SOUTH LEADERSHIP ACADAMY

STRATEGIC MANAGEMENT
TRAINING MANUAL

APRIL, 2013
 HAWASS
Contents
Symbols/ Icons used in this Training Manual.........................................................................v

List of Figures.......................................................................................................................vi

List of Table.........................................................................................................................vii

Definition of Terms............................................................................................................viii

Acronyms...............................................................................................................................x

INTRODUCTION.................................................................................................................1

SESSION ONE: CONCEPT OF STRATEGIC MANAGEMENT.................................3

1.1. Defining Strategy and Strategic Management............................................................4

1.1.1. Strategy and Tactic 4

1.1.2. The distinction between Strategic plan and Tactics 5

1.1.3. Elements of Good Strategy 5

1.1.4. The difference between Good Strategy and Bad strategy 7

1.2. Strategic Planning..........................................................................................................8

1.3. Components of Strategic Management.......................................................................8

1.4 . Process of Strategic Management................................................................................9

1.5. Strategic Issues for Non-Profit and public Sector Organizations................................11

1.6. Benefits of Strategic Management................................................................................13

1.7. Limitations of Strategic Management.........................................................................14

 Summary........................................................................................................................15

 Check List.........................................................................................................................16

SESSION TWO : ENVIRONMENTAL SCANNING....................................................17

INTRODUCTION...............................................................................................................17

Learning Objectives.............................................................................................................17

2.1. Taxonomy of Organizational Environment.................................................................17

2.1.1. Internal Environment 18

2.1.2 .External Environment 19

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2.2. Scanning Internal and External Factors of an Institution...........................................22

2.2.1. PESTEL Analysis 22

2.2.2. SWOT Analysis 23

2.2.3. The 7-S Model 26

 Summary........................................................................................................................28

Check List..........................................................................................................................28

SESSION THREE: STRATEGIC FORMULATION...................................................29

INTRODUCTION...............................................................................................................29

3.1. Developing Organizational Vision and Mission.........................................................30

3.1.1. Developing Vision Statements 30

3.1.2. The Essence of Mission Statements 31

3.2. Organizational Core Value...........................................................................................35

3.3. Organizational Goals and Objectives...........................................................................36

3.3.1. Goal-Setting Aapproach 37

3.3.2. Levels of Organizational Objectives 39

3.3.3. Objectives Matrix for Setting Objectives 40

 Summery.........................................................................................................................43

 Check List........................................................................................................................43

SESSION FOUR: STRATEGY CHOICE AND ALALYSIS.........................................44

INTRODUCTION...............................................................................................................44

4.1. Strategic Choice............................................................................................................44

4.1.1. Focusing on a few Alternatives 45

4.1.2. Analyzing the Strategic Alternatives 45

4.1.3. Evaluating the Strategy Alternative 45

4.1.4. Making the Actual Choice 46

4.2. Strategic Analysis.......................................................................................................47

4.2.1. Input Stage. 47

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 4.2.2. Matching Stage: 50

4.2.3. Decision Stage 55

? Summary........................................................................................................................57

Check List..........................................................................................................................58

SESSION FIVE : STRATEGY IMPLEMENTATION...................................................59

INTRODUCTION...............................................................................................................59

5.1. Strategy Formulation and Implementation Process......................................................60

5.2. Prerequisites of Strategy Implementation.....................................................................61

5.3. Restructuring/Matching Organizational Structure to Strategy.................................63

5.4. Matching Organizational Culture to Strategy...........................................................66

5.5. Strategy and Reward/ Motivational Systems...............................................................67

5.6. Tactical Guidelines on Strategy Implementation.....................................................67

5 .7. Steps in Strategy Implementation...............................................................................68

 Summary.........................................................................................................................72

 Check List.........................................................................................................................73

LESSON SIX: STRATEGIC EVALUATION AND CONTROL..................................74

INTRODUCTION...............................................................................................................74

6.1. Nature of Strategic Evaluation and Control..................................................................75

6.1.1. Types of general control systems 75

6.1.2. Basic Characteristics of Effective Evaluation and Control System 76

6.2. Strategic Control...........................................................................................................77

6.2.1. Types of Strategic Control 77

6.3. Approaches to Strategic Control...................................................................................79

6.3.1. Traditional Approach 79

6.3.2. Contemporary Approach 79

6.3.3. Operational Control 80

6.4. Techniques for Strategic Control..................................................................................83

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6.5. Role of Organizational Systems in Evaluation.............................................................84

 Summary.........................................................................................................................85

 Cheek List.........................................................................................................................86

Bibliography........................................................................................................................87

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 Symbols/ Icons used in this Training Manual
Icon/Symbol What it Refers to Description
Brainstorming questions, group or individual
Exercises/Activities exercises/activities which might be done in the class or
outdoors or at the work place
Definition of key words in each lesson and Important notes
Important notes
for the participants to keep in mind.

 Examples Examples relevant to the topic are provided

 Summary Important learning points for each topic

Sources of information used in the training material and

 Bibliography further readings that can be helpful for the learner during or
after the training.

 Exercises/Activities
Group or individual exercises/activities which might be done
in the class or outdoor or at the work place

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List of Figures
Figure 1: Systematic diagram of the strategic planning process......................................................11

Figure 2: Component of Organizational Environment....................................................................18

Figure 3 : 7-S Models.....................................................................................................................26

Figure 4: Iterative process for setting objectives..............................................................................42

Figure 5: The SPACE matrix..........................................................................................................54

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List of Table
Table 1: Distinction between good strategy and bad strategy............................................................7

Table 2: The distinction between Vision Statements and Mission Statements.................................34

Table 3:The difference between organization goal and objectives...................................................37

Table 4: Illustrative format of objectives matrix..............................................................................41

Table 5: Presents an example of an Internal Factor Evaluation Matrix (IFE) of a soft drink
company (ABC)...............................................................................................................................48

Table 6: External Factor Evaluation Matrix (EFE) of hypothetic soft drink Company ABC...........49

Table 7: SWOT matrix (inside-outside)..........................................................................................51

Table 8: An example of TOWS matrix............................................................................................52

Table 9: The difference between Strategy Formulation and Strategy Implementation.....................61

Table 10: Advantages and Disadvantages simple structure..............................................................63

Table 11: Advantages and Disadvantages Functional Structure.......................................................64

Table 12: Advantages and Disadvantages divisional structure.........................................................64

Table 13: The advantages and disadvantages of strategic business unit...........................................65

Table 14: The advantages and disadvantages of matrix structure.....................................................65

Table 15 : Differences between Strategic Control and Operational Control....................................80

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Definition of Terms
 A grand strategy matrix: Consists of a four-quadrant graph, similar to a SWOT
matrix
 Behaviour controls: Specify how something is to be done Benchmarking: The
concept of discovering what is the best performance being achieved, whether in your
company, by a competitor, or by an entirely different industry
 Environmental analysis scanning: Enables an organization to identity its strengths
weaknesses, opportunities and threats
 External environment: As the external factors of environment are beyond the
control of organizations
 Goals: An idea of the future or desired result that a person or a group of people
envision, plan and commit to achieving goals are an intermediate result which is
expected to be achieved by a certain span of time
 Implementation Control: Takes place as a series of steps, programmes,
investments and moves that occur over an extended period of time
 Input controls: Specify the amount of resources, such as knowledge, skills,
abilities, of employees to be used in performance.
 Internal Environment: Internal environmental factors are these which reside within
organization premises and are easily adjustable and controllable
 Macro environment is also referred to as general or remote environment.. It
includes demographic, economic, natural, social and technological environmental
forces.
 Micro environmental factors mean those which are very close and direct effect
factors. Micro environment includes employees, shareholders, creditors, suppliers,
customers and financial institutions, regulatory organizations, channels of
distribution, and special interest groups like consumer associations, and community
organizations.
 Mission: An organization’s core purpose
 Objectives: The results an organization wants to achieve in pursuing its basic
mission.
 Operational control: Provides post-action evaluation and control over short periods
 Opportunities: A time or place favourable for executing a policy/strategy.
 Organizational environment :Consists of both external and internal factors
 Organizational structure is an established pattern of relationships among the
component parts of an organization. Output controls: Specify what is to be
accomplished by focusing on the end result.
 PESTEL Analysis: Encompasses four macro-environmental aspects: political-legal,
economic, socio-cultural and technological aspects of the environment.
 Policy: Principles, rules, and guidelines planned or adopted by an organization to
reach its goals
 Scanning: Is a method of critical observation into all aspect of organizational
environments
 Strategy is a well-defined roadmap or a goal post to be achieved of an organization.

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 Strategic Choice: Is choice of course of action given the environment, mission and
capabilities
 Strategic control: Type of “steering control”. We have to track the strategy as it is
being implemented, detect any problems or changes in the predictions made, and
make necessary adjustments.
 Strategic evaluation and control: The process of determining the effectiveness of a
given strategy in achieving the organisational objectives and taking corrective
actions wherever required
 Strategy formulation: is the process of deciding best course of action for
accomplishing organizational objectives and hence achieving organizational
purpose..
 Strategy implementation: Implies making the strategy work as intended or putting
the organization’s chosen strategy into action
 Strategic intent: Refers to the purpose for which the organization strives for. It is
the philosophical framework of strategic management process
 Strategic Management: is the art and science of formulating, implementing, and
evaluating, cross-functional decisions that enable an organization to achieve its
objectives.
 Strategic surveillance: Broad-based vigilance activity in all daily operations both
inside and outside the organization..
 SWOT analysis is (Sometimes referred to as a situational assessment) involves the
compilation of current information about the organization’s strengthens and
weaknesses and performance information that highlights critical external issues
(opportunities and threats) which should be addressed in the strategic plan
 Tactic: Is a specific operating plan defiling how a strategy is to be implemented in
organization of when and where it is to be put in to action.
 The 7-S Model: The model by Ms Kinsey is called 7-S because every letter S stands
for one of the seven factors, i.e. Strategy, Structure, System, Shared Values, Skills,
Style and Staff.
 TOWS Analysis: Will look to match internal factors to external factors to help
identify relevant strategic options that an organization could pursue.
 Values: Statements list the core principles and behaviours that guide and describe an
organization’s culture.
 Vision: The articulation of an organization’s dream and hope for the future

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Acronyms
CEO Chief Executive Office

EFE Internal Factor Evaluation Matrix

GDP Gross Domestic Product

IE Matrix The Internal-External (IE) Matrix

MBO Management by Objectives

QSPM The quantitative Strategic Planning Matrix

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SBU Strategic Business Unit

SCM Strategic Cost Management

SWOT Matrix The strengths-weaknesses-opportunities-threats Matrix

PESTEL Analysis Political,economic,Socio-cultural, technological, environmental and

legal aspects of the environment analysis
INTRODUCTION
Modern organizations have been required to make significant transformations in response to an
accelerating rate of change in technical, social, political, and economic forces. As a result of
these changing forces, the management process has become more difficult, requiring greater
skills aimed at guiding the future course of an organization in a rapidly evolving and uncertain
world. These skills are the essence of strategic management.

Strategic management provides an interface between the performance capacity of an

organization and the opportunities and challenges it must face in the broader environment. A
primary aim of strategic management is to broaden the bases on which critical decisions are
made. Strategic managers must attempt to identify the long-range needs of the organization, to
explore the ramifications of policies and programs designed to meet these needs, and to
formulate strategies that maximize the positive aspects and minimize the negative aspects of the
foreseeable future.

This training manual is developed to equip participants with the necessary knowledge, skills and
attitude to effectively plan, execute, monitor and control their strategy. The manual contains a
total of seven lessons. The first lesson covers definitions and features of strategy, strategic
planning and strategic management, Strategic Planning, Components of Strategic Management,
Process of strategic management, Strategic issues for mon-Profit and public Sector
Organizations, as well as the advantages and limitations of strategic management.

The second session encompasses analysis of the internal and external environment. The topic
introduces: macro and micro environment, elements of external and internal environment and
their influences, strategy development models, stages of strategic planning, analysis of dynamic
capabilities, PESTL analysis, analysis of institutional internal factor using the 7-S model and a
SWOT analysis.

The third session covers the structure of strategic management processes in public institutions;
organizational vision, mission, philosophy, strategic problems and objectives. This topic briefly
introduces: organizational vision and mission; the role of managers in formulating the mission
and their ethical motives; formulation of the vision, mission and philosophy in public
institutions; determining strategic problems and strategic objectives.
The fourth session of this training manual is about strategy alternatives and choice and it has two
lessons. The first section discusses the concept of strategic alternatives choice.The second
section describes strategic analysis

The five session of this training manual is about strategy implementation and it covers the
different features of strategy formulation and strategic implementation, the prerequisites of
strategy implementation restructuring/matching /organizational structure to strategy, the need to
matching organizational culture to strategy, the application of reward or motivational systems
for effective strategy implementation, tactical guidelines in strategy implementation and the
steps to follow in strategy implementation process.

The final session of this training manual is about strategy evaluation and control and it deals
about the nature of strategic evaluation and control.

General Objective of the Manual

The overall objective of the training is to enhance the skill, knowledge, and attitude of
participants towards the establishment of a strategic management.

Specific objectives of the Manual

Upon completion of the training based on this manual, the participants will be able to:
 Explain the meaning of strategic management without referencing handout;
 Define vision, mission and values of an organization;
 Describe environmental scanning in light of the organizations’ external and internal
environments;
 Formulate both general and specific objectives in the development of the strategic
management of their organizations;
 Explain the key aspects of strategy implementation and its relationship to strategic
planning.
 Understand how to monitor and evaluate the Strategic plan.

SESSION ONE: CONCEPT OF STRATEGIC MANAGEMENT

INRODUCTION

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Strategic Management can be described as the identification of the purpose of the organization
and the plans and actions to achieve that purpose. It involves formulating and implementing
strategies that will help in aligning the organization and its environment to achieve
organizational goals. Strategic management does not replace the traditional management
activities such as planning, organizing, leading or controlling. Rather, it integrates them into a
broader context, taking into account the external environment and internal capabilities and the
organization’s overall purpose and direction.

This session is about conceptualizing the frameworks of strategic management and it is divided
into seven sections. The first section presents definitions and features of strategy and strategic
management in public organizations. Section two discusses Strategic Planning, Section three
Components of Strategic Management, Section four process of Strategic management, Section
five strategic issues for Non-Profit and public Sector Organizationsm , Section six benefits of
strategic management, The last section deals with limitations of strategic management in the
public sector.

General Objectives of the Session

The overall objective of this Session is to provide knowledge that will help to explain the
meaning, features, purposes, benefits, advantages and limitations of strategic management in the
Public Sector.
Specific Objectives of the Session
Upon the successful completion of this lesson, participants should be able to:
 Define the meanings of strategies and strategic management
 Explain features, purposes and benefits of strategic management
 Describe Strategic planning
 Explain the dimensions of strategic management.
 Analyse the nature of good strategy
 Explain the unique characteristics of strategic management in the public sector
 Describe the strategic management process
 Examine the advantages and limitations of strategic management in the public sector.

1.1. Defining Strategy and Strategic Management

Brainstorming Questions
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 1. What is strategy?

2. What are the difference between "Tactics" and "Strategy"?

1.1.1. Strategy and Tactic

The word "strategy" is often used in everyday language and usually means an idea of how an
objective should be achieved. The term "strategy" is derived from the Greek word "Strategos"
which has a meaning of leading an army. Thus the literal meaning of a strategy is to mean "In
anticipation of opponents move, designing one’s own way of action". This implies that the
concept of strategy is derived from military principles. In the military context, the strategy is a
plan of action to win a war. Here military identifies the quality and quantity of resources to be
mobilized and used at the most appropriate time in suitable and convenient manner to win a war.
On the other hand tactic is a specific operating plan defiling how a strategy is to be implemented
in organization of when and where it is to be put into action. By nature tactics are narrower in
their scope and shorter in their time horizon than strategies. It is a link between the formulation
and implementation of state.

Strategy is a pattern in a stream of decisions and actions.

A few aspects regarding the nature of strategy are the following:
 Strategy is concerned with pursuing those activities which move an organization. From
its current position to a planned future position;
 Strategy is concerned with the resources necessary for implementing a plan or a
predetermined course of action;
 Strategy is a plan or course of action or a set of decision rules;
 Strategy is derived from government policies, objectives and goals.

Strategy is a well-defined roadmap or a goal post to be achieved by an organization. It

defines the overall mission, vision and direction of an organization.
The objective of a strategy is to maximize an organization’s strengths and to minimize the
strengths of the competitors. In short, strategy bridges the gap between "where we are" and
"where we want to be".

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1.1.2. The distinction between Strategic plan and Tactics

A strategic plan supports the organization's vision and mission statements outlining the high-
level plan to achieve both. Strategic plans generally provide a long-term picture of an
organization of the broad. Strategic plans influence the development of tactical plans. A
tactical plan outlines actions to achieve short-term goals, generally within a year or less. They
are much narrower in focus and can be broken down into the departmental or unit level.
Tactical plans outline what each department needs to achieve, how it must do so and who has
the responsibility for implementing. The distinction between Strategy and Tactics are the
following:
 Tactics are the properly organized actions that help to achieve a certain end, whereas
strategy is the integrated plan that ensures the achievement of organization objectives.
 Tactic is a subset of strategy, i.e. without the strategy, tactics can do nothing.
 Tactics try to find out the methods through which strategy can be implemented.
Conversely, Strategy is a unified set of activities that can help the organization to gain an
advantageous position.
 Tactics are formulated by middle-level management, whereas a strategy is formulated by
top-level management.
 Tactics are preventive in nature while Strategy is competitive in nature.
 Tactics are defined as a trip, i.e. typically for a short duration, but the strategy is a
journey that lets the organization travel from one position to another.
 Tactics have a reactive approach, unlike the proactive approach of strategy.
 Tactics are made in reacting against the present situation, but strategies are designed for
the future.

