Sttrtgy MGMT RIIM - U1

Strategy Management
Strategy Management
What is Management?
Strategy Management
What is Management?
Business Organization Administration

Strategy Management
What is Management?
Business may be identified as

Any activity which leads to Creation of utilities
(benefits) of goods and services
For the Satisfaction of Human Wants (Needs)
In return for a Price (Amount)
Strategy Management
What is Management? C.H. Northcott

Arrangements by which
• Tasks are assigned to men
and women
Business Organization • Administration

So that their Individual efforts
contribute effectively to
Defined Purpose
• For which they have been

brought together”.
Strategy Management
What is Management?
What is Administration?
Basically it is direction of affairs
having 3Elements
• Formulation of goals
• The choice of ways and means
• The direction of the people in
some group purpose
Strategy Management
What is Objectives of Management?

Strategy Management
• Main purpose of business is to earn reasonable

Profits for survival &
Objectives of • Growth in the competitive environment by

providing products to satisfy the customers
Management?
To achieve Profits & growth managers pursue

Objectives
Strategy Management
Managers pursue the following Objectives
1) Efficient use of resources
2) Satisfaction of Customers
Objectives of
Management? 3) Adequate return on Capital
4) Satisfied Work force
5) Good working conditions
6) Good relation with suppliers
7) Contribution to national goals

Strategy Management
Paradigm One: Ad-hoc Policy making.

1900 -1930: Era of Mass Production
• Maximising output, Normally a Single Product,
Std and low cost product,
Evolution
of SM • Catering to unique set of customers
• Servicing limited geographical area – Informal

control and co-ordination.
• The Strategic planning was centred on

maximising output.
Strategy Management
Paradigm Two – Integrated Policy Formulation.

1930 - 1940: Changes in Technology,
• Turbulence in Political Env,
• Emergence of new industries,
Evolution • Demand for novelty products even at high costs,
of SM • Product Differentiation,
• Mkt segmentation in increasingly competitive
and changing markets.
• These all made investment decisions increasingly
difficult.
• This was era of integrating all functional areas
and framing policies to guide managerial actions
Strategy Management
Paradigm Three – The Concept of Strategy.

1940 - 1960: Changes in Environment,
• Planned policy became irrelevant due to
increasingly complex and accelerating changes.
Evolution
of SM • Firms had to anticipate environmental changes.
• A strategy needed to be formed with critical look

at basic concept of Business and its relationship
to the existing environment then.
Strategy Management
Paradigm Four – The Strategic Management.

1980 & onwards:
• The focus of SM was on strategic process of
business firms and responsibilities of general
management.
Evolution
of SM • Everything out side the four walls is changing
rapidly and this phenomenon is called as
“Discontinuity” by Mr. Peter Drucker.
• Past experiences were no guarantee for future,

as science and technology moved faster.
• The future was no more extension of the past or

the present.
Strategy Management
• IIMs and Administrative Staff College of India

formed in early sixties were based on American
Model.
• IIM-A is based on Harvard Model.

The Indian
Scenario • The All India Council of technical Education (AICTE),
The Association of Indian Management Schools
(AIMS) have recommended “Business Policy and
Strategic Management” as a compulsory course.
Strategy Management
Till 1980: Pre-liberalisation Stage:
• Strategic management on Government fringes.
• Entwining enterprise objectives in the national

The Indian Planning framework.
Scenario
• Grabbing opportunities, high diversification, non-
competitive scales, and weak technology.
• Secretive & one man Strategic Management

Process.
Strategy Management
1980 - 2000: Liberalisation Stage
• ‘Foreign Complex’ governed strategy.
• Strategy of focus on rationalisation and operations

The Indian improvement.
Scenario
• Strategy of growth through acquisitions,
internationalisation and product market expansion.
• Employing international consulting firms in

Strategic Management.
Strategy Management
2000- Onwards: Post Liberalisation Stage:
• Global maverick’ mind-set & Acquire professional

skills in SM & synergise entrepreneurial flair.
The Indian
Scenario • Portfolio rationalisation, entry into emerging
sectors.
• Mobilise resources and ensure adequate growth

through existing business.
Strategy Management
2000- Onwards: Post Liberalisation Stage:
• De-merge businesses as independent companies

and improve market capabilities.
The Indian
Scenario • Development of Technology capabilities
• Decentralise organisations, develop

institutionalised control mechanism.
Strategy Management
Defining
Strategy
Strategy Management
• Originated from the Greek word Strategia –

meaning general in the army
Defining • A strategy of a business org is a comprehensive

Strategy master plan stating how it will achieve its mission
and objectives.
Strategy Management
Chandler(1962)
• Strategy is the determinator of the basic long-term
goals of an enterprise, and the adoption of courses
of action and the allocation of resources necessary
Defining
for carrying out these goals.
Strategy
Strategy Management
Igor Ansoff(1965) :
• “The common thread among the organisation’s

activities and product-markets…
Defining
Strategy
• that defines the essential nature of business that the
organisation was or planned to be in future”
Strategy Management
Henry Mintzberg(1987) :
• “Strategy is Organization's pattern of response to its

Defining environment
Strategy
• over a period of time to achieve its goals and
mission.
Prahlad (1993)
• Strategy is more then just fit and allocation of
resources.
• It is stretch and leveraging of resources.
Strategy Management
Michael E Porter(1996) :
• “Creation of a unique and valued position involving a

different set of activities.
Defining
Strategy
• The company that is strategically positioned performs
different activities from rivals or performs similar
activities in different ways”
Strategy Management
 A Co. strategy consists of the set of competitive

moves and business approaches that
management is employing to run the company
What is  Strategy is management’s “game plan” to

Strategy? • Attract and please customers
• Stake out a market position
• Conduct operations
• Compete successfully
• Achieve organizational objectives
Strategy Management
Hierarchy of Strategies
Strategy Management
Environmental Corporate mission
Factors Corporate
strategy
Corporate Goal & Obj Corporate Dev Srtgy Resource deployment
Strategy Management
Corporate strategy
 Describes a company’s overall direction in terms of its
general attitude toward growth and the management of
its various businesses and product lines.
Hierarchy of
Strategies  For example, Coco cola, Inc., has followed the growth
strategy by acquisition. It has acquired local bottling
units to emerge as the market leader.
Strategy Management
Factors Corporate
strategy
SBU 1 SBU 2 SBU n

Business
strategy
Buss Unit Obj Competitive Srtgy Res across Prdt-Mkt

Strategy Management
Business strategy
 Usually occurs at the business unit or product level, and
it emphasizes improvement of the competitive position of
a corporation’s products or services in the specific
Hierarchy of industry or market segment served by that business unit.
Strategies
 For example, Apple Computers uses a differentiation
competitive strategy that emphasizes innovative product
with creative design
Strategy Management
Factors Corporate
strategy
SBU 1 SBU 2 SBU n

Business
strategy
Mktg Srtgy for R&D Srtgy & HR Srtgy & OP Srtgy &
Prdt-Mkt entry Plans Plans Plans
Functional
strategy
Strategy Management
Functional strategy
 Is the approach taken by a functional area to achieve
corporate and business unit objectives and strategies by
maximizing resource productivity.
Hierarchy of
Strategies  It is concerned with developing and nurturing a
distinctive competence to provide the firm with a
competitive advantage
Strategy Management
Factors Corporate
strategy
SBU 1 SBU 2 SBU n

Business
strategy
Mktg Srtgy for R&D Srtgy & HR Srtgy & OP Srtgy &
Prdt-Mkt entry Plans Plans Plans
Functional
Tactical Operating strategy
Plan strategy
Strategy Management
Operating Strategy
 These are concerned with how the component parts of
an organization deliver effectively the corporate,
business and functional –level strategies in terms of
Hierarchy of resources, processes and people.
Strategies
 They are at departmental level and set periodic short-
term targets for accomplishment
Strategy Management
Responsibility of
corporate-level managers
Hierarchy of Responsibility of
Strategies business –level general
managers
Responsibility of heads of major

functional activities within a business
unit or division
Responsibility of plant managers,

geographic unit managers, and
lower-level supervisors
Strategy Management
1950 1960 1970 1980 1990 21Century

Dominant Budget Corporate Corporate Industry CA, Strategic
theme planning & planning strategy analysis, innovation
control competition
analysis
Main issue Financial Planning Portfolio planning Choice of Sources of CA Strategic &
control thru growth industries, in the firm organizational
operating Mkts, advantage
budgets segments,
positioning
Main Fin budgeting Forecasting Synergy SBU’s, PIMS analysis Resource Source of CA,
concept investment investment experience profit impact analysis, Knowledge
planning planning curves, returns to of market analysis of management,
model Mkt share strategy core control of
competence standards
Org Financial Rise of Diversification, Industry & Corporate Virtual Org,
implications mgmt the key corporate multidivisional, market restructuring, knowledge
planning dept structures, quest selectivity, business based firm
& 5 year for global Mkt asset process alliances
formal plans share management reengineering
Strategy Management
1950 1960 1970 1980 1990 21Century

control competition
analysis
budgets segments,
positioning
Strategy Management
1950 1960 1970 1980 1990 21Century

control competition
analysis
budgets segments,
positioning
Strategy Management
1950 1960 1970 1980 1990 21Century

control competition
analysis
budgets segments,
positioning
Strategy Management
1950 1960 1970 1980 1990 21Century

control competition
analysis
budgets segments,
positioning
Strategy Management
1950 1960 1970 1980 1990 21Century

control competition
analysis
budgets segments,
positioning
Strategy Management
Strategy should Specify? 3 Big Q.s
What? Where? How?

