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STRATEGIC MANAGEMENT

1. Explain the evolution, role and importance of business policy and


strategic management. What would be the role of manager in this
age?

Introduction: The term strategic management has been traditionally used. New title
such as business policy, corporate strategy and policy, corporate policies is
essentially and extensively used which means more less the same concept.

Evolution of Strategic Management:


1) In early 1920’s and 1930’s the managers used day-to-day planning methods
to perform any task.
2) To anticipate the future, they tried using tools like preparation of budgets and
control systems like capital budgeting and management by objectives.
3) The techniques were unable to emphasize the future adequately.
4) The next step was they tried using long range planning which was replaced
by strategic planning and later by strategic management.
5) In mid 1930’s, according to the nature of business the planning was done
during Adhoc policy making.
6) As many businesses had just started operations and were mostly in a single
product line, there arose a need for policy making.
7) As companies grew they expanded their products and they catered to more
customer and which in turn increased their geographical coverage.
8) The expansion brought in complexity and lot of changes in the external
environment. Hence there was a need to integrate functional areas.
9) This integration was brought about by framing policies to guide managerial
action.
10) Policies helped to have pre-defined set of actions, which helped people to
make decision.
11) Policymaking was the owner’s prime responsibility.
12) Due to increase in the environment changes, in 1930’s and 40’s policy
formulation replaced ad-hoc policy making, which led to emphasis shifted to
the integration of functional areas in this rapidly changing environment.
13) Especially after II World War there was more complexity and significant
changes in the environment.
14) Competition increased with many companies entering into the market.
15) Policy making and functional area integration was not sufficient for the
complex needs of a business.

ROLE OF STRATEGIC MANAGEMENT: -

1) Due to increase in the competition, in 1960’s there was a demand for critical
look at the bane corrupt of business.
2) The environment played an important role in the business.

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3) The relationship of business with the environment lead to the concept of
strategy.
4) In early sixties, this helped the management to manage between the
business and the environment.
5) In early eighties, as many companies were globalised which lead to the
competition of the rivals access the world.
6) Japanese companies along with other Asian companies unleashed a force
across the world and posed a threat for the US and European companies,
which led to the current thinking.
7) Strategic management focused on 2 aspects: -
• Strategic process of business.
• Responsibilities of strategic management.

8) Unlike others, in this phase the role of senior management is vital and of
utmost importance. Their role was important in decision-making like -

a) Whether a company promotes a joint venture/new decision.


b) Decides to go for an expansion.
c) Takes other important actions.

8) All these actions and decision had a long-term impact on the company and
its future operations, which was the result of senior management decision-
making.
9) Strategic management is both about the present and future course of action,
which was the prime responsibility senior management.

Strategic Management is
I. The study of function and responsibilities of senior management
II. A crucial problem that affects success in total enterprise.
III. The decision that determine the direction of the organization and shape of its
future
IV. Identity and molding of its character
V. Mobilisation and their allocation of the resources.

Hence as managers had variety of choices, decisions were based on the


circumstances, which would take the company in specified directions.

IMPORTANCE AND ROLE OF MANAGERS IN STRATEGIC MANAGEMENT: -

I. Strategic management integrates the knowledge and experience gained in


various functional areas.
II. It helps to understand and make sense of complex interaction in various
areas of management.
III. It helps in understanding how policies are formulated and in creating
appreciation of complexities of environment that the senior management
faces in policy formulation.

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IV. Managers need to begin by gaining an understanding of the business
environment and to in control.

Here are few steps Indian managers need to do.


a) They should know to manage and understand information technology,
which is changing the face of business.
b) As public and common investors own and more companies managers
need to acquire skills to maximize shareholder value.
c) To have/take a strategic perspective, managers should foresee the
future and track changes in customer expectation. Intuitive, logic
reasoning is required for proper decision-making.
d) Successful companies depend on people. For people, management
managers should create capability for imitating and manage things
through leadership and should possess qualities like patience,
commitment and perseverance.
e) Managers need to provide speed responses to environmental changes
through informational systems and organizational process.
f) As corporates are becoming more integrated with the public life,
corporate governance is becoming important which manager may
have to practice.
g) Managers should learn to deal with confused and complex situations.
They should know to deal with global managers, business protocols
and market conditions.
h) In complex and certain situations, managers should have the courage
in decision-making to make unconventional decisions.
i) Managers should possess high ethical standards in business and focus
on social responsibility.

