firm may not be able to change all the factors.

The various internal factors are:

a. Value system : The value system of an organisation means the ethical beliefs that guide the
organisation in achieving its mission and objectives. It is a widely acknowledged fact that the extent
to which the value system is shared by all in the organisation is an important factor contributing to
its success
b. Mission and objectives : The business domain of the company, direction of development,
business philosophy, business policy etc are guided by the mission and objectives of the company.
The objective of all firms is assumed to be maximisation of profit. Mission is defined as the overall

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purpose or reason for its existence which guides and influences its business decision and economic
activities.

c. Organisation structure : The organisational structure, the composition of the board of directors,
the professionalism of management etc are important factors influencing business decisions. An
efficient working of a business organisation requires that the organisation structure should be
conducive for quick decision-making.

d. Corporate culture : Corporate culture is an important factor for determining the internal
environment of any company. In a closed and threatening type of corporate culture the business
decisions are taken by top level managers while the middle level and lower level managers have no
say in business decision making. This leads to lack of trust and confidence among subordinate
officials of the company and secrecy pervades throughout the organisation. This results in a sense
of alienation among the lower level managers and workers of the company. In an open and
participating culture, business decisions are taken by the lower level managers and top management
has a high degree of confidence in the subordinates.

e. Quality of human resources : Quality of employees that is of human resources of a firm is an

important factor of internal environment of a firm. The characteristics of the human resources like
skill, quality, capabilities, attitude and commitment of its employees etc could contribute to the
strength and weaknesses of an organisation. Some organisations find it difficult to carry out
restructuring or modernisation plans because of resistance by its employees

f. Labour unions : Labour unions collectively bargains with the managers for better wages and
better working conditions of the different categories of workers etc. For the smooth working of a
business firm good relations between management and labour unions is required.

g. Physical resources and technological capabilities : Physical resources such as plant and
equipment and technological capabilities of a firm determine its competitive strength which is an
important factor for determining its efficiency and unit cost of production. Research and
development capabilities of a company determine its ability to introduce innovations which
enhances productivity of workers.

SWOT Analysis:

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SWOT analysis (or SWOT matrix) is a strategic planning technique used to help a person or
organization identify strengths, weaknesses, opportunities, and threats related to business
competition or project planning.[1] It is intended to specify the objectives of the business venture or
project and identify the internal and external factors that are favorable and unfavorable to achieving
those objectives. Users of a SWOT analysis often ask and answer questions to generate meaningful
information for each category to make the tool useful and identify their competitive advantage.
SWOT has been described as the tried-and-true tool of strategic analysis.[2]
Strengths and weakness are frequently internally-related, while opportunities and threats commonly
focus on the external environment. The name is an acronym for the four parameters the technique
examines:
● Strengths: characteristics of the business or project that give it an advantage over others.
● Weaknesses: characteristics of the business that place the business or project at a
disadvantage relative to others.
● Opportunities: elements in the environment that the business or project could exploit to
its advantage.
● Threats: elements in the environment that could cause trouble for the business or
project.

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SWOT analysis aims to identify the key internal and external factors seen as important to achieving
an objective. SWOT analysis groups key pieces of information into two main categories:
1. Internal factors — the strengths and weaknesses internal to the organization
2. External factors — the opportunities and threats presented by the environment
external to the organization

Strengths and weaknesses (internal factors within an organization):[10]

● Human resources — staff, volunteers, board members, target population
● Physical resources — your location, building, equipment
● Financial — grants, funding agencies, other sources of income
● Activities and processes — programs you run, systems you employ
● Past experiences — building blocks for learning and success, your reputation in the
community
Opportunities and threats (external factors stemming from community or societal forces):[10]
● Future trends in your field or the culture
● The economy — local, national, or international
● Funding sources — foundations, donors, legislatures
● Demographics — changes in the age, race, gender, culture of those you serve or in your
area
● The physical environment —is your building in a growing part of town? Is the bus
company cutting routes?
● Legislation — do new federal requirements make your job harder...or easier?
● Local, national, or international events

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Advantages of SWOT Analysis
The usefulness of SWOT analysis is not limited to profit-seeking organizations. SWOT analysis
may be used in any decision-making situation when a desired end-state (objective) is defined.
Examples include non-profit organizations, governmental units, and individuals. SWOT analysis
may also be used in pre-crisis planning and preventive crisis management. SWOT analysis may
also be used in creating a recommendation during a viability study/survey.

1. Strategy building

SWOT analysis can be used effectively to build organizational or personal strategy. Steps necessary
to execute strategy-oriented analysis involve identification of internal and external factors (using
the popular 2x2 matrix), selection and evaluation of the most important factors, and identification of
relations existing between internal and external features.[5]
For instance, strong relations between strengths and opportunities can suggest good conditions in
the company and allow using an aggressive strategy. On the other hand, strong interactions between

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weaknesses and threats could be analyzed as a potential warning and advice for using a defensive
strategy.[6]

2. Matching and converting

One way of using SWOT is matching and converting. Matching is used to find competitive
advantage by matching the strengths to opportunities. Another tactic is to convert weaknesses or
threats into strengths or opportunities. An example of a conversion strategy is to find new markets.
If the threats or weaknesses cannot be converted, a company should try to minimize or avoid
them.[7]

3. Corporate planning

As part of the development of strategies and plans to enable the organization to achieve its
objectives, that organization will use a systematic/rigorous process known as corporate planning.
SWOT alongside PEST/PESTLE can be used as a basis for the analysis of business and
environmental factors.[8]
● Set objectives — defining what the organization is going to do
● Environmental scanning
● Internal appraisals of the organization's SWOT — this needs to include an
assessment of the present situation as well as a portfolio of products/services
and an analysis of the product/service lifecycle
● Analysis of existing strategies — this should determine relevance from the results of an
internal/external appraisal. This may include gap analysis of environmental factors
● Strategic Issues defined — key factors in the development of a corporate plan that the
organization must address
● Develop new/revised strategies — revised analysis of strategic issues may mean the
objectives need to change
● Establish critical success factors — the achievement of objectives and strategy
implementation
● Preparation of operational, resource, projects plans for strategy implementation
● Monitoring all results — mapping against plans, taking corrective action, which may
mean amending objectives/strategies[9]

4 Marketing

In many competitor analysis, marketers build detailed profiles of each competitor in the market,
focusing especially on their relative competitive strengths and weaknesses using SWOT analysis.
Marketing managers will examine each competitor's cost structure, sources of profits, resources and
competencies, competitive positioning and product differentiation, degree of vertical integration,
historical responses to industry developments, and other factors.
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Marketing management often finds it necessary to invest in research to collect the data required to
perform accurate marketing analysis. Accordingly, management often conducts market research
(alternately marketing research) to obtain this information. Marketers employ a variety of
techniques to conduct market research, but some of the more common include:
● Qualitative marketing research such as focus groups
● Quantitative marketing research such as statistical surveys
● Experimental techniques such as test markets
● Observational techniques such as ethnographic (on-site) observation
● Marketing managers may also design and oversee various environmental scanning and
competitive intelligence processes to help identify trends and inform the company's
marketing analysis.

Example- DMART

DMart is a chain of hypermarkets in India founded by Radhakishan Damani in the year 2002.[1] As
of October 2018, it had 160 stores across India in the states of Maharashtra, Andhra Pradesh,
Telangana, Gujarat, Madhya Pradesh, Chhattisgarh, Rajasthan, National Capital Region, Tamil
Nadu, Karnataka and Punjab.[2]
DMart is promoted by Avenue Supermarts Ltd. (ASL).[3] The company has its headquarters in
Mumbai.

SWOT ANALYSIS D-Mart has positioned itself as a one-stop retail store chain, catering to value
seeking retail customers, largely from the lower-middle, middle and aspiring upper middle income
segments. It has gained its own strength and has some areas to improve as follows: Strengths of D-
Mart

Strengths

are defined as what each business does best in its gamut of operations which can give it an upper
hand over its competitors. The following are the strengths of D-Mart:
1) Focus on long-term: Mr. Damani, the founder of D-Mart, is an investor and thus the company
has been focused entirely on long-term gains. This has made the company maximise its returns
through a value driven pricing strategy.

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2) Slow scaling up: D-Mart started off on a very low key note and slowly took its time to move up
the ladder. This gave the company a better control and deeper understanding of its supply chain and
also helped it manage the bottom line better.
3) People-centric management style: D-Mart has a very good employee policy in place and is
very transparent in its employee relations. They also have a good relationship with vendors and
suppliers and the stakeholders are happy.
4) Discount Policy: One factor that delineates D-Mart from its competitors is its huge discount
policy. The retailer sells essential goods at a flat discount price which most competitors cannot
match and this helped it penetrate the market.
5) Clear price based differentiation: D-Mart never followed the trends set by other competing
retail brands but believed in setting their own trends. They captured the market through a clear price
based differentiation and priced their goods at significantly lower prices

Weaknesses

of D-Mart Weaknesses refer to the areas where the business or the brand needs improvement. Some
of the key weaknesses of D Mart are:
1) Focus on certain places: Quite unlike their competitors, who are present everywhere, D-Mart
has focused more on the Western States and has a very low presence in the South. This has
restricted them from gaining market prominence.
2) Sustainability of low pricing: The company has a zero credit policy and thus vendors and
suppliers give them at much better price which is how the company is able to afford the low prices
that the competitors cannot imagine.
3) No frills: D-Mart follows a no-frills approach where the focus is to cut costs wherever possible.
Their facilities are basic and lack the frills of most upmarket retailers. The customers who come
here essentially look at the low prices of products on offer. So thus the sustainability of this
differentiator is questionable.

Opportunities

for D-Mart Opportunities refer to those avenues in the environment that surrounds the business on
which it can capitalize to increase itsMart include:
1) Technology: Technology has a lot to offer to retailers in terms of in-store experiences and
retailer can use IoT, artificial intelligence, etc. to create value-adding services to their customers for
which a premium can be charged.
2) Personalization of services: Customers are looking for personalized services for which they are
willing to pay extra. Retailers should capitalize on this propensity to pay more and increase the
quality of their services.

Threats
for D-Mart Threats are those factors in the environment which can be detrimental to the growth of
the business. Some of the threats for D-Mart include:

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1) Online retailers: People in cities especially are highly lethargic about leaving their homes and
prefer to shop online today. Companies like Amazon and Flipkart thus become major threats to
most retailers.
2) Online Start-ups: The hottest trend in India is online start-ups. Many of them are aggregators
who bring together the supplier and the customer cost effectively. These companies are the
emerging threats more so because many new brands are cropping up in the aggregation market
primarily because of lower barriers to entry.

Competitive advantage.

Definition of Competitive Advantage

Competitive Advantage can be defined as “the superior performance of a particular company

relative to other competitors in the same industry or superior performance relative to the industry
average.” “It can also be defined as “anything that a particular company does better compared to its
competitors in the same industry.”

Different things can be considered as competitive edge for a company, for example greater return
on assets (ROI), higher profit margin, valuable resource such as brand loyalty or reputation or
unique competencies. Every company must have at least one or two advantage to successfully
compete in the rival market. If a company can’t identify one competitive advantage or just doesn’t
possess any, competitors soon surpass it and force such company to leave the market.

Two Types of Competitive Advantages

Cost Competitive Advantage

The first type of competitive advantage is cost competitive advantage, which means a company is
able to provides/offers products or services to its customers for less than competitor’s price. A
company only become in the position to do so when the company has a lower cost of doing
business.

One of the best-known companies that avail cost competitive advantage is Walmart. Wal-Mart’s
customers/shoppers know that a Walmart store will always provide them low-prices products.
Maybe merchandise has not the highest quality or the best selection, but a given product will be
provided to the customers at the lowest price in Walmart.

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Differentiation Competitive Advantage

The second major type of competitive advantage is differentiation. Differentiation competitive

advantage can be achieved when a company providing products that customers perceive in higher
value than competitors' products and such companies are able to charge a premium or higher prices
for those products.

BMW is the best example of differentiation competitive advantage. BMW sets itself apart from
other through innovative products. Company also builds a consistent theme through the product line
and through its marketing slogan (i.e. The Ultimate Driving Machine). This differentiation
competitive advantage enabled BMW to pass Mercedes in unit sales and dollar sales in the United
States, which was a very difficult task since Mercedes had held a significant lead in both.

Michael Porter, a Harvard University graduate, wrote a book in 1985 named – Competitive
Advantage: Creating and Sustaining Superior Performance, which identified three strategies which
businesses can use to tackle competition and create a sustainable competitive advantage. According
to him, these three generic strategies are:

Cost Leadership: It is a strategy where a business produces a same quality of the product as of the
competitors’ but sells it at a lower price. Cost leadership is achieved by continuously improving the
operational efficiency (using less but more efficient workers or outsourcing to places where the
costs are less), and getting an advantage of economies of scale (in the case of bigger businesses like
Aldi, Walmart, etc.).

Differentiation: A differential advantage is when the product or service offered by the business
deliver different benefits than the products offered by the competitors. It involves defining the
offering’s unique position in the market by explaining the unique benefit it provides to the target
group. This unique position can refer to the high quality, better delivery, more features, or any other
specific attribute of the product or service. Differentiation is usually achieved by innovation and big
innovation usually result in disruption of the industry and creating a sustainable competitive
advantage for the business. An example of the creation of differential advantage through disruption
is Uber. It differentiated the service it was offering by providing it on demand.

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Focus: Also called the segmentation strategy, the focus strategy involves targeting a pre-defined
segment rather than everyone. It involves understanding the target market better than everyone else
and use the data for better offering crafted according to the target market’s needs. This strategy was
initially used by small businesses to compete with the big companies, but with the advent of the
internet and the introduction of micro targeting, even big businesses like Amazon, Face book, &
Google use the focus strategy to differentiate themselves from others.

However, the modern competitive advantages aren’t limited to these three. A strong brand, big
pockets, network effect, patents, and trademarks are few other competitive advantage strategies
businesses use to outdo their competitors.

Brand: Brand loyalty is one of the biggest competitive advantages any business can capitalize on.
An effective brand image and positioning strategy leads to customers becoming loyal to the brand
and even paying more than usual to own the brand’s product. Apple is a perfect example when it
comes to brand-related competitive advantage.

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Big Pockets: Some companies enter the market with huge funding and disrupt the ecosystem by
providing some really enticing offers or providing the products at really low prices. This acts as a
competitive advantage as other companies often fail to respond to such tactics.

Network Effect: The network effect makes the good or service more valuable when more people
use it. For example, Whatsapp enjoys a competitive advantage over other players because its users
are reluctant to try other applications as most of their contacts use Whatsapp.

Barriers to Entry & Competition: Businesses often make use of natural and artificial barriers to
entry like Government policies, access to suppliers, patents, trademarks, etc. to stop others from
becoming a close competition.

A company may achieve Competitive Advantage by the help of two given ways:

By Means External Changes

External changes include PEST factors. When these factors change, many opportunities can appear
for a company, if seized upon, could provide many benefits for company. A particular company
which is capable to respond to external changes faster than other rival, can also gains an upper hand
over its competitors. So when there is a change in PEST factors a successful company should have
the ability to respond fast to changes.

By Developing them Inside the Company

A company can achieve differentiation or cost advantage when it develops unique competences,
VRIO (valuable, rare, hard to imitate and organized) resources, or through innovative processes
and products. When a company possesses VRIO resources it always has an edge over its
competitors due to superiority of VRIO resources. The VRIO resources have following attributes:

1. Intellectual property (patents, trademarks, copyrights,)

2. Brand equity
3. Culture
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 4. Know-how
5. Reputation
6. Unique competences
7. Innovative capabilities

Pulling it all together a company must understand its competitive advantage if it wants to leverage it
and as illustrated above BMW and Walmart understand the importance of competitive advantage
and increasing their share as well as profit rapidly.

Value chain :

A value chain is a set of activities that a firm operating in a specific industry performs in order to
deliver a valuable product or service for the market.

