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Strategic Management Assignment 6-------------------------ANKITA CHAUHAN(51) SY MMS 2017-19 1. What do you mean by strategy? How is a business model different from a strategy? Strategy: 1. Action designed to achieve a long-term or overall aim 2. A method or plan chosen to bring about a desired future, such as achievement of a goal or solution to a problem. 3. The art and science of planning and marshalling resources for their most efficient and effective use. The term is derived from the Greek word for generalship or leading an army. See also tactics. A company's business model is a part of its business' overall strategy: It is the nuts and bolts behind how the company plans to achieve its goals, such as making a profit. A company can change its business model over time as a part of its profit-making strategy. A business model and a business strategy both answer key questions in operating a company. A business model is the systematic method used to generate revenue in a profitable company. A business strategy is a method used to achieve a core company objective.

Business Model Your business model serves as the core of your business. It identifies your business as a system and maps out how your business creates value for its customers. The value that your customers receive is your small business’ product or service. Those products and services generate income 1|Page

and profits for your business when your customers pay for those rendered services. The business model only follows the money. It does not identify the steps that your business will take to achieve the money, nor does it provide forecasting for your business’ future or explain the costs required to create and to provide the services. The business model does, however, identify the key operations that your business provides to generate income, along with the benefits that become available to your business and your clients, such as referral business and reliable service, respectively. Business Strategy Model The business strategy for your company defines the path that your business will take to achieve its goals. These goals include the elements of your business model, along with any additional missions or goals. It explains the steps, processes and changes that the business will follow and it identifies the strategies the business will to counteract potential upsets and hurdles. Achieving the model of the business strategy requires the efforts of every employee. The business strategies should be contemporary, if not advanced, to meet the current industry demands, as well as the forecasted demand Business Model vs. Strategy To identify the difference between business model and strategy, first we require to know the clear definitions and parameters of both, business model and strategy. This is simply because both the terms are interrelated. Typically, a business model refers to a plan or a diagram, which talks about how a company uses its resources, how it competes, how it develops business relationships, how it deal with consumers, and how the firm creates value to generate sustainable earnings. This is according to Barringer & Ireland. Putting it very simple, in overall, a business model talks how a company competes in the competitive market whereas strategy refers to the long-term direction of the company. Explicitly, strategy defines ways and means of achieving a future projected state of affair. Therefore, we see a link and an interrelation between the two terms. Strategy is the long-term direction of the company and the business model facilitates the strategy as it defines how a firm competes. What is a Business Model? In overall, a business model is the overall framework of a business. Illustratively, it depicts what are the key activities of the business. Let’s assume a manufacturing company. Managing operations of the company is crucial, and it requires a number of key activities to be managed. Further, the company has to determine how they manage relationships with the consumer. If it is a luxury good, they have to develop a secure customer relationship management strategy as the company wants a loyal customer base. When creating a loyal customer base, the value proposition is important. Simply, a value proposition refers to what type of a value a company creates in order to retain consumers with them for a foreseeable future. When doing this process, an effective revenue management process is required. If revenue is not managed properly, all the functions of a company may decline. In this regard, effective cost management is also required. 2|Page

Business models also acknowledge managing strategies of key partnerships as well. For effective and smooth transformation of the company’s supply chain, partnerships outside the company are important. Say, a company has adopted a disintermediation strategy while negotiating with the suppliers and thus it is an example of a key partnership. In this regard, the company is required to determine what type of consumers that they deal with. Are they daily buyers, industrial buyers, etc? A proper business model needs clear identification of consumer types too. Therefore, a business model refers to a plan that talks how the company manages key partnerships, consumers, value propositions, costs and revenues, key resources, etc. All in all, a business model defines how a company competes and how its competitiveness is achieved by means of the activities mentioned above. Difference between Business Model and Strategy What is Strategy? As mentioned above, strategy refers to the long-term direction of the company and it expresses in the foreseeable future what the company’s expected position is. Being competitive and achieving competitive advantages are necessary to attain a desired strategy. In fact, there are different classifications of strategies. Among them, corporate strategy, operational strategy, and business unit strategies are common in terms of definitional angles. Corporate strategy refers to the overall scope and the purpose of the business. Corporate level strategies address the whole company. Business level strategies always focus on Strategic Business Units (SBUs). An SBU is defined as a separate department or an entity of a large business conglomerate. The major decisions such as, which markets to follow and what competitive strategies should be used in those markets are determined in business level strategies. Operational strategies focus on organizational process designs, organization in order to produce goods and services as facilitators of business level and corporate strategies