Conclusion
Thus we can say the purpose of strategic management is manifold. To be
successful in the business one should possess/have holistic approach and should
know to integrate the knowledge gained in various functional area of management.
By having generalistic approach, a senior manager can understand the complex
inter linkages operating within the organisation and should have systematic
approach in decision-making in relation with the changes which takes place in the
environment.
Q2. What is strategy? At what levels is it formulated?

INTRODUCTION: -

To understand the process of strategic management the concept should be


understood and controlled. The term strategy is derived from the Greek word
“STRATEGOS”  Generalship. The actual direction of military force, as distinct from
governing its deployment. The word strategy means “ THE ART OF GENERAL ”.
Based on the studies and views by various experts and management gurus
Strategy in business has taken various connotations.

STRATEGY:

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1. Before making a decision managers have to look into the course of deciding
since
Strategy involves situations like

a) How to face the competition.


b) Whether to undertake expansions/diversification
c) To be focused/ broad based
d) How to chart a turn around
e) Ensuring stability/should we go in for disinvestments etc

2. An establishment and successful company would start to face new threats in


the environment. This is due to its success and emergence of new
competitors. It has to rethink the course of action it has been following. This
is called strategy.
3. With such rethinking and environment analysis, new opportunities may
emerge and be identified.
4. To make use of these opportunities, the company might fundamentally
rethink and reason the ways and means, the actions it had been following in
the past. These are called “ strategies “.
5. For a company to survive and to be successful strategy is one of the most
significant concepts to emerge in the field of management. According to
Alfred chandler the determination of basic long-term goals and objectives of
an enterprise and the adoption of the course of action and the allocation of
resources for carrying out these goals.
William Gluck defines strategy as “a unified, comprehension and integrated
plan designed to assure that the basic objectives of the enterprises are
achieved”.
6. Michael Porter views strategy as the “ core of general management is
strategy”.
Managers must make companies flexible, respond rapidly, benchmark the
best practices, outsource aggressively, develop core competencies; Infact
should know how to play new roles everyday. Hyper competition is a common
phenomenon that rivals copy very fast.
7. Companies can outperform rivals only if it can establish a difference it can
preserve and deliver greater value at a reasonable cost.
8. Strategy rests on unique activities –“ The essence of strategy is in the
activities – choosing to perform things differently and to perform different
activities than rivals”.
9. Strategy is long term. If company focus is only on operational effectiveness.
It can become good and not better. Overemphasis on growth leads to the
dilutions of strategy. Growth is achieved by deepening strategy.
10. Strategy is the future plan of action, which relates to the companies
activities and its mission/vision i.e. when it would like to reach from its
current position.
11. It is concerned with the resource available today and those that will be
required for the future plan of action. It is about the trade off between its
different activities and creating a fit among these activities.

LEVELS OF STRATEGY:

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1. When a company performs different business/ has portfolio of products, the
company will organize itself in the form of strategic business units (SBU’s).
2. In order to segregate different units each performing a common set of
activities, many companies are organized on the basis of operating
divisions/decisions. These are known as strategic business units.

CORPORATE LEVEL

FUNCTIONAL LEVEL STRTEGIES [CORPORATE]

SBU1 SBU2 SBU3 (SBU LEVEL)

FUNCTIONAL LEVEL STRATEGIES


3) Strategies are looked at
 Corporate level
 SBU level
4) There exists a difference at functional levels like marketing, finance, productions
etc. Functional level strategies exist at both corporate and SBU level. It has to be
aligned and integrated.
5) CORPORATE LEVEL STRATEGY: It’s a broad level strategy and all its plan of
actions is at corporate level i.e. what the company as a whole. It covers the various
strategies performed by different SBU’s. Strategies needs should be in align with
the company objective.
6) Resources should be allocated to each SBU and broad level functional strategies.
To ensure things there would need to have co-ordination of different business of the
SBU’s.
FUNCTIONAL STRATEGY: As the SBU level deals with a relatively. Smaller area that
provides objectives for a specific function in that SBU environment are marketing,
finance, production, operation etc.
7) For most companies strategies plans are made at 3 levels.
a) FUNCTIONAL STRATEGY
b) SOCIETAL STRATEGY
c) OPERATIONAL STRATEGY

Societal Strategy: Larger Companies like conglometers with multiple business in


different countries needs larger level strategy.
1) A relatively smaller company may require a strategy at a level higher than
corporate level.