A value system, or an industry value chain, includes the suppliers that provide the inputs necessary
to the firm along with their value chains. After the firm creates products, these products pass
through the value chains of distributors (which also have their own value chains), all the way to the
customers. All parts of these chains are included in the value system. To achieve and sustain a

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competitive advantage, and to support that advantage with information technologies, a firm must
understand every component of this value system.[citation needed]

Primary activities[edit]

● Inbound logistics: arranging the inbound movement of materials, parts, and/or finished
inventory from suppliers to manufacturing or assembly plants, warehouses, or retail
stores
● Operations: concerned with managing the process that converts inputs (in the forms of
raw materials, labor, and energy) into outputs (in the form of goods and/or services).
● Outbound logistics: is the process related to the storage and movement of the final
product and the related information flows from the end of the production line to the end
user
● Marketing and sales: selling a product or service and processes for creating,
communicating, delivering, and exchanging offerings that have value for customers,
clients, partners, and society at large.
● Service: includes all the activities required to keep the product/service working
effectively for the buyer after it is sold and delivered.

Support activities[edit]

● Infrastructure: consists of activities such as accounting, legal, finance, control, public

relations, quality assurance and general (strategic) management.
● Technological development: pertains to the equipment, hardware, software, procedures
and technical knowledge brought to bear in the firm's transformation of inputs into
outputs.
● Human resources management: consists of all activities involved in recruiting, hiring,
training, developing, compensating and (if necessary) dismissing or laying off
personnel.
● Procurement: the acquisition of goods, services or works from an outside external
source

Examples:

● Food and Beverage: Selecting and sourcing high-quality coffee beans, developing
loyalty through excellent customer service, and aggressively marketing their brand
were key elements in Starbucks’ creation of a unique identity and a robust competitive
edge. Rather than focusing on premium pricing, Pizza Hut outpaced the competition by
offering fast delivery of a less expensive product.
● Delivery Service: To increase market share and brand loyalty, FedEx's value chain
emphasizes and invests in employee development through excellent human resources
initiatives and infrastructure improvements.
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 ● Retail: Walmart is constantly performing value chain analysis in order to keep costs
low for their customers. From regularly evaluating suppliers and integrating in-store
and online shopping experiences to remaining innovative in order to differentiate,
Walmart is driven by their commitment to helping people save money.

Example-2 Pizza hut

Example: Pizza Hut

Let’s take an example of Pizza Hut – value chain analysis:

Primary activities
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Inbound Logistics: In this process, they buy and regulate every ingredients and material that is
used to bake pizza fast and delicious. They exploit on economies of scale while purchasing the
material in order to get the best prices on raw products for their restaurants.

Operations: Pizza Hut operates in a vast number of countries globally with a licensing model.
Their goal is to target the areas where there is a huge demand for Italian cuisines.

Outbound Logistics: There are two models that Pizza Hut capitalizes on, home delivery service
and in-store dining.

Marketing and Sales: They invested a large amount in marketing to drive additional sales and
compete with the other fast food chains.

Service: The main aim of Pizza Hut is to offer value to their customers in affordable and quality
pizza that everyone can enjoy.

Support Activities

Infrastructure: It includes every other activity that is required to keep the stores in business, such
as finance, legal, etc.

Human Resources: To keep the costs low, they hire staff that is typically junior and unskilled.

Technological Development: The idea of hiring unskilled chefs to cook the pizza is their biggest
asset.

Procurement: The purchasing and other activities that required in the production of pizza, the raw
food, and equipment needed to cook and deliver the pizzas.

Conclusion

Based on these activities, Pizza Hut is leading in the market for producing pizza at the affordable
price and can be delivered to your doorstep in less than 30 minutes (in most cities). This
convenience is what makes them different from many other competing options for meals.

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 MODULE-3 : STRATEGIC PLANNING

A strategic plan is like a road map for your organization. It describes your destination (the vision),
how you’ll get there (your mission) and the things you’ll do along the way (strategic directions).
When properly implemented, a strategic plan is an excellent tool for setting priorities and guiding
decision-making – it tells your team not only “what’s in,” but also “what’s out.” When your
resources are limited and you’re trying to do more with less, you can’t afford to do everything: you
need to make some decisions about how you’ll allocate your resources, and a strategic plan is one
of the best investments you can make to improve your performance.

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Steps of Strategic Planning Process

1. Planning awareness,
2. Formulating goals,
3. Analyzing the external environment,
4. Analyzing internal environment (or own organizational resources),
5. Identifying strategic opportunities and threats,
6. Performing gap analysis,
7. Developing alternative strategies,
8. Implementing strategy,
9. Measuring and controlling progress.

Step-1: Planning Awareness

The first step in developing a strategic plan is to take stock of the existing situation; an
organization’s current mission, its goals, structure, strategy, and performance; the values and
expectations of the major stakeholders and power brokers of the organization and the environment
in which the organization exists and operates.
Commitments made in previous plans must also be reviewed at this stage.
Such earlier commitments might have created groups with vested interests, allocated resources, and
exerted other influences on decisions about the future.
Former organizational missions are most likely to cause managers to establish commitments and
groups which exert considerable influence on future decisions.
The goal, strategy, structure, and organizational performance accompanying the current mission
must also be examined.
The organization’s current goals, methods used to achieve them and the rate of success in achieving
them — all have a major bearing on the decisions to be made for the next round of strategic
planning.
A last element of the planning awareness is the understanding that managers must have knowledge
about the environment of the organization.

Step-2: Formulating Goals

The second step for management to develop a strategic plan is to clearly spell out what an
organization wants to achieve in the future.
Formulating goals demands from managers’ necessary affirmation and verification of reasons or
justification of the organization’s existence, the definition of its mission or purpose, and establish
strategic objectives.

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The beliefs, values, and expectations of the dominant coalition of stakeholders tend to shape any
new mission statement and concomitant goals and strategies. Managers vary in their attitude and
expectation.
For example, some managers are found more concerned about delivering new goods and services
and, hence, give more importance on research and development of goals.
Managers aspiring to dominate the market would like to design goals in terms of acquisitions of and
merger with other companies.
Managers with social orientation and responsibility tend to set goals likely to produce favorable
social effects along with profits.
In case of large organizations, in particular, the process of goal development is complex,
“Individuals and groups, both internal and external to an organization, engage in a process of
bargaining and out of this exchange organizational goals emerge.
The relative power of these various stakeholders in the organization determines the nature and
character of the bargaining process and the goals that ultimately emerge.

Step-3: Analyzing the External Environment

Once the formulation of organizational goals is over, the next step is to look at the factors in the
environment which might affect the management’s ability to accomplish them.
Scanning or assessing the environment is the process of collecting information from the external
environment about factors having the ability to exert influence on the organization.
The assessment of environment is done on economic, social, political, legal, demographic, and
geographic counts.
In addition, the environment is scanned for technological developments, for products and services
in the market and for other factors required to determine the competitive situation of the firm.
The main purpose of an environmental assessment is to identify opportunities and threats to the
organization so that managers can develop a strategy to face them.
This step may be taken along with the next step i.e. step four, analyzing the internal environment or
the organization’s own resources.

Step-4: Analyzing Internal Environment (or own organizational resources)

The analysis of internal environment or the organization’s resources from within identifies its
present strengths and weaknesses by examining its internal resources.
Audit and evaluation should be undertaken in matters of research and development, production
operation, procurement, marketing, products, and services.
Such other important internal factors as human resources and financial resources, the image of the
company, the organization’s culture and structure and relations with customers should also be
assessed.
The critical factor in an organizational analysis is a statement of what the organization does better
or worse than its competitors.
Managers, in other words, must answer the question about their strength or weakness compared
with their competitors so far as internal resources are concerned.

Step-5: Identifying Strategic Opportunities and Threats

Having the facts provided by assessment of the external and internal environments in steps three
and four respectively, managers proceed to the fifth step.
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There they identify their opportunities to achieve their goals, on the one hand and the threats that
could hamper and halt them. Both of these factors must be considered for effective strategic
planning.
In short, managers should use all the information provided by their scanning of both sides of the
environment in the course of strategic planning that is likely to affect their organization in the
future.

Step-6: Performing Gap Analysis

Gap analysis identifies the expected gaps between where managers want the organization to go and
where it will actually go if they maintain the current strategy.
Gap analysis helps to point out areas in which an organization is likely to succeed, but its real value
lies in identifying the limitations of the present strategy and pointing out the areas requiring change.
Thus gap analysis helps determine the causes of the gaps and, most importantly, makes managers
concerned about the issues to be seriously addressed in designing a new strategy—the core issue of
step seven.

Step-7: Developing Alternative Strategies

At this step of the strategic planning process, managers are faced with the question of whether a
new strategy is required and, if so, what kind of strategy it will be.
If no gap is found from the above analysis (step six), there is hardly any problem.
But gap analysis quite often tends to show that some changes in strategy are required. Hence
managers as a matter, of course, have to identify new alternatives, evaluate each of them, and
choose a new or an alternative strategy.
The nature and extent of gaps exercise considerable influence on the complexity of the process.
Sometimes only minor adjustments in existing goals and strategies are required.
For example;
An image problem of the company might be rectified by some simple measures such as a change in
advertisement or modernization of equipment to expedite delivery of products or services.
At other times, important changes in matters of organizational strategy become necessary.
For example;
An organization may require entering into a new market, redesigning a product, or even merging
with or acquiring another organization to face new and changing competition.
Finally, various alternatives have to be carefully considered and evaluated before the choice is
made. Strategic choices must be examined in the light of the risks involved in a particular situation.
Although some opportunities appear to be profitable, they might not be pursued for the risk of
failure and consequent bankruptcy of the company.
Time is another critical factor in selecting a strategy. For example, even a very high-quality product
may fail if it is introduced to the market at a wrong time.

Step-8: Implementing Strategy

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However good a strategic plan may be, it cannot fully utilize its potential unless it is implemented
effectively at each level of the organization.
A corporate level strategy must generate appropriate strategic plans for each unit of business.
Within each business unit, supportive functional strategies must be developed.
Again, as the overall strategy filters downward, managers at each level must follow the full
strategic planning process in a similar manner and must develop in their turn, strategies for the
major organizational divisions, subdivisions and each major functional area.
Managers must also remember that a strategy must have the support of the employees at every level
for its success.
It is therefore important for the managers to give due consideration to the attitudes, values, and
goals of organization members at the time of implementing a new strategy.

Step-9: Measuring and Controlling Progress

At the last step, managers must evaluate the effectiveness of the strategy being pursued.
Necessary checking should be done by management to see whether it conforms to the strategy that
they designed in step seven and is achieving the goals that they set forth in step two.
The results of the evaluation and control measures during this last step of the process inform
managers about the actions required to enforce a strategy, which is not being followed or to revise
or improve a strategy that is not working.
At this final stage, managers can employ several criteria to measure the success of a strategy. Some
of them are;

● External consistency: How far is the strategy of helping the organization to cope with
the demands of the external environment?
● Internal consistency: Is the strategy using organizational resources to achieve the
objectives set by management?
● Competitive advantage: Does the strategy enable the organization to do things better
than its competitors?
● The degree of risk: Is the risk involved in the strategy consistent with the organization’s
expectations?
● Contribution to society: Is the strategy socially responsible?
● Motivation: Is the strategy contributing to the morale, motivation, and commitment of
the people in the organization?

If the plan fulfills these above criteria at the final stage of the strategic planning process, managers
might feel assured that the strategy is working well and according to their expectation.

Business cycle:

The different phases of business cycles are shown in Figure-1:

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There are basically two important phases in a business cycle that are prosperity and depression. The
other phases that are expansion, peak, trough and recovery are intermediary phases

Figure-2 shows the graphical representation of different phases of a business cycle:

As shown in Figure-2, the steady growth line represents the growth of economy when there are no
business cycles. On the other hand, the line of cycle shows the business cycles that move up and
down the steady growth line. The different phases of a business cycle (as shown in Figure-2) are
explained below.

1. Expansion:

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The line of cycle that moves above the steady growth line represents the expansion phase of a
business cycle. In the expansion phase, there is an increase in various economic factors, such as
production, employment, output, wages, profits, demand and supply of products, and sales.

In addition, in the expansion phase, the prices of factor of production and output increases
simultaneously. In this phase, debtors are generally in good financial condition to repay their debts;
therefore, creditors lend money at higher interest rates. This leads to an increase in the flow of
money.

In expansion phase, due to increase in investment opportunities, idle funds of organizations or

individuals are utilized for various investment purposes. Therefore, in such a case, the cash inflow
and outflow of businesses are equal. This expansion continues till the economic conditions are
favorable.

2. Peak:

The growth in the expansion phase eventually slows down and reaches to its peak. This phase is
known as peak phase. In other words, peak phase refers to the phase in which the increase in growth
rate of business cycle achieves its maximum limit. In peak phase, the economic factors, such as
production, profit, sales, and employment, are higher, but do not increase further. In peak phase,
there is a gradual decrease in the demand of various products due to increase in the prices of input.

The increase in the prices of input leads to an increase in the prices of final products, while the
income of individuals remains constant. This also leads consumers to restructure their monthly
budget. As a result, the demand for products, such as jewellery, homes, automobiles, refrigerators
and other durables, starts falling.

3. Recession:

As discussed earlier, in peak phase, there is a gradual decrease in the demand of various products
due to increase in the prices of input. When the decline in the demand of products becomes rapid
and steady, the recession phase takes place.

In recession phase, all the economic factors, such as production, prices, saving and investment,
starts decreasing. Generally, producers are unaware of decrease in the demand of products and they
continue to produce goods and services. In such a case, the supply of products exceeds the demand.

Over the time, producers realize the surplus of supply when the cost of manufacturing of a product
is more than profit generated. This condition firstly experienced by few industries and slowly
spread to all industries.

This situation is firstly considered as a small fluctuation in the market, but as the problem exists for
a longer duration, producers start noticing it. Consequently, producers avoid any type of further
investment in factor of production, such as labor, machinery, and furniture. This leads to the
reduction in the prices of factor, which results in the decline of demand of inputs as well as output.

4. Trough:

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During the trough phase, the economic activities of a country decline below the normal level. In this
phase, the growth rate of an economy becomes negative. In addition, in trough phase, there is a
rapid decline in national income and expenditure.

In this phase, it becomes difficult for debtors to pay off their debts. As a result, the rate of interest
decreases; therefore, banks do not prefer to lend money. Consequently, banks face the situation of
increase in their cash balances.

Apart from this, the level of economic output of a country becomes low and unemployment
becomes high. In addition, in trough phase, investors do not invest in stock markets. In trough
phase, many weak organizations leave industries or rather dissolve. At this point, an economy
reaches to the lowest level of shrinking.

5. Recovery:

As discussed above, in trough phase, an economy reaches to the lowest level of shrinking. This
lowest level is the limit to which an economy shrinks. Once the economy touches the lowest level,
it happens to be the end of negativism and beginning of positivism.

This leads to reversal of the process of business cycle. As a result, individuals and organizations
start developing a positive attitude toward the various economic factors, such as investment,
employment, and production. This process of reversal starts from the labor market.

Consequently, organizations discontinue laying off individuals and start hiring but in limited
number. At this stage, wages provided by organizations to individuals is less as compared to their
skills and abilities. This marks the beginning of the recovery phase.

In recovery phase, consumers increase their rate of consumption, as they assume that there would
be no further reduction in the prices of products. As a result, the demand for consumer products
increases.

In addition in recovery phase, bankers start utilizing their accumulated cash balances by declining
the lending rate and increasing investment in various securities and bonds. Similarly, adopting a
positive approach other private investors also start investing in the stock market As a result, security
prices increase and rate of interest decreases.

Price mechanism plays a very important role in the recovery phase of economy. As discussed
earlier, during recession the rate at which the price of factor of production falls is greater than the
rate of reduction in the prices of final products.

Therefore producers are always able to earn a certain amount of profit, which increases at trough
stage. The increase in profit also continues in the recovery phase. Apart from this, in recovery
phase, some of the depreciated capital goods are replaced by producers and some are maintained by
them. As a result, investment and employment by organizations increases. As this process gains
momentum an economy again enters into the phase of expansion. Thus, a business cycle gets
completed

Types of strategies:
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 1. Stability strategy
2. Expansion strategy
3. Merger strategy
4. Retrenchment strategy
5. Restructure strategy

1. Stability Strategy:
When an enterprise is satisfied by its present position, it will not like to change from here and it will
be a stability strategy. Stability strategy will be successful when the environment is stable. This
strategy is exercised most often and is less risky as a course of action. A stability strategy of a
concern for example will be followed when the organization is satisfied with the same product,
serving the same consumer groups and maintaining the same market share.