2. Explain organizational strategies, organization’s vision, mission and competitive advantage. An organizational strategy is the sum of the actions a company intends to take to achieve long-term goals. Together, these actions make up a company's strategic plan. Strategic plans take at least a year to complete, requiring involvement from all company levels. A Mission Statement defines the company's business, its objectives and its approach to reach those objectives. A Vision Statement describes the desired future position of the company. Elements of Mission and Vision Statements are often combined to provide a statement of the company's purposes, goals and values. Mission, Vision, and Values 3|Page

Mission and vision both relate to an organization’s purpose and are typically communicated in some written form. Mission and vision are statements from the organization that answer questions about which we are, what do we value, and where we’re going. A study by the consulting firm Bain and Company reports that 90% of the 500 firms surveyed issue some form of mission and vision statements (Bart & Baetz, 1998). Moreover, firms with clearly communicated, widely understood, and collectively shared mission and vision have been shown to perform better than those without them, with the caveat that they related to effectiveness only when strategy and goals and objectives were aligned with them as well (Bart, et. al., 2001). A mission statement communicates the organization’s reason for being, and how it aims to serve its key stakeholders. Customers, employees, and investors are the stakeholders most often emphasized, but other stakeholders like government or communities (i.e., in the form of social or environmental impact) can also be discussed. Mission statements are often longer than vision statements. Sometimes mission statements also include a summation of the firm’s values. Valuesare the beliefs of an individual or group, and in this case the organization, in which they are emotionally invested. The Starbucks mission statement describes six guiding principles that, as you can see, also communicate the organization’s values: 1. Provide a great work environment and treat each other with respect and dignity. 2. Embrace diversity as an essential component in the way we do business. 3. Apply the highest standards of excellence to the purchasing, roasting and fresh delivery of our coffee. 4. Develop enthusiastically satisfied customers all of the time. 5. Contribute positively to our communities and our environment. 6. Recognize that profitability is essential to our future success (Starbucks, 2008). Similarly, Toyota declares its global corporate principles to be: 1. Honor the language and spirit of the law of every nation and undertake open and fair corporate activities to be a good corporate citizen of the world. 2. Respect the culture and customs of every nation and contribute to economic and social development through corporate activities in the communities. 3. Dedicate ourselves to providing clean and safe products and to enhancing the quality of life everywhere through all our activities. 4. Create and develop advanced technologies and provide outstanding products and services that fulfill the needs of customers worldwide.

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5. Foster a corporate culture that enhances individual creativity and teamwork value, while honoring mutual trust and respect between labor and management. 6. Pursue growth in harmony with the global community through innovative management. 7. Work with business partners in research and creation to achieve stable, long-term growth and mutual benefits, while keeping ourselves open to new partnerships (Toyota, 2008). A vision statement, in contrast, is a future-oriented declaration of the organization’s purpose and aspirations. In many ways, you can say that the mission statement lays out the organization’s “purpose for being,” and the vision statement then says, “Based on that purpose, this is what we want to become.” The strategy should flow directly from the vision, since the strategy is intended to achieve the vision and thus satisfy the organization’s mission. Typically, vision statements are relatively brief, as in the case of Starbuck’s vision statement, which reads: “Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles as we grow (Starbucks, 2008). Any casual tour of business or organization Web sites will expose you to the range of forms that mission and vision statements can take. To reiterate, mission statements are longer than vision statements, often because they convey the organizations core values. Mission statements answer the questions of “Who are we?” and “What does our organization value?” Vision statements typically take the form of relatively brief, future-oriented statements—vision statements answer the question “Where is this organization going?” Mission and vision statements play three critical roles: (1) communicate the purpose of the organization to stakeholders, (2) inform strategy development, and (3) develop the measurable goals and objectives by which to gauge the success of the organization’s strategy. These interdependent, cascading roles, and the relationships among them, are summarized in the figure. Figure 4.5 Key Roles of Mission and Vision