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2) It’s how the company perceives itself in its role towards the society/ even
countries in terms of vision/ mission statement/ a set of needs that strives to
fulfill corporate level strategies are then derived from the societal strategy.

Operational Level Strategy:


In the dynamic environment & due to the complexities of business strategies are
needed to be set at lower levels i.e. one step down the functional level, operational
level strategies.
There are more specific & has a defined scope. E.g. Marketing Strategy could be
subdivided into sales Strategies for different segments & markets, pricing,
distribution etc.
Some of them may be common & some unique to the target markets.
It should contribute to the functional objectives of marketing function. These are
interlinked with other strategies at functional level like those of finance, production
etc

MISSION/VISION LEVEL

CORPORATE LEVEL

FUNCTIONAL LEVEL STRTEGIES [CORPORATE]

SBU1 SBU2 SBU3 (SBU LEVEL)

FUNCTIONAL LEVEL STRATEGIES

OPERATIONAL LEVEL

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Corporate level is divided from the societal level strategy of a corporation
S.B.U Level are put in to action under the corporate level strategy.
Functional Strategies operate under SBU Level.
Operational Level is derived from functional level strategies

Conclusion:

These are the levels at which strategies are formulated

3) What are the Issues in Strategic Decision Making? Explain the role
of Various Strategies.

Issues in Strategic Decision Making

1. While making a decision the company might have different people at


different periods of time.
2. Decision requires judgments; a personal related factors are important in
decision-making. Hence decision ma y differs as person change.
3. Decisions are not taken individually, but often there is a task in decisions
which could be Individual Vs Group decision making. There will be a
difference between the individual and group decision-making.
4. On what Criteria a company should make its decision, for evaluation of the
efficiency & effectiveness of the decision making process, a company has to
set its objectives which serves as main bench mark.
5. 3 Major Criteria in decision Making are
a. The concept of Maximization.
b. The concept of satisfying.
c. The concept of incrementalism.
Based on the concept chosen the strategic decisions will differ.
6. Generally decision-making process is logical and there will be rationality in
decision-making.
7. When it comes to Strategic decision making point of view there would be
proper evaluation & then exercising a choice from various available
alternative resource, which leads to attain the objectives in a best possible
way.
8. Creativity in decision-making is required when there is a complete situation
& the Decision taken must be original & different.
9. There could be variability in decision-making based on the situation &
Circumstances.

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Various Roles of Strategic Management.

Senior management plays n important role in Strategic Management.

Role of Board Of Directors: Board of Directors is the supreme Authority in a


company. They are the owners/ shareholders/ lenders. They are the ones who direct
and responsible for the governance of the company. The Company act and other
laws blind them and their actions & they sometimes do get involved in operational
issues. Professionals on the B.O.D help to get new ideas, perspectives & provide
guidance. They are the link between the company and the environment.

Role of C.E.O: Chief Executive Officer is the most important Strategist and
responsible for all aspects from formulations/Implementation to review of Strategic
Management. He is the leader, motivator & Builder who forms a link between
company and the board of directors and responsible for managing the external
environment and its relationship.

Role Of Entrepreneur: They are independent in thought and action and they set /
start up a new business. A Company can promote the entrepreneurial spirit and this
can be internal attitude of an organization. They provide a sense of direction and
are active in implementation.

Role of Senior Management: They are answerable to B.O.Directors & The C.E.O
as they would look after Strategic Management a responsible of certain areas /
parts of terms.

Role of SBU – Level Executives: They Co-ordinate with other SBU’s & with Senior
Management. They are more focused on their product / burners line.
They are more on the implementation role.