• Which Res &
• Objectives to be • Industry & Activities to allocate
accomplished • Product-markets to to each product-
focus market to meet
Opportunities &
Threat
• To gain CA
Strategy Management
Three types of actions are involved in Strategy:
Determination of Long Term Goals & Objectives.
Adoption of courses of action.
Allocation of resources
Strategy Management
1. The Chief Architect approach:

• A single person – the owner or CEO –assumes
the role of chief strategist
Approaches to • Brainstorming with subordinates and

crafting a
strategy
considerable analysis by specific departments.
• Characteristic of companies that have been

founded by the company’s present CEO.
• Michael Dell at Dell Computer,

• Steve Case at America Online,
• Bill Gates at Microsoft, and
• Howard Schultz at Starbucks
Strategy Management
2. The Delegation Approach:

• Here the manager in charge delegates big chunks
of strategy-making task to
• Trusted subordinates,
Approaches to • Down the-line managers in charge of key
crafting a
strategy
business units and departments,
• High-level task force of knowledgeable and
talented people from many parts of Co
• Self-directed work teams with authority over a
particular process or function,
• More rarely, a team of consultants brought in
specifically to help develop new strategic
initiatives.
Strategy Management
3. The Collaborative or Team Approach:

• A middle approach where a manager with
strategy-making responsibility enlists the
assistance and advice of key peers and
Approaches to subordinates in hammering out a consensus
crafting a
strategy
strategy.
• Strategy teams often include

• line and staff managers from different
disciplines & dept. units,
• a few handpicked junior staffers known for
their ability to think creatively,
• near-retirement veterans noted for being
keen observers, giving sage advice.
Strategy Management
4. The Corporate Entrepreneur Approach:

• Top mgmt. encourages individuals & teams to
dev and champion proposals for NPD and new
business ventures.
Approaches to
crafting a
strategy
• The idea is to, letting them try out business ideas
and pursue new strategic initiatives.
• Executives serve as judges of which proposals

merit support, give company entrepreneurs the
needed organizational and budgetary support,
and let them run
• 3M
Strategy Management
Four
important
aspects of
Strategy
Strategy Management
Competitive Long Term

Four Advantages Objectives
important
aspects of
Strategy
Vector
Synergy
(Direction)
Strategy Management
The external Env is It emphasises on long

continuously monitored term growth and
& Strategy is made to development.
have firm a continuous These Objectives give
direction for
CA Competitive Long Term implementing
Advantages Objectives Strategy
Direction with Force Once a series of

Series of actions are Vector decisions are
to be taken & they Synergy taken to
should have same
(Direction) accomplish the
direction for whole obj in same
organisation direction, there
will be synergy.
Synergy can
happen due to CA
and Growth
Vector.
Strategy Management
• Strategy is a major course of action through which

org relates itself to its environment. (External)
Nature of
• Strategy is blend of study of internal & external
Strategy
factors, Opportunities & Threats
(Areas
covered)
• Face opportunities & threats provided by external
factors, internal factors are matched with them.
Strategy Management
• Strategic actions are different for different

situations.
Nature of
Strategy • Strategy is combination of actions to solve certain
(Areas problem to achieve a desirable end.
covered)
• Strategy may involve contradictory actions
simultaneously or with a gap of time like closing
down some operations and expanding some at
same time.
Strategy Management
• Strategy is future oriented. New situations, which

have not arisen in past will require revised Strategic
Nature of Actions.
Strategy
(Areas • Strategy requires some systems and norms for its
covered)
efficient adoption in any organisation.
• Strategy provides overall framework for guiding

enterprise thinking and action.
Strategy Management
1. Strategy is a PLAN
• Consciously intended course of action, a guideline
(or set of guidelines) to deal with a situation.
Mintzberg’s
5Ps of
strategy • By this definition, strategies have two essential
characteristics: they are
• developed consciously
• purposefully.
Strategy Management
2. Strategy as a PLOY:
• Strategy can be a ploy, which is really just a specific

"manoeuvre" intended to outwit an opponent or
Mintzberg’s competitor.
5Ps of
strategy • Likewise, a firm may threaten to establish a new
practice area in order to discourage a competitor
from trying to do the same.
.
Strategy Management
3. Strategy is a PATTERN:
• Thus, strategy is also a pattern - specifically, a

Mintzberg’s pattern in a
5Ps of stream of actions.
strategy
Strategy Management
4. Strategy is a POSITION:
• Strategy is also a position; specifically a means of

Mintzberg’s locating a firm in its environment.
5Ps of
strategy • In management terms: a "domain" consisting of a
particular combination of services, clients and
markets.
Strategy Management
5. Strategy is a PERSPECTIVE:
• Strategy in terms of this definition becomes an

ingrained way of perceiving the world.
Mintzberg’s
5Ps of
strategy • Some firms are aggressive pacesetters; others build
protective shells around themselves.
.
Mintzberg’s 5Ps of strategy Strategy Management
Plan provides the roadmap by which the firm intends to achieve its goals.
Ploys add a dimension of feint and manoeuvre, where one firm's gain is
another's loss and CA is critical.
Pattern emphasizes that strategy is not a once-off event but a constant

stream of decisions and resultant actions that drive the firm
forward, over time, towards its goal.
Position adds that different firms have different mixes of markets,

clients and services that they provide to those clients.
Perspective provides an insight onto how the firm and its strategists are
informed by their own professions, their perceptions of
business, and the unique characteristics of each firms own
"world."
Strategy Management
Strategic management
the art and science of
Defining
– formulating, implementing, and evaluating
Strategic
Management – cross-functional decisions
– that enable an org to achieve its objectives
Strategy Management
• SM is used synonymously with the term

strategic planning.
Defining
Strategic
• Sometimes the term SM is used to refer to
Management
strategy formulation, implementation, and
evaluation,
with strategic planning referring only to
strategy formulation.
Strategy Management
• SM is a continuous process that

– evaluates and controls the business and the
Defining industries in which an org is involved;
Strategic
Management – evaluates its competitors and sets goals and
strategies to meet all existing and potential
competitors;
– reevaluates strategies on a regular basis to

determine how it has been implemented
– Analyses if was successful or does needs

replacement.
Strategy Management
• A strategic plan is a company’s game plan.
Defining
• A strategic plan results from
Strategic
Management – tough managerial choices among numerous
good alternatives, and
– it signals commitment to
• specific markets,
• policies,
• procedures,
• operations.
Strategy Management
• SM s planning for both predictable as well as

unfeasible contingencies.
Defining
Strategic
• It is applicable to both small as well as large org
Management
as even the smallest org face competition and,
by formulating and implementing appropriate
strategies, they can attain sustainable CA
Strategy Management
Competitive advantage
• anything that a firm does especially well
compared to rival firms
Key Terms in
Strategic
Management Strategists
• Individuals who are most responsible for the
success or failure of an organization
Vision statement
• Answers the question “What do we want to
become?”
• often considered the first step in strategic
planning
Strategy Management
Mission statements
• Long-term statements of purpose that
distinguish one business from other similar
Key Terms in
firms
Strategic
Management • Identifies the scope of a firm’s operations in
product and market terms
Objectives
• Specific results that an organization seeks to
achieve in pursuing its basic mission
• Long-term means more than one year
• Should be challenging, measurable, consistent,
reasonable, and clear
Strategy Management
External opportunities and external threats

• Refer to economic, social, cultural,
demographic, environmental, political, legal,
Key Terms in
governmental, technological, and competitive
Strategic
trends and
Management
• Events that could significantly benefit or harm
an org in the future
Internal strengths and internal weaknesses