1.1.3. Elements of Good Strategy

At its most basic level, a strategy is a hypothesis. To be a good strategy, it must precisely
diagnose the problem being solved; set a guiding policy that will address that problem; and
propose a set of coherent actions which will deliver that policy.

The Kernel of Good Strategy

The Kernel of Good Strategy is simple and practical. It contains three elements:

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The first is a thorough diagnosis. This is more than a description of the situation; it is an
articulation of the problems and challenges that need to be addressed, a simplified version of
reality.

The second is a clear guiding policy. This is an overarching approach or method for solving the
diagnosed challenges. Importantly, the guiding policy must rule out actions, as well as directing
us towards a number of actions.

Finally, a good strategy will include coherent actions. These must be practical, coordinated
activities. The key word here is ‘coherent’. Actions should complement each other, and create a
‘greater sum’ like effect, where actions add power to each other.

A good strategy should strict the organization not to doing what it does best ,but rather to
what it does better than any other organizations.

Good strategies will diagnose problems, set a guiding principle and then specify coherent
actions.

How to Identify Bad Strategy?.

A bad strategy is often characterized by being full of fluff, as it fails to face the challenge,
mistakes goals for strategy, and comprises of bad strategic objectives (mostly misguided or
impractical ).

The following four major of hallmarks of bad Strategy. Four Major Hallmarks of Bad Strategy

Fluff: A strategy written in gibberish masking as strategic concepts is classic bad strategy. It uses
abstruse and inflated words to create the illusion of high-level thinking.

Failure to face the challenge: A strategy that does not define the challenge to overcome makes it
impossible to evaluate, and impossible to improve.

Mistaking goals for strategy: Many bad strategies are just statements of desire rather than plans
for overcoming obstacles.

Bad strategic objectives: A strategic objective is a means to overcoming an obstacle. Strategic

objectives are “bad” when they fail to address critical issues or when they are impracticable.

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1.1.4. The difference between Good Strategy and Bad strategy

What makes a strategy good or bad? Good strategy takes a lot of discipline. Most managers
mistakenly take strategy work as an exercise in goal setting rather than problem solving. A bad
strategy is often characterized by being full of fluff, as it fails to face the challenge, mistakes
goals for strategy, and comprises of bad strategic objectives (mostly misguided or impractical).
The following Table mentions the distinction between good strategy and bad strategy.

Table 1: Distinction between good strategy and bad strategy

Good Strategy Bad strategy

Good strategy is simple and obvious. Bad Strategy is complex.

Good strategy identifies the key challenge to Bad strategy fails to identify the nature of the
overcome. challenge.
A good strategy honestly acknowledges the A bad strategy tends to skip over pesky
challenges being faced and provides an details such as problems, also ignores the
approach to overcoming them. power of choice and focus. Strategy must
contain action.
Good strategy includes actions to take to Bad strategy lacks actions to take. Bad
overcome the challenge. strategy mistakes goals, ambition, vision,
values.
Good strategy is designed to be coherent – all Bad strategy is designed to be not coherent –
the actions an organization takes should all the actions an organization takes did not
reinforce and support each other. should reinforce and support each other.
A good strategy does more than urge us Bad strategy ignores the power of choice and
forward toward a goal or vision; it honestly focus, trying instead to accommodate a
acknowledges the challenges we face and multitude of conflicting demands and
provides an approach to overcoming them. interests. Like a quarterback whose only
advice to his teammates is “let’s win,” bad
strategy covers up its failure to guide by
embracing the language of broad goals,
ambition, vision, and values.

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1.2. Strategic Planning

1. Can you explain strategic planning?

Strategic planning is a process to determine what an organization wants to accomplish over a

given time period. Strategic planning establishes overall strategic goals and objectives, selects
appropriate policies for the acquisition and distribution of resources, and provides a basis for
translating policies and decisions into specific action commitments. The concept of strategic
planning has evolved over the past two decades as a response to the need for a more dynamic
planning process. It is important to know the difference between traditional strategic planning
and the new style strategic planning.

Strategic planning is a comprehensive planning process designed to determine how an

organization will achieve its mission, goals, and objectives over the next five or ten years or
longer.

1.3. Components of Strategic Management

1. What are the basic components of strategic management?

Different authors have defined strategic management in different ways. Strategic Management
can be defined as the art and science of formulating, implementing, and evaluating, cross-
functional decisions that enable an organization to achieve its objectives. Likewise, strategic
management is also described as the process by which top management determines the long-
term direction of the organization by ensuring that careful formulation, implementation and
continuous evaluation of strategy take place.

Strategic management is a continuous process of strategic analysis, strategy creation,

implementation and monitoring, used by organizations with the purpose to achieve and
maintain a competitive advantage.

Strategic management techniques can be viewed as bottom-up, top-down or collaborative

processes. In the bottom-up approach, employees submit proposals to their managers. Proposals

8
are assessed using financial criteria such as return on investment or cost benefit analysis. The
top-down approach is the most common by far.

The general purpose of strategic management is to combine the energy of organization’s

functional areas into one focused effort to achieve superior performance.

Strategic management is concerned with deciding in advance what an organization should do in

the future (strategic planning), determining how it will be done and who will do it (resource
management) and monitoring and enhancing on-going activities and operations (control and
evaluation). It involves the combined effect of these three basic components in meeting the goals
and objectives of an organization.

1.4 . Process of Strategic Management

1. What are processes of strategic management?

The strategic-management process consists of four stages, namely; Strategy formulation,
Strategy Implementation, and Strategy evaluation.

Environmental Scanning - Internal & External Analysis of Environment

Strategy formulation includes developing a vision and mission, identifying an

organization’s external opportunities and threats, determining internal strengths and weaknesses,
as well as establishing long-term objectives of the firm, generating alternative or competing
strategies, and choosing strategies to be pursued by the organization. Strategy-.

At this stage the following activities are expected to be performed:.

 Develop an organizational profile and collect and analyse environmental information

 Identify issues, problems, or choices critical to the future well-being of the organization;

 Clarify roles and responsibilities, identify client groups to be served and engage key
stakeholders in the process;
 Develop the mission, vision, and values for the organization;
 Delineate significant structural changes required to realize the mission statement
 Develop a goals or organizational status statements;

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  Identify program objectives to achieve the desired state: develop an objectives matrix;
and redefine the desired state of the system in light of more detailed objectives.
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. It is the process by which strategies and
policies are put into action through the development of programs, budgets and procedures. This
process might involve:
 Building a capable organization
 Develop culture, structure, and/or management system of the entire organization;
 Preparing strategies and tactics that address how to develop, manage, and deliver
programs;
 Developing strategies and tactics that focus on administrative and support needs and their
impacts on the organization’s efficiency and effectiveness;
 Delineate and analyze program alternatives to achieve desired strategies.
Evaluation and Control: Strategy evaluation is the final step of strategic 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 its
implementation meets the organizational objectives. It is the process in which organization
activities and performance results are monitored so that actual performance can be compared
with desired performance. Under this stage, the following functions are performed:
 Establish decision guidelines for the allocation of financial resources;
 Delineate effectiveness and efficiency measures;
 Pinpoint weaknesses in previously implemented strategic plans;
 Stimulate the entire process to begin again.
 Examining the underlying bases of a firm’s strategy
 Comparing expected results with actual results
 Taking corrective actions to ensure that performance conforms to plan

The emphasis of the strategic planning process is on an orderly evolution from a broad
mission statement, to statements of more specific goals and objectives consistent with the
organization’s mission, to more explicit policies and implementing decisions. The absence of

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consistency from the general to the specific is one of the major shortcomings of more traditional
planning efforts

Figure 1: Systematic diagram of the strategic planning process

1.5. Strategic Issues for Non-Profit and public Sector Organizations

1. Do you know strategic issues for Non-Profit and public sector organizations?

A non-profit organization also known as a not-for- profit organization is an organization that

does not distribute its surplus funds to owners or shareholders, but instead uses them to help
pursue its goals. Types of non-profit-organizations can be either private, non-profit organizations
or public governmental units.

The institutions of all three branches of state power are defined as the state power institutions.

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Public sector encompasses budgetary institutions funded by the state and municipalities. Public
sector provides public goods and services accessible to every individual and not subject to
competition. The Public sector provides public goods and services accessible to every individual
and not subject to competition. The activity of public institutions is public. The decision-making
process is more complex than in the private sector. Effectiveness is the only criterion for
evaluating the activity of public institutions.

The major evaluation criterion of activity undertaken by private organizations and individual
managers is profit. However, in the case of public institutions, the money earned and spent not
always serves as the most important evaluation criterion. In a democratic society, state
institutions seek to include wishes expressed by society as much as possible when making the
decisions. In the case of the private sector, decisions are often adopted quickly and without the
participation of broad layers of society. The work of a manager in public institutions is always
under control and close inspection, this work entails constant tension and understanding the
responsibility and role of a state representative. Accordingly, one can distinguish the following
specific features of strategic management in public institutions:
 More sensibility to the changes of politics and politicians.
 Broader and more diverse circle of consumers: consumers are the society: they can be the
purchasers, beneficiaries or "obligated consumers".
 The use of state power.
 The advantage of transparency as to the institution’s objectives and funding.
 Results of activity are difficult to measure; the money earned and spent not always serves
as the most important evaluation criterion.
 More complex responsibility of employees.
 Risk avoidance.
 Complexity of strategic problems.


Public sector organizations are less independent than business firms. Their activity is
more influenced by the political and social environment of a country. Thus, the strategy of
public organisations should be compatible with political priorities of a country.

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1.6. Benefits of Strategic Management

1. Can you list out the benefits of strategic management?

An increasing number of organizations are using strategic management for the following
reasons:

 It guides the organization to move in a specific direction. It defines the organization’s

goals and fixes realistic objectives, which are in alignment with the organization’s
vision.

 It reduces uncertainty: Planning forces managers look ahead anticipate change and
develop appropriate responses. It also encourages managers to consider the risks
associated with alternative responses or options.

 It provides a link between long and short terms: Planning establishes a means of
coordination between strategic objectives and the operational activities that support the
objectives.

 It assists an organization in becoming proactive, rather than reactive, to make it analyze

the actions of the competitors and take necessary steps to compete in the market, instead
of becoming spectators.

 It acts as a foundation for all key decisions of an organization.

 It facilitates measurement: By setting out objectives and standards, planning provides a

basis for measuring actual performance.

 It attempts to prepare the organization for future challenges and play the role of pioneer
in exploring opportunities and also helps in identifying ways to reach those
opportunities.

 It ensures the long-term survival of an organization while coping with competition and
surviving the dynamic environment.

 It assists in the development of core competencies and competitive advantage that helps
in the business survival and growth.

 Facilitates Communication and Coordination: as the strategies are well planned. For its
proper execution there is need to have proper communication and coordination at all
levels of operations.

13
 The basic purpose of strategic management is to gain sustained-strategic competitiveness of
an organization. It focuses on assessing the opportunities and threats, keeping in mind
organization’s strengths and weaknesses and developing strategies for its survival, growth and
expansion.

1.7. Limitations of Strategic Management

Strategic management is an intricate and complex process that takes an organization into
unchartered territory. It does not provide a ready-to-use prescription for success. Instead, it takes
the organization through a journey and offers a framework for addressing questions and solving
problems. Strategic management is not a guarantee for success. It can be dysfunctional if
conducted haphazardly. The following are its limitations:

 It is a costly exercise: in terms of the time that needs to be devoted to it by

managers. The negative effect of managers spending time away from their normal
tasks may be quite serious.
 Limitation of the Assumption: Strategic management is based on certain
assumptions; if those assumptions remain good, then the plans will be implemented
otherwise there be no use of strategic management.
 Problem in Analysing Environment: the success of strategic management is
depending on the correct analysis of internal as well as the external environment.
Here especially the external environment scanning is important to grab opportunities
which many times do not prove.
 Unrealistic Mission and Objectives: if the mission and objectives are not realistic
then the strategic management can’t be successful.
 Problem of Setting Target: sometimes it happens that the strategists may be very
enthusiastic, so they may set unrealistic goal which will be difficult to accomplish.
 Problem in Implementation: implementation of strategy is important if it is not
implemented well then there may be a problem, the strategy may not give the desired
result.

14
  Lack of Commitment of Lower Level: generally the strategies are framed by top
level management and at the time of framing if top level management has not
consulted with lower than lower level management may not be that much committed.
 Problem of Resistance: there may be resistance on the part of employees to accept
the set target of the top management.
 More theoretical in Nature: as per experts’ opinion, strategic management is more
theoretical. In practice, there are different, so it remains unsuccessful.
 Problem of Internal Politics: in organizations, there are differences among or
between departments. So as there is no good relation, proper coordination, strategies
became unsuccessful.
 Problem of Traditional Management: the traditional management has a narrow
approach towards development. Its philosophy is not progressive; they want to run
their business with the same fashion. So the strategies are not fruitful in this case.

 Summary

The term Strategic Management is used to denote a branch of management that is concerned
with the development of strategic vision, setting out objectives, formulating and implementing
strategies and introducing corrective measures for the deviations (if any) to reach the
organization’s strategic intent. The primary objective of strategic management is to broaden the
bases on which decisions are made. It has two- fold objectives:
 To gain competitive advantage, with an aim of outperforming the competitors.
 To act as a guide to the organization to help with surviving the changes in the
organizational environment.

Here, changes refer to either the internal environment, i.e. within the organization, introduced by
the managers such as the change in business policies, procedures etc. or changes in the external
environment as in changes in the government rules that can affect organizational performance,
competitors move, change in customer’s tastes and preferences and so forth. In general, strategic
management comprises of four basic elements which are environmental scanning, strategy
formulation, strategy implementation and strategy evaluation and control.

15
 Check List

Put a tick (✓) mark if you have understood or not about.

Subject Yes No
1. Defining Strategy and Strategic Management

2. Distinction Between Strategy and Tactic

3. Strategic Planning

4. Elements of Good Strategy

5. Differentiate between good Strategy and bad strategy

6. Process of Strategic Planning

7. Challenges of strategic management

16
SESSION TWO : ENVIRONMENTAL SCANNING

INTRODUCTION

With this regard, the second session of this manual encompasses analysis of the internal and
external environment. Accordingly, this first session introduces Taxonomy of Organizational
Environment macro and micro environment, The second session includes Scanning Internal and
External Factors of an Institution such as: PESTL analysis, A SWOT analysis.and The 7-S Model

Learning Objectives

After a successful completion of this session, trainees will be able to:

 Explain the concept and different types of environment.
 Examine the elements of the external environment and their influences on organizational
performance.
 Describe the differences and similarities of different scanning techniques.
 State the importance of internal and external analysis.
Explain strategy choice and analyse.

Brainstorming Questions
1. How do strategists look at the environment and take decisions?
2. Distinguish internal environment and external environment

2.1. Taxonomy of Organizational Environment

There are two major parts of organizational environment which are known as internal
environment and external environment. The external environment is divided into two parts
which are known as micro component of environmental and macro component of environment.
These all parts of the environment will be present in the following way:

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Figure 2: Component of Organizational Environment

Components of organizational environment consist of all those forces both internal and external
that affect the working of an organization. It refers to the conditions, forces, events and
situations within which organizations have to operate. Analysing the environment means
identifying external events and trends that may influence or influence the results achieved by an
institution. Environmental changes may demand additional resources: personnel, finances and
new technologies. In other words, organizations are subject to its internal and external
environmental factors. Let’s discuss these components in details:
2.1.1. Internal Environment
Internal environmental factors are those which inside within organization premises and are easily
adjustable and controllable. Factors Influencing Internal Environment: It includes
a) Value System: Value system consists of all those components that are a part of
regulatory frameworks, such as culture, climate, work processes, management practices
and norms of the organization. The employees should perform the activities within the
purview of this framework. The value system is helmed (the position of control) of
affairs of the founders. Therefore, it is widely acknowledged fact that the extent to which
the value system is shared by all in the organization is an important factor contributing to
success. If the founder has strong value, then he will never do any activity which is out of
limit.
b) Vision, Mission and Objectives: Mission and Objectives: It is always advisable for the
organization to frame a mission statement and then to list out various objectives. The
organization’s vision describes its future position, mission defines the organization’s

18
 work and the reason for its existence and objectives implies the ultimate aim of the
organization and the ways to reach those ends.
c) Organizational Structure: The structure of the organization determines the way in
which activities are directed in the organization so as to reach the ultimate goal. These
activities include the delegation of the task, coordination, the composition of the board of
directors, level of professionalization, and supervision. It can be matrix structure,
functional structure, divisional structure, bureaucratic structure, etc.
d) Plans & Policies: Plans & policies are nothing but deciding in advance, of a particular
activity i.e. what is to be done, how it is to be done, when it is to be done, etc. Here
internal environment analysis will help to the firm to know the appropriateness of plans
& policies.
e) Human Resources: The internal environmental analysis in respect of human resources
reveals the shortcomings of human resources and measures need to be undertaken for its
creativeness. Human Resources: Human resource is the most valuable asset of the
organization, as the success or failure of an organization highly depends on the human
resources of the organization.
f) Physical Resources: It consists of machines, equipment, buildings furniture’s and
fixtures. The analysis of these resources reveals the deficiencies of these resources.
g) Financial resources: This includes financial policies, financial positions, capital
structure, management of working & fixed capital, build up adequate reserves for future,
etc. The analysis of these resources reveals the soundness of financial position.
h) Labour management relations: To keep a good relationship with labours a
management needs to take care of all types of problems of the labour. It includes salary,
wages, facilities allowances, good working conditions, their promotion, transfer, etc. The
analysis & internal environmental discloses the certain shortcomings.