The organization may not be adventurous to try new strategies to change the status quo. This
strategy may be possible in a mature industry with static technology. Stability strategy may create
complacency among managers. The managers of such an organization may find it difficult to cope
with the changes when they come.

Stability strategies can be of the following types:

(i) No-Change Strategy:

Stability strategy is a conscious decision to do nothing new, that is to continue with the present
work. It does not mean an absence of strategy, rather taking no decision in itself is a strategy. When
external environment is predictable and organizational environment is stable then a businessman
may like to continue with the present situation. There may be major opportunities or threats
operating in the environment.

There may be no new threat from competitors or no new competing product may be coming into the
market, under these circumstances it will be prudent to continue the present strategies. The small
and medium firms generally operate in a limited market and supply products and services with the
use of time tested technology, such firms will prefer to continue with their present work. Unless
otherwise there is a major threat in the environment or occurrence of some major upset in the
market, the present strategy will serve the firms well.

(ii) Profit Strategy:

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Sometimes things change in such a way that the firm has to adopt changes in its working. There
may be unfavorable external factors such as increase in competition, recession in the industry,
government attitude, industry down turn etc. Under these situations it becomes difficult to sustain
profitability.

A supposition is that the changed situation will be a temporary phase and old situation will again
return. The firm will try to sustain profitability by controlling expenses, reducing investments, raise
prices, cut costs, increase productivity etc. These measures will help the firm in sustaining current
profitability in the short run.

With the opening of markets, Indian industry is facing lot of problems with the presence of
multinationals and reduction in tariff on imports. The firms will have to adjust their policies to the
changing environment otherwise they will find it difficult to stay in the market.

Profit strategy will be successful for a short period only. In case things do not improve to the
advantage of the firms then this strategy will only deteriorate their position. This strategy can work
only if problems are temporary.

(ii) Proceed-With Caution Strategy:

Proceed with caution strategy is employed by firms that wish to test the ground before moving
ahead with full-fledged grand strategy or by those firms which had a rapid pace of expansion and
now wish to rest for a while before moving ahead. The pause is sometimes essential because
intervening period will allow consolidation before embracing on further expansion strategies. The
main object is to let the strategic changes seep down the organizational levels, allow structural
changes to take place and let the system adopt to new strategies

2. Expansion strategy:

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 The Expansion Strategy is adopted by an organization when it attempts to achieve a high
growth as compared to its past achievements. In other words, when a firm aims to grow
considerably by broadening the scope of one of its business operations in the perspective of
customer groups, customer functions and technology alternatives, either individually or
jointly, then it follows the Expansion
Strategy.

The reasons for the expansion could be

survival, higher profits, increased
prestige, economies of scale, larger
market share, social benefits, etc. The
expansion strategy is adopted by those
firms who have managers with a high
degree of achievement and
recognition. Their aim is to grow,
irrespective of the risk and the hurdles
coming in the way.

Types of expansion strategies:

1. Expansion through Concentration

2. Expansion through Diversification
3. Expansion through Integration
4. Expansion through Cooperation
5. Expansion through Internationalization

1. The Expansion through Concentration

is the first level form of Expansion Grand strategy that

involves the investment of resources in the product line,
catering to the needs of the identified market with the
help of proven and tested technology

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 ● Market penetration strategy: The firm focusing intensely on the existing market with its
present product.
● Market Development type of concentration: Attracting new customers for the existing
product.
● Product Development type of Concentration: Introducing new products in the existing
market.

2. The Expansion through Diversification is followed when an organization aims at

changing the business definition, i.e. either developing a new product or expanding into a
new market, either individually or jointly. A firm adopts the expansion through
diversification strategy, to prepare itself to overcome the economic downturns.

1. Concentric Diversification: When an

organization acquires or develops a new
product or service that are closely related
to the organization’s existing range of
products and services is called as a
concentric diversification. For example,
the shoe manufacturing company may
acquire the leather manufacturing
company with a view to entering into the
new consumer markets and escalate sales.
2. Conglomerate Diversification: When an
organization expands itself into different
areas, whether related or unrelated to its
core business is called as a conglomerate
diversification. Simply, conglomerate
diversification is when the firm acquires
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 or develops the product and services that may or may not be related to the existing range of
product and services.

3. The Expansion through Integration means combining one or more present operation of the
business with no change in the customer groups. This combination can be done through a value
chain.

The value chain comprises of interlinked activities performed by an organization right from the
procurement of raw materials to the marketing of finished goods. Thus, a firm may move up or
down the value chain to focus more
comprehensively on the needs of the existing
customers.

The expansion through integration widens the

scope of the business and thus considered as the
grand expansion strategy. There are two ways of
integration:

Vertical integration: The vertical integration is of

two types: forward and backward. When an
organization moves close to the ultimate customers,
i.e. facilitate the sale of the finished goods is said to
have made a forward integration. Example, the
manufacturing firm open up its retail outlet.

Whereas, if the organization retreats to the source of raw materials, is said to have made a backward
integration. Example, the shoe company manufactures its own raw material such as leather through
its subsidiary firm.

Horizontal Integration: A firm is said to have made a horizontal integration when it takes over the
same kind of product with similar marketing and production levels. Example, the pharmaceutical
company takes over its rival pharmaceutical company.

4. The Expansion through Cooperation is a strategy followed when an organization enters

into a mutual agreement with the competitor to carry out the business operations and
compete with one another at the same time, with the objective to expand the market
potential.

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 1. Merger: The merger is the combination of two or more firms wherein one acquires the
assets and liabilities of the other in the exchange of cash or shares, or both the organizations
get dissolved, and a new organization came into the existence.The firm that acquires another
is said to have made an acquisition, whereas, for the other firm that gets acquired, it is a
merger.
2. Takeover: Takeover strategy is the other method of expansion through cooperation. In this,
one firm acquires the other in such a way, that it becomes responsible for all the acquired
firm’s operations. The takeovers can either be friendly or hostile. In the former, both the
companies agree for a takeover and feels it is beneficial for both. However, in the case of a
hostile takeover, a firm try to take on the operations of the other firm forcefully either
known or unknown to the target firm.
3. Joint Venture: Under the joint venture, both the firms agree to combine and carry out the
business operations jointly. The joint venture is generally done, to capitalize the strengths of
both the firms. The joint ventures are usually temporary; that lasts till the particular task is
accomplished.
4. Strategic Alliance: Under this strategy of expansion through cooperation, the firms unite or
combine to perform a set of business operations, but function independently and pursue the
individualized goals. Generally, the strategic alliance is formed to capitalize on the expertise
in technology or manpower of either of the firm.

5.The Expansion through Internationalization is the strategy followed by an organization when it

aims to expand beyond the national market. The need for the Expansion through
Internationalization arises when an organization has explored all the potential to expand
domestically and look for the expansion opportunities beyond the national boundaries.
The expansion through internationalization could be done by adopting either of the following
strategies:

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1. International Strategy: The firms adopt an international strategy to create value by
offering those products and services to the foreign markets where these are not available.
This can be done, by practicing a tight control over the operations in the overseas and
providing the standardized products with little or no differentiation.
2. Multidomestic Strategy: Under this strategy, the multi-domestic firms offer the customized
products and services that match the local conditions operating in the foreign markets.
Obviously, this could be a costly affair because the research and development, production
and marketing are to be done keeping in mind the local conditions prevailing in different
countries.
3. Global Strategy: The global firms rely on low-cost structure and offer those products and
services to the selected foreign markets in which they have the expertise. Thus, a
standardized product or service is offered to the selected countries around the world.
4. Transnational Strategy: Under this strategy, the firms adopt the combined approach of
multi-domestic and global strategy. The firms rely on both the low-cost structure and the
local responsiveness i.e. according to the local conditions. Thus, a firm offers its
standardized products and services and at the same time makes sure that it is in line with the
local conditions prevailing in the country, where it is operating.

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3. Merger Strategy

The term ‘merger’ is used to mean the unification of two or more business houses to form an
entirely new entity. It leads to the dissolution of more or more entities, to get absorbed into another
undertaking, which is relatively bigger in size. It is a strategy adopted by the company to maximise
company’s growth by expanding its production and marketing operations, that results in synergy,
increased customer base, reduced competition, introduction to a new market/product segment, etc.

1.Horizontal mergers: It refers to two firms operating in same industry or producing ideal products
combining together. For e.g., in the banking industry in India, acquisition of Times Bank by HDFC
Bank, Bank of Madura by ICICI Bank, Nedungadi Bank by Punjab National Bank etc. in consumer
electronics, acquisition of Electrolux’s Indian operations by Videocon International Ltd., in BPO
sector, acquisition of Daksh by IBM, Spectramind by Wipro etc. The main objectives of horizontal
mergers are to benefit from economies of scale, reduce competition, achieve monopoly status and
control the market.

2. Vertical merger: A vertical merger can happen in two ways. One is when a firm acquires
another firm which produces raw materials used by it. For e.g., a tyre manufacturer acquires a
rubber manufacturer, a car manufacturer acquires a steel company, a textile company acquires a
cotton yarn manufacturer etc.

Another form of vertical merger happens when a firm acquires another firm which would help it get
closer to the customer. For e.g., a consumer durable manufacturer acquiring a consumer durable
dealer, an FMCG company acquiring m advertising company or a retailing outlet etc.

3. Conglomerate merger: It refers to the combination of two firms operating in industries

unrelated to each other. In this case, the business of the target company is entirely different from
those of the acquiring company. For e.g., a watch manufacturer acquiring a cement manufacturer, a
steel manufacturer acquiring a software company etc. The main objective of a conglomerate merger
is to achieve i big size.

4. Concentric merger/:Co-generic Merger It refers to combination of two or more firms which

are related to each other in terms of customer groups, functions or technology. For eg., combination
of a computer system manufacturer with a UPS manufacturer.: Co-generic merger is when the
companies undergoing merger operate in the same or related industry. However, their
product lines are different, as in they do not offer same products but related one.

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6. Reverse merger: In this case, the buyer merges into the target and the shareholders of the buyer
get stock in the target. This is treated as a stock acquisition by the buyer.A merger wherein a
publicly listed company is taken over by a privately held company and provides an opportunity,
to the private company to go public, without going through the complex and lengthy process of
getting listed on the stock exchange. In this type of amalgamation, the unlisted company acquires
majority shares in the listed company.

4. Retrenchment Strategy

Definition: The Retrenchment Strategy is adopted when an organization aims at reducing its one
or more business operations with the view to cut expenses and reach to a more stable financial
position.

In other words, the strategy followed, when a firm decides to eliminate its activities through a
considerable reduction in its business operations, in the perspective of customer groups, customer
functions and technology alternatives, either individually or collectively is called as Retrenchment
Strategy.

The firm can either restructure its business operations or discontinue it, so as to revitalize its
financial position. There are three types of Retrenchment Strategies:

1. Turnaround
2. Divestment
3. Liquidation

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 1. Turnaround Strategy is a retrenchment strategy followed by an organization when it feels
that the decision made earlier is wrong and needs to be undone before it damages the
profitability of the company.
turnaround strategy is backing out or retreating from the decision wrongly made earlier and
transforming from a loss making company to a profit making company.

Now the question arises, when the firm should adopt the turnaround strategy? Following are certain
indicators which make it mandatory for a firm to adopt this strategy for its survival. These are:

● Continuous losses
● Poor management
● Wrong corporate strategies
● Persistent negative cash flows
● High employee attrition rate
● Poor quality of functional management
● Declining market share
● Uncompetitive products and services
Also, the need for a turnaround strategy arises because of the changes in the external environment
Viz, change in the government policies, saturated demand for the product, a threat from the
substitute products, changes in the tastes and preferences of the customers, etc.

Example: Dell is the best example of a turnaround strategy. In 2006. Dell announced the cost-
cutting measures and to do so; it started selling its products directly, but unfortunately, it suffered
huge losses. Then in 2007, Dell withdrew its direct selling strategy and started selling its computers
through the retail outlets and today it is the second largest computer retailer in the world.

2. The Divestment Strategy is another form of retrenchment that includes the downsizing of the
scope of the business. The firm is said to have followed the divestment strategy, when it sells or
liquidates a portion of a business or one or more of its strategic business units or a major division,
with the objective to revive its financial position.
Following are the indicators that mandate the firm to adopt this strategy:

● Continuous negative cash flows from a particular division

● Unable to meet the competition
● Huge divisional losses
● Difficulty in integrating the business within the company
● Better alternatives of investment
● Lack of integration between the divisions
● Lack of technological upgradations due to non-affordability
● Market share is too small
● Legal pressures

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3. The Liquidation Strategy is the most unpleasant strategy adopted by the organization that
includes selling off its assets and the final closure or winding up of the business operations.
The following are the indicators that necessitate a firm to follow this strategy:

● Failure of corporate strategy

● Continuous losses
● Obsolete technology
● Outdated products/processes
● Business becoming unprofitable
● Poor management
● Lack of integration between the divisions

5. The Corporate Restructuring is the process of making changes in the composition of a firm’s
one or more business portfolios in order to have a more profitable enterprise. Simply, reorganizing
the structure of the organization to fetch more profits from its operations or is best suited to the

present situation.
1. Financial Restructuring: The Financial Restructuring may take place due to a drastic fall
in the sales because of the adverse economic conditions. Here, the firm may change the
equity pattern, cross-holding pattern, debt-servicing schedule and the equity holdings. All
this is done to sustain the profitability of the firm and sustain in the market. Generally, the
financial or legal advisors are hired to assist the firms in the negotiations.
2. Organizational Restructuring: The Organizational Restructuring means changing the
structure of an organization, such as reducing the hierarchical levels, downsizing the
employees, redesigning the job positions and changing the reporting relationships. This is
done to cut the cost and pay off the outstanding debt to continue with the business
operations in some manner.

The need for a corporate restructuring arises because of the change in company’s ownership
structure due to a merger or takeover, adverse economic conditions, adverse changes in business

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such as bankruptcy or buyouts, over employed personnel, lack of integration between the divisions,
etc.

Levels of strategy

Corporate Level

Corporate level strategy defines the business areas in which your firm will operate. It deals with
aligning the resource deployments across a diverse set of business areas, related or unrelated.
Strategy formulation at this level involves integrating and managing the diverse businesses and
realizing synergy at the corporate level. The top management team is responsible for formulating
the corporate strategy. The corporate strategy reflects the path toward attaining the vision of your
organization. For example, your firm may have four distinct lines of business operations, namely,
automobiles, steel, tea, and telecom. The corporate level strategy will outline whether the
organization should compete in or withdraw from each of these lines of businesses, and in which
business unit, investments should be increased, in line with the vision of your firm.

Business Level

Business level strategies are formulated for specific strategic business units and relate to a distinct
product-market area. It involves defining the competitive position of a strategic business unit. The
business level strategy formulation is based upon the generic strategies of overall cost leadership,
differentiation, and focus. For example, your firm may choose overall cost leadership as a strategy
to be pursued in its steel business, differentiation in its tea business, and focus in its automobile
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business. The business level strategies are decided upon by the heads of strategic business units and
their teams in light of the specific nature of the industry in which they operate.

Functional Level

Functional level strategies relate to the different functional areas which a strategic business unit has,
such as marketing, production and operations, finance, and human resources. These strategies are
formulated by the functional heads along with their teams and are aligned with the business level
strategies. The strategies at the functional level involve setting up short-term functional objectives,
the attainment of which will lead to the realization of the business level strategy.

For example, the marketing strategy for a tea business which is following the differentiation
strategy may translate into launching and selling a wide variety of tea variants through company-
owned retail outlets. This may result in the distribution objective of opening 25 retail outlets in a
city; and producing 15 varieties of tea may be the objective for the production department. The
realization of the functional strategies in the form of quantifiable and measurable objectives will
result in the achievement of business level strategies as well.

Summary:

1. Corporate Level Strategy:

○ Defines the business areas in which your firm will operate.
○ Involves integrating and managing the diverse businesses and realizing
synergy at the corporate level.
○ Top management team is responsible.
2. Business Level Strategy:
○ Involves defining the competitive position of a strategic business unit.
○ Decided upon by the heads of strategic business units and their teams.
3. Functional Level Strategy:
○ Formulated by the functional heads along with their teams.
○ Involve setting up short-term functional objectives.