Role of Corporate Planning Staff: It provides administrative support tools and


techniques and is a Co-ordinate function.

Role of Consultant: Often Consultants may be hired for a specified new business
or Expertise even to get an unbiased opinion on the business & the Strategy.

Role of Middle Level Managers: They form an important link in strategizing &
Implementation. They are not actively involved in formulation of Strategies and
they are developed to be the future management.

Conclusion: These are the issues in strategic decision-making and the role in
Strategic Management.

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4) What is Strategic Management Process? Explain each step briefly.

Here are few definitions of Strategic Management Process.


1) According to Glueck it’s a stream of decisions and actions that lead to the
development of an effective strategy/ Strategies to help achieve Corporate
Strategies.
2) According to Hofer it’s the process, which deals with fundamental
Organisational, renewal & growth with the development of strategies,
Structures and Systems necessary to achieve such renewal and growth and
with the organizational systems needed to effectively manage the strategy
formulation and implementation process.
3) Ansoff defines it as “ The Systematic approach & important responsibility of
general management to position and relate the firm to its environment in a
way that will assure its Continued Success and make it secure from
surprises”.
4) Sharplin defines as the formulation & implementation of plans and Carrying
out activities related to the matters, which are vital, and of continuing
importance to the total organization.
5) According to Harrison & St John – Strategic Management is the process
through which organization learn from their internal & external environment,
establish strategic decision create strategies that are intended to help
achieve establish goals & execute there strategies achieve Establish goals
and execute there Strategies all in an effort to satisfy key organizational
stake holders.

COMPANY VISION &MISSION/ REQUIREMENTS


OF MAJOR STOCK HOLDERS STRATEGIC
INTENT

EXTENAL & INTERNAL ANALYSIS /


SWOT ENVIRONMENT ANALYSIS

DEFINE STRENGTHS/WEAKNESS/ CORE


COMPENTENCIES

GENERATE STRATEGIC ALTENATIVES/


EVALUATE & SELECT

IMPLEMENT/ FEEDBACK/CONTROL

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From the above block diagram it states that Strategic Management is a process,
which leads to the formulation of Strategy/ Set of Strategies & managing thru
Organisational System for the achievement of Vision, Mission Goals and
Objectives.

Company Vision / Mission

1) Company Vision is What a Company Wishes to become or aspire to be.


2) Company Mission is what the Company is and why it exists
3) James Parras & James Collins divides Vision/Mission into 2 Parts.

Vision/ Core Ideology Core Values


Core Purpose

Mission Envisioned Future Audaclous Goals


Vivid Description

Core Ideology: Is the unchanging part of organization. It is the character of an


organization, this would not change for a longer time even it were disadvantage.
Core Values : what it believes in.
Core Purpose: Existence of Organization and that goes far behind

Envisioned Future: Are the goals to be reached.


It is classified into:
Audaclous Goals: These are the goals that the company would like to achieve. They
are tough needs extraordinary commitment and effort.
Vivid Description: These Goals are put into words that evoke a picture of what it
would be like to achieve the Audaclous Goals.

SWOT Analysis: External & Internal Analysis:


1. The External Environment is made up of all the Factors, Conditions &
influences outside the organizations.
2. it gives rise to opportunities which can be exploited or it may give rise to
threats which can weaken / cause problem to the organization.

STRENGTHS/WEAKNESS/CORE COMPETENCIES

Strengths: it’s always in relation to the environment. It’s an unborn capacity, which
needs to fulfill two conditions.
1) Requirement for success.
2) It gives the Strategic Advantage.
It has strengths more than the competitor; it could gain more than the Competitor.
E.g. Superior research where new products & Innovations are required.

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Weakness: It’s something required for success is missing/inherent inadequacy. It
gives strategic disadvantage to the Organisation.
E.g. Over dependence on a single product line in a mature market.

Core Competencies: Is developed over a period of time, using these competencies


exceeding well, it develops a fine art of Competition with its rules. This capacity of
exercing turns them to core competencies.

General Strategic Alternatives / Evaluate & Select.


It means that there is a proper evaluation and exercing a choice from various
alternative available resources in such a way it may lead to the achievement of
company’s objective.