2.1.2 .External Environment

External environment of an organization is also important for its survival and success. The
external factors are those over which the business organization has no control such as social and
political atmosphere, economic environment, etc. These environmental factors are regarded as
uncontrollable factors. As the external factors of environment are beyond the control of
organizations, its progress, success and survival largely depends upon its capacity and ability to
adapt successfully to environmental changes. In order to do this, it will have to reorganize,

19
readjust its controllable internal factors to suit the external business environment. The external
environmental factors are divided into micro environment and macro environment.

I. Micro Environmental Factors

Micro environmental factors mean those which are very close and direct effect factors. Micro
environment includes employees, shareholders, creditors, suppliers, customers and financial
institutions, regulatory organizations, channels of distribution, and special interest groups like
consumer associations, and community organizations. This environment has a substantial impact
on an organization’s current business. These factors are more intimately linked with the
company than the macro factors. Let’s see the all these factors in detail.
Suppliers: This force supplies the inputs like raw materials and other supplies. This is important
because of supplying smoother functioning of the business. The supply is very sensitive.
Customers: Customer is the king of the market. Therefore, monitoring the customer sensitivity
is the pre-requisite for the business success.
Competitors: In simple word competition means the firms which market the same products.
Here all those who compute for the discretionary income of the consumer are considered as
competitors.
Marketing Intermediaries: Marketing intermediaries means those who are helping companies
to supply goods from manufacturing companies to customers. It includes warehousing,
transportations, marketing firms or promoting companies’ products. So the wrong choice of the
marketing intermediaries may cost the company heavily.

The purpose of environmental analysis is to enable the firm to turn change to its advantage
by being proactive.

II. Macro Environmental Factors

The macro environment is also referred to as general or remote environment. The micro
environment operates in a large macro environmental forces that shapes opportunities and pose
threats to the company. It includes demographic, economic, natural, social and technological
environmental forces or factors.
a) Demographic Environment: It relates to human population with reference to its size,
density, literary rate, gender, age, occupations etc.

20
b) Economic Environment: For example, economic environmental forces generally include
such elements in the economy as exchange rates and wages, employment statistics, and
related factors such as inflation, recessions, and other shocks—negative and positive. Hiring
and unemployment, employee benefits, factors affecting organizational operating costs,
revenues, and profits are affected by global, national, regional, and local economies. Other
factors discussed here that interact with economic forces include politics and governmental
policies, international wars, natural disasters, technological inventions, and socio cultural
forces.
c) Politico-Legal Environment: The various forces in the political and legal environment
direct and restrict business decision-making. E.g. Tax and economic policies: Increasing
or decreasing the rate of taxes is a good example of a political component.
d) Ecological Environment: If consists of geographical and ecological factors such as natural
resources endowments, weather and climatic conditions, location aspects in the global
context, port facilities, etc. which are relevant to business.
e) Social - Cultural environment: Socio-cultural fabric is an important environmental factor
that would be analysed while formulating organizational strategies. This involves the
consumption habits of the people, their languages, beliefs and values, customs and traditions,
taste and preferences and education level should have to be considered and then it has to decide
its strategy so that it will be fit in the socio-cultural environment.
f) Technological Environment: it related to technological know-how used in organizations.
Technological changes are of two types. The first type of change is a convergent change
which involves changes incremental innovation and improvement optimizes the ability of the
organization to succeed in the existing environment. Examples of such technological
discoveries are computer engineering, robotics, unmanned factories, miracle drugs, fibber
optics biometrics, and electronic funds transfer. On the other hand, the second type of change
would happen in response to events related to radical changes in technology like product life
cycle shifts, new process technologies, radical innovations, etc., these changes involve
organizational re-formation or transformation.

Organizations have to recognize the dynamic nature of the environment in which

they operate. The environment is affected by a number of factors that include events and
influences from a number of sources.

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2.2. Scanning Internal and External Factors of an Institution

Scanning is a method of critical observation in all aspects of organizational environments. The

proper evaluation or analysis of the environment helps an organization to formulate effective
strategies in various areas of its functions. Environmental scanning consists of analyzing internal
and external factors that may affect the organization and its ability to pursue a given course of
action.
Environmental analysis or scanning is the process of monitoring the events and evaluating trends
in the external environment, to identify both present and future opportunities and threats that
may influence the firm’s ability to reach its goals. The main purpose of environmental scanning
is therefore to find out the correct "fit" between the firm and its environment. As a result,
managers can formulate strategies to take advantage of the opportunities and avoid or reduce the
impact of threats. The organization uses a number of tools and techniques depending on their
specific requirements in terms of quality, relevance, cost, etc.

Environmental analysis enables an organization to identity its strengths weaknesses,

opportunities and threats. The proper evaluation or analysis of environment helps a firm to
formulate effective strategies in various areas of its functions.

II.2.1. PESTEL Analysis

What are the factors of PESTEL Analysis?

PEST analysis encompasses four macro-environmental aspects: political-legal, economic, socio-

cultural and technological aspects of the environment. The technique of PEST analysis is not
described in the literature of strategic management separately as a set of precise and finite rules.
During the PEST analysis factors of an external environment are determined and their impact on
an institution is evaluated. The formulations of external factors have to be as concrete as
possible; where possible, quantitatively expressed indicators should be given. The following
groups of external factors should be mentioned:
 Political Factors: Political factors determined by state policy, laws and decisions
adopted by the government. They affect the regulation of institutional activity. Political
factors may help or disturb the implementation of strategic objectives prioritized by the
government. They may help or disturb the employment of the tools for implementing the
Government programme. They may force an institution to change or amend its strategic

22
 activity plan. As policy determines the major orientations of the society, an institution
has to understand the political reality.
 Economic Factors: Development trends in the economy of state, sector, region or
municipality are analyzed. It determines how the gross domestic product (GDP) changes
and what are its growth trends, what is the tax policy, inflation, and the level of
investment in a state, what are the possibilities for the privatization of state property, and
how the structure of consumption changes. The following are examples of factors in the
macro economy: economic growth, interest rates, exchange rates, and inflation rate.
 Social Factors: Social factors include the demographic and cultural aspects of the
external microenvironment. These factors affect customer needs and the size of potential
markets. Some social factors include health consciousness, population growth rate, age
distribution, career attitudes, and emphasis on safety.
 Technological Factors: Technological factors can lower barriers to entry, reduce
minimum efficient production levels, and influence outsourcing decisions. Some
technological factors include: R&D activity, automation, technology incentives, and rate
of technological change.
 An environmental factor: These factors include ecological and environmental aspects
such as weather, climate, environmental offsets and climate change which may especially
affect industries such as tourism, farming, agriculture and insurance.
 Legal Factors: Although these factors may have some overlap with the political factors,
they include more specific laws such as discrimination laws, antitrust laws, employment
laws, consumer protection laws, copyright and patent laws, and health and safety laws.

II.2.2. SWOT Analysis

What are the factors of SWOT Analysis?

A SWOT analysis is a relatively easy-to-use technique for getting a quick overview of an

organization’s strategic situation. Strengths and Weaknesses are internal to the organization and
Opportunities and Threats are external to the organization. A SWOT analysis (sometimes
referred to as a situational assessment) involves the compilation of current information about the
organization's strengthens and weaknesses and performance information that highlights critical
external issues (opportunities and threats) which should be addressed in the strategic plan.

The products of a SWOT analysis include a database of quality information and a list of the most
important issues the organization needs to address. The SWOT analysis provides information

23
that is helpful in matching the firm's resources and capabilities to the competitive environment in
which it operates. The following strategic links are analyzed by the means of SWOT:

 How to use weaknesses in the implementation of opportunities?

 How to correct weaknesses by the means of opportunities?
 How to use the strengths to weaken the threats? and
 What weaknesses have to be eliminated to weaken the threats?

A key component of a SWOT analysis is an evaluation of the efficiency and effectiveness of the
organization’s current programs and processes based on quantitative data (review of records,
descriptive statistics related to various indices, formal performance evaluations) and qualitative
data (constituents/clients opinions about the organization’s programs). The effects of the
organization’s programs should be assessed in terms of:

 Inputs: Resources required operating the programs

 Throughputs: Processes through which the programs are operated
 Outputs: Immediate, observable results of the programs
 Outcomes: How the programs affect constituents/clients
 Impacts: Long-term benefits to clients and/or the broader society

The major problem in the implementation of a SWOT analysis method is not obtaining the
information that is trustworthy.
 To improve the quality of a SWOT analysis of an institution, it is beneficial to:
 Avoid too detailed SWOT analyses. A highly detailed SWOT analysis shows a lack of
strategic thought; every factor needs to be linked to a certain comment that reveals the
nature of the factor’s impact on an institution. A short list of well-grounded problems is
more convincing. Evaluation procedures need to be simple but helpful when developing
a strategic thought and organizations have to institutionalize a periodic SWOT analysis.

 Cost–benefit analysis might be applied in evaluating the inputs and outputs of an

organization’s program. However, it may be difficult to apply cost–benefit techniques to
many public and non-profit programs.

 The first thing that a SWOT analysis does is to evaluate the strengths and weaknesses in
terms of skills, resources, and competencies. The analyst then should see whether the
24
 internal capabilities match the demands of the key success factors. Opportunities and
threats are considered to be external factors over which you have essentially no control
 Strengths: Strengths and Weaknesses are derived from the analysis of the organization’s
internal situation. The following areas should be analyzed to develop the strengths and
weaknesses:
 Human resources
 Organization dynamics (including cross functional resources and relationships)
 Financial Statements and profitability
 Product or service attributes and quality
 Effectiveness of delivery of products or services
 Internal processes
 Other relevant internal factors and categories.
 Weaknesses: A weakness is something an organization lacks or does poorly. Examples
include lack of skills or expertise, deficiencies in assets, inferior capabilities in functional
areas, lack of patent protection, a weak brand name, poor reputation among customers,
lack of access to the best natural resources, and lack of access to key distribution
channels.

Understanding the key strengths and weaknesses of an organization helps in narrowing

down the choice of alternatives and selecting a strategy.

 Opportunities: An opportunity is a major favourable situation in a firm’s environment.

Opportunities - Opportunities are presented by the environment within which our
organization operates. These arise when an organization can take benefit of conditions in
its environment to plan and execute strategies that enable it to become more profitable.
Organizations can gain a competitive advantage by making use of opportunities. The
organization should be careful and recognize the opportunities and grasp them whenever
they arise. Selecting the targets that will best serve the clients while getting the desired
results is a difficult task. Opportunities may arise from the market, competition,
industry/government, and technology.
 Threats: A threat is a major unfavourable situation in a firm’s environment. Threats
arise when conditions in the external environment jeopardize the reliability and
profitability of the organization’s efficiency .They compound the vulnerability when they

25
 relate to the weaknesses. Threats are uncontrollable. When a threat comes, stability and
survival can be at stake. Examples of threats are - unrest among employees; ever-
changing technology; increasing competition leading to excess capacity, price wars, and
reducing industry profits; etc.

SWOT is an acronym for Strengths, Weaknesses, Opportunities and

Threats. By definition, Strengths (S) and Weaknesses (W) are considered to be
internal factors over which you have some measure of control. Also, by definition,
Opportunities (O) and Threats (T) are considered to be external factors over which
you have essentially no control.

II.2.3. The 7-S Model

What are 7-S Models?

A quite popular method for analysing internal factors is the 7-S model. The model by Ms Kinsey
is called 7-S because every letter S stands for one of the seven factors, i.e. Strategy, Structure,
System, Shared Values, Skills, Style and Staff. All of those factors interact with each other and
the circumstances determine which of them will become the driving force in the implementation
of a strategy.

The 7-S Model describes how one can holistically and effectively organize a company. Together
these factors determine the way in which a corporation operates.
Figure 3 : 7-S Models

26
 i. Shared values: It is the interconnecting canter of McKinsey's model. What does the
organization stands for and its central beliefs believe and attitude?
ii. Strategy: Plans for the allocation of firms scarce resources, over time, to reach identified
goals. It also analyses the organizational environment.

iii. Structure: It is a formal structure of an organization. The way the organization's units
relate to each other: centralized, functional divisions (top-down); decentralized (the trend
in larger organizations); matrix, network, holding, etc.
iv. Systems: The procedures, processes and routines that characterize how important work is
to be done: financial systems; hiring, promotion and performance appraisal systems;
information systems.
v. Skills: Distinctive capabilities of personnel or of the organization as a whole. It is
primarily about the core competences of an organization.
vi. Staff: Numbers and types of personnel within the organization.
vii. Style: Cultural style of the organization and how key managers behave in achieving the
organization‘s goals.

The 7-C model of by Waterman may also be used as equivalent to the 7S model.
Accordingly, every letter C stands for one of the following seven elements, i.e. Culture, Control,
Crisis Point, Cause and Commitment, Communication, Chance and Information and Capability.

In the result of the analysis of environmental and internal factors, certain conclusions are drawn.
The results of these analyses are summarized and linked by the means of a SWOT analysis.

Group Exrecises

1. Conduct SWOT analysis for your organization`s and identify its core
competencies( Time Allowd 2 hours)

27
 Summary

The organizational environment consists of all those forces both internal and external that affect
the working of an organization. It refers to the conditions, forces, events and situations within
which organizations have to operate. Organizations and its environment are closely related and
the effectiveness of interaction of the two determines the success or failure of the organization.
Organizational environment can be broadly divided into internal environment and external the
environment. Environmental scanning means an examination and study of the environment of a
business unit in order to identify its survival and prosperity chances. It means observing the
organizational environment, both external and internal, and understanding its implications. It
also involves knowing beforehand the risks and uncertainties as well as threats to the business
unit.

Check List

Put a tick (✓) mark if you have understood or not about.

Subject Yes No
1. What are internal and External environments?
2. Scanning Internal and External Factors of an Institution
3. PESTEL Analysis
4. SWOT Analysis
5. The 7-S Models

28
SESSION THREE: STRATEGIC FORMULATION

INTRODUCTION

The formulation of strategy includes organizational vision, mission, value, goal and objectives.
This strategic intent lays the foundation for the strategic management of any organization. They
are important tools of strategic planning, and thus they help to shape the strategy that will be
used by an organization to achieve the desired future. Strategies are a series of ways of using the
mission to achieve the vision. Goals are statements of what needs to be accomplished to
implement the strategy. Objectives are specific actions and timelines for achieving the goal.

This session concerned with Strategic Intent and it comprises three sub- sections. The first
section elaborates the development of Organisational Mission and Vision statements. Likewise,
the second section discusses Organizational Core Value, Finally section presents of organizational
Goals and Objectives..

General Objective of the Session

The general objective of this session is to enhance the skill, knowledge, and attitude of
participants towards the formulation of a strategic vision and mission, values, goal, and
objectives.

Specific Objectives of the Session

Upon the successful completion of this session, participants will be able to:
 Distinguish the differences among the strategic mission, Vision, goal, objectives and value
statements,
 Elaborate the importance of having a strategic mission and vision for an institution,
 Describe the main characteristics of mission and vision statements,
 State the purpose of strategic objectives and characterize their dimensions,
 Develop a mission and vision statement for their organizations,

29
3.1. Developing Organizational Vision and Mission

Brainstorming Questions
Describe the vision, mission and Goals, objectives and values of your respective
organizations

Mission and Vision are the standard or benchmark in determining the organizational purposes
and are critical elements of organizational strategy. Most public organization firms establish
their organizational mission and vision statements, which serve as foundational guides in
ascertaining the objectives of the work as a whole. Thus, based upon the vision and mission
identified and established, an organization develops strategic and tactical plans for objectives.

3.1.1. Developing Vision Statements

The vision statement describes the future of the organization. It reveals what the organization
aspires to be or hopes to achieve in the long term. The vision statement is inspirational and
motivational but also provides direction, mapping out where the organization is headed. In this
regard, it serves as a guide for choosing current and future courses of action. A vision articulates
the position that an organization would like to attain in the distant future. It helps in creating a
common identity and a shared sense of purpose. Vision is a short and simple inspirational
description of what an organization would like to achieve or accomplish in the medium-term or
long-term future. The vision of an organization must be created by consensus, forms an
organization’s future mental image and forms the basis for formulating the mission statement.

Many organizations combine their mission and vision into a single statement. However, the
mission statement often focuses primarily on the organization’s responses to current issues,
problems, and challenges. A separate vision statement may be appropriate to provide some
“stretch,” to inspire its members to strive for a higher level of attainment, and to trigger the
necessary changes in the organization’s structure and processes to bring about the longer term
improvements and broader contributions to society.
A vision statement should present a guiding image of what success will look like, formulated in
terms of an organization’s anticipated contribution to the broader society. A vision statement is
more encompassing than a mission statement in that it seeks to provide an image of success that
will motivate people within the organization to work together. A vision statement should be
appropriate to the organization’s mission and consistent with the organization’s values. It should

30
be realistic and credible, yet ambitious and responsive to change. It should be well-articulated
and easily understood. And it should challenge and inspire the group to achieve its mission.