First, mission and vision provide a vehicle for communicating an organization’s purpose and values to all key stakeholders. Stakeholders are those key parties who have some influence over the organization or stake in its future. You will learn more about stakeholders and stakeholder analysis later in this chapter; however, for now, suffice it to say that some key stakeholders are employees, customers, investors, suppliers, and institutions such as governments. Typically, 5|Page

these statements would be widely circulated and discussed often so that their meaning is widely understood, shared, and internalized. The better employees understand an organization’s purpose, through its mission and vision, the better able they will be to understand the strategy and its implementation. Second, mission and vision create a target for strategy development. That is, one criterion of a good strategy is how well it helps the firm achieve its mission and vision. To better understand the relationship among mission, vision, and strategy, it is sometimes helpful to visualize them collectively as a funnel. At the broadest part of the funnel, you find the inputs into the mission statement. Toward the narrower part of the funnel, you find the vision statement, which has distilled down the mission in a way that it can guide the development of the strategy. In the narrowest part of the funnel you find the strategy —it is clear and explicit about what the firm will do, and not do, to achieve the vision. Vision statements also provide a bridge between the mission and the strategy. In that sense the best vision statements create a tension and restlessness with regard to the status quo—that is, they should foster a spirit of continuous innovation and improvement. Key Takeaway Mission and vision both relate to an organization’s purpose and aspirations, and are typically communicated in some form of brief written statements. A mission statement communicates the organization’s reason for being and how it aspires to serve its key stakeholders. The vision statement is a narrower, future-oriented declaration of the organization’s purpose and aspirations. Together, mission and vision guide strategy development, help communicate the organization’s purpose to stakeholders, and inform the goals and objectives set to determine whether the strategy is on track. Competitive advantage Competitive advantage is the favorable position an organization seeks in order to be more profitable than its rivals. To gain and maintain a competitive advantage, an organization must be able to demonstrate a greater comparative or differential value than its competitors and convey that information to its desired target market. For example, if a company advertises a product for a price that's lower than a similar product from a competitor, that company is likely to have a competitive advantage. The same is true if the advertised product costs more, but offers unique features that customers are willing to pay for. 3. Explain the step by step process of making strategic plan, its implementation, execution and evaluation by an entrepreneur. Step Process for Developing a Strategic Plan Step 1: Write a Vision Statement A Vision Statement is a statement (typically 2-3 sentences) that gives the reader (and more importantly, the organization) a mental picture of what the organization hopes to become or what the organization hopes to achieve. 6|Page

It is important to understand where an organization is going before it can develop a strategic plan for how to get there. The value of a vision statement is that is gives leadership and employees a shared goal. To facilitate a visioning session: Get the visionaries in a room. Ask them to close their eyes and describe the mental picture they see when the organization has reached its optimal state. Document thoughts that describe the picture on a flip chart. Come to agreement on all that is described. Take some time to wordsmith or play with the wording until it describes the thoughts accurately. Example Vision Statement: “ABC Dry Cleaners will be the premier professional laundry of the metropolitan area by providing unmatched customer service and cleaning services that exceed the competition.” Step 2: Write a Mission Statement A Mission Statement is an explanation of why an organization exists and the path it will take to achieve its vision. Mission statements are typically shorter than a vision statement but not always and are organization specific. This is a statement that describes what the organization is passionate about and why it exists. To facilitate the mission statement process: Have the group look at vision statement and begin the process to brainstorm a mission statement. Go around the room and have everyone give a brief description (5-7 words) describing their thoughts and document their answers on a flip chart. Once everyone has put their ideas down, look for similarities and usually a natural statement will flesh itself out. Reword and refine the statement until everyone agrees that it reflects the mission of the organization. Example Mission Statement: We exist to “help our customers care for and extend the life of their clothes investment.” Strategy execution as a step-by-step process. Both of the models outlined above are important and anyone serious about the practice of strategy execution should be familiar with them, but they suffer from what might be called the “Goldilocks Problem.” The process view doesn’t contain enough detail to help managers construct the three processes within an organization (i.e., too cold). Conversely, the systems view contains so many sub steps that it can be overwhelming to managers (i.e., too hot).