• Org controllable activities that are performed
especially well or poorly
• determined relative to competitors
Strategy Management
Strategies
• The means by which long-term objectives will
be achieved
Key Terms in
Strategic • May include
Management – geographic expansion,
– diversification,
– acquisition,
– product development,
– market penetration,
– retrenchment,
– divestiture,
– liquidation,
– joint ventures
Strategy Management
Annual objectives
• Short-term milestones that organizations must
achieve to reach long-term objectives
Key Terms in
Strategic
Management • Should be measurable, quantitative,
challenging, realistic, consistent, and prioritized
• Should be established at the

– corporate,
– divisional, and
– functional levels in a large organization
Strategy Management
Policies
• The means by which annual objectives will be
achieved
Key Terms in
Strategic
Management • Include guidelines, rules, and procedures
established to support efforts to achieve stated
objectives
• Guides to decision making and address

repetitive or recurring situations
Strategy Management
The Five Tasks of Strategic Management
Task 1 Task 2 Task 3 Task 4 Task 5
Develop a Monitor,
Craft a Implement
Strategic Evaluate,
Set Strategy and
Vision and Take
Objectives to Achieve Execute
and Corrective
Objectives Strategy
Mission Action
Revise as Revise as Improve/ Improve/ Recycle

Needed Needed Change Change as Needed
Strategy Management
Strategic planning Long range planning

Focus Growth Present
Objective Future profits & share Annual profits
Constraints Future resource environment Present resource environment
Rewards Development of future potential Efficiency, stability
Risks Slow process , efforts more Growth less
Information Future opportunities & threats Present business
Leadership Creative , entrepreneurial Autocratic, conservative
Problem Anticipates, discovers new Reactive, rely on past experience

solving approach,
approach
Defining SM- Operational Management role Strategy Management
Strategic Decisions Administrative Decisions Operational Decisions
Long-term decisions. Decisions are taken daily. Decisions not frequently

taken.
Considered where future These are short-term These are medium-period
planning is concerned. based Decisions. based decisions.
Taken in Accordance with Taken according to Taken in accordance with

org mission and vision. strategic and operational strategic and admin
Decisions. decision.
Related to overall Counter Related to working of Related to production.
planning of all Org employees in an Org
Deal with org Growth. Deals in welfare of Deals in production and
employees working in an factory growth.
org
Phases | Stages of SM Strategy Management
Establishment Strategy Strategy

Strategy
of strategic
intent Formulation Implementation Evaluation
Strategic control
Strategy Management
I Establishment of strategic intent

• Creating & communicating a vision
Phase • Designing a mission statement,
Stages • Defining the business,
SM
• Setting objectives,
Strategy Management
II Strategy formulation (1)

• Includes developing a vision and mission,
Phase • Id org external opportunities & threats,
Stages • Determining internal strengths and weaknesses,
SM
• Considering corporate level, business level strategy
• Establishing long-term objectives,
• Generating alternative strategies, and
• Choosing particular strategies to pursue
• Prepare a strategic plan
Strategy Management
II Strategy formulation (2)

• Deciding what new businesses to enter,
Phase • What businesses to abandon,
Stages • How to allocate resources,
SM
• Whether to expand operations or diversify,
• Whether to enter international markets,
• Whether to merge or form a joint venture,
• How to avoid a hostile takeover.
Strategy Management
III Strategy implementation

• Requires a firm to establish annual objectives,
Phase • Designing structures & systems
Stages • Devise policies,
SM
• Motivate employees, and
• Allocate resources so that formulated strategies can
be executed
• Managing behavioral & functional implementation
• Operationalizing strategies
• Often called the action stage
Strategy Management
IV Strategy evaluation
• Reviewing external and internal factors that are the
Phase bases for current strategies,
Stages
SM • Measuring performance, and taking corrective
actions
Strategy Management
• Strategy formulation, implementation, evaluation

activities occur at 3 hierarchical levels in a large org
Phase
Stages • Corporate, Divisional or SBU, and Functional
SM
• SM helps a firm function as a competitive team
Strategy Management
A Comprehensive Strategic-Management Model

Strategy Management
Strategy Management
• Businesses using SM concepts show significant

improvement in sales, profitability, and productivity
Financial compared to firms without systematic planning
Benefits activities
• High-performing firms make more informed

decisions with good anticipation of both short- and
long-term consequences
Strategy Management
• Allows id, prioritization, exploitation of opp
• Provides an obj view of management problems.

Non
Financial • Framework for improved coord & control of activities.
Benefits
• Minimizes effects of adverse conditions & changes.
• Allows major decisions better support established obj
• Allows more eff allocation of time & res to id Opp
• Allows fewer resources and less time to be devoted to

correcting erroneous or ad hoc decisions.
• Creates framework internal comm among personnel

Strategy Management
• Using strategic planning to gain control over

decisions and resources
• Doing strategic planning only to satisfy accreditation
Pitfalls in or regulatory requirements
Strategic
• Too hastily moving from mission development to
Planning
strategy formulation
• Failing to communicate the plan to employees, who
continue working in the dark
• Top managers making many intuitive decisions that
conflict with the formal plan
• Top managers not actively supporting the strategic-
planning process
Strategy Management
• Failing to use plans as a standard for measuring

performance
Pitfalls in
• Delegating planning to a “planner” rather than
Strategic
involving all managers
Planning
• Failing to involve key employees in all phases of

planning
• Failing to create a collaborative climate supportive of

change
Strategy Management
• SM also defined as a bundle of decisions & acts

which a manager undertakes which decides the
Defining result of the firm’s performance.
SM-Manager • Manager have thorough knowledge & analysis
Stakeholders of general and competitive org environment to
role take right decisions.
• They should conduct a SWOT Analysis

• Make best possible
– utilization of strengths,
– minimize the org weakness,
– make use of arising Opp from business env,
– shouldn’t ignore the threats.
Strategy Management
• SM gives broader perspective to employees to

better understand their job fits in entire org
Defining plan and how co-related to other org members.
SM- Employee
Stakeholders • Art of managing employees in manner which
role maximizes ability of achieving business obj
• Employees become
– more trustworthy,
– more committed,
– more satisfied can co-relate well with each org task.
• They can understand the
– reaction of Env changes on the org and
– probable response of the org with the help of SM
Strategy Management
• One of the major role is to incorporate

various functional areas of the org
Defining completely, as well as,
SM- Management
Stakeholders • To ensure these functional areas harmonize
role and get together well.
• Another role is to keep a continuous eye on

the goals and objectives of the org.
Strategy Management
• Are the owners of the company
• Unable to mange D2D activities: Mainly

Defining
occupied in various activities, large in No.
SM- Shareholders
scattered, not expected to have managerial
Stakeholders
skills
role
• Elect directors to act as representative &

manage the company
• Representatives of SH – BOD share the

responsibility & activities of management.
• Very crucial decisions taken in SH meetings

Strategy Management
Strategic responsibilities
• Formulation of mission
• Designing organizational structure
Defining
SM- BOD • Selection of top executives
Stakehold • Financial sanctions
ers role • Link between external environment and company
• Role
• Strategy formulation
• Linking strategy with consequent corporate action
• Supporting new strategies, mobilizing res, protecting
org from outside threat, & linking powerful outsiders
• Formulating vital strategies like M&A, takeovers,
acquisitions
Hierarchy of strategic intent
Strategic Intent
• Org strategic intent is the purpose that it exists and why it will
continue to exist, providing it maintains a CA
• Strategic intent gives a picture about what an org must get into
immediately in order to achieve the company’s vision.
• It motivates the people.
• It clarifies the vision of the vision of the company.
• helps management to emphasize & concentrate on priorities

Strategic Intent
• Strategic intent includes directing organization’s attention on

– the need of winning;
– inspiring people by telling them that the targets are valuable;
– encouraging individual and team participation as well as

contribution; and
– utilizing intent to direct allocation of resources.

