Unit 1-Part 3

Strategic Management of
Business
What is Corporate Planning ?
A Planning is a predefined action to be
taken in the future.
This document of planning mainly consists
of details of how those actions will be
performed in future time.
Planning needs deep thinking over the
events, which are likely to happen in total
business.
Planning is deciding what to do before you
do it. Most of us would agree planning is
an important ingredient of success
 Long-range and short-range
Planning
Long-Range planning can be for the period of five
years or some times more than that. This consists
of whole business and deals with the growth rate,
directions of the business, shares and so on.
However, many organizations have a continual
planning process that reviews and modifies their
long-range plans on a regular basis, such as
every six months to a year.
Short-Range planning can be for the period one
year. This type of planning mainly concerns the
business results for that year. Typical examples
are the development of financial and operating
budgets, production scheduling, and planning for
the development and implementation of projects.
 Dimensions of Planning
1. Time
2. Entity
3. Organization
4. Elements
5. Characteristics
 Time

The plan may either be long-range or

short-range, but the execution of the plan
is, year after year. The plan is made on a
rolling basis where every year it is
extended by one year, keeping the plan
period as the next five years.
The rolling plan provides an opportunity to
correct or revise the plan in the light of
any new information the planner may
receive.
 Entity

The plan entity is the thing on which the

plan is focused.
The entity could be the production in
terms of quantity or it could be a new
product. It could be about the finance, the
marketing, the capacity, the manpower or
the research and development.
The goals, and the objectives would be
stated in terms of these entities. A
corporate plan may have several entities.
 Organization

The corporate plan would deal with the

company as a whole, but it has to be
broken down for its subsidiaries, if any,
such as the functional groups, the
divisions, the product groups and the
projects.
The breaking of the corporate business
plan into smaller organizational units helps
to fix the responsibility for execution.
The corporate plan, therefore, would be a
master plan and it would comprise several
subsidiary plans.
 Elements

The plan is made out of several

elements, the plan begins with the
mission and goal, which the
organization would like to achieve.
It may provide a vision statement for
all to understand as also the
purpose; focus and direction the
organization would like to move
towards.
 Characteristics

The characteristics of a corporate plan are not

definite. The choice of characteristics is a matter
of convenience helping to communicate to
everybody concerned in the organization and for
an easy understanding in execution. The features
of a plan could be several and could have several
parts.
The plan is a confidential written document
subject to change, and known to a limited few in
the organization.
Plan is described in the quantitative and
qualitative terms.
The long-term plan is normally flexible while the
short term one is generally not.
Essentiality of Strategic Planning
The purpose of strategic planning is to develop
strategies by which an organization will be able to
achieve its objectives. The following reasons
make planning an essential management
processes to keep the business in a good shape
and condition.
1. Market force
2. Technology change
3. Complex diversity of business
4. Competition
5. Environment (Threats, Challenges &
Opportunities)
 DEVELOPMENT OF BUSINESS
STRATEGIES
Long-Range Strategic Planning
In the 1970's, many large firms adopted a formalized top-
down strategic planning model.
Under this model, strategic planning became a deliberate
process in which top executives periodically would
formulate the firm's strategy, then communicate it down
the organization for implementation.
The concept of strategy has been borrowed from the
military and adapted for use in business. Strategy is a term
that comes from the Greek strategia, meaning
"generalship." In the military, strategy often refers to
maneuvering troops into position before the enemy is
actually engaged.
In this sense, strategy refers to the deployment of troops.
Once the enemy has been engaged, attention shifts to
tactics.
 Strategy According to Henry
Mintzberg
Strategy is a plan, a "how", a means of
getting from here to there.
Strategy is a pattern in actions over time;
for example, a company that regularly
markets very expensive products is using
a "high end" strategy.
Strategy is position; that is, it reflects
decisions to offer particular products or
services in particular markets.
Strategy is perspective, that is, vision
and direction.
Pure Strategy :
If a strategy single considers a single point
of attack by a specified method then it is
called as pure strategy. When a
management decides to fight the external
forces of a single area by choice, it
becomes a pure strategy.
Mixed Strategy :
If a strategy acts on many fronts by
different means, then it is a mixed
strategy, i.e. if it is operating on different
areas., then it becomes mixed strategy.
 Classification of Strategies
Pure or mixed strategies can be
classified into four broad categories.
These strategies are applicable to all
types of businesses and industries.
Overall company strategy
Growth strategy
Product strategy
Marketing strategy
 Overall Company Strategy

This type of strategy deals with the overall

strength of the company. This strategy will
consider a very long-term business perceptive. If
this strategy is chosen properly and implemented
then it is the most productive strategy. Examples
of overall company strategies are as under :
Due to rapid change in the technology, a
computer manufacturing industry will have a
strategy of introducing new range of product
every two or three years.
A new company designing shirt and trousers may
have strategy of remaining in the low price range.
Few company may want to grow very fast as
their strategy
 Growth Strategy