Competitor analysis:

Competitor analysis in marketing and strategic management is an assessment of the

strengths and weaknesses of current and potential competitors. This analysis provides both
an offensive and defensive strategic context to identify opportunities and threats. Profiling
combines all of the relevant sources of competitor analysis into one framework in the
support of efficient and effective strategy formulation, implementation, monitoring and
adjustment.

Ex: ola uber case study

Porter’s Five Forces Model

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Definition: Porter’s five forces model, refers to a framework based on the competitive analysis,
introduced by Harvard Business School Prof. Michael E. Porter. The model determines the
intensity of competition in any industry is a mix of five competitive factors operating in different
areas of the whole market.

The framework is an outside-in strategy tool for the business unit that evaluates the attractiveness
(profitability) of an industry. Thus, helps the business-persons to identify existing and potential
lines of business.

It is a useful tool for accurately diagnosing important competitive elements in the market, as well as
determining the strength and significance of each five forces.

1. Threat of new entrants: Potential entrant is the major source of competition in the
industry. The product range, quality, capacity, etc. brought by them, increases competition.
The size of the new entrant plays a major role here, i.e. the bigger the entrant, the more
intense is the competition. Moreover, the prices are slashed, and the overall profitability of
existing players is also affected, by the new entry.

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 It analyses the ease of entry to the new market, i.e. if the entry is easy, then the level of
competition in the industry is severe.

2. Bargaining power of suppliers: Suppliers, also exert substantial bargaining power over the
firms, by threatening to increase prices or degrade quality. They are likely to exercise power
if:
○ The number of suppliers in the industry is limited in number.
○ They offer the specialised product.
○ The supplier’s product is an important input, to the buyer’s product.
○ The product has a few substitutes.

Thus, the factor analyses bargaining power of industry suppliers, which directly affects the
profitability, i.e. the higher the cost, the lesser is the profitability.

3. Bargaining power of customers: The market of outputs, i.e. the customers have the ability
to compete with the supplying industry and put the companies under pressure, by forming
groups or cartels. This force not only affects the prices but also influences the producer’s
cost and investments in certain circumstances, as the powerful buyers influence producers to
offer better quality which involves cost and investment.

Buyer groups are likely to exercise power if, they are concentrated, products are
homogeneous, the switching cost is low, and full information is available.

4. Threat from substitutes: It is the quiescent source of competition, present in the industry.
They are the key cause of competition in many industries. Substitute products are offered at
reasonable prices along with high quality, to the customers can radically change the
competitive scenario of industry, especially, when the introduction is sudden.
5. Rivalry among current players: Last but not the least, is the rivalry among current players,
which is all that is known as competition. It can be shown in a number of ways such as:
○ Price competition
○ Advertising battles
○ New introductions
○ Improving quality
○ Increasing consumer warranties.

So, this factor analyses, how ruthless the competition is, by identifying the existing player
and marketing down their moves and activities. The competition is said to be acute when,
there are a few sellers, offering similar products to the customers because it is easy for
buyers to switch to the one offering product at low prices.

Prof. Sharmila F
 Unit 4: IMPLEMENTATION OF STRATEGY

Strategy implementation is the translation of chosen strategy into organizational action so

as to achieve strategic goals and objectives.

Strategy implementation is also defined as the manner in which an organization should

develop, utilize, and amalgamate organizational structure, control systems, and culture to
follow strategies that lead to competitive advantage and a better performance.
Organizational structure allocates special value developing tasks and roles to the employees
and states how these tasks and roles can be correlated so as maximize efficiency, quality,
and customer satisfaction-the pillars of competitive advantage. But, organizational structure
is not sufficient in itself to motivate the employees.

Aspects of strategy implementation:

1. Strategies :

A strategy is an administrative course of action designed to

achieve success It is a plan for meeting challenges posed by
the activities of competitors and environmental forces.
Strategy is the complex plan for bringing the organization
from a given state to a desired position in a future period of
time. For example, if management anticipates price-cut by
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competitors, it may decide upon a strategy of launching an advertising campaign to educate the
customers and to convince them of the superiority of its products.

2. Policies :

Policies refers to the framework with in which the decision making is done.

The term policy is derived from the Greek word “Politicia” relating to policy that is citizen and
Latin work “politis” meaning polished, that is to say clear. These policies which are generally
formulated at top level helps managers sufficient freedom to make judgments and helps to achieve
the organizational goals and objectives.

The term “Policy” is defined by koontz and O ‘Donnel as “policies are general statements or
understandings which guide managers thinking in decision making”. They ensure that
decisions fall within certain boundaries. They usually don’t require action but are intended to guide
managers in their commitment to the decision they ultimately make.

George R.Terry defined “policy is a verbal written or implied overall guide setting up boundaries
that supply the general limits and direction in which managerial action will take place”.

Examples:

● Payment will be provided for overtime work only if it is allowed by the management.
● Leave policy
● Typical human resources policies, for example, address such matters as employee hiring,
terminations, performance appraisals, pay increases, and discipline.

3.Procedures:

A fixed, step-by-step sequence of activities or course of action (with definite start and end
points) that must be followed in the same order to correctly perform a task.

Take for example the procedure of admission of a student in a college. The procedure starts
with filling out an application form. It will be followed by a collection of documents and
sorting the applications accordingly.

4. Programs :

It is a single use plan. It is a sequence of activities designed to implement policies and accomplish
objectives. It gives step-by step approach to guide action necessary to reach predetermined targets.

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It enables a manager to prepare carefully and systematically for difficulties, before they arise. We
have detailed programmes of personal selling advertising, and sales promotion in our marketing
campaign to accomplish the set goals in sales and to reach the particular market.

5. Rules :

A rule is an explicit statement that tells an employee what he or she can and cannot do. Rules are
“do” and “don't” statements put into place to promote the safety of employees and the uniform
treatment and behavior of employees. For example, rules about tardiness and absenteeism permit
supervisors to make discipline decisions rapidly and with a high degree of fairness.

6. Methods :

Methods prescribe the ways in which in which specific tasks of a procedure must be performed.
Also, methods are very specific and detailed instructions on how the employees must perform every
task of the planned procedure. So managers form methods to formalize routine jobs.

7. Budget:
An organization’s budget is a document that details the financial and physical resources allocated to
a project or department. They are single-use plans because they are specific to a particular period or
event. For example, departments may have a hiring budget that allocates a certain number of
positions and a total salary value for a calendar year. Next year, that budget may be the same or it
may change, depending upon conditions in the organization.

ISSUES :

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 1. Project implementation :

Project implementation involves decision regarding the project to be undertaken in future

and to see that they are properly executed.

Phases of project implementation includes:

● Conceptual stage - environmental scanning reveals potential opportunities to

organisation . the opportunities must be categorised into various projects . and assign
priorities.
● Analyzing stage - project feasibility and possibility should be checked and
examined through technical,financial,economical and legal aspects.project feasibility
report must be prepared for further action.
● Planning stage - once the project idea is feasible the resources must be planned for
implementation
● Implementation stage - contacts must be done and test trials are undertaken before
final take off
● Launching stage- project must be ready for operation

2. Procedure implementation :

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 After the organisation is satisfied with the feasibility of project it has to undergo certain
procedures. Procedure is a regulatory framework within which the management is supposed to
implement the plans , projects and policies as per government approval.
Following are the important procedures connected with the project implementation.

1. Formulation of the company

2. Licensing procedure
3. SEBI Requirements
4. Foreign collaboration
5. FEMA Requirements
6. MRTP Requirements
7. Business incentives
8. Import and export requirements
9. Labour legislation
10. Patenting requirements
11. Environmental requirements
12. Consumer protection requirements.

1 Formulation of the company:

Company should obtain the certificate of incorporation from registrar of companies.

the whole process of company formation may be divided into the following four stages:
1. Promotion Stage
2. Incorporation or Registration Stage
3. Capital Subscription Stage
4. Commencement of Business Stage.

“Promotion may be defined as the discovery of business opportunities and the subsequent
organisation of funds, property and managerial ability into a business concern for the purpose of
making profits therefrom.”

Incorporation or registration is the second stage in the formation of a company. It is the

registration that brings a company into existence. A company is properly constituted only when it is
duly registered under the Act and a Certificate of Incorporation has been obtained from the
Registrar of Companies.

Certificate of Incorporation:On the registration of memorandum and other documents, the

Registrar will issue a certificate known as the Certificate of Incorporation certifying under his hand
that the company is incorporated and, in the case of a limited company that the company is limited.

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3. Capital Subscription Stage:A private company or a public company not having share capital
can commence business immediately on its incorporation. As such ‘capital subscription stage’ and
‘commencement of business stage’ are relevant only in the case of a public company having a share
capital.

4.Commencement of Business Stage:After getting the certificate of incorporation, a private

company can start its business. A public company can start its business only after getting a’
certificate of commencement of business’.

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2.licensing procedure :

Application must be filed with the necessary documents pertaining to the company for obtaining the
license from the government.
Ex: Food Business License
Any individual or an entity proposing to start a food business must obtain food business license or
registration from the FSSAI (Food Safety and Standard Authority of India).

3. SEBI Requirements.

The Securities and Exchange Board of India (SEBI) is the regulator for the securities market in
India. It was established in 1988 and given statutory powers on 30 January 1992 through the SEBI
Act, 1992.

Objectives of SEBI

1. Protection to the investors

The primary objective of SEBI is to protect the interest of people in the stock market and provide a
healthy environment for them.

2.Prevention of malpractices
This was the reason why SEBI was formed. Among the main objectives, preventing malpractices is
one of them.

3.Fair and proper functioning

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SEBI is responsible for the orderly functioning of the capital markets and keeps a close check over
the activities of the financial intermediaries such as brokers, sub-brokers, etc.

4. Foreign collaborations:

Foreign collaboration is an agreement or contract between two or more companies from different
countries for mutual benefit. The collaborating agreement can be between:

a. Domestic and foreign private firm.

b. Domestic and foreign public firm.

c. Domestic Public and foreign private firm.

d. Domestic government and foreign government.

Foreign collaboration needs approval from the government for allowing the foreign investment and
ventures.

5. FEMA requirements.

The Foreign Exchange Management Act, 1999 (FEMA) is an Act of the Parliament of India "to
consolidate and change the law relating to foreign exchange with the objective of facilitating
external trade and payments and for promoting the orderly development and maintenance of foreign
exchange market in India.

6. MRTP Requirements:

The Competition Act, 2002 was enacted by the Parliament of India and governs Indian
competition law. It replaced the archaic The Monopolies and Restrictive Trade Practices Act, 1969.
Under this legislation, the Competition Commission of India was established to prevent the
activities that have an adverse effect on competition in India.[1][2] This act extends to whole of India
except the State of Jammu and Kashmir.

The Act establishes a Commission which is duty bound to protect the interests of the free and fair
competition (including the process of competition), and as a consequence, protect the interests of
consumers. Broadly, the Commission's duty is:-

● To prohibit the agreements or practices that have or are likely to have an appreciable
adverse effect on competition in a market in India, (horizontal and vertical agreements /
conduct);
● To prohibit the abuse of dominance in a market;
● To prohibit acquisitions, mergers, amalgamations etc. between enterprises which have or
are likely to have an appreciable adverse effect on competition in market(s) in India.

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7. Business Incentives:

Governments can offer financial assistance to private businesses making investments through the
use of economic incentives. Incentives can include tax abatements, tax revenue sharing, grants,
infrastructure assistance, no or low-interest financing, free land, tax credits and other financial
resources.hence strategists cannot ignore such incentives given by government for promotion of
company in country.

8. Import and export requirements:

If business is into export or import of any of these

● Goods or Products
● Machinery
● Raw Materials
● Semi-finished Goods, etc

Then company will need to obtain an Import or Export Licence before they can proceed with the
import or export activities. Company should submit the application for an Import or Export Licence
as early as possible, before they make any contractual commitment. In certain cases special import
or export authorisations are required before obtaining the relevant licences, which authorisations are
normally valid for 1 year.

9. Labour legislation;

Labour law (also known as labor law or employment law) mediates the relationship between
workers, employing entities, trade unions and the government. Collective labour law relates to the
tripartite relationship between employee, employer and union. Individual labour law concerns
employees' rights at work also through the contract for work. Employment standards are social
norms (in some cases also technical standards) for the minimum socially acceptable conditions
under which employees or contractors are allowed to work. Government agencies (such as the
former US Employment Standards Administration) enforce labour law (legislature, regulatory, or
judicial)

10. Patenting requirements:

Intellectual property (IP) is a category of property that includes intangible creations of the human
intellect. Intellectual property encompasses two types of rights; industrial property rights
(trademarks, patents, designations of origin, industrial designs and models) and copyright.

A patent is a form of intellectual property. A patent gives its owner the right to exclude others from
making, using, selling, and importing an invention for a limited period of time, usually twenty
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years. The patent rights are granted in exchange for an enabling public disclosure of the invention.
In most countries patent rights fall under civil law and the patent holder needs to sue someone
infringing the patent in order to enforce their rights. In some industries patents are an essential form
of competitive advantage; in others they are irrelevant.

11. Environmental Requirements:

Environment Protection Act,1986 19 Nov and 26 sections is an Act of the Parliament of India. In
the wake of the Bhopal Tragedy, the Government of India enacted the Environment Protection Act
of 1986 under Article 253 of the Constitution. Passed in March 1986, it came into force on 19
November 1986.It has 26 sections.The purpose of the Act is to implement the decisions of the
United Nations Conference on the Human Environment. They relate to the protection and
improvement of the human environment and the prevention of hazards to human beings, other
living creatures, plants and property. The Act is an “umbrella” legislation designed to provide a
framework for central government coordination of the activities of various central and state
authorities established under previous laws, such as the Water Act and the Air Act.

12. Consumer protection requirements:

Consumer Protection Act, 1986 is an Act of the Parliament of India enacted in 1986 to protect the
interests of consumers in India. It makes provision for the establishment of consumer councils and
other authorities for the settlement of consumers' disputes and for matters connected therewith
also.The act was passed in Assembly in October 1986

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The objectives of the Central Council is to promote and to protect the rights of the consumers such
as:-
1. The right to be protected against the marketing of goods and services which are
hazardous to life and property.
2. The right to be informed about the quality, quantity, potency, purity, standard and
price of goods or services, as the case may be so as to protect the consumer against
unfair trade practices;
3. The right to be assured, wherever possible, access to a variety of goods and services
at competitive prices ;
4. The right to be heard and to be assured that consumer's interest will receive due
consideration at appropriate forums;
5. The right to seek redressal against unfair trade practices or restrictive trade practices
or unscrupulous exploitation of consumers; and
6. The right to consumer education.

3. Resource allocation : [5M’S]

In strategic implementation, resource allocation is a plan for using available resources, for example
human resources, especially in the near term, to achieve goals for the future. It is the process of
allocating scarce resources among the various projects or business units

Approaches for resource allocation

● Top down approach

● Bottom up approach
● Mixed approach

4. Structural implementation: [ McKinsey 7S Framework ]

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the McKinsey 7S Framework is a management model developed by well-known business
consultants Robert H. Waterman, Jr. and Tom Peters (who also developed the MBWA--
"Management By Walking Around" motif, and authored In Search of Excellence) in the 1980s. This
was a strategic vision for groups, to include businesses, business units, and teams. The 7 Ss are
structure, strategy, systems, skills, style, staff and shared values.
The model is most often used as an organizational analysis tool to assess and monitor changes in
the internal situation of an organization.
The model is based on the theory that, for an organization to perform well, these seven elements
need to be aligned and mutually reinforcing. So, the model can be used to help identify what needs
to be realigned to improve performance, or to maintain alignment (and performance) during other
types of change.

Hard Elements
● Strategy - Purpose of the business and the way the organization seeks to enhance its
competitive advantage.
● Structure - hierarchy, specialization, centralisation,decentralisation,Division of
activities; integration and coordination mechanisms.
● Systems - Formal procedures for measurement, reward, resource allocation, information
system.
Soft Elements
● Shared Values- guiding principles, values,culture.
● Skills - The organization's core competencies and distinctive capabilities of employees
to be trained.

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 ● Staff - Organization's human resources, demographic, educational and attitudinal
characteristics HRM Activities.
● Style - leadership style,Typical behaviour patterns of key groups, such as managers, and
other professional

Structural considerations:

Organisational structure is a diagrammatic representation of flow of authority and responsibility

in the organisation.
Types of organisational structure:

● Entrepreneurial structure
● Functional organisational structure
● Product based structure
● SBU organisational structure
● Geographical organisational structure
● Matrix organisational structure.