Implement / Feedback/ Control


Implementation is the responsibility of CEO. He is responsible from implementation
to review of Strategic Management.

5) Explain Strategic intent, stretch leverage & Fit.

Introduction: for an effective strategic intent one has to develop effective strategy,
rather than focusing at the resourcefulness of Competition & their pace at which
they are building competencies one has to focus on existing position.

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Strategic Intent is something more than the unfettered ambition. It’s not a soft
target. According to Prahlad & Gray

1) It forsee’s a desired leadership position and establishes the criteria the


organization will chart it’s progress.
2) It Captures the essence of winning & is stable over time.
3) It requires personal effort, Commitment and bit of luck to achieve the target.
4) The Important thing that a company asks for is not “How Well Next Year be
different”? But they ask, “ What must we do differently next year to get
closer to our strategic intent?”
5) Most companies look at change and innovations in isolation
6) Innovations come from everywhere & top Management role is to add value to
it.
7) Strategic intent leaves room for creativity, innovation & top Management
directs it.
8) There must be a balance between resources as a Constrain Vs Resource as
leverage so as to reduce risk. Former is done through building a balanced
portfolio of cash generating and cash consuming business and in the latter a
well balanced and sufficiently broad portfolio/ collection of advantages is
assured.
9) It implies a seryable stretch for an organization.
10) Since the current capabilities & resources are not------- it will force
inventiveness and the management will keep on involving challenges and
they give time to digest one challenge before launching another.
11) One important parameter is reciprocal responsibility - Which means equal
blame & credit for both operating levels & top management.
12) Companies with good strategic intent know the importance of documenting
failure but instead of blame fixing and nailing people they are more
interested in the management reasons and the orthodoxy, that may have led
to future.

Stretch: To Achieve strategic intent one has to stretch forward and has to look at
the resourcefulness instead of looking at resources. One has to make use of
Innovation and resources. Stretch leads to leverage.

Leverage: Refers to concentrating on the resources to achieve strategic intent,


accumulating, learning, experiences & Competencies in a manner to meet the
aspirations by stretching the scarce resource that an organizational resource to the
environment.
Instead of allotting the competitors blindly & taking their head companies must
leverage the resources.

Fit: Strategic fit is the traditional way of looking at strategy. Strategic fit is
conservative and seems to be more realistic but u may not be aware of the
potential. Under stretch & leverage Strategic extent could be impossible, idealistic
but under fit strategic something far beyond possibilities and look at the potential
possibilities.

Conclusion.

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Thus Strategic intent is what the organization strives for e.g. Canon wanted to beat
Xerox. It’s an obsession to an organization & it is to win at all levels of the
organization, sustaining that obsession is in quest for global leadership.

6) Write a detailed note on Goals and Objectives.

Goals: - Goal – Target


a) It’s a target that a company wants to achieve in a future period of time.
b) An organization sets a combination of goals, which might be Qualitatively,
Quantitative, and Financial & Non Financial. These Goals must be clear and
unambiguous.
c) On an organizational level goals are broad in nature and they could set goals
on turnover, profits, returns on assets/equity, market share, Customer
satisfaction, Employee satisfaction.
d) Goals should be limited, manageable, and clear& Consistent with each other,
otherwise it may lead to confusion & Contradictions.
e) Goals may be Qualitative, Quantitative in specification.

Objectives:
a) Objectives are the ends that specify how the goals shall be achieved.
b) They are concrete and specific and they are in contrast with the goals.

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c) Objectives make the goals operational and tend to Quantitative in
specifications.
d) Objectives are set in a way that what the organisation has to achieve for its
employees, shareholders, customers etc.,
e) Objectives are in relation with the environment. They are the brains of
Strategic Decision Making.
f) They are framed in line with the vision/mission of the organization and it
helps to pursue them.
g) Objectives are invariably Quantitative and provide clear measures and
standards for performance.
h) It helps to see whether the Organisation is in right track or not.
i) Objectives should be concrete, specific, and understandable & should have
clearly defined time frame.
j) It must be measurable, actionable, challenging but controllable.
k) There must be co-relation with other objectives.
l) While setting objectives these are the factors to be evaluated. It should be
specific at the level, which it is being set. It should not be either too narrow
or too broad.
m) There need to be multiplicity of objectives.
n) It should be formulated at different time frames like short term, medium
term, and long term & should be linked & consistent.
o) Since its in relation with the environment it needs to check whether they are
fulfilling the needs of customers, share holders etc.,
p) It should be In reality with the organizational resources and internal
constraints, including policies & lower relationship.