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So, how can we find a solution that is “just right"? While there is no easy answer, the best of both approaches can be synthesized into 10 steps outlined below. These steps provide both high level direction as well as the detail necessary to capture the lion’s share of strategy execution success. Step 1: Visualize the strategy. One of the most pressing challenges in all of strategy simply understands what a strategy is. An effective way to improve this understanding is to visualize the strategy via an illustration that shows both the important elements of the strategy and how each relates to one another. Frameworks such as the Strategy Map by Kaplan and Norton, the Activity Map by Michael Porter, or the Success Map by Andy Neely help in this regard. Step 2: Measure the strategy. Key elements of the visualized strategy should be assigned an easily understood performance measure. The full set of strategic performance measures can be organized into a dashboard, a Balanced Scorecard, or some other framework so the reader can determine that progress is being made toward completion of the strategy. Step 3: Report progress. In the same way that a budget is reviewed monthly to ensure financial commitments are being kept, the strategy should be reviewed regularly, but with more of an eye toward determining if the strategy is producing results, versus controlling performance. Step 4: Make decisions. Strategy execution is much like sailing a boat toward a planned destination. A defined course and a full complement of navigational charts will never eliminate the need to remain vigilant, to assess the environment, and to make corrections as conditions change. As part of the regular reporting process leaders must make ongoing strategic decisions to keep the strategy current and on course. Step 5: Identify strategy projects. Organizations may have scores, if not hundreds, of projects ongoing at any point, but they rarely have a firm grasp on the type and range of these projects. The first step in improving project-oriented strategy execution is to capture and organize all projects— strategy projects in particular—that are underway in throughout an organization. Step 6: Align strategy projects. Once projects are captured they must then be aligned to the strategies or goals for the organization. This step entails comparing each project, either proposed or ongoing, to the strategic goals to determine if alignment exists. Only those projects that directly impact the strategy should be resourced and continued. Step 7: Manage projects. Organizations must develop a capability in project management if they are to execute strategy effectively. In some settings, projects receive very little management. In others, projects persist well beyond their scheduled completion. The full complement of projects in any organization should be coordinated and controlled by a central project office or officer with the responsibility for monitoring both progress and performance. 8|Page

Step 8: Communicate strategy. It is difficult to execute strategy when the strategy itself isn’t well understood, or performance relative to it is not communicated. Leaders must communicate their visualized strategy to the workforce in a way that will help them understand not only what needs to be done, but why. Step 9: Align individual roles. Employees want to know they are making a meaningful contribution to their organization’s success. It’s up to senior leaders to ensure that employees at all levels can articulate and evaluate their personal roles toward achievement of specific strategic goals. This is perhaps one of the most critical aspects of the execution process. Step 10: Reward performance. In strategy execution, as in any other area of management, what gets measured gets done. Taking this one step further, what get measured and rewarded gets done faster. After explaining the strategy and aligning the workforce to it, senior managers institute the incentives that drive behaviors consistent with the strategy. Strategy execution is difficult in practice for many reasons, but a key impediment to success is that many leaders don’t know what strategy execution is or how they should approach it. Home-grown approaches may be incomplete if they fail to incorporate many of the basic activities highlighted above Step 3: Perform a Gap Analysis A gap analysis is a process an organization goes through to identify the gaps between its current state and its vision. To do a gap analysis, simply look at where the organization is and compare it to where it hopes to be. This process typically involves a step of researching data outside the organization as well as taking a good hard look at data within the organization. Examples of gaps an organization might look at would be: • • • • •

Market Share Financials Internal Process/Systems Public Relations Customer Satisfaction and Quality of products/service (these are also considered Critical Success Factors). • Example of organization’s current state: • Customer Satisfaction scores of 65 • Profit margin 1% • 10% of market share • 10% return on poor quality cleanings Step 4: Write SMART Goals 9|Page