 Examples of Vision Statements

1. Example of Addis Ababa University Vision Statement
Addis Ababa University aspires to be ranked among the top ten pre-eminent African graduates
and research universities in 2023.
2. Example of Ethiopian Airlines Vision Statement
To become the most competitive and leading aviation group in Africa by providing safe, market
driven and customer focused passenger and cargo transport, aviation training, flight catering,
MRO and ground services by 2025.

3.1.2. The Essence of Mission Statements

An organization’s mission is its purpose or the reason for its existence. The mission statement
defines an organization’s purpose or reason for being. It states what it is providing to society. A
well-conceived mission statement defines the fundamental, unique purpose that sets an
institution apart from other organizations of its type and identifies its operation. It guides the
day-to-day operations of the organization, communicates to external stakeholders the core
solutions the organization provides in society and motivates employees toward a common near-
to-short, medium, and long-term goal. A mission statement is a simple, compelling statement
that describes how the organization is going to operate in the present and towards the fulfilment
of the vision. It provides detailed information about what the organization does, how it does it,
and who it does it for. Without a mission, your organization lacks the why and how. If
everyone in your organization has their own interpretation of the vision, it can lead to
conflicting strategies and initiatives

The mission of an organization should be a statement of why the organization exists and what it
wants to achieve. The Mission Statement should establish the purpose of the organization as a
whole. Mission statements, in general, are single-line quotes, which are easily repeatable and
sound inspiring members of the organization. An organizational mission statement is essentially
its statement of purpose. It serves as a guide for all the decision-making processes within the
organization. The mission statement is important because it can engage both the hearts (culture)
and minds (strategy) of the organization’s staff and the board. A good mission that is used well
can be inspirational and develop a strong, shared organizational culture. It helps to ensure that
employees’ are emotionally tied to the organization, and that their goals are synchronized with

31
those of the organization. Such a statement should be simple and concise enough and help
employees within the organization know what decisions and tasks best align with the mission of
the organization.

Establishing an organizational mission is an important part of management’s job. Having an

established and documented organizational mission accomplishes several important things. A
mission statement once established serves an organization for many years. Therefore, a mission
statement should be broad enough to accommodate any new changes to avoid reformulation.
Some general guiding principles about mission statements are that they are:

 Concise. While not as short as vision statements, mission statements generally still get
their point across in one sentence.
 Outcome-oriented. Mission statements explain the fundamental outcomes your
organization is working to achieve.

 Inclusive. While mission statements do make statements about your group's key goals,
it's very important that they do so very broadly. Good mission statements are not limiting
in the strategies or sectors of the community that may become involved in the project.

A mission statement sets the fundamental purposes for which your organization has been
formed. It should cover:

 Purpose :why the organization exists and what it seeks to accomplish.

 Activity : The main method or activity through which the organization tries to fulfill this
purpose..
 Values: The principles or belief system that guides an organization’s members as they
pursue the organization’s purpose

1. Example of Addis Ababa University’s mission Statements

Addis Ababa University’s mission is to produce competent graduates, provide need-based

community service and produce problem-solving research outputs through innovative and
creative education, research and consultancy service to foster social and economic development
of the country..

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 2. Example of Ethiopian Air Lines Mission Statements.
To become the leading Aviation group in Africa by providing safe and reliable passenger and
cargo air transport, Aviation Training, Flight Catering, MRO and Ground Services whose quality
and price “value proposition” is always better than its competitors, To ensure being an airline of
choice to its customers, employer of choice to its employees and an investment of choice to its
Owner, To contribute positively to socio- economic development of Ethiopia in particular and
the countries to which it operates in general by undertaking its corporate social responsibilities
and providing vital global air connectivity,

3. Example of Child Development Centre’s Mission Statements

Foster the social, ethical, and intellectual development of children (purpose) by developing,
evaluating, and disseminating programs (business) that enhance their capacity to think critically
and skilfully, while striving to deepen children’s commitment to social values such as kindness,
helpfulness, personal responsibility, and respect for others (values).
The Importance of Organizational Mission Statements

The mission statement provides the way forward for the vision of the firm and planned as per the
vision statement. Therefore, the benefits of missions are mentioned as follows:
 It helps to ensure unanimity of purpose within the organization.
 It provides a basis or standard for allocating organizational resources.
 The mission statement is a tool to inspire and provide a sense of direction and purpose.
 It provides a clear guide for making decisions.
 It serves as a focal point for individuals to identify with the organization’s purpose and
direction.
 The mission statement helps to come up with new and innovative ideas.
 It helps to build and shape a teamwork culture.
 It helps to strive and drive action.
Evaluating Organizational Mission Statements

For a mission statement to be effective, it should meet the following eleven conditions:
 Clear and understandable to all organizations involved,
 Brief enough for most people to remember,
 Clearly specify the purpose of the organization,
 Focus on a single strategic thrust,

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  Broad enough to allow flexibility in the implementation,
 Serve as a template and be the same means by which the organization can make
decisions,
 Reflect the values, beliefs, and philosophy of the operations of the organization,
 Reflect attainable goals,
 Worked so as to serve as an energy source,
 Written in the active voice,
 Focus on the customer rather than on the organization itself.
The Distinction between Vision and Mission Statements

The vision and mission statements are interrelated to each other. Besides this interrelated, there
are certain focal points on the basis of which some differentiation can be done. A vision
statement should present a guiding image of what success will look like, formulated in terms of
an organization’s anticipated contribution to the broader society. A vision statement is more
encompassing than a mission statement in that it seeks to provide an image of success that will
motivate people within the organization to work together. A vision statement should be
appropriate to the organization’s mission and consistent with the organization’s values.

Many organizations combine their mission and vision into a single statement. However, the
mission statement often focuses primarily on the organization’s responses to current issues,
problems, and challenges. A separate vision statement may be appropriate to provide some
stretch, to inspire its members to strive for a higher level of attainment, and to trigger the
necessary changes in the organization’s structure and processes to bring about the longer term
improvements and broader contributions to society.
Table 2: The distinction between Vision Statements and Mission Statements

Vision Statements Mission Statements

 A mental image of a possible and desirable  Enduring statement of philosophy, a
future state of the organization. creed statement.
 The purpose or reason for a firm’s
 A dream.
existence.
 Broad.  More specific than vision
 Answers the question “what we want to  Answers the question “what is our
become? business”.

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 Group Discussion
1. Find out the Vision and mission statement of any one of a service organization( Time
Allowd 1 hour)

3.2. Organizational Core Value

The values statement highlights an organization’s core principles and philosophical ideals. It is
used to both inform and guide the decisions and behaviours of the people inside the organization
and signal to external stakeholders what’s important to the organization. An organization’s core
values shape daily culture and establish standards of conduct against which actions and decisions
can be assessed. Core values are the central principles or standards, set by an individual or an
organization, from which the individual or an organization, do not deviate, as such values decide
the very nature of the organization. Thus, core values of an organization, occupies the central
place in an organization, and it becomes important to think about the core values first, which
serves as the base in establishing sound and meaningful mission, vision and goals for the
organization.

Once the core values of an organization is identified, it becomes important, to rank them in order
of priority. Such ranking will help in determining whether the goals fixed for the organization
are in the right track or not. For instance, let’s assume that the core values of an organization are
efficiency, safety and respect for other, in order of priority. And imagine that a question comes
up about implementing a practice that will improve the operational efficiency of the
organization, but may compromise the health and safety of employees. In such a case, if the core
values of the organization are well identified and ranked as per priority, it would be easy for the
managers to decide, whether to go for efficiency or safety. It can be understood that if a manager
has sound knowledge of the organizational values, it will give him/her the guidance or direction
in setting the right goals for the organization. Thus, defining the core values of an organization is
the first step, towards framing sound mission and vision.

A values statement should be memorable, actionable and timeless. The format of the values
statement depends on the organizations; some organizations use one, two or three words to
describe their core values while others provide a short phrase

35
 Value statements list the core principles and behaviours that guide and describe an
organization’s culture.
Values are the fundamental beliefs of an organization reflecting its commitments and ethics.

 Example of Organizational Values

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 1. Community first
2. Collaboration

3. Commitment

4. Change

5. Trust

3.3. Organizational Goals and Objectives

The concept of objective and goals are interlinked to each other. Sometimes goals and
objectives of an organization are confused with each other and are interchangeably used.
However, there are considerable differences between the two terms. The goals are the outcome
statements that define what an organization is trying to accomplish, both programmatically and
organizationally. Goals are usually a collection of related programmes, a reflection of major
actions of the organization, and provide rallying points for managers.

An organization, in order to be effective, has to state their goals and objectives in

written form. If they are not in written form, they are just like any other ideas with no real
powers. It has to be understood that only written goals and objectives provide
motivational power among employees or whosoever is concerned to achieve them.
Clearly and specifically written goals prevent confusions and misunderstandings. Further, a
well-written goals and objectives, facilitates easy assessment of the organizational
performance, as the results can be measured in comparison with the time frame in
accomplishing the goals.

A goal is an idea of the future or desired result that a person or a group of people envision.
People endeavour to reach goals within a finite time by setting deadlines. A goal is typically a
general and overarching idea expressed clearly, concisely and descriptively. It is a long-term
and time-sensitive indicator of where you hope to be in the future. A goal is the aim of a
project in terms of what should be accomplished. Goals are normally singular and expressed as
a single sentence that specifies the desired outcome, the anticipated date it is to be achieved
and the resources required. The goals are the key efforts that must happen for the organization
to accomplish the mission. They provide a detailed description of the services, products, and
activities the organization undertakes.

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On the other hand, objectives are very precise, time-based, measurable actions that support the
completion of a goal. Objectives are directly related to the goal and are expressed in clear,
concise and understandable form. Objectives are measurement plans of an organization that
will be reaching to goals. Objectives are specific, actionable targets that need to be achieved
within a smaller time frame, such as a year or less, to reach a certain goal. Besides from this
connection there are certain focal points on the basis of which some differentiation can be
done. Following are some distinctions among these terms

Table 3:The difference between organization goal and objectives.

Features of Organizational Goal Features of Organizational Objective

 General  Specific
 Qualitative  Quantitative, measurable
 Broad organization–wide target  Narrow targets set by operating divisions
 Long term results  Immediate, short term results
 Difficult to measure  Easy to measure

3.3.1. Goal-Setting Aapproach

The goal-setting approach is the oldest and most widely used approach which helps in
defining and measuring effectiveness. It assumes that organizations exist to accomplish goals
that reflect purpose, rationality, and achievement. Many management practices like
Management by Objectives (MBO) are based on the goal approach. The three goal-Setting
approachs are as follows:
Top-Down Approach to Goal-Setting: This approach focuses on the topmost level (the
managers) establishes the organizational mission and then determine strategic goals.
Management by objectives (MBO) is a common example of top-down approach. This
approach focuses on coordinating the goal setting, incentives, and feedback. Here the topmost
level (the managers) establishes the organizational mission and then determine strategic goals.
The strategic goals, determine the tactical goals and objectives as they are passed down to the
next level of management. The tactical goals in each department speak the operational goals
and objectives to individual employees. Then on the lowest level, the supervisor and the
employee agree upon performance objectives, as well as how goal attainment will be
measured. This will help the superior to know employees' concern and the calibre towards
achieving the set goals. When the next evaluation occurs, the supervisor and subordinate meet
to assess to what extent performance objectives have been met.

38
The top-down approach has several advantages. It guarantees that the goals and objectives of
the organization are directly tied to and support the mission statement. It helps in breaking
down the goals so set by the top level to the lower level in the organization; thus, ambitious
goals will be set for everyone in the organization. However, the top-down approach has
several disadvantages. Upper-level management employees are unaware of the day-to-day
activities that the goals may be overly ambitious and unrealistic. Goals set at the top of the
organization takes time to percolate down to the lower level. Lastly, the top-down approach
does not always involve employee participation in the goal-setting process. Thus, employees
may not have a sense of ownership.

Bottom-Up Approach to Goal-Setting: The bottom-up approach works at the lower levels of
the organization. Personnel at the lowest or at the bottom level set the goals and objectives for
the employees directly above them. Here, operational goals and objectives determine the
tactical objectives, which in turn determine the strategic goals and objectives. Finally, the
organizational mission is defined according to the guidelines set by the employees. Goals
determined by bottom-up goal setting are likely to be more realistic than those set at the top of
the organization. They are more flexible, realistic and reflect the current situation of the
organization. Finally, goals created by all levels of the organization, and by all types of
employees, are more likely to encourage employee commitment. There are disadvantages to
bottom-up goal setting. Goals and objectives formulated by bottom-up goal setting are not
always in line with the organization’s mission. Sometimes it goes out of track with that an
organizational objective. Often, organizations that use a bottom-up approach lack clear
direction and focus. Lack of hierarchy is seen in this type of approaches. Here the goals so set
or created by the lower level employees are not always challenging and ambitious.

Interactive Approach to Goal-Setting: Another approach in goal setting is interactive. It is a

process by which employees at different levels of the organization participate together in
forming the goals and objectives. Here, senior level or the top management employees start
developing a mission statement Managers at different levels and departments of the
organization, then come together, contribute their expertise and then determine the strategic
goals. Further, then these are then discussed with lower-level managers and supervisors and
lastly, employees at the individual level contributes their inputs by defining their own
personal goals and objectives. The interactive goal setting involves discussion and cooperation
between management and employees in the overall working within the organization. Here, the

39
goals are more realistic and current than the top-down approach. Because it involves
cooperation/collaboration and team work at all levels, employees feel valued and important.
Their commitment to the organization, as well as the goals, is increased. Input from upper
management helps to ensure that the goals are challenging and ambitious, which in turn
increase motivation? On the other side, this approach is time consuming because of involving
all the employees at all the levels to know there inputs. It is also difficult to manage and
maintain. To get the most out of this approach, active involvement from the manager’s end is
quite important

3.3.2. Levels of Organizational Objectives

Every organization has short-term, medium-term, and long-term goals. These are the goals
organizations seek to accomplish and are otherwise known as organizational development
objectives. Objectives play a significant role in determining policies and allocation of
resources in the future. An organizational objective is a target toward which the organization
directs its efforts. Basically, organizational objectives exhibit a hierarchy. The organtional top
managers are more concerned with mission, purpose and overall objectives. Middle managers
are involved in key result areas, division and department objectives. At the lower level, group
personal objectives are set. The objectives can be top down or bottom up taking the initiative
from lower management. Managers should develop organizational objectives that are specific,
require a desirable level of effort, flexible, measurable and operational as well as consistency
in the long and short run.

Organizational objectives perform in three levels such as: Strategic Objectives, Intermediate
(Management objectives) and Operational Objectives.
1. Strategic objectives: These are the long term plans or the "Big Picture" goal of an
Organisation and are usually the concern of Senior Management, for example they will
decide where the organization wants to be in 5-10 years. An objective is what is set to
accomplish the goal. This is where organisations implement a Strategic Plan which details
time frames and goals for the organization usually over 3-5 years and is updated annually
or bi-annually. Strategic objectives are broad statements of direction that create a bridge
from our vision to intermediate or the annual plan or goals.

ExampleI : FDR of Ethiopian Ministry of Health

" Improve access to health services"

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2. Intermediate (Management objectives): These are the short term plans i.e. within the
financial Year; these are the responsibility of Middle Management. When setting these
objectives they will take into account the strategic objectives of the organisation.
Intermediate (Management objectives) often reflect staffing requirements or other
resource commitments required to achieve a single key result. Such objectives usually are
internal to the organization and are often associated with and identified through such
techniques as management by objectives (MBO) .Management objectives may identify
how an organization intends to carry out a particular program component. Management
objectives should be precise, measurable, and time bound. This degree of specificity is not
easily achieved. The tendency often is to state objectives that simply describe current
activities. In order to avoid this pitfall, objectives should be expressed in words of change.

3. Operational Objectives: These are Daily, Weekly or Monthly targets and these are
derived from the Intermediate objectives. Operational objectives most often are associated
with the implementation and control of specific tasks, and the assignment of specific
resources to achieve strategic and management objectives. Operational objectives
frequently reflect explicit performance measures that can be adopted by the organization
to monitor its activities. The primary purpose should be the detailed identification of
activities and techniques that should be carried out in the implementation of a project or
program. Operational objectives may involve the determination of specific resource
requirements (personnel, equipment, materials, capital expenditures, etc.) and their
appropriate order of commitment (project schedules) to ensure that specific tasks are
carried out efficiently. Operational objectives often include references to relatively short-
term completion dates (e.g., one to two years).

3.3.3. Objectives Matrix for Setting Objectives

Explicit recognition is given in this strategic planning model to the fact that value inputs
(personal biases) are likely to occur at critical points, namely, in connection with the
formulation of more explicit objectives. This tendency can never be completely eliminated.
Therefore, the objectives must be formulated within a concise framework that provides an
opportunity to clearly identify conflicting positions, that is, statements of existing or potential
value conflicts. An objectives matrix provides a basis for the identification of such conflict
situations.