Conclusion:Thus an organization is set up to make Prompt and Accurate decision.


Hence goals & objectives are set for the accomplishment of an organization.

7) What is Environment ? How is it Changing?

Introduction : -
Environment means the surrounding. It includes both internal and external objects,
factors & influences under which someone/something exist.

Environment :

1) The Environment of an organization is the aggregate/total of all conditions


events that influences itself & it’s Surroundings,
2) The dynamic & has relationships with each other.
3) The factors in environment may affect the company and visa versa.
4) It has a great impact on the company.

Environment – Changes:

According to Michael Hommer and James Chapey.

1) An Organisation must be flexible enough to adjust quickly with this changing


environment.

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2) The Efficiency of the company comes at the expenses of the efficiency of the
company as a whole.
3) It requires co-operation & Co-ordination within the organization.
4) Few Companies are rigid, non-competitive, inefficient and losing money
because they are not able to adjust themselves with the changing
environment.
5) In 1776 Adam Smith described in his book, “The Wealth of Nations.” The
Principle of division of labour for increasing the productivity and there by
reducing the cost of goods. American Companies became best in the world
after applying the principles.
6) But in today’s world, nothing is constant or predictable & these principles
don’t work.
7) Market growth, customer demand, the rate of technological change, and
nature of competition keeps changing.
8) The three forces that drives company are
Customers
Competition &
Change.
Customers : Earlier days, Customers had little choice they used to buy the product
that was offered to them. These days customers come with more specifications and
they demand for customized products and they want individual attention. Hence
customers have upper hands these days. It’s difficult for an organization to survive
in the long run unless they satisfy customers needs.

Competition : As many companies emerges, the competition rises. They offer good
quality of products at lesser price and consumers prefer such products. Earlier the
company could get into market with an acceptable product/service at the best price
would go to sell. But these days customers prefer high quality at lowest price. The
Company, which offers these at best price, goes high quality and best service
becomes standard of all the competitors.

Changes : Changes has become both pervasive and persistent because companies
face a greater competitors and each one introduces a product and service
innovation to the market with the globalisation of the economy. Hence the
companies need to move fast in pace with the changing environment otherwise it’s
difficult to move.

CONCLUSION: In today’s environment nothing is constant and predictable hence for


a company to survive in the long run, it has to satisfy customer needs and cope
with the changes in the environment at a faster rate.

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Q8) Explain the process of SWOT analysis? Elaborate what you would
study in the environment?

INTRODUCTION

The external environment is made of factors, conditions that influences


outside the organization. The external environment gives rise to
opportunities, which can be accomplished, or it may cause problems to
the organization.

SWOT ANALYSIS:

The internal environment refers to all factors within the control of and within the
organization. These factors may impart strengths that can be utilised by the
organization or cause weakness, which becomes threat to the organization.

S – Strength O- Opportunity
W – Weakness T – Threats

Strength: –It is an inherent capacity that is in relation to the environment. For an


organization to be a success it requires strength and it gives strategic advantage to
gain more than the competition.
E.g. Innovation and new products are required for superior research and
development facilities.

Weakness: - It is an inherent inadequacy that is again in relation to the


environment. It gives strategic disadvantage and something that required for
success is missing. It leads to competition where weakness can be used to gain
more due to inherent limitation / constraint/inadequacy.
E.g.1) In a mature market over dependence on a single product line.

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2) Lack of capabilities for the development of new product, which is potentially
risky for a company during the time of crisis.