Prof. Sharmila F
 Line organisational structure Line organization is the oldest and simplest pattern of
organization, wherein the supervisor has outright supervision over the subordinate. The flow
of authority is from the top level executive to the person at the lowest level of the

organization’s echelon.

Advantages :

● Quick decision, close supervision and relationship with subordinates

● Simple and easily used by small organisation

Disadvantages:

● Development of future managers is difficult since decision making will be done by the top
level
● Inadequate when organisation grows

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 2.Functional organisational structure:- based on various functional departments

● A functional organization is a common type of organizational structure in which the

organization is divided into smaller groups based on specialized functional areas, such
as IT, finance, or marketing.
● Functional departmentalization arguably allows for greater operational efficiency
because employees with shared skills and knowledge are grouped together by
function.
● A disadvantage of this type of structure is that the different functional groups may not
communicate with one another, potentially decreasing flexibility and innovation. A
recent trend aimed at combating this disadvantage is the use of teams that cross
traditional departmental lines.

3. Product based structure:

Product organisational structure is a framework in which a business is organised in separate

divisions, each focusing on a different product or service and functioning as an individual
unit within the company.
n a product-based structure (also known as a divisional structure), you assign employees into self-
contained divisions according to:

● the particular line of products or services they produce

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 ● the customers they deal with
● the geographical area they serve

Product organisation may not suit everyone, but is likely to provide distinct advantages to those
businesses that:

● have particular product lines that are substantially different

● require specialised expertise for production or distribution
● target a few major customers that make up most of your business
Product structure can also help your business:

● focus on specific market segments

● meet customer needs more effectively
● extend knowledge or expertise within specialised divisions
● respond to market changes more flexibly and quickly
● encourage positive competition between each department
● coordinate and measure performance of each division directly
Product organisational structure does have certain disadvantages, including being difficult to scale
and potentially:

● duplicating functions and resources, eg a different sales team for each division
● dispersing technical expertise across smaller units
● nurturing negative rivalries among divisions
● over-emphasising divisional, rather than organisational goals
● losing central control over each separate division

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Product or divisional structure is mainly suitable for larger companies with two or more key

product lines, strategic customers or markets.

4. Strategic Business Unit (SBU) implies an independently managed division of a large

company, having its own vision, mission and objectives, whose planning is done separately from
other businesses of the company. The vision, mission and objectives of the division are both distinct
from the parent enterprise and elemental to the long-term performance of the enterprise.

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The structure of SBU consist of operating units; wherein the units serve as an autonomous
business. The top corporate officer assigns the responsibility of the business to the managers, for
the regular operations and business unit strategy. So, the corporate officer is accountable for the
formulation and implementation of the comprehensive strategy and administers the SBU by way of
strategic and financial controls.

In this way, the structure combines related divisions of business into the strategic business unit and
the senior executive is empowered for taking decisions for each unit. The senior executive works
under the supervision of a chief executive officer.

There are three levels in a strategic business unit, wherein the corporate headquarters remain at
the top, SBU’s in the middle and divisions clustered by similarity, within each SBU, remain at the
bottom. Hence, the divisions within the SBU are associated with each other, and the SBU groups
are independent of each other. From the strategic viewpoint, each SBU is an independent business.

A single strategic business unit is considered as a profit centre and governed by the corporate
officers. It stresses over strategic planning instead of operational control so that the separate
divisions of the SBU can respond as fast as they can, to the changing business environment.

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5. Geographical organisational structure:

This reorganization is used by multinational companies which have activities in several countries,
such as this Organization help firms branches to interact efficiently with tastes, preferences and
different cultural levels. for the advantages of this division , it would be possible to take quick
decisions and easy for the coordination of the various operations of specific site because managers
concerns will be focused on their local areas which fall within the scope of their competence , also
this Division will allow to take advantage of the features of the lower operational cost in some areas
and open wider window for training, skill acquisition and the possibility of evasion of the strict

roles in some countries.

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 6. Matrix Organization: Matrix organization is the emerging structure of the organization,
which is a combination of functional organization and project organization. In such an
organization, the functional departments such as production, accounting, marketing, human
resource, etc. constitute a vertical chain of command, while project division constitute

horizontal line of authority.

Organisational Design and change:

Organization design” involves the creation of roles, processes and structures to ensure that the
organization’s goals can be realized.
Steps:
1. Identify various activities that has to be performed
2. Group those activities requiring common skills
3. Select an appropriate structure
4. Using these groups formulate different departments and assign activities and
responsibilities.
5. Interrelate various departments for proper coordination and communication

Organisational change:
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Organisational change refers to the alteration of structural relationships and roles of people in the
organization. It is largely structural in nature. An enterprise can be changed in several ways. Its
technology can be changed, its structure, its people and other elements can be changed.
Organisational change calls for a change in the individual behaviour of the employees.

Causes of Organisational Change:

(A) External Pressures:
i. Change in Technology and Equipment:

Advancements in technology is the major cause (i.e., external pressure) of change. Each
technological alternative results in new forms of organization to meet and match the needs.

ii. Market Situation:

Changes in market situation include rapidly changing goals, needs and desires of consumers,
suppliers, unions etc. If an organization has to survive, it has to cope with changes in market
situations.

iii. Social and Political Changes:

Organisational units literally have no control over social and political changes in the country.
Relations between government and business or drive for social equality are some factors which may
compel for organisational change.

(B) Internal Pressures (Pressures for Change from Within the Organisation):
i. Changes in the Managerial Personnel:

One of the most frequent reasons for major changes in the organisation is the change of executives
at the top. No two managers have the same style, skills or managerial philosophies.

ii. Deficiencies in the Existing Organization:

Many deficiencies are noticed in the organisations with the passage of time. A change is necessary
to remove such deficiencies as lack of uniformity in the policies, obstacles in communication, any
ambiguity etc.

iii. Other Factors:

Certain other factors such as listed below also demand a change in the organisation.

Employee’s desire to share in decision-making

Employee’s desire for higher wage rate

Improvement in working conditions, etc.

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Response to Organisational Change:
Every change is responded by the people working in the organisation. These responses may be
positive or negative depending upon the fact as how they affect people.

Before introducing a change, the manager should study and understand employee’s attitudes so as
to create a positive response. Three sets of factors-psychological, personal and social- govern the
attitude of people.

Process of Organisational Change:

Unless the behavioural patterns of the employees change, the change will have a little impact on the
effectiveness of the organisation.

A commonly accepted model for bringing change in people was suggested by Kurt Lewin in
terms of three phase process:-

(1) Unfreezing:
The essence of unfreezing phase is that the individual is made to realize that his beliefs, feelings
and behaviour are no longer appropriate or relevant to the current situation in the organisation.
Once convinced, people may change their behaviour. Reward for those willing to change and
punishment for others may help in this matter.

(2) Changing:
Once convinced and ready to change, an individual, under this phase, learns to behave in new ways.
He is first provided with the model in which he is to identify himself. Gradually he will accept that
model and behave in the manner suggested by the model. In another process (known as
internalisation), the individual is placed in a situation where new behaviour is demanded of him if
he is to operate successfully.

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(3) Refreezing:
During this phase, a person has to practice and experiment with the new method of behaviour and
see that it effectively blends with his other behavioural attitudes. Reinforcement, for creating a
permanent set in the individual, is provided through either continuous or intermittent schedules.

Organisational system :

A system is a network of interdependent elements that work together to accomplish the systems aim
(or its intent). Thinking of organisations as systems provides us with a variety of important
viewpoints. For example, organisations are exposed to their environment (in this case social,
political, technological, legal, etc) just as any other type of system. In order for systems to work
effectively in such a changing environment, systems must be capable of adaption and continuous
improvement. Failure to monitor and make adjustments to the environment can cause a state called
entropy where misalignment occurs through incorrect assertions and decisions. This can lead to
irrelevance and threatens survival.

Types of systems :

1. Information system
2. Appraisal system
3. Motivational system
4. Control system
5. Planning system
6. Development system

1. Information system:

Information systems (IS) are formal, sociotechnical, organizational systems

designed to collect, process, store, and distribute information. In a sociotechnical
perspective Information Systems are composed by four components: technology,
process, people and organizational structure.

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 1. Transaction Processing System (TPS)
2. Management Information System (MIS)
3. Decision Support System (DSS)
4. Artificial intelligence techniques in business
5. Online Analytical Processing (OLAP)

1. Transaction processing systems are used to record day to day business transactions of the
organization.y recording the day to day business transactions, TPS system provides answers
to the above questions in a timely manner.
● The decisions made by operational managers are routine and highly structured.
● The information produced from the transaction processing system is very detailed.
Examples of transaction processing systems include;
● Point of Sale Systems – records daily sales
● Payroll systems – processing employees salary, loans management, etc.
● Stock Control systems – keeping track of inventory levels
● Airline booking systems – flights booking management

2. Management Information System (MIS)

Management Information Systems (MIS) are used by tactical managers to monitor the
organization's current performance status. The output from a transaction processing system is used
as input to a management information system.
The MIS system analyzes the input with routine algorithms i.e. aggregate, compare and summarizes
the results to produced reports that tactical managers use to monitor, control and predict future
performance.
For example, input from a point of sale system can be used to analyze trends of products that are
performing well and those that are not performing well. This information can be used to make
future inventory orders i.e. increasing orders for well-performing products and reduce the orders of
products that are not performing well.
Examples of management information systems include;
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 ● Sales management systems – they get input from the point of sale system
● Budgeting systems – gives an overview of how much money is spent within the
organization for the short and long terms.
● Human resource management system – overall welfare of the employees, staff turnover,
etc.
Tactical managers are responsible for the semi-structured decision. MIS systems provide the
information needed to make the structured decision and based on the experience of the tactical
managers, they make judgement calls i.e. predict how much of goods or inventory should be
ordered for the second quarter based on the sales of the first quarter.

3. Decision Support System (DSS)

Decision support systems are used by senior management to make non-routine decisions. Decision
support systems use input from internal systems (transaction processing systems and management
information systems) and external systems.
The main objective of decision support systems is to provide solutions to problems that are unique
and change frequently. Decision support systems answer questions such as;
● What would be the impact of employees' performance if we double the production lot at the
factory?
● What would happen to our sales if a new competitor entered the market?
Decision support systems use sophisticated mathematical models, and statistical techniques
(probability, predictive modeling, etc.) to provide solutions, and they are very interactive.
Examples of decision support systems include;
● Financial planning systems – it enables managers to evaluate alternative ways of achieving
goals. The objective is to find the optimal way of achieving the goal. For example, the net
profit for a business is calculated using the formula Total Sales less (Cost of Goods +
Expenses). A financial planning system will enable senior executives to ask what if
questions and adjust the values for total sales, the cost of goods, etc. to see the effect of the
decision and on the net profit and find the most optimal way.
● Bank loan management systems – it is used to verify the credit of the loan applicant and
predict the likelihood of the loan being recovered.

4.Artificial intelligence systems mimic human expertise to identify patterns in large data sets.
Companies such as Amazon, Facebook, and Google, etc. use artificial intelligence techniques to
identify data that is most relevant to you.
Let's use Facebook as an example, Facebook usually makes very accurate predictions of people that
you might know or went with to school. They use the data that you provide to them, the data that
your friends provide and based on this information make predictions of people that you might
know.
Amazon uses artificial intelligence techniques too to suggest products that you should buy also
based on what you are currently getting.
Google also uses artificial intelligence to give you the most relevant search results based on your
interactions with Google and your location.

5. Online Analytical Processing (OLAP)

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Online analytical processing (OLAP) is used to query and analyze multi-dimensional data and
produce information that can be viewed in different ways using multiple dimensions.
Let's say a company sells laptops, desktops, and Mobile device. They have four (4) branches A, B,
C and D. OLAP can be used to view the total sales of each product in all regions and compare the
actual sales with the projected sales.
Each piece of information such as product, number of sales, sales value represents a different
dimension
The main objective of OLAP systems is to provide answers to ad hoc queries within the shortest
possible time regardless of the size of the datasets being used.

2. Appraisal system:

Employee appraisal systems help managers evaluate employee job performance and develop a fair
system of pay increases and promotions. Appraisals in turn can help staff members improve
performance, and assist companies in devising or reorganizing job functions to better fit the
position or the employee. In addition, employee appraisals may reveal outdated or inefficient
business practices. Effective employee appraisal systems incorporate goals to help improve the
employer as well as the employee, through the application of appropriate and timely feedback and
training.

General Appraisal
It is an ongoing communication between the manager and the employee throughout the year. End of
the year, they will determine if the pre-set goals and objectives were met, provide feedback and set
new goals.

360-Degree Appraisal
It allows other employees to provide feedback about their experience with a specific employee. This
feedback of peers can be reviewed by manager and considered for appraisal process.

Technological Performance Appraisal

It assesses technical expertise/capabilities of an employee. It figures out employee throughput and
identifies how sound he/she is technically.

Employee Self-Assessment
The employee assesses himself/herself and it is finally compared with the manager’s completed
assessment results. It is followed by discussions and if there are differences, manager speaks to the
employee about it.

Manager Performance Appraisal

In this type, managers go through the appraisal process. It is the role of the manager that is very
crucial handling both the team and the client. Manager has to satisfy the clientele without disrupting
the (team’s) employee morale. Most often manager appraisal process involves feedback from the
respective team members and sometimes from the client as well.

Project Evaluation Review

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 This is one of the best ways to identify how good an employee is at work. Rather than to wait to
review an employee end of the year, it helps evaluating employees end of each project.

Sales Performance Appraisal

A sales person is judged by the goals he/she has set versus his/her results. Salesmen are closely held
to the financial goals of any organization. The manager and salesperson must find out ways to
achieve goals prior to which they must set realistic goals.

3. Motivational system:

Employee motivation, i.e. methods for motivating employees, is an intrinsic and internal drive to
put forth the necessary effort and action towards work-related activities. It has been broadly defined
as the "psychological forces that determine the direction of a person's behavior in an organisation, a
person's level of effort and a person's level of persistence".[1]Also, "Motivation can be thought of as
the willingness to expend energy to achieve a goal or a reward. Motivation at work has been
defined as 'the sum of the processes that influence the arousal, direction, and maintenance of
behaviors relevant to work settings'.

Extrinsic Rewards

These are rewards that come from outside. The most prominent extrinsic reward is money. Extrinsic
rewards satisfy basic human needs for survival, security, social, and recognition. In other words, it
is the job context. An example of an extrinsic reward is employee’s salary.

Extrinsic reinforcement is valuable since it can be used as a tool to shape habits that will lead to
personal success.

The downside to this type of extrinsic reward is that the reward quickly becomes an expected
reward for job performance. If you provide a reward such as a gift card for a project and then do not
do so for the next two special projects, the employee might lose the motivation to excel. The
employee likely still will perform the job adequately, however, not with the same high-intensity
level as when she receives a reward.

Intrinsic Rewards

Intrinsic rewards satisfy higher-level human need such as self-esteem, achievement, growth, and
development. Unlike extrinsic rewards, the factors derive from the job content. An example of
intrinsic reward is providing meaningful feedback.

The benefit to this type of internal reward is that it originates within the employee; he has a great
deal of personal satisfaction when he accomplishes the task.

The downside to intrinsic rewards are that the employee might take on a new challenge to prove
himself, but feel taken advantage of if he must continue the extra duties without recognition. If the

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employee is not promoted, given a raise or a bonus, he might decide to take his new skills to
another company where he is recognized for the skills.

It is important for employers to distinguish the differences between the rewards, and if utilized
effectively, each can produce important benefits for the organization.

4. Control system:
The controlling process is a method that makes sure standards are being meet within an
organization. The process typically has between 4 and 5 steps. A five (5) step example is detailed
below.