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Conflicts can emerge on several different levels. The first dimension of potential conflict is
among the overall objectives of the organization and the objectives of individuals or groups
within the organization or served by the organization. A second level of possible conflict
arises from territorial considerations, that is, the prerogatives of various units within the
organization or community. A third level of conflict emerges with regard to explicit issues and
the various viewpoints that can be brought to bear on their resolution.
Table 4: Illustrative format of objectives matrix

Organization Individuals
Territorial Prerogatives Territorial Prerogatives
Unit A Unit B Unit N Unit N Unit B Unit A
View Point/ Issue 1
View Point/ Issue 2
View Point/ Issue 3
View Point/ Issue 4

The objectives matrix is built through a series of iterations, involving a broad cross-section of
participants. First, an objective statement is posited for each identified issue area. These
objectives are then categorized according to the three conflict levels. At the end of the first
round, a number of cells in the matrix should be fulfilled in and others likely will remain
empty. The next iteration should focus on fulfilling in the empty cells by identifying
objectives that parallel (that is, complement or are in conflict with) those previously identified
in the auricular dimensions. This round may reveal additional issue areas, which produces yet
another cycle. The end product of this phase of the analysis should be a fully articulated
matrix, with each cell containing one or more objectives. Finally, those objectives should be
identified that (1) are clearly in conflict with one another, (2) evidence potential conflict or
consensus, and (3) are mutually reinforcing.

This approach has been successfully applied in small focus groups and on a broader basis
using a series of questionnaires and public meetings. The matrix can reveal different levels of
understanding regarding the broader goals of the organization. Respondent conflict must be
expected and analyzed.

The general premise underlying this matrix approach is that information regarding conflicts
among participants will be valuable in identifying levels of comprehension with respect to
complex organizational issues.

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 The objectives matrix merely provides a convenient scorecard for recording these points,
so as to avoid the tendency to assume that objectives are mutually exclusive

One of the advantages of this hierarchy is that, if someone begins by describing a management
objective, the question can be raised as to the appropriate strategic objective to which it
relates. This approach can also be applied in the other direction. Those persons charged with
the implementation of an agreed-upon strategic objective could begin to explore appropriate
management and operational objectives in their respective areas of responsibility.
Figure 4: Iterative process for setting objectives.

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 Group Activities/ Exercises
1.Find goal,and objective statements of your organizations and figure out its strategic
intent ( Time Alowed 1 hour)

 Summery

A vision articulates the position that an organization would like to attain in the distant
future. It helps in creating a common identity and a shared sense of purpose. Mission refers
to the purpose of an organization. Goals are an intermediate result that is expected to be
achieved by a certain span of time. It is a target that an organization wishes to achieve in
the long term. It provides the basis for judging the performance of the organization for a
long time. However, Objectives are specific, actionable targets that need to be achieved
within a smaller time frame, such as a year or less, to reach a certain goal. Objectives
describe the actions or activities involved in achieving a goal. Objectives are specific,
actionable targets that need to be achieved within a smaller time frame, such as a year or
less, to reach a certain goal. Objectives describe the actions or activities involved in
achieving a goal. In general idea vision, mission, value, goal, and objective statements are
considered as an important part of the strategic management process for an organization.

 Check List

Put a tick (✓) mark if you have understood or not about.

Subject Yes No
1. What is Vision?
2. What is Mission?
3. Development of Mission and Vision
4. The goal setting Approach
5. The levels of organization objectives
6. Objectives Matrix for Setting Objectives
7. Example of organizational values

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SESSION FOUR: STRATEGY CHOICE AND ALALYSIS

INTRODUCTION

After analysing the environment and assessing the internal environment, the next step in the
strategic planning process is to develop strategic alternatives to help the organization in
achieving its objectives. Strategy analysis and choice focus on generating and evaluating
alternative strategies, as well as on selecting strategies to pursue. Strategy analysis and choice
seek to determine alternative courses of action that could best enable the firm to achieve its
mission and objectives. The firm’s present strategies, objectives, and mission together with
the external and internal information provide a basis for generating and evaluating feasible
alternative strategies. The alternative strategies represent incremental steps that move the firm
from its current position to the desired future.

This session includes two sections. The first section discusses process for Strategic
Choice ,and the second section describes Strategic Analysis.

Session Objectives
Specific Objectives of the Session

Upon the successful completion of this training session, participants will be able to:

1. Explain the of process for Strategic Choice.

2. Describe a three-stage framework fo choosing among alternative strategies.
3. Explain how to develop a SWOT Matrix, SPACE Matrix, BCG Matrix, IE Matrix,
and QSPM.

4.1. Strategic Choice

Brainstorming Questions
1. Can you mention strategic choice and analysis?
2. What are steps of strategic alternatives choice ?

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Strategic choice is essentially a decision making process. The decision making process
consists of setting objectives, generating alternatives that will help the organization achieve its
objectives in the best possible manner and finally implementing the chosen alternative.

The decision to select from among the grand strategies considered the strategy which will
best meet the organization’s objectives. The decision involves focusing on a few
alternatives, considering the selection factors, evaluating the alternatives against these
criteria and making the actual choice”

Process for Strategic Choice consists of four distinct steps:

1) Focusing on a few Alternatives.

2) Analyzing the Strategy Alternatives.
3) Evaluating the Alternatives Strategies
4) Making the Actual Choice.

4.1.1. Focusing on a few Alternatives

The aim of this step is to narrow down the choice to a manageable number of feasible
strategies. It focuses on strategic alternatives, focusing on alternatives could be done by
visualizing the future state and working backward. This is done through gap .By analyzing
the difference between the projected and desired performance, a gap could be found. Gap
analysis = projected performance–desired performance.

4.1.2. Analyzing the Strategic Alternatives

This step has to rely on certain factors. These factors are termed as selection factors Such
as objective factors and subjective factors
1. The objective Factors- Based on analytical techniques and hard facts or data
2. The Subjective Factors- Based on one’s personal judgment, collective or
descriptive factors.

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 4.1.3. Evaluating the Strategy Alternative

Evaluation of strategic alternatives basically involves bringing together the analysis done on
the basis of the objective and subjective factors. To observe what is important, both the
factors have to be considered together. The evaluation of strategic choice should lead to a
clear assessment of which alternative is the most suitable under the existing conditions. One
or more strategies have to be chosen for implementation. Also, a blueprint has to be made
that will describe the strategy and the condition under which they operate. After narrowing
down the alternative strategies to a few alternatives.

When we are evaluating a strategy. We must answer these questions.

 Is the strategy consistent with strategic analysis results?
 Do the findings from the environmental assessment support the strategy (Strategic
objectives)?
 Will the strategy enable the strategic objectives to be achieved?
 Are the right people available to support the strategy?
 Is the organizational culture and managerial skill sufficient for the strategy to work?
 Are there sufficient resources (like capital, facilities, managerial expertise and so on)
to make the strategy work?
 Is the strategy socially acceptable?
 Is the strategy clear and communicable enough for all to understand?
 Is the strategy achievable enough challenging, so that people will be motivated to
make it work, yet not so easy or conservative that they lose interest in it?
 Does the strategy involve an acceptable degree of risk?
 Does the strategy have an appropriate time frame work?.

4.1.4. Making the Actual Choice

This is the final step of making the strategic choice. One or more strategies have to be chosen
for implementation. To make the actual choice. Strategies should involve the managers and
employees who earlier assembled the organizational vision and mission statements. Alternative
Evaluating strategies proposed by participants should be considered and discussed in a meeting
or series of meetings. Proposed strategies should be listed in writing. When all feasible
strategies identified by participants are given and understood, the strategies should be ranked in
order of attractiveness by all participants, For example, with 1 = should not be implemented, 2 =
possibly should be implemented, 3 = probably should be implemented, and 4 = definitely should

47
be implemented. This process will result in a prioritized list of the best strategies that reflect the
collective wisdom of the group. Brainstorming sessions; special meetings for the purpose; the
services of an outside consultant; and the senior employees of the organization are various ways
of generating strategic alternatives in large organizations. A number of alternatives may be
possible, but only one or a few of them may finally be accepted as a strategy or strategy for the
future

4.2. Strategic Analysis

Fred R David has developed a comprehensive strategy formulation and analytical framework
which is very useful for strategic analysis and choice. We now discuss the framework briefly.
This framework consists of three stages: Input stage, Matching stage and Decision Stage.

4.2.1. Input Stage.

This stage summarizes the basic input information needed to generate alternative strategies.
This basic input information relates to the opportunities and threats, strengths and weaknesses
as also the competitive profile of the firm. This information can be obtained from the
following matrices

The Internal –Extenal (IE) Matrix

A summary step in conducting an internal strategic-management assessment is to construct

an Internal –Extenal (IFE) Matrix. This strategy-formulation tool summarizes and evaluates
the major strengths and weaknesses in the functional areas of a business, and it also provides a
basis for identifying and evaluating relationships among those areas. Intuitive judgments are
required in developing an IE Matrix, so the appearance of a scientific approach should not
be interpreted to mean this is an all-powerful technique. An Internal –Extenal Matrix can be
developed in five steps. The following guiding steps are designed by David (2011) and they are
put in the following order:

1. List key internal – external factors as identified in the internal analysis process. Use a
total of from 10 to 20 internal factors, including both strengths and weaknesses. List
strengths first and then weaknesses. Be as specific as possible, using percentages,
ratios, and comparative numbers.
2. Assign a weight that ranges from 0.0 (not important) to 1.0 (all important) to each
actor. The weight assigned to a given factor indicates the relative importance of the
factor to being successful in the firm’s industry. Regardless of whether a key factor is

48
 an internal strength or weakness, factors considered to have the greatest effect on
organizational performance should be assigned the highest weights. The sum of all
weights must equal 1.0.
3. Assign a 1-to-4 rating to each factor to indicate whether that factor represents a major
weakness (rating = 1), a minor weakness (rating = 2), a minor strength (rating = 3), or a
major strength (rating = 4). Note that strengths must receive a 3 or 4 rating and
weaknesses must receive a 1 or 2 rating. Ratings are thus company based, whereas the
weights in step 2 are industry based.
4. Multiply each factor’s weight by its rating to determine a weighted score for each
variable.
5. Sum the weighted scores for each variable to determine the total weighted score for
the organization.
6. Regardless of how many factors are included in an IFE Matrix, the total weighted
score can range from a low of 1.0 to a high of 4.0, with the average score being
2.5.
7. Total weighted scores well below 2.5 characterize organizations that are weak
internally, whereas scores significantly above 2.5 indicate a strong internal
position. Like the EFE Matrix, an IFE Matrix should include from 10 to 20 key
factors. The number of factors has no effect upon the range of total weighted
scores because the weights always sum to 1.0. When a key internal factor is both
strength and a weakness, the factor should be included twice in the IFE Matrix, and a
weight and rating should be assigned to each statement.

Table 5: Presents an example of an Internal Factor Evaluation Matrix (IFE) of a soft

drink company (ABC).

No Key internalFACTORS Weight Rating Weighted

Strength score

1 Strategic locations of existing and future plants 0.20 4 0.80

help expand the business; hence it is a competitive
advantage to us on cost and market access.

2 ABC has sustained continuity in its growth. An 0.11 3 0.44

11% estimated annual sales growth end of current
year 2010/11 and a potential over 11% growth in
the plan year.

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 3 Aqua Clean is our flagship, supported by its family 0.05 3 0.15
Tafach-Apple.

4 Capability of creating one way convenience pack 0.06 3 0.18

PET 500ml (Single Serve) and other packages
(Multiple Serve) will be reality in near future.

5 Wealth of experience and capability in the 0.07 3 0.21

industry.

6 The operating synergy among our plants is helping 0.04 4 0.16

greatly move ABC objectives

Weakness

7 Under capacity utilization of our resources and 0.08 1 0.08

capabilities, is yet a challenge.

8 Less competitive market execution in the trade. 0.07 2 0.14

9 Constraint in distribution capacity in some areas. 0.06 2 0.12

10 Lack of a sustained training program towards 0.08 1 0.08

employee awareness of improved working culture
and attitude change.

11 Uncompetitive salary scale, in specific job areas 0.07 2 0.14

has led to high turnover of employees within
similar industries.

12 Weak Performance Appraisal Evaluation practice 0.06 1 0.06

does not generate the intended purpose.

13 Lack of incentive packages covering other areas 0.05 1 0.15

to ensure company-wide joint effort towards
common objectives.

Total 1.00 2.71

The ABC company total internal weighted score is 2.71. This indicates that it is above 2.5
which shows it is in a strong internal position. It can also be observed that there are much
more internal strengths than the weaknesses and the company can perform better if it sets a
strategy that minimizes its weakness and at the same time capitalizing its strengths.

Table 6: External Factor Evaluation Matrix (EFE) of hypothetic soft drink Company ABC

No Key External Factors Weight Rating Weighted

score
Opportunity

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 1 Expected growth in soft drinks industry by 15%. 0.10 4 0.40

2 Agricultural output for current harvest year is estimated to 0.07 2 0.14

increase by 8.8%.

3 Export expected to grow by 33% current year and constitute 0.08 3 0.24
80% agricultural produces. Hence disposable income to
farmers.

4 Good will of the owner in development endeavors. 0.07 2 0.14

5 Remittance inflows from Ethiopians in Diaspora grew by 9%. 0.07 2 0.14

6 Existence of huge market opportunity. Expected growth in soft 0.09 4 0.36

drinks industry by 15% in year.

7 Ethiopia reported as the second fast-growing economies in sub- 0.08 2 0.16

Saharan Africa.

Threats

8 Limited OD (over draft) facility to meet the increasing working 0.08 3 0.24
capital requirement and increasing costs.

9 Competition ahead of us in glass availability with lower price. 0.07 2 0.14

This is volume driver of the trade.

10 By year 2015 poverty will still prevail at 23%, versus 40% in 0.04 2 0.08
last year.

11 Competitions price game in selected areas affects the smooth 0.07 2 0.14
atmosphere of competing with each other.

12 New entrants to the market with flavored/ vitamin water 0.07 3 0.14
products, packed with PET bottles.

13 Industry wise Cola sector leads by 53%, Orange 39% Lemon 0.06 3 0.18
7% and Tonic 1%. It is an opportunity to solidify in cola and
lemon sectors to gain more market share.

14 50 – 60% of low income groups pay is spent on food stuff, 0.05 3 0.15
which has an inflation rate of 32% now. While general inflation
is reported to have increased from 25 – 30%, putting much
pressure on disposable income of consumers.

Total 1.00 2.65

AS demonstrated in table 3:2 the total weighted scores have come up to 2.65 which are above
average of 2.5 indicating that the plant has more than an average ability to respond to the
changes in external factors. This is the representation of the current business conditions and

51
ABC is pretty comfortable in facing these external factors. This information can be obtained
from the following matric
4.2.2. Matching Stage: These tools rely upon information derived from the input stage to
match external opportunities and threats with internal strengths and weaknesses. Matching
external and internal critical success factors is the key to effectively generating feasible
alternative strategies.

The SWOT Matrix

The Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix is an important matching
tool that helps managers develop four types of strategies: SO (strengths-
opportunities)Strategies, WO (weaknesses-opportunities) Strategies, ST (strengths-threats)
Strategies,and WT (weaknesses-threats) Strategies.3 Matching key external and internal
factors is themost difficult part of developing a SWOT Matrix and requires good judgment—
and thereis no one best set of matches.

Table 7: SWOT Matrix Inside-Outside)

Strengths Weaknesses

Opprtunites S-O W-O

Maxi-Maxi strategy Mini-Maxi strategy

Offensive strategy Defensive strategy

Make the most of these Restore strengths

Threats S-T W-T

Maxi-Mini strategy Mini-Mini strategy

Strengthen strategy Survival strategy

Watch completion closely Turn around

SO Strategiesuse a firm’s internal strengths to take advantage of external opportunities.

SO Strategies. When a firm has major weaknesses;

52
WO Strategiesaim at improving internal weaknesses by taking advantage of external
opportunities. Sometimes key external opportunities exist, but a firm has internal weaknesses
that prevent it from exploiting those opportunities. For example, there may be a high demand
for electronic devices to control the amount and timing of fuel injection in automobile
engines (opportunity), but a certain auto parts manufacturer may lack the technology required
for producing these devices (weakness). One possible WO Strategy would be to acquire this
technology by forming a joint venture with a firm having competency in this area. An
alternative;

WO Strategy would be to hire and train people with the required technical capabilities.ST
Strategiesuse a firm’s strengths to avoid or reduce the impact of external threats. This does
not mean that a strong organization should always meet threats in the external environment
head-on.;

WT Strategiesare defensive tactics directed at reducing internal weakness and avoiding

external threats. An organization faced with numerous external threats and internal
weaknesses may indeed be in a precarious position.

TOWS Matrix Analysis

 TOWS matrix is just an extension of SWOT matrix.

 TOWS stand for threats, opportunities, weaknesses and strengths.

 Whereas a TOWS analysis will look to match internal factors to external factors to
help identify relevant strategic options that an organization could pursue.

 TOWS matrix illustrates how internal strengths and weaknesses can be matched with
external opportunities and threats to generate four sets of possible alternative
strategies.

Table 8: An example of TOWS matrix

Internal factors/
Strengths (S) Weaknesses (W)
External factors

Opportunities (O) SO (Strengths & Opportunities WO (Weaknesses & Opportunities)

strategies: strategies that use

53
 strengths to take advantage of strategies: strategies that
opportunities.
take advantage of opportunities by
over -coming weaknesses

ST (Strengths & Threats) WT (Weaknesses & Threats)

Threats(T) strategies: strategies that use strategies: strategies that minimize
strengths to avoid threats. weaknesses and avoid threats.