Write SMART goals for 2-3 years out (some organizations choose to go shorter or longer depending on the organization). Example Organizational Goals: By 20xx ABC Dry Cleaner will have a customer satisfaction rate of 85 By 20xx ABC Dry Cleaner will have a profit margin of 5% By 20xx ABC Dry Cleaner will have a 25% market share By 20xx ABC Dry Cleaner will have less than 2% return for poor quality cleanings Now this is where the rubber meets the road. Goals are a wonderful thing to have but unless they are implemented and someone is held accountable through a structured performance management process, they are nothing more than words on a piece of paper. To give goals some teeth, they need to be taken down to the department and ultimately the employee level. This means identifying who will get it done. Step 5: Monitor Progress Goals should be monitored at least on a quarterly basis. This can be as simple as asking the responsible person to give a status update on their goals for the quarter. It is very important that this is done because all organizations are so busy today that the day-to-day responsibilities can sometimes get in the way of completing long-term goals. Once a year the strategic plan and goals should be reviewed and updated to reflect current market conditions and changes to ensure that goals are focused on the current state of the organization. Many organizations don’t create a strategic plan because the process intimidates them, but any size organization can map out a plan if they solicit the help of a trained facilitator and commit the time and resources to doing it. Strategic Implementation Implementation is the process that turns strategies and plans into actions in order to accomplish strategic objectives and goals. Implementing your strategic plan is as important, or even more important, than your strategy. The video The Secret to Strategic Implementation is a great way to learn how to take your implementation to the next level. Critical actions move a strategic plan from a document that sits on the shelf to actions that drive business growth. Sadly, the majority of companies who have strategic plans fail to implement them. A strategic plan provides a business with the roadmap it needs to pursue a specific strategic direction and set of performance goals, deliver customer value, and be successful. However, this is just a plan; it doesn’t guarantee that the desired performance is reached any more than having a roadmap guarantees the traveler arrives at the desired destination. Getting Your Strategy Ready for Implementation 10 | P a g e

For those businesses that have a plan in place, wasting time and energy on the planning process and then not implementing the plan is very discouraging. Although the topic of implementation may not be the most exciting thing to talk about, it’s a fundamental business practice that’s critical for any strategy to take hold. The strategic plan addresses the what and why of activities, but implementation addresses the who, where, when, and how. The fact is that both pieces are critical to success. In fact, companies can gain competitive advantage through implementation if done effectively. In the following sections, you’ll discover how to get support for your complete implementation plan and how to avoid some common mistakes Strategy Evaluation Process and its Significance Strategy Evaluation is as significant as strategy formulation because it throws light on the efficiency and effectiveness of the comprehensive plans in achieving the desired results. The managers can also assess the appropriateness of the current strategy in todays dynamic world with socio-economic, political and technological innovations. Strategic Evaluation is the final phase of strategic management. The significance of strategy evaluation lies in its capacity to co-ordinate the task performed by managers, groups, departments etc, through control of performance. Strategic Evaluation is significant because of various factors such as - developing inputs for new strategic planning, the urge for feedback, appraisal and reward, development of the strategic management process, judging the validity of strategic choice etc. The process of Strategy Evaluation consists of following stepsFixing benchmark of performance - While fixing the benchmark, strategists encounter questions such as - what benchmarks to set, how to set them and how to express them. In order to determine the benchmark performance to be set, it is essential to discover the special requirements for performing the main task. Measurement of performance - The standard performance is a bench mark with which the actual performance is to be compared. The reporting and communication system help in measuring the performance Analyzing Variance - While measuring the actual performance and comparing it with standard performance there may be variances which must be analyzed. The strategists must mention the degree of tolerance limits between which the variance between actual and standard performance may be accepted. Taking Corrective Action - Once the deviation in performance is identified, it is essential to plan for a corrective action. If the performance is consistently less than the desired performance, the strategists must carry a detailed analysis of the factors responsible for such performance 4.

What are the strengths of formal strategic planning? What are its Weaknesses? 11 | P a g e

Ans Formal strategic planning (hereafter FSP) is the most sophisticated form of planning. It implies that a firm's strategic planning process involves explicit systematic. Procedures used to gain the involvement and commitment of the stakeholders. Most affected by the plan Corporate strategic planning is essential if an organization is to survive, let alone expand. No organization can remain on a plateau; if it is not going up then it is going down, since all other organizations in the same sector will always be trying to increase their own market share to the detriment of its competitors Successful strategic planning involves looking ahead and making decisions based upon future likely conditions. In some cases this will lead to decisions to diversify into other markets, and where these, or other, decisions fail then the organization can be left in real trouble. There are a number of suggested advantages of having formalized strategic planning systems, some of the main ones being as follows: Advantages of Formalized Planning Systems Strategic planning is essentially a decision making process. Our experience is that strategic planning as a group decision making process benefits greatly from formalizing of the procedures involved.