OPPORTUNITY: can be accomplished and can help to consolidate and strengthen the
organization. It’s a favorable condition for an organization in its environment.
E.g. Due to better GDP growth a company provides increase in demand for the
products/services. It helps in strengthening its position.
THREATS: when the opportunities are not utilized properly it can cause problem to
the to the organization which causes threat. It is unfavorable condition for the
organization. It causes risk/damage to an organization.
E.g. Due to opening up of economy, the emergence of multinational companies,
which are stronger and has good resources, offers stiff competition to the existing
companies in an industry.

CONCLUSION

An understanding of both internal and external environment in terms of


opportunities, threat, strength, weaknesses important for existence, growth and
profitability of an organization. A systematic approach and understanding the
environment is SWOT analysis all about.

Environment to be studied

1) Events: Is some specific occurrence that takes place in different


environmental sectors. E.g. Bilateral agreement between 2 countries in
which the company is operating and facing competition from local
companies.
2) Trends: is the way the environment is shaping up. They are he course of
action along which events take place like global warming, nuclear families
etc.
3) Issues: are the current concerns that arise in response to events and trends.
E.g. Pollution Control, Business ethics after scams.
4) Expectations: are the demands made by interested groups in light of their
concern. Like corporate governance, greater transparency, stricted auditing
norms.

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Q9. What are the core competencies and organization capabilities?

CORE COMPENTENCIES:
1) An organization with its resources and the capacity of converting the
resources in to outputs and the behaviour of there (i.e. capability and
resources) develops certain strength and weakness, which their combined
lead to synergistic effects.
2) Synergy – Total (is greater) sum of the parts. In terms of organizational
competencies it manifest themselves in advantages over competition.
3) Competencies develop over a period of time.
4) It’s a fine art of competing with its rivals over a period of time and it uses
these competencies to exceed well. The capability of using these
competencies to exceed well turns them into core competence.
5) Core competencies have joined greater currency and popularity as per C.K
Prahaled and Gary Hamel. It’s a portfolio of products/services/different
business.
6) In short run competencies for a company is derived from the price
performance and in longer run it’s the ability to build at lower cost and
speedily than others.
7) A diversified company is like a large tree. What are not easily visible and
apparent – are the core products and leaves, flowers, fruits are the end
product.
8) Root is akin to “Core Competence”.
9) Core competence is communication, collective learning and co-ordination of
diverse production skills and deep involvement and commitment to work and
delivery of value across all levels and functions.
10) Core competencies are the glue that binds existing business and guide
market entries instead of market attractiveness.
11) Core competencies can be identified by conducting 3 tests i.e provides
potential access to wide variety of markets and significant contributions to
the benefit of the end product difficult for competitors to imitate.
12) Building competencies are not sharing costs by SBU’ (or) out pending rivals
on R and D
13) By not building competencies in emerging markets you may lose the chance
of competing in existing markets.
It’s important to maintain the competencies even it not active in the market.

ORGANISATIONAL CAPABILITY: -

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1) It’s the inherent capacity of an organization to use its strengths and
overcome weakness to exploit opportunities and face threats in the external
environment.
2) It’s comparable & it’s very difficult to measure the capability of an
organization.
3) Strategist would like to know what capacity exist within the organization &
what potentials should be developed so that opportunities can be exploited &
how it can face threats.
4) Organisational capability includes Financial, Marketing, Operations,
Personnel, and Information Management & General Management.

Financial Capability:

1) Source of Funds – How well the company can raise funds, their cost &
availability.
2) Management & use of funds – how optimally it utilizes the funds where and
how they are used.
3) Factor governing marketing capability are the from P’s i.e. Product, Price
Place & Promotion related factors how it generates systematically.
4) Factors influencing personal capability are R & D System, production &
Control Systems.
5) Factors leading to personal Capability are industrial & personnel relations,
organizational & employees Characteristics.
6) Factors that lead to information management capability are integrative,
systematic & supportive factors.

The retrieval, usage, Acquisition, processing, synthesis, transmission &


dissemination of information.

General Management methods & Techniques.


To carry at the organizational study internal analysis tools can be used as
mentioned below.

1) Value Chair Analysis


2) Qualitative & Quantitative analysis both financial non financial.
3) Comparative analysis, bench marking, industrial norms.
4) Comprehensive Analysis using new tools Balance score card/key factor
making.

Conclusion: These are the factors that influence them.

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Q.10)

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