 SO Strategies: Strengths & Opportunities strategies are generated by thinking of

ways in which an organization can use its strengths to take advantage of opportunities.
This is the most desirable and advantageous strategy as it seeks to mass up the firm’s
strengths to exploit opportunities.

 ST Strategies: Strengths & Threats, strategies use an organization’s strength as a way

to avoid threats.

 WO Strategies: Weaknesses & Opportunities strategies attempt to take advantage of

opportunities by overcoming its weaknesses.

 WT Strategies: Weaknesses & Threats, strategies are basically defensive strategies

and primarily aimed at minimizing weaknesses and avoiding threats. For example,
managerial weakness may be solved by changing of managerial personnel, training
and development etc. Weakness due to excess manpower may be addressed by
restructuring, downsizing and delay ring and voluntary retirement schemes.

To generate a TOWS matrix, the following steps are to be followed:

1. List external opportunities available in the organization’s current and future
+environment, in the ‘opportunities block’ on the left side of the matrix.

2. List external threats facing the organization now and in the future in the “threats,
block” on the left side of the matrix.

3. List the specific areas of current and future strengths for the organization, in the
“strengths block” across the top of the matrix.

4. List the specific areas of current and future weaknesses for the organization in the
“weaknesses box” across the top of the matrix.

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 5. Generate a series of possible alternative strategies for the organization based on
particular combinations of the four sets of factors. The four sets of strategies that
emerge are:

A strategy which utilizes strength to take advantage of an opportunity are generally

referred to as "exploitative" or "developmental strategies".

Strategies which use strength to eliminate a weakness may be referred to as "blocking

strategies". Strategies which overcome a weakness to take advantage of an opportunity or
eliminate a threat may be referred to as "remedial strategies".

Group Exercises

1. Analysis your organization strategy by using SWOTS and TOWS matrix ( Time
Alowed 2 Hour)

SPACE Matrix.

The SPACE matrix is a strategic management tool used to analyze a company. It is used to
determine what type of strategy a company should undertake. The Strategic Position & Action
Evaluation matrix or short a SPACE matrix is a strategic management tool that focuses on
strategy formulation, especially as related to the competitive position of an organization. The
SPACE matrix can be used as a basis for other analyses, such as the SWOT analysis, BCG
matrix model, industry analysis, or assessing strategic alternatives (IE matrix). The SPACE
matrix is broken down into four quadrants where each quadrant suggests a different type or a
nature of a strategy, Aggressive, Conservative, Defensive, and Competitive

While the SPACE dimensions of the matrix are designed for private sector application, some
parallels can be drawn for public and non-profit organizations.

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The axes of the SPACE matrix represent two internal dimensions (financial strength and
competitive advantage) and two external dimensions (environmental stability and industry
strength

Figure 5: The SPACE matrix

The SPACE matrix

The steps required to develop a SPACE matrix are as follows:

1. A numerical value ranging from +1 (worst) to +6 (best) is assigned to each of the

variables selected to represent the financial strength and economic status dimensions.
2. A numerical value ranging from −1 (best) to −6 (worst) is assigned to each of the
variables selected to represent the environmental stability and competitive advantage
dimensions.
3. An average score is computed for each dimension by summing the values given to the
variables, and dividing by the number of variables included in the respective
dimension. For example, if the values assigned to the financial strength variables were
+1, +3, +4, and +5, the average score would be 13/4 = +3.25.
4. The two scores on the x axis are summed and the resultant point is plotted on X. The
two scores on the y axis are summed and the resultant point is plotted on Y. The
intersect of the new XY point then is plotted.
5. A directional vector is drawn from the origin of the matrix through the new
intersection point. This vector reveals the type of strategies recommended for the
organization.

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If, for example, competitive advantages are low (e.g., −4) compared to economic status (+2),
and financial strength (+5) outweighs environmental stability (−2), then the XY intercept
would be (−2, +3). The vector would point to the conservative quadrant, indicating an
organization that has achieved financial strength but without major competitive advantages

4.2.3. Decision Stage

The matching techniques discussed above reveal feasible alternative strategies, which need
to be examined and appropriate strategies selected for implementation. With the help of
techniques like QSPM (Quantitative Strategic Planning Model), the strategies can be
prioritized so that the best strategies could be chosen.

Steps to develop Quantitative Strategic Planning Matrix (QSPM)

Step 1: Make a list of the firm’s key external opportunities/threats and internal
strengths/weaknesses in the left column of the QSPM. This information should be taken
directly from the EFE Matrix and IFE Matrix. A minimum of 10 external critical success
factors and 10 internal critical success factors should be included in the QSPM.

Step 2: Assign weights to each key external and internal factor. These weights are identical
to those in the EFE Matrix and the IFE Matrix. The weights are presented in a straight
column just to the right of the external and internal critical success factors.

Step 3: Examine the Stage 2 (matching) matrices and identify alternative strategies that the
organization should consider implementing. Record these strategies in the top row of the
QSPM. Group the strategies into mutually exclusive sets if possible.

Step 4: Determine the Attractiveness Scores (AS), defined as numerical values that indicate
the relative attractiveness of each strategy in a given set of alternatives. Attractiveness Scores
are determined by examining each key[ external or internal factor, one at a time, and asking
the question, “Does this factor affect the choice of strategies being made?” If the answer to
this question is yes, then the strategies should be compared relative to that key factor.
Specifically, Attractiveness Scores should be assigned to each strategy to indicate the relative
attractiveness of one strategy over others, considering the particular factor. The range of
attractiveness Scores is 1 = not attractive, 2 = somewhat attractive, 3 = reasonably attractive,

57
and 4 = highly attractive. If the answer to the above question is no, indicating that the
respective key factor has no effect upon the specific choice being made, then do not assign
Attractiveness Scores to the strategies in that set. Use a dash to indicate that the key factor
does not affect the choice being made. Note: If you assign an AS score to one strategy, then
assign AS score(s) to the other. In other words, if one strategy receives a dash, then all others
must receive a dash in a given row.

Step 5: Compute the Total Attractiveness Scores. Total Attractiveness Scores are defined as
the product of multiplying the weights (Step 2) by the Attractiveness Scores (Step 4) in each
row. The Total Attractiveness Scores indicate the relative attractiveness of each alternative
strategy, considering only the impact of the adjacent external or internal critical success
factor. The higher the Total Attractiveness Score, the more attractive the strategic alternative
(considering only the adjacent critical success factor).

Step 6: Compute the Sum Total Attractiveness Score. Add Total Attractiveness Scores in
each strategy column of the QSPM. The Sum Total Attractiveness Scores reveal which
strategy is most attractive in each set of alternatives. Higher scores indicate more attractive
strategies, considering all the relevant external and internal factors that could affect the
strategic decisions. The magnitude of the difference between the Sum Total Attractiveness
Scores in a given set of strategic alternatives indicates the relative desirability of one strategy
over another.

Group exercises

Deplope the givien organization′s activity sstrategy weight score by using Internal –Extenal
(IE) Matrix and Quantitative Strategic Planning Matrix (QSPM) : Time Alowed 1 hour)

? Summary
Strategic analysis and choice is essentially a decision-making process. This involves
generating feasible alternatives, evaluating those alternatives and choosing a specific course of
action that could best enable the firm to achieve its mission and objectives. Alternative
strategies do not come from a vacuum. They are derived from the firm’s present strategies
keeping in view the vision, mission, objectives and also the information gathered from
external and internal analysis. They are consistent with or built on past strategies that have
worked well.

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Strategic choice is the decision to select from among the alternatives considered, the strategy
which will best meet the organizational objectives. This decision-making process comprises
four distinct steps: Focusing on a few alternatives, Analysing the Strategy, Evaluating the
alternatives, and Making the actual choice strategic Intent. The Strategic choice concept
encompasses an active management process that includes the organization’s attention on the
essence of winning strategy management goals.

Check List
Put a tick (✓) mark if you have understood or not about.

Subject Yes No
Focusing on strategic alternatives
Analysing the strategic alternatives
TOWS matrix
Evaluating the strategic alternative
Strategy choice

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SESSION FIVE : STRATEGY IMPLEMENTATION

INTRODUCTION

The true success of an organization depends upon an effective formulation and

implementation of strategies. Effective managers often work back and forth between strategy
formulation and strategy implementation. In this process, there is a need to understand the
concept of Strategic Business Units (SBUs) and functional level strategies. Likewise, there is
a need to be aware of the decisive prerequisites for strategy implementation, the basic steps to
follow and the application of reward or motivational systems for effective strategy
implementation.
This session is about strategy implementation and it is sub-divided into seven sections. The
first section presents the different features of strategy formulation and strategic
implementation. Section two discusses the prerequisites of strategy implementation such as:
institutionalization of strategy/ communicating strategy, developing proper organizational
climate, formulation of operating plans, developing proper organizational structure and
periodic review of strategy. Section three is about restructuring/matching organizational
structure to strategy which focused upon downsizing, organizational policies, procedures and
rules and organizational leadership. Section four is about the need to match organizational
culture to strategy in strategic implementation. Section five is dealing with the application of
reward or motivational systems for effective strategy implementation. Section six discusses
tactical guidelines in strategy implementation. Finally, section seven presents the five steps to
follow in strategy implementation process.
Session Objectives
Upon completing this training session, participants will be able to:

 Explain the key aspects of strategy implementation and its relationship to strategic
planning.
 Explain how strategies are activated.

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 List the seven factors in the 7s Model and, explain how they interact in strategy
implementation.
 Distinguish between the two basic types of operational plans.
 State the nature and barriers in strategy implementation
 Discuss the model of strategy implementation
 Describe the concept of resource allocation

5.1. Strategy Formulation and Implementation Process

Brainstorming Questions.
1. What do you mean by strategic implementation?
2. What is the difference between strategy formulation and strategy
implementation?

Obviously, strategy formulation is the first stage in strategic management. Strategy

implementation is the stage that demands participation of the entire organization. Formulation
of the strategies is mostly in the hands of the strategic management team, with the aid of
senior management and key employees. If strategy formulation tackles the "what" and "why"
of the activities of the organization, strategy implementation is all about "how" the activities
will be carried out, "who" will perform them, "when" and how often will they be performed,
and "where" will the activities be conducted.

Strategy Formulation is the development of long-range plans for the management of

environmental opportunities and threats, in light of the organizations strengths and
weaknesses.

Strategies formulated but not implemented serve no useful purpose. The successful strategy
formulation, does not guarantee successful strategy implementation. Even the most technically
perfect strategic plan will serve little purpose if it is not implemented. Change comes through
implementation and evaluation, not through the plan. A technically imperfect plan that is
implemented well will achieve more than the perfect plan that never gets off the paper on
which it is typed. The transition from strategy formulation to strategy implementation requires
a shift in responsibility from strategists to divisional and functional managers. The
organization should participate early and directly in strategy-implementation decisions.

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 In the context of strategic management, implementation is the process by which an
organization moves from the formulation of a strategic plan into the operations necessary
to achieve the specific objectives and strategies identified within the plan.

Strategy implementation is the process of turning plans into action to reach a desired
outcome.

Strategy implementation often is called the "action stage" of strategic management. Strategy
implementation is the sum total of the activities and choices required for the execution of
strategic plan by which strategies and policies are put into action through the development of
programs , budgets and procedures. Although implementation is usually considered after
strategy has been formulated, implementation is a key part of strategic management. Thus
strategy formulation and strategy implementation are the two sides of same coin. Strategy
formulation and implementation can be differentiated in the following ways:
Table 9: The difference between Strategy Formulation and Strategy Implementation

Strategy Formulation Strategy Implementation

 Strategy Formulation involved in developing  Strategy implementation involves all
organization‘s strategic goals and plans. those means related to executing the
strategic plans.
 Strategy formulation is placing the forces  Strategy Implementation is managing
before the action. forces during the action.
 Strategy formulation is an entrepreneurial  Strategic implementation is mainly an
Activity based on strategic decision-making. Administrative Task based on strategic
and operational decisions.
 Strategy formulation emphasizes on  Strategy implementation emphasizes on
effectiveness. efficiency.
 Strategy formulation is primarily an  Strategy implementation is primarily an
intellectual/ rational process operational process
 Strategy formulation requires good intuitive  Strategy implementation requires
and analytical skills special motivation and leadership skills
 Strategy formulation requires coordination  Strategy implementation requires
among a few individuals coordination among many individuals
 Strategy Formulation requires a great deal of  Strategy implementation requires
initiative and logical skills. specific motivational and leadership
traits
 Strategy formulation concepts and tools do not  Strategy implementation varies
differ greatly for small, large, for-profit, or substantially among different types and
non-profit organizations. sizes of organizations
 Strategic formulation precedes Strategy  Strategy implementation follows
Implementation. strategy Formulation.

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5.2. Prerequisites of Strategy Implementation

Mention some important issues which are important to implement organizational

strategy successfully?

Organizations implement strategies through creating budgets, programs and policies meet
financial, management, human resources and operational goals. Strategy implementation
involves translating formulated strategies into action. It entails moving from "planning your
work" to "working your plan". Strategy implementation involves: establishing short-range
objectives, budgets and functional strategies to achieve the strategy. Successful
implementation of strategy requires the following:

 Institutionalization of Strategy/ Communicating Strategy: First of all the strategy

is to be institutionalized, in the sense that the one who framed it should promote or
defend it in front of the members.
 Developing proper organizational climate: Organizational climate implies the
components of the internal environment that includes the cooperation, development of
personnel, the degree of commitment and determination, efficiency, etc., which
converts the purpose into results.
 Formulation of operating plans: Operating plans refers to the action plans, decisions
and the programs, that take place regularly, in different parts of the company. If they
are framed to indicate the proposed strategic results, they assist in attaining the
objectives of the organization by concentrating on the factors which are significant.
 Developing proper organisational structure: Structure is the sum total of the ways
in which the organization divides its labour into distinct tasks and then achieves
coordination between them. The structure breaks up the company’s work into well-
defined jobs, assigns these jobs to departments and people and coordinates these jobs
by defining formal lines of authority and communication. To implement a strategy, the
structure is to be designed as per the requirements of the strategy.
 Periodic Review of Strategy: Review of the strategy is to be taken at regular intervals
so as to identify whether the strategy so implemented is relevant to the purpose of the
organisation. As the organization operates in a dynamic environment, it is essential to
take a review, to know if it can fulfil the needs of the organization.

63
 The best-formulated strategies may fail if they are not implemented in an appropriate
manner. Moreover, an effective implementation of strategy is possible if and only if there is
an alignment between strategies and other elements like resource allocation, organizational
structure, work climate, culture and reward structure.

5.3. Restructuring/Matching Organizational Structure to Strategy

1. . Have you ever faced restructuring/ matching organizational structure to its

strategy?
2. Why matching organizational structure to the strategic plan is so important in the
implementation process of strategy?
Organizational structure is an established pattern of relationships among the component parts
of an organization. It is through the structure that the various parts of an organization are
interrelated or interlinked. Organization structure involves issues such as division of work
among various units or departments, and the coordination of activities to accomplish
organizational objectives... The structure may range from simple organizational structure to a
major complex one, matrix or network structure. The organization has to be designed
according to the needs of the strategy implementation. A firm must design a suitable structure
to undertake activities required to implement strategy

Types of Organizational Structure

Simple Structure: This referred to firms of small enterprises which are managed by the
founder. The entrepreneur makes all the important decisions and is involved in every detail
and phase of the organization. The strategies adopted may be of expansion type. The
advantages and disadvantages of this structure include:
Table 10: Advantages and Disadvantages simple structure

Advantages of this structure Disadvantages of this structure

64
 Since there is only one decision maker,
the decisions are taken faster.
 Quick and timely on the spot decisions
are taken depending on the environmental
changes and competition.
 These firms are very simple in nature. .
 These firms are very informal in nature
 Since the owner has to do nearly
everything. He concentrates so much on
day to day activities that major
expansion decisions are left pending.
 When the owner is on holiday or such
the firm's operations usually fall due to
lack of supervision.
 Excessive reliance on the owner.
 Future expansion only depends on the
owner's ability to invest money.

Functional Structure: The most widely used structure is the function type because this
structure is the simplest and least expensive of the seven alternatives. A functional structure
group tasks and activities by business function, such as production/operations, marketing,
finance/accounting, research and development, management information systems. A
university may structure, its activities by major functions that include academic affairs,
student services, alumni relations, athletics, maintenance, and accounting. Besides being
simple and inexpensive, a functional structure also promotes specialization of labour,
encourages efficient use of managerial and technical talent, minimizes the need for an
elaborate control system, and allows rapid decision making. The advantages and
disadvantages of this structure include:
Table 11: Advantages and Disadvantages Functional Structure.

Advantages of functional structure Disadvantages of functional structure

 The day to routine work is delegated to people,  Co-ordination between different
thus the owner/chief executive can concentrate departments is difficult. Everyone wants to
on strategic business decisions. work in watertight compartments. Line and
 Efficient distribution of work through staff departments usually conflicts.
specialization. Hence work is done faster.  This creates specialists which results in
narrow specialization.