Figure 1: The Control Process [1]

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 1. Establish clear standards: Standards are the plans or the targets which have to be achieved
in the course of business function. They can also be called as the criterions for judging the
performance. Standards generally are classified into two:
1. Measurable or tangible: Those standards which can be measured and expressed are
called as measurable standards. They can be in form of cost, output, expenditure,
time, profit, etc.
2. Non-measurable or intangible: There are standards which cannot be measured
monetarily. For example- performance of a manager, deviation of workers, their
attitudes towards a concern. These are called as intangible standards.
3. Controlling becomes easy through establishment of these standards because
controlling is exercised on the basis of these standards.
2. Monitor and record performance: The second major step in controlling is to measure the
performance. Finding out deviations becomes easy through measuring the actual
performance. Performance levels are sometimes easy to measure and sometimes difficult.
Measurement of tangible standards is easy as it can be expressed in units, cost, money
terms, etc. Quantitative measurement becomes difficult when performance of manager has
to be measured. Performance of a manager cannot be measured in quantities. It can be
measured only by:
1. Attitude of the workers,
2. Their morale to work,
3. The development in the attitudes regarding the physical environment, and
4. Their communication with the superiors.
3. Comparison results against standards Comparison of actual performance with the
planned targets are very important. Deviation can be defined as the gap between actual
performance and the planned targets. The manager has to find out two things here- extent of
deviation and cause of deviation. Extent of deviation means that the manager has to find out
whether the deviation is positive or negative or whether the actual performance is in
conformity with the planned performance. Once the deviation is identified, a manager has to
think about various causes which have led to a deviation. The causes can be:
1. Erroneous planning,
2. Coordination loosens,
3. Implementation of plans is defective, and
4. Supervision and communication is ineffective, etc.
4. Communicate Results: Once the results have been determined, all stakeholder needs to be
notified and keep up to date.
5. If needed, take corrective action Once the causes and extent of deviations are known, the
manager has to detect those errors and take remedial measures for it. There are two
alternatives here:
1. Taking corrective measures for deviations which have occurred; and
2. After taking the corrective measures, if the actual performance is not in conformity
with plans, the manager can revise the targets. It is here the controlling process
comes to an end. Follow up is an important step because it is only through taking
corrective measures, a manager can exercise controlling

5.Planning System: strategic success depends on how the plans are formulated and
implemented.organisations should decide whether to have a centralised or decentralised planning
system
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6.Development system: development is defined as the process of gradual, systematic improvement
of knowledge,skills, performance, and attitude of individuals who perform management
responsibilities.continuous changes will be happening in organisation due to internal and external
factors. Hence managers must be ready to face these situations. For this they must be trained to
handle various situations.

Behavioural Implementation:

It is to do with the human side of enterprise and is essentially about changing people’s attitudes,
feelings and – above all else – their behavior. The behavioral of the employees affect the success of
the organization. Strategic implementation requires support, discipline, motivation and hard work
from all manager and employees.

Techniques:

Influence Tactics: The organizational leaders have to successfully implement the strategies and
achieve the objectives. Therefore the leader has to change the behavior of superiors, peers or
subordinates. For this they must develop and communicate the vision of the future and motivate
organizational members to move into that direction.

Power: it is the potential ability to influence the behavior of others. Leaders often use their power
to influence others and implement strategy. Formal authority that comes through leaders position in
the organization (He cannot use the power to influence customers and government officials) the
leaders have to exercise something more than that of the formal authority (Expertise, charisma,
reward power, information power, legitimate power, coercive power).

Empowerment as a way of Influencing Behavior: The top executives have to empower lower
level employees. Training, self managed work groups eliminating whole levels of management in
organization and aggressive use of automation are some of the ways to empower people at various
places.

Political Implications of Power: Organization politics is defined as those set of activities engaged
in by people in order to acquire, enhance and employ power and other resources to achieve
preferred outcomes in organizational setting characterized by uncertainties. Organization must try
to manage political behavior while implementing strategies. They should;

● Define job duties clearly.

● Design job properly.
● Demonstrate proper behaviors.
● Promote understanding.
● Allocate resources judiciously.
Leadership Style and Culture Change: Culture is the set of values, beliefs, behaviors that help its
members understand what the organization stands for, how it does things and what it considers
important. Firms culture must be appropriate and support their firm. The culture should have some
value in it . To change the corporate culture involves persuading people to abandon many of their
existing beliefs and values, and the behaviors that stem from them, and to adopt new ones. The first
difficulty that arises in practice is to identify the principal characteristics of the existing culture. The
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process of understanding and gaining insight into the existing culture can be aided by using one of
the standard and properly validated inventories or questionnaires that a number of consultants have
developed to measure characteristics of corporate culture. These offer the advantage of being able
to benchmark the culture against those of other, comparable firms that have used the same
instruments. The weakness of this approach is that the information thus obtained tends to be more
superficial and less rich than material from other sources such as interviews and group discussions
and from study of the company’s history. In carrying out this diagnostic exercise, such instruments
can be supplemented by surveys of employee opinions and attitudes and complementary
information from surveys of customers and suppliers or the public at large.

Values and Culture: Value is something that has worth and importance to an individual. People
should have shared values. This value keeps the every one from the top management down to
factory persons on the factory floor pulling in the same direction.

Ethics and Strategy: Ethics are contemporary standards and a principle or conducts that govern the
action and behavior of individuals within the organization. In order that the business system
function successfully the organization has to avoid certain unethical practices and the organization
has to bound by legal laws and government rules and regulations.

Managing Resistance to Change: To change is almost always unavoidable, but its strength can be
minimized by careful advance. Top management tends to see change in its strategic context. Rank-
and-file employees are most likely to be aware of its impact on important aspects of their working
lives. Some resistance planning, which involves thinking about such issues as: Who will be affected
by the proposed changes, both directly and indirectly? From their point of view, what aspectsof
their working lives will be affected? Who should communicate information about change, when and
by what means? What management style is to be used?

Managing Conflict: Conflict is a process in which an effort is purposefully made by one person or
unit to block another that results in frustrating the attainment of the others goals or the furthering of
his interests. The organization has to resolve the conflicts.

Functional and operational implementation:

Once the management formulates corporate strategy, management must concentrate on the
functional strategy. Functional strategy is the game plan for different functions in the organisation
likeFunctional strategy - organizational plans prepared for various functional areas of a company's
organizational structure (e.g., marketing strategy, financial strategy, production strategy etc.).
Functional strategies can be part of overall corporate strategy or serve as separate plans of strategy
cascading/implementation within a functional area. [1]

1. Financial plan and policies

2. Marketing plan and policies
3. Operational plan and policies
4. Personnel/Human plan and policies.

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 1. Financial plan:

Financial Planning is the process of estimating the capital required and determining it’s
competition. It is the process of framing financial policies in relation to procurement,
investment and administration of funds of an enterprise.

Objectives of Financial Planning

Financial Planning has got many objectives to look forward to:

1. Determining capital requirements- This will depend upon factors like cost of current and
fixed assets, promotional expenses and long- range planning. Capital requirements have to
be looked with both aspects: short- term and long- term requirements.
2. Determining capital structure- The capital structure is the composition of capital, i.e., the
relative kind and proportion of capital required in the business. This includes decisions of
debt- equity ratio- both short-term and long- term.
3. Framing financial policies with regards to cash control, lending, borrowings, etc.
4. A finance manager ensures that the scarce financial resources are maximally utilized in
the best possible manner at least cost in order to get maximum returns on investment.

6- A’s Of financial management :

1. Anticipating Financial Needs: The financial manager has to forecast expected events in
business and note their financial implications. He anticipates the financial needs by
consulting an array of documents such as cash budget, the proformace income statement etc.

2. Acquiring financial resources: This implies knowing when, where and how to obtain
the funds which a business needs.Funds should be acquired well before the need for them is
actually felt.

3. Allocating funds in business- Allocating funds in a business means investing them in the
best plan of assets. Assets are balanced by weighing their profitability against their liquidity.

4. Administrating the allocation of funds: Once funds are allocated on various investment
opportunities,it is the basic responsibility of the finance manager to watch the performance
of each rupee that has been invested.

5. Analysing the performance of finance: Once the funds are administered, it is very
comfortable for the finance manager to take decisions. Through budgeting, he will be able to
compare the actuals with standards.

6. Accounting and Reporting to the Management: Finance manager has to advise and
supply information about the information about the performance of finance to the top
management and is also responsible for maintaining up-to-date records of the performance
of financial decisions.

2. Marketing plan :

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 Marketing refers to "the activity, set of institutions, and processes for creating, communicating,
delivering, and exchanging offerings that have value for customers, clients, partners, and society at
large.A marketing strategy is a business's overall game plan for reaching people and turning them
into customers of the product or service that the business provides. The marketing mix has been
defined as the "set of marketing tools that the firm uses to pursue its marketing objectives in the
target".[1] Thus the marketing mix refers to four broad levels of marketing decision, namely:
product, price, promotion, and place.

Marketing policies should answer

1. Product strategies
2. Price strategies
3. place/ distribution channel strategies
4. Promotional strategies

Marketing is related to the exchange of goods and services. Through its medium the goods and
services are brought to the place of consumption. This satisfies the needs of the customers. The
following activities are undertaken in respect of the exchange of goods and services:

1. Gathering and Analysing Market Information:

Gathering and analyzing market information is an important function of marketing. Under it, an
effort is made to understand the consumer thoroughly in the following ways:

(a) What do the consumers want?

(b) In what quantity?

(c) At what price?

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(d) When do they want (it)?

(e) What kind of advertisement do they like?

(f) Where do they want (it)?

What kind of distribution system do they like? All the relevant information about the consumer is
collected and analysed. On the basis of this analysis an effort is made to find out as to which
product has the best opportunities in the market.

2. Marketing Planning:

In order to achieve the objectives of an organisation with regard to its marketing, the marketeer
chalks out his marketing plan. For example, a company has a 25% market share of a particular
product.

The company wants to raise it to 40%. In order to achieve this objective the marketer has to prepare
a plan in respect of the level of production and promotion efforts. It will also be decided as to who
will do what, when and how. To do this is known as marketing planning.

3. Product Designing and Development:

Product designing plays an important role in product selling. The company whose product is better
and attractively designed sells more than the product of a company whose design happens to be
weak and unattractive.

In this way, it can be said that the possession of a special design affords a company to a competitive
advantage. It is important to remember that it is not sufficient to prepare a design in respect of a
product, but it is more important to develop it continuously.

4. Standardisation and Grading:

Standardisation refers to determining of standard regarding size, quality, design, weight, colour,
raw material to be used, etc., in respect of a particular product. By doing so, it is ascertained that the
given product will have some peculiarities.

This way, sale is made possible on the basis of samples. Mostly, it is the practice that the traders
look at the samples and place purchase order for a large quantity of the product concerned. The
basis of it is that goods supplied conform to the same standard as shown in the sample.

Products having the same characteristics (or standard) are placed in a given category or grade. This
placing is called grading. For example, a company produces commodity – X, having three grades,
namely A’. ‘B’ and ‘C’, representing three levels of quality; best, medium and ordinary
respectively.

Customers who want best quality will be shown ‘A’ grade product. This way, the customer will
have no doubt in his mind that a low grade product has been palmed off to him. Grading, therefore,
makes sale-purchase easy. Grading process is mostly used in case of agricultural products like food
grains, cotton, tobacco, apples, mangoes, etc.

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5. Packaging and Labelling:

Packaging aims at avoiding breakage, damage, destruction, etc., of the goods during transit and
storage. Packaging facilitates handling, lifting, conveying of the goods. Many a time, customers
demand goods in different quantities. It necessitates special packaging. Packing material includes
bottles, canister, plastic bags, tin or wooden boxes, jute bags etc.

Label is a slip which is found on the product itself or on the package providing all the information
regarding the product and its producer. This can either be in the form of a cover or a seal.

For example, the name of the medicine on its bottle along with the manufacturer’s name, the
formula used for making the medicine, date of manufacturing, expiry date, batch no., price etc., are
printed on the slip thereby giving all the information regarding the medicine to the consumer. The
slip carrying all these is details called Label and the process of preparing it as Labelling.

6. Branding:

Every producer/seller wants that his product should have special identity in the market. In order to
realise his wish he has to give a name to his product which has to be distinct from other
competitors.

Giving of distinct name to one’s product is called branding. Thus, the objective of branding is to
show that the products of a given company are different from that of the competitors, so that it has
its own identity.

For instance, if a company wants to popularise its commodity – X under the name of “777” (triple
seven) then its brand will be called “777”. It is possible that another company is selling a similar
commodity under AAA (Triple ‘A’) brand name.

Under these circumstances, both the companies will succeed in establishing a distinct identity of
their products in the market. When a brand is not registered under the trade Mark Act, 1999, it
becomes a Trade Mark.

7. Customer Support Service:

Customer is the king of market. Therefore, it is one of the chief functions of marketer to offer every
possible help to the customers. A marketer offers primarily the following services to the customers:

(i) After-sales-services

(ii) Handling customers’ complaints

(iii) Technical services

(iv) Credit facilities

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(v) Maintenance services

Helping the customer in this way offers him satisfaction and in today’s competitive age customer’s
satisfaction happens to be the top-most priority. This encourages a customer’s attachment to a
particular product and he starts buying that product time and again.

8. Pricing of Products:

It is the most important function of a marketing manager to fix price of a product. The price of a
product is affected by its cost, rate of profit, price of competing product, policy of the government,
etc. The price of a product should be fixed in a manner that it should not appear to be too high and
at the same time it should earn enough profit for the organisation.

9. Promotion:

Promotion means informing the consumers about the products of the company and encouraging
them to buy these products. There are four methods of promotion: (i) Advertising, (ii) Personal
selling, (iii) Sales promotion and (iv) Publicity. Every decision taken by the marketer in this respect
affects the sales. These decisions are taken keeping in view the budget of the company.

10. Physical Distribution:

Under this function of marketing the decision about carrying things from the place of production to
the place of consumption is taken into account. To accomplish this task, decision about four factors
are taken. They are: (i) Transportation, (ii) Inventory, (iii) Warehousing and (iv) Order Processing.
Physical distribution, by taking things, at the right place and at the right time creates time and place
utility.

11. Transportation:

Production, sale and consumption-all the three activities need not be at one place. Had it been so,
transportation of goods for physical distribution would have become irrelevant. But generally it is
not possible. Production is carried out at one place, sale at another place and consumption at yet
another place.

Transport facility is needed for the produced goods to reach the hands of consumers. So the
enterprise must have an easy access to means of transportation.

Mostly we see on the road side’s private vehicles belonging to Pepsi, Coca Cola, LML, Britannia,
etc. These private carriers are the living examples of transportation function of marketing. Place
utility is thus created by transportation activity.

12. Storage or Warehousing:

There is a time-lag between the purchase or production of goods and their sale. It is very essential
to store the goods at a safe place during this time-interval. Godowns are used for this purpose.
Keeping of goods in godowns till the same are sold is called storage.

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For the marketing manager storage is an important function. Any negligence on his part may
damage the entire stock. Time utility is thus created by storage activity

3. Production and Operational policies:

Production and operations management talks about applying business organization and
management concepts in creation of goods and services.

Production is a scientific process which involves transformation of raw material (input) into desired
product or service (output) by adding economic value.

Operations management is an area of management concerned with designing and controlling the
process of production and redesigning business operations in the production of goods or services.

Production and operations management concern with the conversion of inputs into outputs, using
physical resources, so as to provide the desired utilities to the customer while meeting the other
organizational objectives of effectiveness, efficiency and adoptability. It distinguishes itself from
other functions such as personnel, marketing, finance, etc., by its primary concern for ‘conversion
by using physical resources.’

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Following are the activities which are listed under production and operations management
functions:

1. Location of facilities
2. Plant layouts and material handling
3. Product design
4. Process design
5. Production and planning control
6. Quality control
7. Materials management
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 8. Maintenance management.

LOCATION OF FACILITIES
Location of facilities for operations is a long-term capacity decision which involves a long term
commitment about the geographically static factors that affect a business organization. It is an
important strategic level decision-making for an organization. It deals with the questions such as
‘where our main operations should be based?’
The selection of location is a key-decision as large investment is made in building plant and
machinery. An improper location of plant may lead to waste of all the investments made in plant
and machinery equipments. Hence, location of plant should be based on the company’s expansion
plan and policy, diversification plan for the products, changing sources of raw materials and many
other factors. The purpose of the location study is to find the optimal location that will results in the
greatest advantage to the organization.
PLANT LAYOUT AND MATERIAL HANDLING
Plant layout refers to the physical arrangement of facilities. It is the configuration of departments,
work centers and equipment in the conversion process. The overall objective of the plant layout is
to design a physical arrangement that meets the required output quality and quantity most
economically.
PRODUCT DESIGN
Product design deals with conversion of ideas into reality. Every business organization has to
design, develop and introduce new products as a survival and growth strategy. Developing the new
products and launching them in the market is the biggest challenge faced by the organizations.
The entire process of need identification to physical manufactures of product involves three
functions: marketing, product development, and manufacturing. Product development translates the
needs of customers given by marketing into technical specifications and designing the various
features into the product to these specifications. Manufacturing has the responsibility of selecting
the processes by which the product can be manufactured. Product design and development provides
link between marketing, customer needs and expectations and the activities required to manufacture
the product.