Strategic intent differs from Strategic fit
• While strategic fit deals with harmonizing available resources

and potentials to the external environment,
• Strategic intent emphasizes on building new resources and

potentials so as to create and exploit future opportunities.
3.Management Mission & Vision
VISION
• Vision and mission statements are powerful shapers of effective
corporate cultures, for many organizations.
• These statements present the values, philosophies and

aspirations that guide organizational action.
• They motivate and inspire the current & future employees of

the organization.
Characteristics of Vision:
• Vision is developed through sharing across an org
Famous stories of successful vision involve visions that have been
widely shared across entire organizations.
Individual leader, founder has a powerful impact on the others.
• Methods of convincing the others about vision:

The leaders by working hard along with others convince the
others in the org rather than simply by delivering speeches.
• Change Agents:
Organizations must redefine themselves through updated visions
of the future through new objectives and strategies.
Developing a Strategic Vision

• Involves thinking strategically about Firm’s future business plans
• Where to “go”
• Tasks include
» Creating a roadmap of the future
» Deciding future business position to stake out
» Providing long-term direction
» Giving firm a strong identity

VISION STATEMENT OF MICROSOFT

“To empower people through great software, any time, any place, on any
device”.
VISION OF GENERAL ELECTRIC
“We have a vision that includes helping our clients be successful,
satisfying our stakeholders, and maintaining a competitive edge.
But our vision starts with being the employer-of-choice, because it is our
people who are the key to making us successful“.
VISION OF BOEING COMPANY in 2016
“People working together as a global enterprise for aerospace
leadership”.
VISION OF GOOGLE
“To organize the world’s information and make it universally
accessible and useful”.
98
Characteristics of a Strategic Vision Geographic

Roadmap of a company’s future & Product
Markets to
Future pursue
technology-
product-
customer
focus
Capabilities
to be
developed
Kind of
company
to create
Vision Examples
• General Motors’ vision is to be the world
leader in transportation products and related
services.
• PepsiCo’s responsibility is to continually
improve all aspects of the world in which we
operate—environment, social, economic—
creating a better tomorrow than today.
• Dell’s vision is to create a company culture
where environmental excellence is second
nature.
• Procter & Gamble’s vision is to be, and be
recognized as, the best consumer products
company in the world
Vision Examples
• General Motors’ vision is to be the world
Good statement
leader in transportation products and related
services.
• PepsiCo’s responsibility is to continually Statement is too vague;
it should reveal beverage
improve all aspects of the world in which we and food business
operate—environment, social, economic—
creating a better tomorrow than today. Statement is too vague; it
should reveal computer
• Dell’s vision is to create a company culture buss in some manner; the
where environmental excellence is second word Env is generally used
nature. to refer to Natural Env so
is unclear in its use here
• Procter & Gamble’s vision is to be, and be
recognized as, the best consumer products Statement is too vague and
company in the world readability is not that good
Benefits of having a Vision:
• Good visions are inspiring and exciting.

• Visions represent a step function and a jump ahead so that the
company knows what it is to be.
• Good visions help in the creation of a common identity and a
shared sense of purpose.
• Good visions are competitive, original and unique. They make
sense in the marketplace as they are practical.
• Good visions foster risk-taking and experimentation.
• Good visions foster long-term thinking.
• Good visions represent integrity; they are truly genuine and can
be used for the benefit of people
Creating a shared Vision

Larsen & Toubro, Crompton Greaves, and Gujarat
Heavy Chemicals typically follow certain steps in this regard:
• Elicit ideas from employees as to how their dream organization

should be like in terms of characteristics;
• Combine these with the company's core values and purpose to
build the vision statement.
• Individuals from across the org have a common mental image
and a mutually supported set of aspirations that serve to unite
their efforts.
• People at all levels must share a common inspirational image
that compels them to give their best & realize their own dreams.
Mission Statement:
• A declaration of an organization’s reason for being.
• It provides a statement to insiders and outsiders of what the

corporation stands for its purposes image & character.
• A long-run vision of what the org is trying to become-the unique

aim that differentiates it from similar organizations.
Characteristics of a Mission
Feasible:
The mission should be realistic and achievable.
• For instance, UTI declared its mission as "to encourage saving and
investment habits among common man".
• By providing tax relief under Sec 88c, the investment up to 1lakh in

UTI is exempted from income tax.
• Hereby common man's savings habit is encouraged by UTI.

Precise:
A mission statement should not be narrow or too broad.
Clear:
A mission statement should lead to action.
• BSNL'S mission of ‘connecting India' leads it to a variety of service
with varied tariff structure so as to cater to the preferences of
mobile phone users.
Motivating:
The mission should be motivating for the employees to be inspired
for action.
• For example India Post's mission is to expectations of the

customer' with dedication, devotion and enthusiasm.
• So customer service has become a value and it is inspiring and

motivating the postal employees.
Distinctive:
A mission statement will indicate the major components of the
strategy to be adopted.
• The mission should be unique.
• When HCL defines its mission as ‘to be a world class competitor' it

creates a unique place in the minds of Indian personal computer
users who across personal computers of MNCs on most of the
occasions.
Indicates major components of strategy:

• "The mission statement of IOC emphasizes petroleum refining,
marketing and transportation with international standards and
modern technology.
• It indicates that IOC is going to adopt diversification strategy in

future.
• The mission provides direction to insiders and outsiders on what

the firm stands for. It is the guiding star for any firm.
Components of Mission Statements
1. Customers—Who are the firm’s customers?

2. Products or services—What are the firm’s major products or services?
3. Markets—Geographically, where does the firm compete?
4. Technology—Is the firm technologically current?
5. Concern for survival, growth, and profitability—Is firm committed to growth
and financial soundness?
6. Philosophy—What are the basic beliefs, values, aspirations, and ethical
priorities of the firm?
7. Self-concept—What is the firm’s distinctive competence or major CA?
8. Concern for public image—Is the firm responsive to social, community, and
environmental concerns?
9. Concern for employees—Are employees a valuable asset of the firm?
1. Customers
• We believe our first responsibility is to the doctors, nurses,
patients, mothers, and all others who use our products and
services. (Johnson & Johnson)
• To earn our customers’ loyalty, we listen to them, anticipate their

needs, and act to create value in their eyes.
(Lexmark International)
2. Products or Services
• AMAX’s principal products are molybdenum, coal, iron ore, copper,
lead, zinc, petroleum and natural gas, potash, phosphates, nickel,
tungsten, silver, gold, and magnesium.
(AMAX Engineering Company)
• Standard Oil Company (Indiana) is in business to find and produce
crude oil, natural gas, and natural gas liquids; to manufacture high-
quality products useful to society from these raw materials; and to
distribute and market those products and to provide dependable
related services to the consuming public at reasonable prices.
(Standard Oil Company)
3. Markets
• We are dedicated to the total success of Corning Glass Works as a
worldwide competitor.
(Corning Glass Works)
• Our emphasis is on North American markets, although global

opportunities will be explored.
(Blockway)
4. Technology
• Control Data is in the business of applying micro-electronics and
computer technology in two general areas: computer-related
hardware; and computing-enhancing services, which include
computation, information, education, and finance. (Control Data)
• We will continually strive to meet the preferences of adult smokers

by developing technologies that have the potential to reduce the
health risks associated with smoking. (RJ Reynolds)
5. Concern for Survival, Growth, and Profitability

• In this respect, the company will conduct its operations prudently
and will provide the profits and growth which will assure Hoover’s
ultimate success.
(Hoover Universal)
• To serve the worldwide need for knowledge at a fair profit by

adhering, evaluating, producing, and distributing valuable
information in a way that benefits our customers, employees,
other investors, and our society.
(McGraw-Hill)
6. Philosophy
• Our world-class leadership is dedicated to a management
philosophy that holds people above profits.
(Kellogg)
• It’s all part of the Mary Kay philosophy—a philosophy based on the
golden rule. A spirit of sharing and caring where people give
cheerfully of their time, knowledge, and experience.
(Mary Kay Cosmetics)
7. Self-Concept
• Crown Zellerbach is committed to leapfrogging ongoing
competition within 1,000 days by unleashing the constructive and
creative abilities and energies of each of its employees.
(Crown Zellerbach)
8. Concern for Public Image

• To share the world’s obligation for the protection of the
environment.
(Dow Chemical)
• To contribute to the economic strength of society and function as a

good corporate citizen on a local, state, and national basis in all
countries in which we do business.
(Pfizer)
9. Concern for Employees

• To recruit, develop, motivate, reward, and retain personnel of
exceptional ability, character, and dedication by providing good
working conditions, superior leadership, compensation on the
basis of performance, an attractive benefit program, opportunity
for growth, and a high degree of employment security.
(The Wachovia Corporation)
Pepsi Co Mission
• We aspire to make PepsiCo the world’s premier consumer products

company, focused on convenient foods and beverages .
• We seek to produce healthy financial rewards for investors as we

provide opportunities for growth and enrichment to our
employees , our business partners and the communities in which
we operate.
• And in everything we do, we strive to act with honesty, openness,

fairness and integrity .
Pepsi Co Mission
• We aspire to make PepsiCo the world’s (3) premier consumer

products company, focused on convenient foods and beverages (2).
• We seek to produce healthy financial rewards for investors (5) as
we provide opportunities for growth and enrichment to our
employees (9), our business partners and the communities (8) in
which we operate.
• And in everything we do, we strive to act with honesty, openness,
fairness and integrity (6).
Statement lacks three components:

Customers, Technology, and Self-Concept
Dell Mission
• Dell’s mission is to be the most successful computer company in

the world at delivering the best customer experience in markets
we serve .
• In doing so, Dell will meet customer expectations of highest
quality; leading technology ; competitive pricing; individual and
company accountability ; best-in-class service and support ; flexible
customization capability ; superior corporate citizenship ; financial
stability .
Dell Mission
• Dell’s mission is to be the most successful computer company (2) in

the world (3) at delivering the best customer experience in markets
we serve (1).
• In doing so, Dell will meet customer expectations of highest
quality; leading technology (4); competitive pricing; individual and
company accountability (6); best-in-class service and support (7);
flexible customization capability (7); superior corporate citizenship
(8); financial stability (5).
Statement lacks only one component: Concern for Employees

P&G Mission
• Procter & Gamble will provide branded products and services of

superior quality and value that improve the lives of the world’s
consumers.
• As a result, consumers will reward us with industry leadership in

sales, profit , and value creation, allowing our people , our
shareholders, and the communities in which we live and work to
prosper.
P&G Mission
• Procter & Gamble will provide branded products and services of

superior quality and value (7) that improve the lives of the world’s
(3) consumers.
• As a result, consumers (1) will reward us with industry leadership

in sales, profit (5), and value creation, allowing our people (9), our
shareholders, and the communities (8) in which we live and work
to prosper.
Statement lacks three components:

Products/Services, Technology, and Philosophy
L’Oreal Mission
• L’Oreal, we believe that lasting business success is built upon

ethical standards which guide growth and on a genuine sense of
responsibility to our employees , our consumers, our environment
and to the communities in which we operate .
L’Oreal Mission
• L’Oreal, we believe that lasting business success is built upon

ethical (6) standards which guide growth and on a genuine sense
of responsibility to our employees (9), our consumers, our
environment and to the communities in which we operate (8).
Statement lacks six components:

Customers, Products/Services, Markets, Technology, Concern for
Survival/Growth/Profits, Concern for Public Image
Strategic Visions Missions

Strategic vision concerns a Mission statement focuses on
firm’s Future business path – Current business activities –
“Where we are going” “Who we are & What we do”
 Markets to be pursued  Current product and service

offerings
 Future technology-product-
customer focus  Customer needs being
served
 Kind of company that
management is  Technological and business
trying to create capabilities
Importance of Vision Mission

1. To ensure unanimity of purpose within the org
2. To provide a basis, or standard, for allocating org resources
3. To establish a general tone or org climate
4. Serve as focal point for individuals to id with org purpose, direction
5. To facilitate the translation of objectives into a work structure
6. To translate purposes into obj in such a way that cost, time, and
performance parameters can be assessed and controlled.
Ten Benefits of Having a Clear Mission and Vision

1. Achieve clarity of purpose among all managers and employees.
2. Provide a basis for all other strategic planning activities, including

the internal and external assessment,
establishing objectives,
developing strategies,
choosing among alternative strategies,
devising policies,
establishing organizational structure,
allocating resources, and evaluating performance.
Ten Benefits of Having a Clear Mission and Vision

4. Provide a focal point & direction for all stakeholders of the firm.
5. Resolve divergent views among managers.
6. Promote sense shared expectations all managers, employees
7. Project a sense of worth and intent to all stakeholders.
8. Project an organized, motivated organization worthy of support.
9. Achieve higher organizational performance.
10. Achieve synergy among all managers and employees.

Vision
• “Our vision is to be a leading pharmaceutical company in India and to
become a significant global player by providing high quality, affordable
and innovative solutions in medicine and treatment.”
Mission
• “We will discover, develop and successfully market pharmaceutical
products to prevent, diagnose, alleviate and cure diseases.
• We shall provide total customer satisfaction and achieve leadership in

chosen markets, products and services across the globe, through
excellence in technology, based on world-class research and development.
• We are responsible to the society. We shall be good corporate citizens

and will be driven by high ethical standards in our practices.”
132
Intel
Vision
Getting to a billion connected computers worldwide,
millions of servers, and trillions of dollars of e-commerce.
Mission
is being the building block supplier to the Internet
economy and spurring efforts to make the Internet more
useful. Being connected is now at the center of people’s
computing experience. We are helping to expand the
capabilities of the PC platform and the Internet.
Business definition – Abell 3 dimension

• The Abell matrix is a three dimensional tool most often is referred

to as the three dimensional business definition model.
• Model is used to analyze the scope of operation for a business.
• Tool helps define a business by its competitive scope (narrow or

broad) and the extent of competitive differentiation of its
products/services
The three dimensions of the business are

• customer groups (who will be served by the business),
• customer needs (what are the customer needs that will be met)
• technology or distinctive competencies (how are these needs
going to be met).
.
Customer Needs:
• This leg of the model identifies and lists down all the customer
needs that are relevant to the company in question.
• Customer needs are identified based on the product offering

and a link is made to customer benefits.
Ex- a software developer who has studied customer needs in

relation to their product will respond by providing easy to install
software packages and may provide other useful options such as
an anti-virus, a software cleanup option as well as manuals and
tech support.
Technologies:
• Describe all those technologies that are used to create a

product as well as put in on the market.
• Issues here include things as diverse as the marketing

campaign being use or the way market research must be
conducted.
Taking our software example further, the manufacturer will used

the latest technologies in the product itself as well as proving a
helpdesk which provides the best possible and most relevant info
Customer Groups:
• It is vital for every org to understand how to segment the

market & which segments to target in order to successfully sell
a product to them.
• Once the market has been segmented, the company needs to

work toward acquiring as much knowledge as possible about
the different target groups and offer specific products or
campaigns to these segments.
Our software manufacturer may choose to serve both business

and customers and will need a separate strategy and account
managers for its B2B and B2C lines of business.
Objectives
OBJECTIVES:
Objectives
OBJECTIVES:
• The accomplishment of purpose or mission of an org requires

the formulation of a number of objectives
• An obj indicates the result that the org expects to achieve in long
run. It is an end result, the end point, aim for and try to reach
• Mission & directional course are converted into designated

performance outcomes in the process of formulating objectives.
• Obj represent a managerial commitment to achieve specified

results in a specified period, of time.
Objectives
OBJECTIVES:
• Obj spell out

• the quantity and quality of performance to be achieved,
• the time period,
• the process and
• the person who is responsible for the achievement of obj.
Objectives
IMPORTANCE OF OBJECTIVES
• Obj help to define the org in its environment: The org justify
their existence to their stakeholders in the environment like
customers, government, creditors and society at large.
• Obj help coordinating decisions & decision-maker: Stated obj

impose some constraints on the employees and modify it
towards the desirable direction. It coordinates decision-making
process by different employees.
• Obj help in formulating strategies: Mission statements are

translated into objectives and objectives are the basis for
formulating strategies.
Objectives
IMPORTANCE OF OBJECTIVES
Objectives provide standards for assessing org performance:
• Obj provide not only the direction to move to the org but also
provide ultimate goals & targets that org is expected to achieve.
• These targets and goals become the standards to judge the org
performance.
• Org, without clear obj will not have basis for evaluating their
performance or success.
Goals
Goals
Goals
Goals
• Achievement of the org obj requires the formulation &

fulfillment of departmental and unit goals.
• These are targets more precise and expressed in specific terms.
• They are stated in precise terms as quantitatively as possible.
• The emphasis in goals is on measurement of progress toward

the attainment of objectives.
Goals
Goals have the following features they:

1. Are derived from objectives,
2. Offer a standard for measuring performance,
3. Are expressed in concrete terms,
4. Are time-bound and work-oriented.