The Divisional Structure: The divisional structure is the second most commonly used by
businesses. The functional structure may not work well for large firms with diverse product
lines. Managers managing diversified product lines need more decision making powers than
the top management is willing to provide to them. The company needs to move to a different
structure, i e, divisional structure. Each division is semi-autonomous and linked to the
headquarters but functionally independent. The divisional structure can be organized in one of

65
4 ways: Geographic area based structure, Customer-based Structure, Product - based structure
and Process based structure. The advantages and disadvantages of this structure include
Table 12: Advantages and Disadvantages divisional structure

Advantages of divisional structure Disadvantages of divisional structure

 Allows local control of local situations
 Creates career development chances
 Promotes delegation of authority
 Leads to the competitive climate internally
 Allows easy adding of new products or regions
 Allows strict control and attention to products,
customers, and/or regions
 Can be costly
 Duplication of functional activities
 Requires a skilled management force
 Requires an elaborate control system
 Competition among divisions can
 become as intense as to be dysfunctional
 Can lead to limited sharing of ideas and
resources
 Some regions/products/customers
 may receive special treatment

The strategic business unit (SBU) structure: In multidivisional organizations, an SBU

structure can greatly facilitate strategy implementation efforts. The SBU structure groups
similar divisions into strategic business units and delegates authority and responsibility of
each unit to a senior executive who reports directly to the chief executive officer. This change
in structure can facilitate strategy implementation by improving coordination between similar
divisions and channelling accountability to distinct business units. The advantages and
disadvantages of this structure include:
Table 13: The advantages and disadvantages of strategic business unit

Advantages of SBU structure Disadvantages of SBU structure

 This structure encourages the grouping  Company overheads increase duplication
of various functions which are required of work in each unit is also there.
for the performance of activities with  Policy inconsistencies between the
respect to a particular division. different divisions.
 Here the top management can
concentrate on strategic business
policies and decisions while the day to
day operations are conducted by those
in the lower rung of the ladder.
 This structure generates quick response
to environmental changes affecting the
businesses of different divisions.

The Matrix Structure: It uses two or more co-existing structures. It can combine project
organization with functional organization structure. A matrix structure is the most complex of
all designs because it depends upon both vertical and horizontal flows of authority and
communication (hence the term matrix). A matrix organization would seem desirable in a

66
multi-product, multi- Market Company. Such a type of structure is created by assigning
functional specialists, who normally work in a department in their area of specialization to
work on a special project or a new product or service. The advantages and disadvantages of
this structure include:
Table 14: The advantages and disadvantages of matrix structure

Advantages of the matrix structure Disadvantages of the matrix structure

 Individual specialists are assigned
where their talent is needed most.
 Fosters creativity because of pooling of
diverse talents.
 Provides good exposure to specialists in
general management
 Dual accountability creates confusion and
thus difficulty to individual team members
 This system is costly and conflicting
 There are questions about where authority
and responsibility should reside.
 shared authority creates communication
problem

Therefore, managers must, closely examine the way their company is structured in order to
decide what changes should be made in the way work is accomplished. This should be done
with consideration on the results to be delivered e.g. customer satisfaction, product
differentiation, lower costs, speed of delivery etc. Restructuring is achieved through:

1. Downsizing: it means lying off large numbers of managerial staff and other
employees. This is aimed at reducing levels of management and widening the span of
control to cut costs. Outsourcing: means obtaining work previously done by
employees inside the company. During restructuring certain activities may be seen as
not being strategically critical and may even be done more competently by other
outside businesses specializing in them.
2. Organizational Policies: Policies are directives designed to guide the thinking,
decisions and actions of managers and subordinates in implementing an organizational
strategy. Whenever strategic changes are made, it is necessary to review current
policies and determine whether they need to be modified.
3. Procedures and Rules: These differ from policies in degree of specificity. A
procedure is a series of related steps or tasks expressed in chronological order to
achieve a specific purpose. They specify in step-by-step fashion the manner in which a
recurring activity must be accomplished. Rules require that specific and definite
actions be taken or not taken with respect to a given situation. They permit no
flexibility and no deviation.
4. Organizational Leadership: Leadership is the ability to influence the attitudes and
opinions of others in order to achieve a coordinated effort from a diverse group of
employees. The assumption is that the style of managers influences their effectiveness
in carrying out particular strategies. Therefore the organization should be provided
with management skills required to cope with the consequences of constant change i.e.
operating managers to provide the operational leadership and vision

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 5.4. Matching Organizational Culture to Strategy

1. Have you ever faced matching organizational culture to its strategy?

2. Why matching organizational culture to strategic plan is so important in the
implementation process of strategy?

Organizational culture refers to the collective assumption and beliefs that pervade the
organization about how organizational operations should be conducted and how employees
should behave and should be treated. A strong culture makes activities predictable i.e.
management knows how employees will react in certain situations. Three basic considerations
should be emphasized by firms seeking to manage a strategy-culture relationship:
1. Key changes should be linked to the basic company mission.
2. Emphasis should be placed on the use of existing personnel where possible to fill
positions created to implement the new strategy because existing personnel possess the
shared values and norms that help ensure cultural compatibility as major changes are
made.
3. Attention should be made to the changes that are least compatible with the current
culture so that current norms are not disrupted.

5.5. Strategy and Reward/ Motivational Systems

Mention some of the motivational methods that managers are used in order
recognize or encourage the performance of employees.

Highly motivated employees can increase the likelihood that organizational strategies will be
successfully implemented. The organizational reward system is one of the most effective
motivational tools. The organizational rewards include all types of rewards both intrinsic and
extrinsic, which are received as a result of employment. Intrinsic rewards are such as
recognition, responsibility status, attention, advancement etc. Extrinsic rewards are external
and are provided by the organization and are such as adequate pay, allowances, insurance etc.

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 5.6. Tactical Guidelines on Strategy Implementation

When implementing the strategy, it is important to define and adjust clear guidelines for those
implementing the strategy. Typically, this process of task preparation and communication
involves what must be done, at what time and with what resources. Thus, task preparation and
communication in the process of strategy implementation is tied to planning. For successful
implementation of strategy, the managers of divisions and functional areas worked with their
fellow managers to develop programs, budgets and procedures for implementation of strategy.
They also work to achieve synergy among the divisions and functional areas in order to
establish and maintain a company‘s distinctive competence.
 Short-range objectives: Long-range objectives do not provide the detail necessary
to guide daily operations. Short-range objectives are more specific, usually focus
on a time frame of one year or less and are often quantifiable. One way to ensure
that short-range objectives are derived from long-range objectives is to use the
cascade approach.
 Programs: A program is a statement of the activities or steps needed to
accomplish a single use plan. The purpose of program is to make a strategy action
oriented.
 Budgeting/ Resource Allocation: Planning a budget is the last real check an
organization has on the feasibility of its selected strategy. It is a process by which
management specifies the resources to be employed to achieve the organization’s
objectives. When speaking of resource distribution in the strategy implementation
phase, three main components should always be considered: human resources,
financial resources and operational resources. Of course, the most important is the
distribution of financial resources. It also provides the means of measuring the
successful accomplishment of the stated objectives within a specified period.
 Procedures: Procedures are system of sequential steps or techniques that describe
in detail how a particular task or job is to be done.
 Monitoring and control:-The implementation of the strategy has to be monitored
(supervised) by periodically reporting the factual results of the implementation and
the changes in the environment.
 Reward and Incentive system Strategic leaders work in an ambiguous
environment very difficult issue. Strategic leaders make greater use of reward and
incentive system for encouraging productive and quality employees to show much

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 better performance for their organization.
Synergy: One of the goals to be achieved in strategy implementation is synergy between
functions and business units. The acquisition or development of additional product lines is
often justified on the basis of achieving some advantages of scale in one or more of a
company‘s functional areas.

5 .7. Steps in Strategy Implementation

Now days, what steps are being taken by your organization for the successful
implementation of its strategic plan

Once you have formulated the strategy and selected the best strategy to be implemented, stop
doing things the old way. Activities of the organization should be renewed so that they can be
relevant to the new strategy. Align budgets and performance: Each department of the
organization should manage their budgets so as to contribute to the strategic initiatives. Also,
the performance of the firm should be aligned closely to the selected strategy by placing
performance measures against strategic goals. Structure aligned to strategy: Ensure that the
organizational structure allows efficient and meaningful delivery of the strategy for
transformation to occur in the organization. An outdated organizational structure will hinder
the successful implementation of the new strategy. Engaging workers and critical
stakeholders: Employees and key stakeholders should be aware of their role towards the
attainment of the formulated strategy. Communicate the strategic vision again and again to
minimize resistance to its implementation. Involve all players and clarify expectations from
each individual. Monitor and adapt: The strategy should be flexible and adaptable to respond
to the ever-changing internal and external business environments. Performance and strategic
relevance should be reviewed regularly to ensure that the organization is on the right track.To
ensure an effective and successful implementation of strategies, it’s a good idea to have a
system to go about it. Take a look at the steps to ensure that happens.

Step #1: Evaluation and Communication of Strategic Plan: The strategic plan, which was
developed during the Strategy Formulation stage, will be distributed for implementation.
However, there is still a need to evaluate the plan, especially with respect to the initiatives,
budgets and performance. After all, it is possible that there are still inputs that will crop up
during evaluation but were missed during strategy formulation. There are several sub-steps to
be undertaken in this step:

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 a) Align the strategies with the initiatives. First things first, check that the strategies on
the plan are following the same path leading to the mission and strategic goals of the
organization.
b) Align budget to the annual goals and objectives. Financial assessments conducted
prior will provide an insight on budgetary issues. You have to evaluate how these
budgetary issues will impact the attainment of objectives, and see to it that the budget
provides sufficient support for it. In the event that there are budgetary constraints or
limitations, they must first be addressed before launching fully into implementation
mode.
c) Communicate and clarify the goals, objectives and strategies to all members of the
organization. Regardless of their position in the organization’s hierarchy, everyone
must know and understand the goals and objectives of the organization, and the
strategies that will be employed to achieve them.
Step #2: Development of an Implementation Structure: The next step is to create a vision,
or a structure, that will serve as a guide or framework for the implementation of strategies.
Accordingly,
a) Establish a linking or coordination mechanism between and among the various
departments and their respective divisions and units. This is mainly for purposes of
facilitating the delegation of authority and responsibility.
b) Formulate the work plans and procedures to be followed in the implementation of the
tactics in the strategies.
c) Determine the key managerial tasks and responsibilities to be performed, and the
qualifications required of the person who will perform them.
d) Determine the key operational tasks and responsibilities to be performed, and the
qualifications required of the person who will perform them.
e) Assign the tasks to the appropriate departments of the organization.
f) Evaluate the current staffing structure, checking if you have enough manpower, and if
they have the necessary competencies to carry out the tasks. This may result to some
reorganization or reshuffling of people. In some cases, it may also require additional
training for current staff members, or even hiring new employees with the required
skills and competencies. This is also where the organization will decide if it will
outsource some activities instead.
g) Communicate the details to the members of the organization. This may be in the form
of models, manuals or guidebooks.

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Step #3: Development of implementation-support policies and programs: Some call them
"strategy-encouraging policies" while others refer to them as "constant improvement programs.
Nonetheless, these are policies and programs that will be employed in aid of implementation.
a) Establish a performance tracking and monitoring system. This will be the basis of
evaluating the progress of the implementation of strategies, and monitoring the rate of
accomplishment of results, or if they were accomplished at all. Define the indicators
for measuring the performance of every employee, of every unit or section, of every
division, and of every department.
b) Establish a performance management system. Quite possibly, the aspect of
performance management that will encourage employee involvement is a recognition
and reward structure. When creating the reward structure, make sure that it has a clear
and direct link to the accomplishment of results, which will be indicated in the
performance tracking and monitoring system.
c) Establish an information and feedback system that will gather feedback and results
data, to be used for strategy evaluation later on.
d) Again, communicate these policies and programs to the members of the organization.
Step #4: Budgeting and allocation of resources: It is now time to equip the implementes
with the tools and other capabilities to perform their tasks and functions.
a) Allocate the resources to the various departments, depending on the results of financial
assessments as to their budgetary requirements.
b) Disburse the necessary resources to the departments, and make sure everything is
properly and accurately documented.
c) Maintain a system of checks and balances to monitor whether the departments are
operating within their budgetary limits, or they have gone above and beyond their
allocation.

Step #4: Budgeting and allocation of resources: It is now time to equip the implementers
with the tools and other capabilities to perform their tasks and functions.
a) Allocate the resources to the various departments, depending on the results of financial
assessments as to their budgetary requirements.
b) Disburse the necessary resources to the departments, and make sure everything is
properly and accurately documented.
c) Maintain a system of checks and balances to monitor whether the departments are
operating within their budgetary limits, or they have gone above and beyond their

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 allocation.

Step #5: Discharge of functions and activities: It is time to operationalize the tactics and
put the strategies into action, aided by strategic leadership, utilizing participatory management
and leadership styles. Throughout this step, the organization should also ensure the following:
a) Continuous engagement of personnel by providing trainings and reorientations.
b) Enforce the applicable control measures in the performance of the tasks.
c) Evaluate performance at every level and identify performance gaps, if any, to enable
adjusting and corrective actions. It is possible that the corrective actions may entail
changes in the policies, programs and structures established and set in earlier steps.

Group exercise

1. Suppose you are the head of a public sector organization. You have a decent amount of
money to spend, but not as many workers. How will you allocate your resources

 Summary
The true success of an organization depends upon effective formulation and implementation
of strategies. Strategy formulation and strategy implementation when depicted in a matrix
form suggests four probable outcomes of the four combinations of variables: Success,
roulette, trouble and failure. Designing sound organization structures would enable strategists
to accomplish the implementation of strategies in a proper way. There are four types of
organization structures. The five types of organizational structures that are commonly seen are
the simple, functional, divisional, strategic business unit (SBU) and matrix structures.

Depending on how the corporation is organized those who implements strategy will probably
be a much more divorced group of people than those who formulate it. Most of the people in
the organization who are crucial to successful strategy implementation probably had little to
do with the development of corporate and even business strategy. Therefore, they might be
entirely ignorant of vast amount of data and work into formulation process. This is one reason
why involving middle managers in the formulation as well as in the implementation of
strategy tends to result in better organizational performance.
Organizations seem to have difficulties in implementing their strategies. Researchers have
revealed a number of problems in strategy implementation: e.g. weak management roles in
implementation, a lack of communication, a lacking commitment to the strategy, unawareness

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or misunderstanding of the strategy, unaligned organizational systems and resources, poor
coordination and sharing of responsibilities, inadequate capabilities, competing activities, and
uncontrollable environmental factors. It is important for managers to understand and identify
the pitfalls and challenges that can occur during the process to improve the effective
implementation. To know which pitfalls can emerge could help to prevent them and can lead
to a more proactive approach.

 Check List

Put a tick (✓) mark if you have understood or not about.

Subject Yes No
1. Strategy Formulation and Implementation Processes
2. Prerequisites of Strategy Implementation
3. Types of organization Structures
4. Matching organizational cultural to strategy
5. Strategy and Reward/ Motivational Systems
6. Technical guidelines for strategy management.
7. Step of strategy implementation

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LESSON SIX: STRATEGIC EVALUATION AND CONTROL
INTRODUCTION
Strategic evaluation and control is the final phase in the process of strategic management. Its
basic purpose is to ensure that the strategy is achieving the goals and objectives set in the
strategy. It compares performance with the desired results and provides the feedback
necessary for management to take corrective action. According to Fred R. David, strategy
evaluation includes three basic activities: examining the underlying basis of a firm’s strategy;
comparing expected results with actual results and taking corrective action to ensure that the
performance conforms to plans. Strategic evaluation generally operates at two levels: strategic
and operational level. At the strategic level, managers try to examine the consistency of
strategy with the environment. At the operational level, the focus is on finding how a given
strategy is effectively pursued by the organization.

This lesson concerned with strategic control and evaluation and it is sub-divided into four
sections. The first section deals about nature of strategy evaluation and control. The second
section is about general control systems; the third section discusses the operational control
system. The final section of this training manual presents the techniques of strategic control
and evaluation.

General Objective of the Lesson

The general objective of this lesson is to enhance the skill, knowledge, and attitude of
participants towards the establishment nature of strategy evaluation and control, strategic
control, operational control, techniques for strategic control, role of organizational systems in
evaluation.

Specific Objectives of the Lesson

Upon the successful completion of this training lesson, participants should be able to:

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  State the nature of strategy evaluation and control
 Discuss the concept of operational control
 Explain the techniques for strategic control
 Identify the role of organizational systems in evaluation

6.1. Nature of Strategic Evaluation and Control

Strategic evaluation and control is defined as the process of determining the effectiveness of a
given strategy in achieving the organizational objectives and taking corrective actions
wherever required. According to Pearce and Robinson, strategic control is concerned with
tracking a strategy as it is being implemented, detecting problems or changes in its underlying
premises and making necessary adjustments. In contrast to post-action control, strategic
control seeks to guide action on behalf of the strategies, as they are taking place and when the
end result is still several years off. Strategic control systems , thus offer a framework for

tracking, evaluating or reorienting the functioning of the firm’s strategy.

6.1.1. Types of general control systems

1 Explaine types of General Control Systems

Basically, there are three types of general control systems:

1. Output control (i.e. control on actual performance results)

2. Behaviour control (i.e. control on activities that generate the performance)

3. Input control (i.e. control of resources that are used in performance)

Output Control: Output controls specify what is to be accomplished by focusing on the end
result. This control is done through setting objectives, targets or milestones for each division,
department, section and executives, and measuring actual performance. These controls are
appropriate when specific output measures haven’t been agreed on. Often rewards and
incentives are linked to performance goals..