PROCESS DESIGN
Process design is a macroscopic decision-making of an overall process route for converting the raw
material into finished goods. These decisions encompass the selection of a process, choice of
technology, process flow analysis and layout of the facilities. Hence, the important decisions in
process design are to analyze the workflow for converting raw material into finished product and to
select the workstation for each included in the workflow.
PRODUCTION PLANNING AND CONTROL

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Production planning and control can be defined as the process of planning the production in
advance, setting the exact route of each item, fixing the starting and finishing dates for each item, to
give production orders to shops and to follow up the progress of products according to orders.
The principle of production planning and control lies in the statement ‘First Plan Your Work and
then Work on Your Plan’. Main functions of production planning and control includes planning,
routing, scheduling, dispatching and follow-up.
Planning is deciding in advance what to do, how to do it, when to do it and who is to do it. Planning
bridges the gap from where we are, to where we want to go. It makes it possible for things to occur
which would not otherwise happen.
Routing may be defined as the selection of path which each part of the product will follow, which
being transformed from raw material to finished products. Routing determines the most
advantageous path to be followed from department to department and machine to machine till raw
material gets its final shape.
Scheduling determines the program for the operations. Scheduling may be defined as ‘the fixation
of time and date for each operation’ as well as it determines the sequence of operations to be
followed.
Dispatching is concerned with the starting the processes. It gives necessary authority so as to start a
particular work, which has already been planned under ‘Routing’ and ‘Scheduling’. Therefore,
dispatching is ‘release of orders and instruction for the starting of production for any item in
acceptance with the route sheet and schedule charts’.
The function of follow-up is to report daily the progress of work in each shop in a prescribed
proforma and to investigate the causes of deviations from the planned performance.
QUALITY CONTROL
Quality Control (QC) may be defined as ‘a system that is used to maintain a desired level of quality
in a product or service’. It is a systematic control of various factors that affect the quality of the
product. Quality control aims at prevention of defects at the source, relies on effective feed back
system and corrective action procedure.
Quality control can also be defined as ‘that industrial management technique by means of which
product of uniform acceptable quality is manufactured’. It is the entire collection of activities which
ensures that the operation will produce the optimum quality products at minimum cost.
The main objectives of quality control are:

● To improve the companies income by making the production more acceptable to the
customers i.e., by providing long life, greater usefulness, maintainability, etc.
● To reduce companies cost through reduction of losses due to defects.
● To achieve interchangeability of manufacture in large scale production.
● To produce optimal quality at reduced price.
● To ensure satisfaction of customers with productions or services or high quality level, to
build customer goodwill, confidence and reputation of manufacturer.
● To make inspection prompt to ensure quality control.
● To check the variation during manufacturing.

MATERIALS MANAGEMENT
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Materials management is that aspect of management function which is primarily concerned with the
acquisition, control and use of materials needed and flow of goods and services connected with the
production process having some predetermined objectives in view.
The main objectives of materials management are:

● To minimize material cost.

● To purchase, receive, transport and store materials efficiently and to reduce the related
cost.
● To cut down costs through simplification, standardization, value analysis, import
substitution, etc.
● To trace new sources of supply and to develop cordial relations with them in order to
ensure continuous supply at reasonable rates.
● To reduce investment tied in the inventories for use in other productive purposes and to
develop high inventory turnover ratios.

MAINTENANCE MANAGEMENT
In modern industry, equipment and machinery are a very important part of the total productive
effort. Therefore, their idleness or downtime becomes are very expensive. Hence, it is very
important that the plant machinery should be properly maintained.
The main objectives of maintenance management are:

1. To achieve minimum breakdown and to keep the plant in good working condition at the
lowest possible cost.
2. To keep the machines and other facilities in such a condition that permits them to be
used at their optimal capacity without interruption.
3. To ensure the availability of the machines, buildings and services required by other
sections of the factory for the performance of their functions at optimal return on
investment.

Personnel policies/ Human Resource policies:

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Human Resource Management is a function within an organization which focuses mainly on the
recruitment of, management of, and providing guidelines to the manpower in a company. It is a
function of the company or organization which deals with concerns that are related to the staff of
the company in terms of hiring, compensation, performance, safety, wellness, benefits, motivation
and training.

Functions of Human Resource Management

☆ Operative Functions

1. Recruitment: This is the most challenging task for any HR manager. A lot of attention
and resources are required to draw, employ and hold the prospective employees. A lot
of elements go into this function of recruitment, like developing a job description,
publishing the job posting, sourcing the prospective candidates, interviewing, salary
negotiations and making the job offer.
2. Training and Development: On the job training is the responsibility of the HR
department. Fresher training may also be provided by some companies for both new
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 hires and existing employees. This Fresher training is mainly done to make the
employees up to date in their respective areas as required by the company. This function
makes the employees understand the process and makes it easy for them to get on their
jobs with much ease. During the process of the training and development, the results are
monitored and measured to find out if the employees require any new skills in addition
to what he/she has.
3. Professional Development: This is a very important function of Human Resource
Management. This function helps the employees with opportunity for growth,
education, and management training. The organization undertakes to sponsor their
employees for various seminars, trade shows, and corporal responsibilities. This, in
turn, makes the employees feel that they have been taken care by their superiors and
also the organization.
4. Compensation and Benefits: A company can attain its goals and objectives if it can
acclimatize to new ways of providing benefits to the employees. Some of the benefits
given by companies are listed below for our understanding:
1. Working hour flexibility
2. Extended vacation
3. Dental/Medical Insurance
4. Maternal/Paternal Leave
5. Education Reimbursement for children
5. Performance Appraisal: The employees of any organization will be evaluated by the
HR department as per the performance. This function of Human Resource Management
is to help the organization in finding out if the employee they have hired is moving
towards the goals and objectives of the organization. On the other hand, it also helps the
company to evaluate whether the employees needs improvement in other areas. It also
helps the HR team in drawing certain development plans for those employees who have
not met the minimal requirements of the job.
6. Ensuring Legal Compliance: To protect the organization this function plays a crucial
role. The HR department of every organization should be aware of all the laws and
policies that relate to employment, working conditions, working hours, overtime,
minimum wage, tax allowances etc. Compliance with such laws is very much required
for the existence of an organization.

☆ Managerial Functions

1. Planning: This function is very vital to set goals and objectives of an organization. The
policies and procedures are laid down to achieve these goals. When it comes to
planning the first thing is to foresee vacancies, set the job requirements and decide the
recruitment sources. For every job group, a demand and supply forecast is to be made,
this requires an HR manager to be aware of both job market and strategic goals of the
company. Shortage versus the excess of employees for that given job category is
determined for a given period. In the end, a plan is ascertained to eliminate this shortage
of employees.
2. Organizing: The next major managerial function is to develop and design the structure
of the organization. It fundamentally includes the following:
1. Employees are grouped into positions or activities they will be performing.
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 2. Allocate different functions to different persons.
3. Delegate authority as per the tasks and responsibilities that are assigned.
3. Directing: This function is preordained to inspire and direct the employees to achieve
the goals. This can be attained by having in place a proper planning of career of
employees, various motivational methods and having friendly relations with the
manpower. This is a great challenge to any HR manager of an organization; he/she
should have the capability of finding employee needs and ways to satisfy them.
Motivation will be a continuous process here as new needs may come forward as the
old ones get fulfilled.
4. Controlling: This is concerned with the apprehension of activities as per plans, which
was formulated on the basis of goals of the company. The controlling function ends the
cycle and again prompts for planning. Here the HR Manager makes an examination of
outcome achieved with the standards that were set in the planning stage to see if there
are any deviations from the set standards. Hence any deviation can be corrected on the
next cycle.

☆ Advisory Functions

1. Top Management Advice: HR Manager is a specialist in Human Resource

Management functions. She/he can advise the top management in formulating policies
and procedures. He/she can also recommend the top management for the appraisal of
manpower which they feel apt. This function also involves advice regarding
maintaining high-quality human relations and far above the ground employee morale.
2. Departmental Head advice: Under this function, he/she advises the heads of various
departments on policies related to job design, job description, recruitment, selection,
appraisals.

INTEGRATION OF FUNCTIONAL PLANS AND POLICIES:

Strategies formulated by functional heads should not conflict with the overall objective of the
organisation laid down by corporate strategy.
Integration of functional strategies should take into consideration of

1. Internal consistency: policies must be consistent and flexible for implementation

2. Consideration of organisational capacity:- concentrate on core competencies and key
success factors.
3. Minimize irregularity: proper coordination among the department heads to avoid conflict
and irregularity.
4. Establishing proper linkages:each department is linked with other department to perform
its functions. So proper linkages must be done.
5. Timing of implementation : time for the execution of functional policies should be
properly decided and implemented on time considering all the factors.
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Strategies to be considered for implementation:

1. Product life cycle

2. BCG Matrix
3. GE Multi factoral analysis
4. Five force model
5. PEST analysis.

1. PLC:
The Product Life Cycle contains five distinct stages. For the four stages introduction,
growth, maturity and decline, we can identify specific product life cycle strategies.
These are based on the characteristics of each PLC stage. Which product life cycle
strategies should be applied in each stage is crucial to know in order to manage the
PLC properly. We will now go into these four PLC stages in detail to identify
characteristics of the stages and product life cycle strategies for each.

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2. BCG matrix:

The BCG matrix (aka B.C.G. analysis, BCG-matrix, Boston Box, Boston Matrix, Boston Consulting
Group analysis) is a chart that had been created by Bruce Henderson for the Boston Consulting Group
in 1970 to help corporations with analyzing their business units or product lines. This helps the
company allocate resources and is used as an analytical tool in brand marketing, product management,
strategic management, and portfolio analysis.The BCG Matrix (also known as the Boston Consulting
Group analysis, the Growth-Share matrix, the Boston Box or Product Portfolio matrix) is a tool
used in corporate strategy to analyse business units or product lines based on two variables: relative
market share and the market growth rate. By combining these two variables into a matrix, a
corporation can plot their business units accordingly and determine where to allocate extra
(financial) resources, where to cash out and where to divest. The main purpose of the BCG
Matrix is therefore to make investment decisions on a corporate level. Depending on how well
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the unit and the industry is doing, four different category labels can be attributed to each unit: Dogs,
Question Marks, Cash Cows and Stars.

Cash cows are units with high market share in a slow-growing industry. These units typically
generate cash in excess of the amount of cash needed to maintain the business. They are regarded as
staid and boring, in a "mature" market, and every corporation would be thrilled to own as many as
possible. They are to be "milked" continuously with as little investment as possible, since such
investment would be wasted in an industry with low growth.

Dogs, or more charitably called pets, are units with low market share in a mature, slow-growing
industry. These units typically "break even", generating barely enough cash to maintain the
business's market share. Though owning a break-even unit provides the social benefit of providing
jobs and possible synergies that assist other business units, from an accounting point of view such a
unit is worthless, not generating cash for the company. They depress a profitable company's return
on assets ratio, used by many investors to judge how well a company is being managed. Dogs, it is
thought, should be sold off.

Question marks (also known as problem child) are growing rapidly and thus consume large
amounts of cash, but because they have low market shares they do not generate much cash. The
result is a large net cash consumption. A question mark has the potential to gain market share and
become a star, and eventually a cash cow when the market growth slows. If the question mark does
not succeed in becoming the market leader, then after perhaps years of cash consumption it will
degenerate into a dog when the market growth declines. Question marks must be analyzed carefully
in order to determine whether they are worth the investment required to grow market share.

Stars are units with a high market share in a fast-growing industry. The hope is that stars become
the next cash cows. Sustaining the business unit's market leadership may require extra cash, but this
is worthwhile if that's what it takes for the unit to remain a leader. When growth slows, stars
become cash cows if they have been able to maintain their category leadership, or they move from
brief stardom to dogdom.

3. GE Multi factorial analysis:

Prof. Sharmila F
GE multi factoral analysis is a technique used in brand marketing and product management to
help a company decide what product(s) to add to its product portfolio and which opportunities in
the market they should continue to invest in.
The GE matrix is constructed in a 3x3 grid with Market Attractiveness plotted on the Y-axis and
business strength on the X-axis, both being measured on a high, medium, or low score. Five steps
must be considered in order to formulate the matrix

The GE matrix was developed by Mckinsey and Company consultancy group in the 1970s. The
nine cell grid measures business unit strength against industry attractiveness and this is the key
difference. Whereas BCG is limited to products, business units can be products, whole product
lines, a service or even a brand. You can plot these chosen units on the grid and this will help you to
determine which strategy to apply.
Before you can plot anything on the grid however first you need to decide how you will determine
both industry attractiveness and business unit strength.

Industry Attractiveness:

Factors you could choose to base this on include:

● Market size
● Market growth
● Pestel factors
○ Political
○ Economical
○ Social
○ Technological
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 ○ Environmental
○ Legal
● Porters five forces
○ Competitive rivalry
○ Buyer power
○ Supplier power
○ Threat of new entrants
○ Threat of substitution

You need to decide which factors you will use as a determining factor as these will be applied to
ALL business units.

Step 1: Decide on determining factors

Step 2: Give each factor a weighting number based on its magnitude (make the total weight of all
factors add up to 1.00 or 10.00 for example)

Step 3: Rate each business unit against each factor on a scale. For example 1 – 5 where 1 is
extremely attractive and 5 is extremely unattractive.

Step 4: Give each business unit a weighted rating on each factor by multiplying its rating by the
weight for that factor.

Step 5: Total up all the weighted ratings for each business unit.

Business Unit Strength:

Factors to determine how strong a unit is compared to others in its industry include:
● Market share
● Growth in market share
● Brand equity
● Profit margins compared to competition
● Distribution channel process – the strength of

Repeat steps 1 to 5 here.

Now you have the measurements you can plot your business units on the GE matrix and depending
on where they are plotted will determine your strategy from one of the following:

Grow/Invest:

Units that land in this section of the grid generally have high market share and promise high returns
in the future so should be invested in.

Hold/Selectivity:
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Units that land in this section of the grid can be ambiguous and should only be invested in if there is
money left over after investing in the profitable units.

Harvest/Divest:

Poor performing units in an unattractive industry end up in this section of the grid. This should only
be invested in if they can make more money than is put into them. Otherwise they should be
liquidated

5. PESTEL analysis:

The PESTEL framework is an analytical tool used to identify key drivers of change in the strategic
environment. PESTEL analysis includes Political, Economic, Social, Technological, Legal, and
Environmental factors, but other variants include PEST, PESTLIED (including International and
Demographic factors), STEEPLE (including Ethical factors), and STEEPLED (including Education
and Demographic factors)

The idea of this tool is to analyse the external environment from many different angles, and to
provide a complete evaluation when considering a certain idea or plan, providing insight to whether
a project is better placed than its competitors, and if its able to respond to change more effectively.
Understanding these environments helps to minimize threats, while maximizing opportunities.
Environmental scanning can help business identify opportunities in the market while avoiding
costly mistakes or risks. These environments include:

● Political
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 ● Economic
● Social
● Technological
● Environmental
● Legal

All aspects (or environments) are important in delivering a multi visioned analysis of the
organisations external environment. Although different industries will hold higher value to one
environment over another, it is imperative to apply all aspects to any business strategy who wants to
develop, grow or even sustain their involvement in the market. A PESTEL analysis forms a much
more comprehensive result over a SWOT analysis.When the factors for each environment are
assessed, this information can then be analysed further using a SWOT analysis to identify the threats
and weakness associated with each of the factors.

Political Factors

These factors involve governmental influences effecting the economy and how a business can be
operated. These include, but not limited to:

● Government policy

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 ● Political stability or instability overseas
● Foreign trade policy
● Tax policy
● Labor laws
● Terrorism and military considerations
● Environmental laws
● Funding grants and initiatives
● Trade restrictions
● Fiscal policy

Organisations need to adapt to political changes both current and future in order to remain
compliant while trading. An example of this is if a government introduces a new tax, the
organisation may need to reassess their revenue generating structure if said taxes deem this
nonviable.

