“Strategic management is concerned with the

determination of the basic long-term goals and the

objectives of an enterprise, and the adoption of courses
of action and ALLOCATION OF RESOURCES necessary
for carrying out these goals”.
– Alfred Chandler
ELEMENTS OF STATREGIC MANGEMNET PROCESS:
1. Strategic Analysis:
•Environmental analysis
•Develop Vision and Mission

2. Strategic Choice:
•Overall scope and direction of the business.
E.g. What business to compete
•Check feasibility, suitability and acceptability

3. Strategy Implementation:
•Ensuring suitable structure

•Suitable RESOURCES ALLOCATIONS.

•Right leadership and culture

4. Strategy Evaluation and Control:

•Monitoring and control
•Develop standards to judge performance.
Resource
An economic or productive factor required to accomplish an activity, or as means to
undertaken enterprise and achieve desired outcome.

Philosophy behind resource allocation

Pareto law
In most cases 80% of our results ,Come from 20% of our effort .

The resource allocation decisions are generally linked to the objectives. For example,
decision about dividend payment is linked to the ability of the company to attract
capital. How to distribute the expected profits among investors, employees and the
company’s own needs is an important resource allocation decision from the viewpoint
of long-term implications of the strategy.
RESOURCE ALLOCATION

1. Physical Resources

2. Financial Resources

3. Human Resources

4. Technological Resources

5. Intellectual Resources

These resources may already exist in the organization or may have

to be acquired. Resource allocation decisions are very critical in
that they set the operative strategy for the firm. Resource
allocation decisions about how much to invest in which areas of
business reinforce the strategy and commit the organization to the
chosen strategy
Importance of Resource Allocation

Process of resource allocation

Criteria for Resource Allocation Process
1.Contribution towards fulfillment of organizational objectives

2. Support of key strategies

(a) Support of core competencies
(b) Enhancement of value chain activities
(c) Risk-acceptance level of the organization

3. Special circumstances
a) When major strategic changes are unlikely

b) When major strategic changes are predicted

c) When resources are shared between divisions

THREE APPOACHES TO RESOURCE ALLOCATION
1.Top-down approach
2. Bottom-up approach
3. Strategic budgeting

1. Top-Down approach: In this approach, resources are allocated

through a process of segregation down to the operating levels.
Top management typically decide the requirements of each
subunit and distribute resources accordingly.

2. Bottom-up approach: Resources are distributed through a process

of aggregation from the operating level. The operating levels work out
the requirements of each subunit and the resources are allocated
accordingly.

3. Strategic budgeting: This approach is a mix of the above two

approaches, and involves
an interactive form of decision-making between different levels of
management
Managing Resource Conflict (Answers where ,why, how to allocate resources)

1. BCG MATRIX
PORTFOLIO APPROACH
DEPENDS UPON MARKET GROWTH AND SHARE.

2. PLC-BASED BUDGETING
Look upon Different stages of a Product Life Cycle

3. CAPITAL BUDGETING
long-term commitment of resources
eg.( Mergers, Acquisitions, joint ventures, and setting up of new plants etc. )
payback period, net present value, internal rate of return, etc. Used for
maximum returns estimations.

4. Operating Budgets
Routine resource allocation for conducting operations.
A)Fixed budgeting system retain the committed resources even if the
activity levels are not being achieved.
B)Flexible budgeting system
•This system provides for transfer of funds from one unit to
•another if a fall is expected in actual activity level in a particular unit, thus
ensuring better resource utilization

5. Zero-based Budgeting (ZBB)

•managers to justify their budget requests in detail from the scratch, without
relying on the previous budget allocations. Therefore, instead of taking the last
year’s budget as the base for projecting the future allocations, ZBB forces the
managers to review the objectives and operations afresh and ZBB is, therefore, a
type of budget that requires managers to rejustify the past objectives, projects
and budgets and set priorities for the future. It amounts to recalculation of all
organizational activities to see which should be eliminated or funded at a
reduced or increased level.

6. Network techniques:
•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.
FACTORS AFFECTING RESOURCE ALLOCATION

1. Objectives of the organisation

2. Powerful units
3. Dominant strategists
4. Internal politics
5. External influences

DIFFICULTIES IN RESOURCE ALLOCATION

1. Scarcity of Resources
2. Bloated Demands:
3. Budgetary Process
4. New SBUs
5. Restrictions on Generating Resources