Behaviour Control: Specify how something is to be done. This control is done through
policies, rules, standard operating practices and orders from superiors. These controls are the
most appropriate when performance results are hard to measure. Rules standardize the
behaviour and make outcomes predictable. If employees follow rules, then actions are

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performed and decisions handled the same way time and again. The result is predictability and
accuracy, which is the aim of all control systems. The main mechanisms of behaviour control
are: operating budgets, standard operating practices and rules and procedures.

Input Control: Input controls specify the amount of resources, such as knowledge, skills,
abilities, of employees to be used in performance. These controls are most appropriate when
output is difficult to measure.

6.1.2. Basic Characteristics of Effective Evaluation and Control System

can you metion basic characteristics of effective evaluation and control System?

Effective strategy evaluation systems must meet several basic requirements. They must be:

 Simple: Strategy evaluation must be simple, not too comprehensive and not too
restrictive. Complex systems often confuse people and accomplish little. The test of an
effective evaluation system is its simplicity not its complexity.
 Economical: Strategy evaluation activities must be economical. Too many controls
can do more harm than good.
 Meaningful: Strategy evaluation activities should be meaningful. They should
specifically relate to a firm’s objectives. They should provide managers with useful
information about tasks over which they have control and influence.
 Timely: Strategy evaluation activities should provide timely information. For
example, when a firm has diversified into a new business by acquiring another firm,
evaluative information may be needed at frequent intervals. Time dimension of control
must coincide with the time span of the event being measured.
 Truthful: Strategy evaluation should be designed to provide a true picture of what is
happening. Information should facilitate action and should be directed to those
individuals who need to take action based on it.
 Selective: The control systems should focus on selective criteria like key important
factors which are critical to performance. Insignificant deviations need not be focused.
 Flexible: They must be flexible to take care of changing circumstances.
 Suitable: Control systems should be suitable to the needs of the organization. They
must conform to the nature and needs of the job and the area to be controlled.

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  Reasonable: Control standards must be reasonable. Frequent measurement and rapid
reporting may frustrate control.
 Objective: A control system would be effective only if it is unbiased and impersonal.
It should not be subjective and arbitrary. Otherwise, people may resent them.
 Acceptable: Controls will not work unless they are acceptable to those who apply
them.
 Foster Understanding and Trust: Control systems should not dominate decisions.
Rather, they should foster mutual understanding, trust and common sense. No
department should fail to cooperate with another in evaluating and controlling of
strategies.
 Fix Responsibility for Failure: An effective control system must fix responsibility
for failure. x deviations would be meaningless unless one knows where they are
occurring and who is responsible for them. The control system should also pinpoint
what corrective actions are needed.

There is no ideal strategy evaluation and control system. The final design depends on the
unique characteristics of an organization's size, management style, purpose, problems and
strengths.

6.2. Strategic Control

1. What is Strategic control?

2. What are types of strategic control?

Strategic control is a type of “steering control”. We have to track the strategy as it is being
implemented, detect any problems or changes in the predictions made, and make necessary
adjustments. This is especially important because the implementation process itself takes a
long time before we can achieve the results. Strategic controls are, therefore, necessary to
steer the organization through these events.

6.2.1. Types of Strategic Control

There are four types of strategic controls such as: premise control, strategic surveillance,
special alert control and implementation control.

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 2. Premise Control: Strategy is built around several assumptions or predictions, which
are called planning premises. Premise control checks systematically and continuously
whether the assumptions on which the strategy is based are still valid. If a vital
premise is no longer valid, the strategy may have to be changed. The sooner these
invalid assumptions are detected and rejected, the better are the chances of changing
the strategy. The premise control is concerned with two types of factors,
environmental factors and industry factors.
a) Environmental Factors: The performance of an organization is affected by changes
in environmental factors like the rate of inflation, change in technology, government
regulations, demographic and social changes etc. Although the organization has little
or no control over environmental factors, these factors have considerable influence
over the success of the strategy because strategies are generally based on key
assumptions about them..
b) Industry Factors: Industry factors also affect the performance of an organization.
Competitors, services provider, customers ,etc. are some of the industry factors about
which assumptions are made. If any of these assumptions go wrong, the strategy may
have to be changed.
3. Strategic Surveillance: Strategic surveillance is a broad-based vigilance activity in all
daily operations both inside and outside the organization. With such vigilance, the
events that are likely to threaten the course of an organization’s strategy can be tracked.
4. Special Alert Control: Sudden, unexpected events can drastically alter the course of
the organization’s strategy. Such events trigger an immediate and intense
reconsideration of the organization’s strategy.

4. Implementation Control: Strategy implementation takes place as a series of steps,

programs and moves that occur over an extended period of time. Resources are allocated,
essential people are put in place, special programs are undertaken and functional areas initiate
strategy related activities. Implementation control is aimed at assessing whether the plans,
programs and policies are actually guiding the organization towards the predetermined
objectives or not. Implementation control assesses whether the overall strategy should be
changed in the light of the results of specific units and individuals involved in implementation
of the strategy. The two important methods to achieve implementation control are: monitoring
strategic thrusts and milestone reviews.

a) Monitoring Strategic Thrusts: Strategic thrusts are small critical projects that need to be
done if the overall strategy is to be accomplished. They are critical factors in the success of
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strategy. One approach is to agree early in the planning process on which thrusts are critical
factors in the success of the strategy. Managers responsible for these -implementation controls
will single them out from other activities and observe them frequently. Another approach is to
use stop/go assessments that are- linked to a series of these thresholds (time, costs, success
etc.) associated with a particular thrust.

b) Milestone Reviews: Milestones are critical events that should be reached during strategy
implementation. These milestones may be fixed on the basis of: critical events, major resource
allocations and time frames etc . Strategic controls are, thus, designed to systematically and
continuously monitor the implementation of the strategy over long periods to decide whether
the strategic direction should be changed in the light of unfolding events. However, for post-
action evaluation and control over short periods, the f organization needs operational controls.

6.3. Approaches to Strategic Control

Can you explaine traditional and contemporary approach strategic control systems?

6.3.1. Traditional Approach

Traditional approach to strategic control is sequential:

1. Strategies are formulated and top management sets goals

2. Strategies are implemented

3. Performance is measured against goals

4. Corrective measures are taken, if there are deviations.

Control is based on a feedback loop from performance measurement to strategy formulation.

This process typically involves lengthy time lags and often tied to an organization’s annual
planning cycle. This reactive measure is not sufficient to control a strategy. As already
explained, this is because a strategy takes a long period for implementation and to produce
results. The uncertain future requires continuous evaluation of the planning premises and
strategy implementation. There is a better contemporary approach for strategic control.

6.3.2. Contemporary Approach

Under this approach, adapting to and anticipating both internal and external environments
change is an integral part of strategic control. This approach addresses the assumptions and

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premises that provide the foundation for the strategy. The key question addressed here is: do
the organization's goals and strategies still fit within the context of the current environment?
This involves two key actions:

1. Managers must continuously scan and monitor the external and internal environment

2. Managers must continuously update and challenge the assumptions underlying the
strategy.

This may even need changes in the strategic direction of the organization. While strategic
control requires the contemporary approach, operational control is generally done through
traditional approach.

6.3.3. Operational Control

Operational control provides post-action evaluation and control over short periods.
They involve systematic evaluation of performance against predetermined objectives. The
major differences between strategic control and operational control are summarised in Table
below.

Table 15 : Differences between Strategic Control and Operational Control

Attribute Strategic control Operational control

“Are we moving in the right

Basic question “How are we performing?”
direction?”

Proactive continuous questioning Allocation and use of

Aim
of the basic direction of strategy organizational resources

“Steering” the organization's

Main concern Action control
future direction

Focus External environment Internal organization

Time horizon Long-term Short-term

Mainly by executives of
Exclusively by top management,
middle
Exercise of control may be through lower-level
level management in the
support
direction of top management

Environmental scanning, information Budgets, schedules and

Main techniques
gathering, questioning and review Management by Objectives

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To be effective, operational control systems, involve four steps common to all post-action
controls: set standards of performance, measure actual performance, identify deviations from
standards set and initiate corrective action.
a) Setting of Standards - The first step in the control process is setting of standards.
Standards are the targets against which the actual performance will be measured.
They are broadly classified into quantitative standards and qualitative standards.
Quantitative standards are expressed in physical terms in respect of services
delivered, costumers handling, budget allocation etc. They may relate to: time
standards, cost standards, service standards and budget allocation standards. On the
other hand, qualitative criteria are expressed in human factors such as high
absenteeism and turnover rates, poor services quality or low employee satisfaction.
b) Measurement of Performance: The second step in operational control is the
measurement of actual performance. Here, the actual performance is measured
against the standards fixed. Standards of performance act as the benchmark against
which the actual performance is to be compared. It is important, however, to
understand how the measurement of performance actually takes place.
Operationally measuring is done through accounting, reporting and communication
systems. There are several activities for which it is difficult to set standards and
measure performance..
 Timing of Measurement: Timing refers to the point of time at which measurement
should take place. Delay in measurement or measuring before time can defeat the very
purpose of measurement. So measurement should take place at critical points in a task
schedule, which could be at the end of a definable activity or the conclusion of a task..
 Periodicity in Measurement: Another important issue in measurement is “how often
to measure”, Generally, annual plan, annual performance report and quarterly
performance report are prepared every year. But there are certain reports like quarterly
reports, annual reports etc.
c) Identifying Deviations: The third step in the control process is identifying deviations.
The measurement of actual performance and its comparison with standards of
performance determines the degree of deviation or variation between actual
performance and the standard. Broadly, the following three situations may arise: the
actual performance matches the standards; the actual performance exceeds the
standards or the actual performance falls short of the standards.

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 The first situation (the actual performance matches the standards) is ideal, but
sometimes may not be realistic. Generally, a range of tolerance limits within which the
results may be accepted satisfactorily, are fixed and deviations from it are considered
as variance. The second situation (the actual performance exceeds the standards) is an
indication of superior performance. If exceeding the standards is considered unusual, a
check needs to be made to test the validity of tests and the measurement system. The
third type of situation (the actual performance falls short of the standards) which
indicates short fall in performance should be taken seriously and strategists need to
pinpoint the areas where the performance is below standard and go into the causes of
deviation.
 The analysis of variance is generally presented in a format called ‘variance chart’ and
submitted to the top management for their evaluation. After noting the deviations, it is
necessary to find the causes of deviation, which can be ascertained through the
following questions: Is the cause of deviation internal or external? Is the cause random
or expected?. And is the deviation temporary or permanent? Analysis of variance leads
to a plan for corrective action.
d) Taking Corrective Action: The last and final step in the operational control
process is taking corrective action. Corrective action is initiated by the
management to rectify the shortfall in performance. If the performance is
consistently low, the strategists have to do an in depth analysis and diagnosis to
isolate the factors responsible for such low performance and take appropriate
corrective actions. There are three courses of corrective action. These are checking
performance, checking standards and reformulating strategic plans and objectives.
 Checking Performance: Performance can be affected adversely by a number of
factors such as inadequate resource allocation, ineffective structure or systems, faulty
programmes and policies, motivational schemes, inefficient leadership styles, etc.,
Corrective actions may therefore include the change in strategy, systems, structure,
compensation practices, training programmes, redesign of jobs, replacement of
personnel, re-establishment of standards, budgets etc.
 Checking Standards: When there is nothing significantly wrong with performance,
then the strategist has to check the standards. A manager should not mind revising the
standards when the standards set are unreasonably low or high level. Higher standards
breed discontentment and frustration. Low standards make employee unproductive.

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 So, standards check may result in lowering of standards if it is concluded that
organizational capabilities do not match the performance requirements. It may also
lead to elevation of standards if the conditions have improved to allow better
performance. For example, better equipment, improved systems, upgraded skills, etc.
need modification in existing standards.
 Reformulating Strategies, Plans and Objectives: A more radical and infrequent
corrective action is to reformulate strategies, plans and objectives. Strategic control,
rather than operational control, generally leads to changes in strategic direction, which
will take the strategist back to the process of strategy formulation and choice.
Techniques like total quality management (TQM) and ISO 9000 standard series are
examples of very good control mechanisms.

what are techniques for strategic control?

6.4. Techniques for Strategic Control

Organizations use many techniques or mechanisms for strategic control. Some of the
important mechanisms are:
a) Management Information systems: Appropriate information systems act as an
effective control system. Management will come to know the latest performance in
key areas and take appropriate corrective measures.
b) Benchmarking: It is a comparative method where a firm finds the best practices in an
area and then attempts to bring its own performance in that area in line with the best
practice. Best practices are the benchmarks that should be adopted by an organization
as the standards to exercise operational control. Through this method, performance can
be evaluated continually till it reaches the best practice level. In order to excel, an
organization shall have to exceed the benchmarks. In this manner, benchmarking
offers firms a tangible method to evaluate performance.
c) Balanced scorecard: It is a method based on the identification of four key
performance measures i.e. customer perspective, internal business perspective,
innovation and learning perspective, and the financial perspective. This method is a
balanced approach to performance measurement as a range of financial and non-
financial parameters are taken into account for evaluation.
d) Key factor rating: It is a method that takes into account the key factors in several
areas and then sets out to evaluate performance on the basis of these. This is quite a

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 comprehensive method as it takes a holistic view of the performance areas in an
organization.
e) Network techniques: Network techniques such as Programme Evaluation and Review
Technique (PERT), Critical Path Method (CPM), and their variants, are used
extensively for the operational controls of scheduling and resource allocation in
projects. When network techniques, they become highly effective operational controls
for project costs and performance.
f) Management by Objectives (MBO): It is a system based on a regular evaluation of
performance against objectives which are decided upon mutually by the superior and
the subordinate. By the process of consultation, objective-setting leads with the
establishment of a control system that operates on the basis of commitment and self-
control. Thus, the scope of MBO to be used as an operational control is quite extensive

6.5. Role of Organizational Systems in Evaluation

There are six types of organizational system involved in evaluation.

I. Information System: Organizations evaluates by comparing actual performance with

standards. Purpose of information management system is to enable managers to keep
the track performance through control reports. Whether strategic surveillance are
based on information system to provide relevant & timely data to managers to allow
them to evaluate performance & strategy & initiate corrective action
II. Control System: The control system is the core of any evaluation process & is used
for setting standards, measuring performance, analyzing variances, & taking corrective
action.
III. Appraisal System: This is the system that actually evaluates performance. When
measuring the performance of managers, it is contributing to the organizational
objectives which is sought to be measured. The evaluation process through appraisal
system, measure the actual performance and provides for the control system to work.
IV. Motivation System: The primary role of the motivation system is to induce
strategically desirable behaviour so that managers are encouraged to work towards the
achievement of organizational objectives. This system plays an important role in
ensuring that deviation of actual performance with standards. Performance checks,
which are a feedback in the evaluation process, are done through the motivational
process.

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 V. Development System: The development system prepares the managers for performing
strategic & operational tasks. Among the several aims of development, the most
important is to match a person with the job to be performed. This in other words ,is
matching actual performance with standards. This matching can be done provided it is
known what a manager is required to do and what is deficient in terms of knowledge,
skills & attitude. Such a deficiency is located through the appraisal system. The role of
development systems in evaluation is to help the strategists to initiate & implement
corrective action.
VI. Planning System: The evaluation process also provides feedback for planning
systems for the reformulation of strategies, plans & objectives. Thus the planning
system closely interacts with the evaluation process on a continual basis.

Group Activities/ Exercises

1. If you were a strategist making , evaluation, what would you do if you find something
wrong though nothing is wrong with the performance?

 Summary

Strategic evaluation generally operates at two levels – strategic and operational level. At the
strategic level, managers try to examine the consistency of strategy with the environment. At
the operational level, the focus is on finding how a given strategy is effectively pursued by the
organization Strategic control is a type of “steering control”. We have to track the strategy as
it is being implemented, detect any problems or changes in the predictions made, and make
necessary adjustments. Operational control provides post-action evaluation and control over
short periods. They involve systematic evaluation of performance against predetermined
objectives.

Organizations use many techniques or mechanisms for strategic control. Some of the
important mechanisms are management Information systems, benchmarking, balanced
scorecard, key factor rating, network technique, Management by Objectives (MBO).

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If the need for evaluation was recognized from the outset, then a strategic evaluation will
ideally take place before the project begins delivering activities.

The purpose of evaluating causal connections between activities, outputs and outcomes, is
to explore whether or not the project’s assumptions about the likely outcomes and effects of
its activities and outputs are well-founded.

There are three fundamental strategy evaluation activities, viz. reviewing external and
internal factors that are the bases for current strategies; measuring performance and taking
corrective action.

 Cheek List

Put a tick (✓) mark if you have understood or not about.

Subject Yes No
Types of General Control Systems
Basic Characteristics of Effective Evaluation and Control
System
Types of strategic control
Approaches to Strategic Control
Operational Control
Techniques for Strategic Control
Role of Organizational Systems in Evaluation

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Dr. Anand Thakur. Guinea Nijhaywan, Lovely Professional University Strategic Management
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Dr .M.Neeraja, Professor (2018:Lecture note on Strategic Management.
Fred David (2014 and ( 2019) Books of Strategic Management Concepts and Cases, Global
Edition-Pearson Education Limited .
Strategic Analysis Tools, 2007Topic Gateway Series No. 34.
Stevens Maleka(2014): Chadalawada Ramanamama Engineering College. Strategic
Management and Strategic Planning Process, Research Journal.
Papulova, Z. (2014) The Significance of Vision and Mission Development for Enter- prises in
Slovak Republic. Journal of Economics, Business and Management, 2, 12- 17.

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