Economic Factors

These factors determine an economy’s performance resulting in impacting the organisations

operational capabilities as well as their profitability and sustainability. These include, but are not
limited to:

● Economic Growth
● Interest Rates
● Exchange rates
● Inflation
● Disposable income of consumers
● Disposable income of businesses
● Taxation
● Interstate taxes
● Wages rates
● Financing capabilities

Breaking this factor down further, we can class the Economics into Macro and Micro-economic
factors. The Macro includes the management of demand in any given economy, tax rate control,
taxation policy and governmental expenditure. Micro refers to the way people spend their
disposable income, an area of interest for business to consumer organisations. An example of how
economics effect an organisations performance is if there was a rise in inflation, the company
would need to increase their supply price, causing a potential loss of sales to their clients.

Social Factors

Also known as socio-cultural factors, these factors consider the beliefs, attitudes and trends of the
population that affect the market and community socially. This requires the advantages and

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disadvantages the product holds to the community to be considered. These factors include but are
not limited to:

● Population growth
● Age distribution
● Health consciousness
● Career attitudes
● Customer buying trends
● Cultural trends
● Demographics
● Industrial reviews and consumer confidence
● Organisational image

These factors show high consideration for businesses and marketers as this has direct
relation to customers spending habits and their motivation. An example of this would be in
high tourism locations, requiring the business strategy to be sustainable during the low
seasons, yet capable of accommodating the demand during the busy seasons.

Technological Factors

In a world of technological innovation and increased demand on technology, these factors impact
the way organisations market their products, as well as platforms for marketing itself, while also
realizing technology often becomes outdated within a short period of time after its released. These
factors include but are not limited to:

● Producing goods and services

● Emerging technologies
● Maturity of technologies
● Distributing goods and services
● Communicating with target markets
● Potential Copyright infringements
● Increased training to use innovation
● Potential Return on Investment (ROI)

These factors affect the operations of the organisation and can pose opportunities as well as risks.
An automated system needing continual servicing due to malfunctions, can pose supply issues and
drop the reliability of the company causing a loss in clients.

Environmental Factors

These factors consider ecological and environmental aspects including those which influence or are
determined by the the surrounding environment. Environmental factors have increased in their

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importance for analysis over the last 15 years or so due to the changes in material supply and
pollution controls. These factors include but are not limited to:

● The decline of raw materials

● Pollution and greenhouse gas emissions
● Promoting positive business ethics and sustainability
● Reduction of their carbon footprint.
● Climate and weather
● Environmental Legislation
● Geographical location (and accessibility)

Industries including tourism, farming and agriculture see this aspect of a PESTEL to be crucial in
their industries operations. Consumers are also showing a higher regard for ‘going green’ and
supporting organisations that show their efforts in following this trend. An example of this is from
the oil companies using sugar cane (a renewable source) to make ethanol fuel for automotive
transportation.

Legal Factors

The legal considerations can be a make or break for an organisation. Although PESTEL analysis is
typically and external evaluation, Legal factors considered need both internal and external
consideration. With governmental laws laws affecting how an organisation acts, internal policies
are also taken into account when developing strategies for the company. If these factors are not
continually reviewed, large fines, imprisonment and business closure can become reality. These
factors include but are not limited to:

● Health & Safety

● Equal Opportunities
● Advertising Standards
● Consumer Rights and laws
● Product Labeling
● Product Safety
● Safety Standards
● Labor Laws
● Future Legislation
● Competitive Legislation

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 MODULE- 5

STRATEGY EVALUATION

The final stage in strategic management is strategy evaluation and control. All strategies are subject
to future modification because internal and external factors are constantly changing. In the strategy
evaluation and control process managers determine whether the chosen strategy is achieving the
organization's objectives. The fundamental strategy evaluation and control activities are: reviewing
internal and external factors that are the bases for current strategies, measuring performance, and
taking corrective actions.
Strategic evaluation is the process of monitoring and evaluating the strategies by establishing the
standards, measuring the performance, comparing the standard with the actual performance to find
the deviations if any and take corrective actions towards organization's success.

The process of Strategy Evaluation consists of following steps-

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1. Fixing benchmark of performance - While fixing the benchmark, strategists encounter
questions such as - what benchmarks to set, how to set them and how to express them. In
order to determine the benchmark performance to be set, it is essential to discover the
special requirements for performing the main task. The performance indicator that best
identify and express the special requirements might then be determined to be used for
evaluation. The organization can use both quantitative and qualitative criteria for
comprehensive assessment of performance. Quantitative criteria includes determination of
net profit, ROI, earning per share, cost of production, rate of employee turnover etc. Among
the Qualitative factors are subjective evaluation of factors such as - skills and competencies,
risk taking potential, flexibility etc.
2. Measurement of performance - The standard performance is a bench mark with which the
actual performance is to be compared. The reporting and communication system help in
measuring the performance. If appropriate means are available for measuring the
performance and if the standards are set in the right manner, strategy evaluation becomes
easier. But various factors such as managers contribution are difficult to measure. Similarly
divisional performance is sometimes difficult to measure as compared to individual
performance. Thus, variable objectives must be created against which measurement of
performance can be done. The measurement must be done at right time else evaluation will
not meet its purpose. For measuring the performance, financial statements like - balance
sheet, profit and loss account must be prepared on an annual basis.
3. Analyzing Variance - While measuring the actual performance and comparing it with
standard performance there may be variances which must be analyzed. The strategists must
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 mention the degree of tolerance limits between which the variance between actual and
standard performance may be accepted. The positive deviation indicates a better
performance but it is quite unusual exceeding the target always. The negative deviation is an
issue of concern because it indicates a shortfall in performance. Thus in this case the
strategists must discover the causes of deviation and must take corrective action to
overcome it.
4. Taking Corrective Action - Once the deviation in performance is identified, it is essential
to plan for a corrective action. If the performance is consistently less than the desired
performance, the strategists must carry a detailed analysis of the factors responsible for such
performance. If the strategists discover that the organizational potential does not match with
the performance requirements, then the standards must be lowered. Another rare and drastic
corrective action is reformulating the strategy which requires going back to the process of
strategic management, reframing of plans according to new resource allocation trend and
consequent means going to the beginning point of strategic management process.

Operational control:

Operational control regulates the day-to-day output relative to schedules, specifications, and costs.
Are product and service output high-quality and delivered on time? Are inventories of raw
materials, goods-in-process, and finished products being purchased and produced in the desired
quantities? Are the costs associated with the transformation process in line with cost estimates? Is
the information needed in the transformation process available in the right form and at the right
time? Is the energy resource being used efficiently?

Strategic control:

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Techniques for operational control:

1. Value chain analysis

2. Benchmarking
3. Gap analysis
4. Balanced scorecard
5. Quantitative performance measures
6. Qualitative performance measures
7. Key factor rating.

1. Value chain analysis:

Definition: Value chain analysis is a process of dividing various activities of the business in
primary and support activities and analyzing them, keeping in mind, their contribution towards
value creation to the final product. And to do so, inputs consumed by the activity and outputs
generated are studied, so as to decrease costs and increase differentiation.Value chain analysis is
used as a tool for identifying activities, within and around the firm and relating these activities to an
assessment of competitive strength.

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Value Chain Analysis is grouped into primary or line activities, and support activities discussed as
under:

1. Primary Activities: The functions which are directly concerned with the conversion of
input into output and distribution activities are called primary activities. It includes:

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 ○ Inbound Logistics: It includes a range of activities like receiving, storing,
distributing, etc. which make available goods and services for operational
processes. Some of those activities are material handling, transportation, stock
control, etc.
○ Operations: The activity of transforming input raw material to final product
ready for sale, is termed as operation. Machining, assembling, packaging are the
activities covered under operations.
○ Outbound Logistics: As the name suggests, the activities that help in collecting,
storage and delivering the product to the customer is outbound logistics.
○ Marketing and Sales: All the activities like advertising, promotion, sales,
marketing research, public relations, etc. performed to make the customer aware
of the product or service and create demand for it, comes under marketing.
○ Service: Service means service provided to the customer so as to improve or
maintain the value of the product. It includes financing service, after-sales service
and so on.
2. Support Activities: Those activities which assist primary activities in accomplishment, are
support activities. These are:
○ Procurement: This activity serves the organization, by supplying all the
necessary inputs like material, machinery or other consumable items, that
required by the organization for performing primary activities.
○ Technology Development: At present, technology development requires heavy
investment, which takes years for research and development. However, its
benefits can be enjoyed for several years and by a multitude of users in the
organization.
○ Human Resource Management: It is the most common plus important activity
which excel all primary activities of the organization. It encompasses overseeing
the selection, retention, promotion, transfer, appraisal and dismissal of staff.
○ Infrastructure: This is the management system, which provides, its services to
the whole organization and includes planning, finance, information management,
quality control, legal, government affairs, etc.

2. Benchmarking
Definition: Benchmarking, is a tool of strategic management, that allows the organisation to set
goals and measure productivity, on the basis of the best industry practices. It is a practice in which
quality level is used as a point of reference to evaluate things by making a comparison.

The process helps in comparing and gauging the processes, programs, strategies and performance
metrics with the standard measurements or to other similar companies. It is concerned with the
analysis of three major dimensions:

● Quality
● Time
● Cost

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It is a useful technique for enhancing the organisation’s performance by identifying and
implementing the finest process and practices, for achieving them. The process involves repeatedly
evaluating the aspects of performance with the similar measurements of its peers, identifying the
gaps, discovering new methods for filling gaps and also for excelling the condition, so that the gaps
might prove positive for the organisation.

Types of Benchmarking
● Internal Benchmarking: When measurement and comparison of key operations
between teams, groups and individuals is made within the organisation, the
benchmarking is said to be internal.
● External Benchmarking: When measurement and comparison of key operations is
made with the competitors, then, it is called as external benchmarking.
Further, the process is sub-classified as:

1. Process Benchmarking
2. Performance Benchmarking
3. Strategic Benchmarking

Application of Benchmarking

The process entails looking outside the organisation to study what others do to achieve their
performance level and also the processes they use. So, the approach helps in determining the
processes behind the exceptional performance. It can be applied in the following areas:

● Human Resource Management

● Product Development
● Product Distribution
● Maintenance Operations
● Plant utilisation levels
● Customer Services
Process of Benchmarking
● Identifying the need for Benchmarking
● Understanding the existing process and practices
● Obtaining support and approval from the top management.
● Identifying best practices.
● Making a comparison between the firm’s processes and performance with those of rivals.
● Preparation of report, regarding the differences in standard and actual results.
● Implementing steps necessary for filling gaps in performance.
● Evaluation and review
Benchmarking does not provide a solution to all the problems rather it analyses the situations and
processes and helps in improving the performance. It is a continuous improvement process; hence,
the benchmarking exercises are applied appropriately and performed regularly, so as to gain

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competitive advantage and also refining performance in the major areas of business. In this process,
a firm’s major operations are measured and compared with the rivals and acknowledged leaders of
the industry.

3.Gap analysis:

Gap Analysis can be understood as a strategic tool used for analyzing the gap between the target
and anticipated results, by assessing the extent of the task and the ways, in which gap might be
bridged. It involves making a comparison of the present performance level of the entity or business
unit with that of standard established previously.

Gap Analysis is a process of diagnosing the gap between optimized distribution and integration of
resources and the current level of allocation. In this, the firm’s strengths, weakness, opportunities,
and threats are analyzed, and possible moves are examined. Alternative strategies are selected on
the basis of:

● Width of the gap

● Importance
● Chances of reduction
If the gap is narrow, stability strategy is the best alternative. However, when the gap is wide, and
the reason is environment opportunities, expansion strategy is appropriate, and if it is due to the past
and proposed bad performance, retrenchment strategies are the perfect option.

Types of Gap
The term ‘strategy gap’ implies the variance between actual performance and the desired one, as
mentioned in the company’s mission, objectives, and strategy for reaching them. It is a threat to the
firm’s future performance, growth, and survival, which is likely to influence the efficiency and
effectiveness of the company. There are four types of Gap:

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 1. Performance Gap: The difference between expected performance and the actual
performance.
2. Product/Market Gap: The gap between budgeted sales and actual sales is termed as
product/market gap.
3. Profit Gap: The variance between a targeted and actual profit of the company.
4. Manpower Gap: When there is a lag between required number and quality of workforce
and actual strength in the organization, it is known as manpower gap.

For different types of gaps, various types of strategies are opted by the firm to get over it.

Alternative Courses of Action

In case, gaps are discovered the company’s management has three alternatives:

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 ● Redefine the objectives: If there is any difference between objectives and forecast, first
and foremost the company’s top executives need to check whether the objectives are
realistic and achievable or not. If the objectives are intentionally set at a high level, the
company should redefine them.
● Do nothing: This is the least employed action, but it can be considered.
● Change the strategy: Lastly, to bridge the gap between the company’s objectives and
forecast, the entity can go for changing strategy, if the other two alternatives are
considered and rejected.
Before making any change in the strategy, one must consider that the gap exists between the present
and proposed state of affairs. It is too wide to be noticed, and the organization is encouraged to
reduce it. The company’s management is of the opinion that something can be done to reduce it.

Stages in Gap Analysis

1. Ascertain the present strategy: On what assumptions the existing strategy is based?
2. Predict the future environment: Is there any discrepancy in the assumption?
3. Determine the importance of gap between current and future environment: Are
changes in objectives or strategy required?

Whether it is anticipated sales, profit, capacity or overall performance, they are always based on the
past, and present figures and some amount of guess are also involved in it. So, the occurrence of the
gap is quite natural, but if the gap is large, then it is a point to ponder because it might have an
adverse affect on the company’s future.

4. Balance score card:

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Balance Score Card is an approach which seeks to provide a balanced and comprehensive
framework for judging an organization’s performance from perspective like financial perspective,
customer perspective, business and production process perspective and learning and growth
perspective;

A Balanced Scorecard is a performance management tool used by executives and managers to

manage the execution of organizational activities and to monitor the results of actions.
Fundamentally a balanced scorecard provides a summary level view of organizational performance
at a quick glance and includes key performance indicators (KPIs) across four main areas or
perspectives:

The balanced scorecard concept was originated by Drs. Robert Kaplan (Harvard Business School)
and David Norton as a framework for managing and measurement organizational performance. The
concept added strategic non-financial performance measures to traditional financial metrics to
provide executives and managers a more ‘balanced’ and ‘holistic’ view of organizational
performance.

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5. Quantitative performance measures:
Ratio analysis , return on investment,return on equity,profit margin,market share, debt
equity ratio, earnings per share,sales growth asset growth are used.

6. Qualitative performance measure:

Social responsibility, employee satisfaction, consistency of strategy with
environment,appropriateness of available resources.

7.Key factor rating:

Key factors are those factors which influence the overall organisation capability. Therefore
managers should keep track of these factors which contribute to the success of organisation.

Management control
management control is concerned with coordination, resource allocation, motivation, and
performance measurement. The practice of management control and the design of
management control systems draws upon a number of academic disciplines.A management
control system (MCS) is a system which gathers and uses information to evaluate the
performance of different organizational resources like human, physical, financial and also
the organization as a whole in light of the organizational strategies pursued.

Areas of management control:

● Managerial control over policies
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 ● Control over organisation
● Control over personnel
● Control over costs
● Control over methods
● Control over wages
● Control over capital expenditure
● Control over production
● Control over external relations
● Control over research and development
● Information control.

KEY RESULT AREAS:

Key result areas or KRAs refer to the general metrics or parameters which the organisation
has fixed for a specific role. The term outlines the scope of the job profile, and captures
almost 80%-8% of a work role.

Key result areas (KRAs) broadly define the job profile for the employee and enable them to
have better clarity of their role. KRAs should be well-defined, quantifiable, and easy to
measure. It also helps employees to align their role with that of the organisation. RAs are
broad categories or topics on which the employee has to concentrate during the year. For
example, an employee who is working at a managerial level in a manufacturing company
would have a different KRA than somebody who is in a technology firm.

A manager who is working in a manufacturing firm would have to focus on maintaining the
budget of the department, safety of the employees, coordination with different departments,
training, reporting as well as introducing new technologies to improve productivity.

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