KPI
KPI
• A key performance indicator (KPI) is a business metric used to
evaluate factors that are crucial to the success of an organization.
• KPIs differ per organization; business KPIs may be net revenue or a

customer loyalty metric, while government might consider
unemployment rates.
KPI
KPI
• A good KPI should act as a compass, helping team understand
whether on the right path toward strategic goals.
• To be effective, a KPI must:

• Be well-defined and quantifiable.
• Be thoroughly communicated throughout organization and
department.
• Actually be crucial to achieving goal. (Hence, key performance
indicators.)
• Be applicable to Line of Business (LOB), or department.
KPI
KPI
To measure financial performance:
1. Net Profit 11. Return on Assets (ROA)

2. Net Profit Margin 12. Return on Equity (ROE)
3. Gross Profit Margin 13. Debt-to-Equity (D/E) Ratio
4. Operating Profit Margin 14. Cash Conversion Cycle (CCC)
5. EBITDA 15. Working Capital Ratio
6. Revenue Growth Rate 16. Operating Expense Ratio (OER)
7. Total Shareholder Return (TSR) 17. CAPEX to Sales Ratio
8. Economic Value Added (EVA) 18. Price Earnings Ratio (P/E Ratio)
9. Return on Investment (ROI)
10. Return on Capital Employed
(ROCE)
KPI
KPI
To understand customers:
19. Net Promoter Score (NPS)

20. Customer Retention Rate
21. Customer Satisfaction Index
22. Customer Profitability Score
23. Customer Lifetime Value
24. Customer Turnover Rate
25. Customer Engagement
26. Customer Complaints
KPI
KPI
To gauge market and marketing efforts:
27. Market Growth Rate
28. Market Share
29. Brand Equity
30. Cost per Lead
31. Conversion Rate
32. Search Engine Rankings (by keyword) and click-through rate
33. Page Views and Bounce Rate
34. Customer Online Engagement Level
35. Online Share of Voice (OSOV)
36. Social Networking Footprint
37. Klout Score
KPI
KPI
To measure your operational performance:
38. Six Sigma Level 49. Time to Market
39. Capacity Utilization Rate (CUR) 50. First Pass Yield (FPY)
40. Process Waste Level 51. Rework Level
41. Order Fulfillment Cycle Time 52. Quality Index
42. Delivery In Full, On Time (DIFOT) Rate 53. Overall Equipment
43. Inventory Shrinkage Rate (ISR) Effectiveness (OEE)
44. Project Schedule Variance (PSV) 54. Process or Machine
45. Project Cost Variance (PCV) Downtime Level
46. Earned Value (EV) Metric 55. First Contact Resolution
47. Innovation Pipeline Strength (IPS) (FCR)
48. Return on Innovation Investment (ROI2)
KPI
KPI
To understand your employees and their performance:
56. Human Capital Value Added (HCVA)
57. Revenue Per Employee
58. Employee Satisfaction Index
59. Employee Engagement Level
60. Staff Advocacy Score
61. Employee Churn Rate
62. Average Employee Tenure
63. Absenteeism Bradford Factor
64. 360-Degree Feedback Score
65. Salary Competitiveness Ratio (SCR)
66. Time to Hire
67. Training Return on Investment
KRA
KRA
Are those things that absolutely, positively must be done to fulfill
responsibilities and achieve business goals.
A key result area has three qualities:

1. It is clear, specific, and measurable. You can determine exactly if
the result has been achieved, and how well.
2. It is something that is completely under your control. If you do not

do it, it will not be done by someone else. If you do it, and do it well,
it can contribute significant value to your business and to your career.
3. It is an essential activity of the business. A key result is an

important output that then becomes an input to the next key result
area, or to the next person.
KRA
KRA-A key result area has three qualities:
For example, in selling,

• a key result area is prospecting—finding new, qualified, and
interested prospects to talk to about your product or service.
• Identifying and contacting new potential customers is an essential

key result area of the salesperson.
4.External Assessment
The Nature of an External Audit
• The purpose of an external audit is to develop a finite list of

opportunities that could benefit a firm and threats that should
be avoided.
Key External Forces

• External forces can be divided into five broad categories:
(1) Economic forces;
(2) Social, Cultural, Demographic, & Natural environment forces;
(3) Political, Governmental, and Legal forces;
(4) Technological forces; and
(5) Competitive forces.
3.Management
4.External
Mission
Assessment
& Vision
Relationship between Key External forces & Organization
Competition
Supplier
Distributor
Economic forces Creditor
Customer
Social, cultural, Employees
demographic, Communities
environmental, Managers Organizations
political, Stockholders Opportunities &
governmental, legal, Unions Threats
Government
Technological Forces Trade Association
Special interest group
Competitive forces Products
Services
Markets
Natural environment
External forces affect

• Types of Prod dev,
Changes in
Changes • Positioning &
Consumer Demand
in Segmenting strategies,
both Industrial &
External
Consumer products
forces • Type of services
and services
offered, &
• Choice of Buss to
Acquire or Sell.
3.Management
4.External
Mission
Assessment
& Vision
Enables
Id & Eval To
Org to To Dev Policies
Ext Opp To Design Achieve
Dev To Achieve annual
& Strategies Long-
clear objectives.
Threats term Obj
Mission
External forces directly affect both Suppliers and Distributors.

3.Management
4.External
Mission
Assessment
& Vision
Performing external audit

• Co first gather Competitive intelligence info about eco, social,
cultural, demographic, env, pol, govt, legal, and tech trends.
• Individuals monitor various sources of info, such as key
magazines, trade journals, and newspapers.
• Submit periodic scanning reports to a committee of managers
Incharge for external audit.
• Approach provides a continuous stream of timely strategic info
& involves many individuals in the external-audit process.
• The Internet provides another source for gathering strategic
information, as do corporate, university, and public libraries.
• Suppliers, distributors, salespersons, customers, competitors
represent other sources of vital information.
3.Management
4.External
Mission
Assessment
& Vision
The Industrial Organization (I/O) View
• Advocates that external (industry) factors are more important

than internal factors in a firm achieving CA.
• Porter’s Five-Forces Model, is an Ex of the I/O which focuses on

analyzing external forces & industry variables for CA
• I/O view firms compete in attractive industries, avoiding weak or

faltering industries
• I/O research provides important contributions to gain CA.

3.Management
4.External
Mission
Assessment
& Vision
Economic Forces
Economic factors have a direct impact on the potential
attractiveness of various strategies.
• When interest rates rise, funds needed for capital expansion
become more costly or unavailable.
• When interest rates rise, discretionary income declines, and the

demand for discretionary goods falls.
• When stock prices increase, the desirability of equity as a source

of capital for market development increases.
• When the market rises, consumer and business wealth expands.

3.Management
4.External
Mission
Assessment
& Vision
Key Economic Variables to Be Monitored

3.Management
4.External
Mission
Assessment
& Vision
Key Economic Variables to Be Monitored

• Shift to a service economy Import/export factors
• Availability of credit Demand shifts for different
• Level of disposable income categories of goods and services
• Propensity of people to spend Price fluctuations
• Interest rates Monetary policies
• Inflation rates Fiscal policies
• Money market rates Tax rates
European Economic Community
• Gross domestic product trend
(EEC) policies
• Consumption patterns
Organization of Petroleum
• Unemployment trends Exporting
• Worker productivity levels Countries (OPEC) policies
• Value of the Rs Coalitions of Lesser Developed
• Stock market trends Countries (LDC) policies
• Foreign countries’ economic conditions
Social, Cultural, Demographic, and Natural Environment Forces
• Have a major impact on virtually all products, services, markets,

and customers.
• Small, large, for-profit, & nonprofit org in all industries are being
staggered and challenged by the opportunities and threats
arising from changes in social, cultural, demographic, and
environmental variables.
• In every way, India is much different today than it was yesterday,

and tomorrow promises even greater changes.
Social, Cultural, Demographic, Natural Env Forces

Key Social, Cultural, Demographic, Natural Environment Variables
• Number of special-interest groups • Trust in Govt

• Number of marriages • Attitudes toward govt
• Number of divorces • Ethical concerns
• Number of births • Attitudes toward saving
• Number of deaths • Attitudes toward
• Life expectancy rates investing
• Per capita income • Avg level of education
• Location of retailing, manufacturing, • Government regulation
and service businesses • Recycling
• Lifestyles • Waste management
• Traffic congestion • Air pollution
• Average disposable income • Water pollution
• Buying habits • Ozone depletion
• Reg changes in tastes & preferences • Endangered species
Political, Governmental, and Legal Forces
• Central, state, local, and foreign governments are major

regulators, deregulators, subsidizers, employers, and customers
of organizations.
• Political, governmental, and legal factors, therefore, can

represent key opportunities or threats for both small and large
organizations.
• For industries and firms that depend heavily on Govt contracts or

subsidies, political forecasts can be the most important part of an
external audit.
• Changes in patent laws, antitrust legislation, tax rates, and

lobbying activities can affect firms significantly.
• The increasing global interdependence among economies,

markets, governments, and org makes it imperative that firms
consider the possible impact of political variables on the
formulation and implementation of competitive strategies.