Every organization would like to grow their business

sooner.An organization may grow in two different
ways :
Growth of the existing business turnover, year
after year. Simple example of Scooter Company.
Initially started with a Scooter, then introduced
moped and then bikes. Company then
manufacturing these two-wheelers at different
parts of the nation. This is nothing but growth in
existing business.
Expansion and diversification of the business.
This type of growth starts with one or two product
and then manufactures variety of products and
sells them in variety of markets.
 Product Strategy

Product strategy is nothing but a growth

strategy, where the company chooses a
certain product with particular
characteristics.
A home appliances market may start their
product manufacturing with cookers.
Then they can expand their business by
launching products like ovens, mixtures
and other appliances which is related to
home.
 Marketing Strategy
The product and market strategies are
closely related to each other. The
marketing strategies deal with the
distribution, services, market research,
pricing and advertising.
For example : A company may offer a
financial loan to purchase a particular
product.
The marketing strategies act as an
expediting and activating force for the
product and the growth strategy as the
force, which accelerates business
development.
MIS : BUSINESS PLANNING
Business environment is prone to changes and
this factor makes business planning very
complex. Some factors such as the market forces,
technological changes, complex diversity of
business and competitions have a significant
impact on any business prospects.
MIS is designed to assess and monitor these
factors.
The MIS design is supposed to provide some
insight into these factors enabling the
management to evolve some strategy to deal
with them.
Since these factors are a part of the environment,
MIS design is required to keep a watch on
environment factors and provide information to
the management for a strategy formulation.
 MIS : BUSINESS PLANNING
There are various business strategies
such as :
1. Overall company growth,
2. Product,
3. Market,
4. Financing and so on.
 MIS : BUSINESS PLANNING
MIS should provide the relevant information that would help
the management in deciding the types of strategies the
business needs. Every business may not require all the
strategies all the time.
o The type of strategy is directly related to the current status
of business and the goals it withes to achieve.
o The MIS is supposed to provide current information on the
status of the business vis-a-vis the goals.
o MIS is supposed to give a status to regard whatever the
business in on growth path or is stagnant or is likely to
decline, and the reasons thereof.
o If the status of the business shows a declining tend, the
strategy should be of growth. If business is loosing in a
particular market segment, there the strategy should be a
market or a product strategy.
The Strategic Planning Process
This process is most applicable to strategic
management at the business unit level of the
organization.
For large corporations, strategy at the corporate
level is more concerned with managing a portfolio
of businesses.
For example, corporate level strategy involves
decisions about which business units to grow,
resource allocation among the business units,
taking advantage of synergies among the
business units, and mergers and acquisitions.
In the process outlined here, "company" or "firm"
will be used to denote a single-business firm or a
single business unit of a diversified firm
 Mission

A company's mission is its reason

for being. The mission often is
expressed in the form of a mission
statement, which conveys a sense of
purpose to employees and projects a
company image to customers. In the
strategy formulation process, the
mission statement sets the mood of
where the company should go.
 Objectives

Objectives are concrete goals that

the organization seeks to reach, for
example, an earnings growth target.
The objectives should be challenging
but achievable. They also should be
measurable so that the company can
monitor its progress and make
corrections as needed.
 Situation Analysis
Once the firm has specified its objectives, it
begins with its current situation to devise a
strategic plan to reach those objectives. Changes
in the external environment often present new
opportunities and new ways to reach the
objectives.
An environmental scan is performed to identify
the available opportunities. The firm also must
know its own capabilities and limitations in order
to select the opportunities that it can pursue with
a higher probability of success. The situation
analysis therefore involves an analysis of both the
external and internal environment.
The internal analysis considers the situation within the
firm itself, such as:
Company culture
Company image
Organizational structure
Key staff
Access to natural resources
Position on the experience curve
Operational efficiency
Operational capacity
Brand awareness
Market share
Financial resources
Exclusive contracts
Patents and trade secrets
INTEGRATING TECHNOLOGY
WITH THE BUSINESS
ENVIRONMENT
Today it is much easier to built IT-
based systems than it ever has been,
but the task is still difficult.
The fact that IT still has a long way to
go illustrated by the enormous
efforts that went into the Year 2000
(Y2K) problem, which was related to
the way many information system
use just two digits to identify the
year portion of a date.
Integrating business and technology is a
challenge to the management. Now manager has
to keep in mind that, how their decision about
technology affects the business
Initially manager searches for any new
technology launched in the market which support
their business so that they create new business
opportunities.
These new business opportunities, alongwith the
technology will lead them to development of new
product.
Any new technology will have its own constraints.
Manager has to think about these technology
constraints before stepping forward. These
activities will help in decision-making process.
Business is successful if manager can integrate
their knowledge about the Information
Technology and business.