Political, Governmental, and Legal Variables

• Government regulations or deregulations
• Changes in tax laws •Import–export regulations
• Special tariffs •Govt fiscal and monetary
• Political action committees policy changes
• Voter participation rates •Political n foreign countries
• Number of patents •Spl local, state, central laws
• Changes in patent laws •Lobbying activities
• Environmental protection laws •Size of govt budgets
•World oil, currency, and
• Level of defense expenditures
labor markets
• Legislation on equal employment •Location and severity of
• Level of government subsidies terrorist activities
• Antitrust legislation •Local, state, national
elections
Technological Forces
The Internet has changed the very nature of Opp and threats by
• Altering the life cycles of products,
• Increasing the speed of distribution,
• Creating new products and services,
• Erasing limitations of traditional geographic markets, and
• Changing the historical trade-off between production
standardization and flexibility.
• Economies of scale, changing entry barriers, and redefining the
relationship between industries and various suppliers, creditors,
customers, and competitors.
• Represent major Opp and threats that must be considered in

formulating strategies.
• Tech advancements affect org’ Prod, Serv, Mkt, Sup, Dist, Comp,
Cust, Mfg processes, Mktg practices, Comp position.
• Can create new Mkts, result in a proliferation of new & improved
Prod,
• Change the relative Comp cost positions in an industry,
• Render existing Prod & Serv obsolete.
• Reduce or eliminate cost barriers between businesses, create

shorter production runs, create shortages in technical skills,
result in changing values and expectations of employees,
managers, and customers.
• Create new CA that are more powerful than existing advantages.
• No Co or Ind today is insulated against emerging tech dev
• In high-tech industries, Id & Eval of key tech Opp & threats

important part of the external strategic-management audit.
Internet has changed the nature of Opp-threats how

The Internet has changed the very nature of Opp and threats by
• Altering the life cycles of products,
• Increasing the speed of distribution,
• Creating new products and services,
• Erasing limitations of traditional geographic markets, and
• Changing the historical trade-off between production
standardization and flexibility.
• Economies of scale, changing entry barriers, and redefining the
relationship between industries and various suppliers, creditors,
customers, and competitors.
To Effectively capitalize on e-commerce,

• Org have new positions : chief info off (CIO) chief tech off (CTO).
• Trend reflects the growing importance of IT in Srtgy. Mgt.
• A CIO and CTO work together to ensure that info needed to
formulate, implement, and evaluate strategies is available where
and when it is needed.
• Responsible for developing, maintaining, and updating a Co. info
database.
• CIO is more a manager, managing the firm’s relationship with
stakeholders; CTO is more a technician, focusing on technical
issues such as data acquisition, data processing, decision-support
systems, and software and hardware acquisition.
Examples of the Impact of Wireless Technology
• Airlines—Many airlines now offer wireless technology in flight.

• Automotive—Vehicles are becoming wireless.
• Banking—Visa sends txt msg alerts after usual transactions.
• Education—Many secondary (and even college) students may
use smart phones for math because research shows this to be
greatly helpful.
• Energy—Smart meters now provide power on demand in your
home or business.
• Health Care—Patients use mobile devices to monitor their own
health, such as calories consumed.
Examples of the Impact of Wireless Technology
• Hotels—Days Inn sends daily specials and coupons to hotel

guests via text messages.
• Market Research—Cell phone respondents provide more honest
answers,
• Politics—President Obama won the election partly by mobilizing
Facebook and MySpace users, revolutionizing political
campaigns. Obama announced his vice presidential selection of
Joe Biden by a text message.
• Publishing—eBooks are increasingly available.
Competitive Forces
• An important part of an external audit is identifying rival firms

and determining their
– strengths,
– weaknesses, capabilities, opportunities, threats, objectives,
and strategies.
• Collecting and evaluating info on competitors is essential for

successful strategy formulation.
Competitive Forces - Key Questions About Competitors
1. What are the major competitors’ strengths weaknesses?

2. What are the major competitors’ objectives and strategies?
3. How will the major competitors most likely respond to PESTEL?
4. How are our Prod or Serv positioned relative to major Com?
5. How have the sales and profit rankings of major competitors?
6. What is nature of supplier & distributor relationships in
industry?
7. To what extent could substitute products or services be a threat
to competitors in this industry?
Competitive Intelligence
Competitive intelligence (CI), as formally defined by the Society of

Competitive Intelligence Professionals (SCIP),
– is a systematic and ethical
– process for gathering and analyzing info about the

competition’s activities and
– general business trends to further a business’s own goals

Competitive Intelligence
The three basic objectives of a CI program are

1. To provide general understanding of industry & its competitors,
2. To identify areas in which competitors are vulnerable and
3. To assess impact strategic actions have on competitors, and
4. To identify potential moves that a competitor might make that

would endanger a firm’s position in the market
Porter’s The Five-Forces Model of Competition
The nature of competitiveness in a given industry can be viewed as

composite of five forces:
1. Rivalry among competing firms

2. Potential entry of new competitors
3. Potential development of substitute products
4. Bargaining power of suppliers
5. Bargaining power of consumers
4.External
Business
Assessment
strategy
Potential
Entrants
Relative Power
of Unions, Threat of
Governments, New Entrants
Other etc
Stakeholders Industry Bargaining Power
Competitors of Buyers
Buyers
Suppliers Rivalry among

Existing Firms
Threat of
Substitute products
or services
Substitutes

• The most powerful of the five competitive forces.
• The strategies pursued by one firm can be successful until they

provide CA over strategies pursued by rival firms.
• Changes in strategy by one firm may be met with retaliatory

countermoves, such as …..

• Changes in strategy by one firm may be met with retaliatory
countermoves, such as
– lowering prices,
– enhancing quality,
– adding features,
– providing services,
– extending warranties, and
– increasing advertising.
1. Conditions That Cause High Rivalry among competing firms

1. Conditions That Cause High Rivalry among competing firms
• High number of competing firms

• Similar size of firms competing
• Falling demand for the industry’s products
• Falling product/service prices in the industry
• When consumers can switch brands easily
• When fixed costs are high among firms competing
• When the product is perishable
• When rivals have excess capacity
• When consumer demand is falling
• When rivals have excess inventory
• Whenever new firms can easily enter a particular industry, the

intensity of competitiveness among firms increases.
• Barriers to entry
Barriers to entry
– Need to gain technology and specialized know-how,

– Lack of experience,
– Strong customer loyalty, & strong brand preferences,
– Large capital requirements,
– Lack of adequate distribution channels,
– Government regulatory policies, tariffs,
– Lack of access to raw materials,
– Possession of patents,
– Potential saturation of the market.
4.External
Business
Assessment
strategy

Barriers to entry Ex
• Indian FMCG market high product differentiation and strong
dealer distribution network. Marico Parachute oil
• Procter & Gamble for Tide and Ariel, create high entry barriers
through their high levels of advertising and promotion.
• Huge financial resources in mfg facilities commercial airplanes

creates barrier to entry to any competitor for Boeing and Airbus.
• Govt Policy: Govt limit entry into an industry thru licensing req by
restricting access to raw materials, such as oil-drilling sites in
protected areas.
4.External
Business
Assessment
strategy

Barriers to entry Ex
• Excel or Word established in office, office managers are reluctant
to switch to a new program because of the high training costs.
• Access to Distribution Channels: Small entrepreneurs often have

difficulty obtaining supermarket shelf space for their goods
because
– large retailers charge for space on their shelves
– give priority to the established firms who can pay for Ad
needed to generate high customer demand.
Follower Firm – New Entrant

Despite numerous WHAT? .
barriers to entry, new firms
sometimes enter industries with
Leader Firm
To Id potential new firms
entering the market,
To monitor the new rival firms’ HOW?
strategies, to counterattack as
needed, and
To capitalize on existing
strengths and opportunities.
Follower Firm – New Entrant Higher-quality products,

Despite numerous WHAT? Lower prices,
barriers to entry, new firms Substantial marketing resources.
Leader Firm
entering the market,
To monitor the new rival firms’ HOW?
strategies, to counterattack as
needed, and
To capitalize on existing
Follower Firm – New Entrant Higher-quality products,

Despite numerous WHAT? Lower prices,
barriers to entry, new firms Substantial marketing resources.
Leader Firm
entering the market, Fortify their positions such as
To monitor the new rival firms’ Lowering prices,
HOW?
strategies, to counterattack as Extending warranties,
needed, and Adding features,
To capitalize on existing Offering financing specials.

Substitute products are those products that appear to be
different but can satisfies’ the same need as another product.
• Sugar free is a substitute for sugar,

• Plastic container producers competing with glass, paperboard,
and aluminum can producers
• Producers of eye glasses and contact lenses, for example, face
increasing competitive pressures from laser eye surgery.
• Newspapers, magazines face substitute-product competitive
pressures from the Internet and 24-hour cable television.

• According to Porter, “Substitutes limit the potential returns of an
industry by placing a ceiling on the prices firms in the industry
can profitably charge.”
• Tea can be considered a substitute for coffee. If price of coffee

goes up high enough, coffee drinkers will begin switching to tea.
• The price of tea thus puts a price ceiling on the price of coffee.
• Suppliers can affect an industry through their ability to raise

prices or reduce the quality of purchased goods and services.
• Supplier or supplier group is powerful if these factors apply?

• Supplier or supplier group is powerful if these factors apply

– Supplier industry is dominated by a few companies, but it sells
too many
• Ex. Petroleum industry
– Product/service is unique &/or has built up switching costs

• Ex. Word processing software
– Substitutes are not readily available

• Ex. Electricity
• Supplier or supplier group is powerful if these factors apply

– Suppliers able to integrate forward & compete directly with
their present customers
• Ex. a microprocessor producer like Intel can make PCs.
– A purchasing industry buys only a small portion of the

supplier goods/services & thus unimportant to Supplier
• Ex. sales of bi-cycle tires are less imp to the tire industry
than sales of auto tires.
• In more & more industries, sellers are forging strategic

partnerships with select suppliers in efforts to
1. Reduce inventory & logistics costs (e.g., thru JIT deliveries);
2. Speedup the availability of next-generation components;
3. Enhance the quality of the parts and components being

supplied and reduce defect rates; and
4. Squeeze out important cost savings for both themselves and

their suppliers
5. Bargaining power of buyers / consumers
• Buyers affect industry through their ability to force down prices,
• Bargain for higher quality or more services, and
• Play competitors against each other.
A buyer or a group of buyers is powerful if some of the following

factors hold true:
Buyer/Group of buyers is powerful if following factors hold true:

• Buyer purchases large proportion of the seller’s product/ service
– Ex. Oil filters purchased by a major auto maker
• Buyer has potential to integrate backward by producing itself

– Ex. Tata's Mfg. Green Batteries
• Changing suppliers costs very little

– Ex. Office supplies are easy to find

Buyer/Group of buyers is powerful if following factors hold true:
• Alternative suppliers plentiful as product is Std/Undifferentiated
– Ex. Motorists can choose among many petrol retail outlets
• Purchased product represents high % of buyer’s costs, providing

an incentive to shop around for a lower price
– Ex. Gold purchased for jewelry by jewelry shops
• Purchased product is unimportant to final quality/price of buyer’s

products/services and can be easily substituted without affecting
the final product adversely
– Ex. Electric wire bought for use in lamps

• Consumers gain increasing bargaining power if:

1. If they can inexpensively switch to competing brands/substitutes
2. If they are particularly important to the seller
3. If sellers are struggling in the face of falling consumer demand
4. If they are informed about sellers’ products, prices, and costs
5. If they have discretion in if & when they can purchase the product
Porter’s Five forces Model
Threat of new entrants
Bargaining Rivalry in Bargaining

power Existing firms Power of
of suppliers of Industry Buyers
Threat of substitute products

3
Threat of substitute
products
Threat of new entrants : Low
• Regulatory changes to bring
product patents so entry barriers
for companies with no patented
products.
Analysis of the • Price is based on Competition

Pharma market in reducing industry attractiveness
India
• Large no of small scale units

products Threat of Substitute Products :
High
•Threat is high in a process

patent regime.
•In niche areas, no of products

is less & competition less.
Analysis of the
Pharma market in •Threat is high in OTC (over the
Counter) segment.
India

products Bargaining power of buyers : Low
•Drug choice is with doctors so

customers have low power.
•Brand loyalty high in many

segments.
Analysis of the •In some segments buyers are price

sensitive, therapeutically
Pharma market in
equivalent substitutes are available
India
•In OTC customer strength is high

Threat of substitute Bargaining power of suppliers :

products Low
•Supplier industry is fragmented.
•Companies are relatively small in

size.
•Threat of low priced import in

Analysis of the many therapeutic segments.
Pharma market in
India •Price is competition based due
to intense competition

Threat of substitute Rivalry within the industry :

products High
•M&A of Units & brands leading to

concentration.
•Multiple branding arrangements

gaining popularity.
Analysis of the •Differentiated products (new del

Pharma market in systems) are being launched.
India
•Price control exists.
SWOT Analysis
• The most renowned tool for audit and analysis of the overall
strategic position of the business and its environment.
• Its key purpose is to identify the strategies that will create a firm
specific business model that will best align an organization’s
resources and capabilities to the requirements of the
environment in which the firm operates.
SWOT
• Strengths are the qualities that enable to accomplish the

organization’s mission, can be either tangible or intangible
• Basis on which continued success can be made and sustained.
• Strengths are the beneficial aspects of the organization or the

capabilities of an organization, which includes human
competencies, process capabilities, financial resources, products
and services, customer goodwill and brand loyalty.
• Examples of organizational strengths are huge financial

resources, broad product line, no debt, committed employees,
etc.
SWOT
• Weaknesses are the qualities that prevent from accomplishing

mission and achieving full potential.
• These weaknesses deteriorate influences on the organizational
success and growth.
• Weaknesses in an organization may be depreciating machinery,
insufficient research and development facilities, narrow product
range, poor decision-making, etc.
• Weaknesses are controllable & must be minimized and
eliminated. For instance - to overcome obsolete machinery, new
machinery can be purchased.
• Other examples of organizational weaknesses are huge debts,

high employee turnover, complex decision making process,
narrow product range, large wastage of raw materials, etc.
SWOT
• Opportunities - are presented by the environment within which

organization operates.
• These arise when an org can take benefit of conditions in its

environment to plan and execute strategies that enable it to
become more profitable.
• Organizations can gain CA advantage by making use of

opportunities.
• Opportunities may arise from market, competition,

industry/government and technology. Increasing demand for
telecommunications accompanied by deregulation is a great
opportunity for new firms to enter telecom sector and compete
with existing firms for revenue.
SWOT
• Threats - Threats arise when conditions in external environment

jeopardize the reliability and profitability of the organization’s
business.
• They compound the vulnerability when they relate to the

weaknesses. Threats are uncontrollable.
• When a threat comes, the 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
Advantages of SWOT Analysis
• It is a source of information for strategic planning.

• Builds organization’s strengths.
• Reverse its weaknesses.
• Maximize its response to opportunities.
• Overcome organization’s threats.
• It helps in identifying core competencies of the firm.
• It helps in setting of objectives for strategic planning.
• It helps in knowing past, present and future so that by using past
and current data, future plans can be chalked out.

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Strategy Management

Business Organization Administration

Business may be identified as

What is Management? C.H. Northcott

Business Organization • Administration

• For which they have been

What is Objectives of Management?

• Main purpose of business is to earn reasonable

Objectives of • Growth in the competitive environment by

To achieve Profits & growth managers pursue

Managers pursue the following Objectives

1) Efficient use of resources

4) Satisfied Work force

5) Good working conditions

6) Good relation with suppliers

7) Contribution to national goals

Paradigm One: Ad-hoc Policy making.

• Servicing limited geographical area – Informal

• The Strategic planning was centred on

Paradigm Two – Integrated Policy Formulation.

Paradigm Three – The Concept of Strategy.

• A strategy needed to be formed with critical look

Paradigm Four – The Strategic Management.

• Past experiences were no guarantee for future,

• The future was no more extension of the past or

• IIMs and Administrative Staff College of India

• IIM-A is based on Harvard Model.

Till 1980: Pre-liberalisation Stage:

• Strategic management on Government fringes.

• Entwining enterprise objectives in the national

• Secretive & one man Strategic Management

1980 - 2000: Liberalisation Stage

• ‘Foreign Complex’ governed strategy.

• Strategy of focus on rationalisation and operations

• Employing international consulting firms in

2000- Onwards: Post Liberalisation Stage:

• Global maverick’ mind-set & Acquire professional

• Mobilise resources and ensure adequate growth

2000- Onwards: Post Liberalisation Stage:

• De-merge businesses as independent companies

• Decentralise organisations, develop

• Originated from the Greek word Strategia –

Defining • A strategy of a business org is a comprehensive

• “The common thread among the organisation’s

• “Strategy is Organization's pattern of response to its

• “Creation of a unique and valued position involving a

 A Co. strategy consists of the set of competitive

What is  Strategy is management’s “game plan” to

SBU 1 SBU 2 SBU n

Buss Unit Obj Competitive Srtgy Res across Prdt-Mkt

SBU 1 SBU 2 SBU n

Buss Unit Obj Competitive Srtgy Res across Prdt-Mkt

SBU 1 SBU 2 SBU n

Buss Unit Obj Competitive Srtgy Res across Prdt-Mkt

Responsibility of heads of major

Responsibility of plant managers,

1950 1960 1970 1980 1990 21Century

1950 1960 1970 1980 1990 21Century

1950 1960 1970 1980 1990 21Century

1950 1960 1970 1980 1990 21Century

1950 1960 1970 1980 1990 21Century

1950 1960 1970 1980 1990 21Century

What? Where? How?