Unstructured or freewheeling approaches are highly regarded in some organizations; however, when the process of strategic planning is involved such free form approaches can suffer from certain disadvantages. The purpose of a number of the procedures of formal strategic planning is to reduce these problems, while making the gains possible with group decision making. (a) Formalized strategic planning provides what many would term a logical but certainly a structured means of analysis and thinking about complex issues and problems. There is no doubt that strategy development is complex, and formal planning systems attempt to help resolve and deal with this complexity by suggesting a series of distinct steps and stages which the manager can follow in the development of strategic plans. (b) It is argued that formal and structured planning systems force managers to take a longerterm view of strategic options and directions than they would otherwise. So, for example, the stages of environmental and competitor analysis which form a key part of most formalized corporate planning systems encompass planning horizons of three years at the minimum, and in some cases up to 20 years. (c) Formalized and structured planning systems, it is suggested, enable effective control and evaluation. So, for example, because objectives in formal planning systems are usually 12 | P a g e

precisely specified, and because strategic direction is determined in advance, the measurement of strategic performance is facilitated. d) Co-ordination between different functions and managers throughout the organization can be increased with highly formalized and structured planning systems. This is because very often a formal planning system will require the different functions/managers to work together towards the achievement of corporate objectives in a manner specified in the corporate plan. Furthermore, formalized strategic plans will normally specify and communicate to managers what they are required to do in the context of the strategic plan. (e) Related to co-ordination, formalized strategic planning also helps ensure that the required resources to implement strategic plans are understood and made available. (f) Finally, formalized planning systems can sometimes help to motivate individuals towards the achievement of strategic objectives, particularly where they are involved in the planning process and feel, therefore, that they have some degree of ownership of and commitment to the process. Disadvantages of Formal Planning Systems (a) Highly formalized strategic planning systems may not always adequately reflect the people and cultural elements of the organization. (b) Individual managers may feel absolved from any strategic planning responsibilities, these being left to the specialist strategic planners. As a result, line managers may not feel they own strategic plans. (c) Highly formalized strategic plans can be restrictive, particularly where the environment is changing rapidly. This may result in lost opportunities and a gradual loss of strategic fit. (d) Highly formalized strategic planning can become very cumbersome and over-detailed requiring large amounts of analysis and information, often resulting in information overload. (e) Strategic planning can become a substitute for action, i.e. it can become an activity in its own right divorced from the actual activities and plans of the organization. What is the importance of the study of an organization’s internal and external environment before formulation of strategy for the growth of its business? Environmental analysis will help the firm to understand what is happening both inside and outside the organization and to increase the probability that the organizational strategies developed will appropriately reflect the organizational environment. Environmental scanning is necessary because there are rapid changes taking place in the environment that has a great impact on the working of the business firm. Analysis of business environment helps to identify strength weakness, opportunities and threats. SWOT analysis is necessary for the survival and growth of every business enterprise. Organizations have an external and internal environment; 13 | P a g e

1. External Environment. 2. Internal Environment. In this post, we will look at the elements of organizations environment. The following is the need and importance of environmental scanning: 1. Identification of strength: Strength of the business firm means capacity of the firm to gain advantage over its competitors. Analysis of internal business environment helps to identify strength of the firm. After identifying the strength, the firm must try to consolidate or maximize its strength by further improvement in its existing plans, policies and resources. 2. Identification of weakness: Weakness of the firm means limitations of the firm. Monitoring internal environment helps to identify not only the strength but also the weakness of the firm. A firm may be strong in certain areas but may be weak in some other areas. For further growth and expansion, the weakness should be identified so as to correct them as soon as possible. 3. Identification of opportunities: Environmental analyses helps to identify the opportunities in the market. The firm should make every possible effort to grab the opportunities as and when they come. 4. Identification of threat: Business is subject to threat from competitors and various factors. Environmental analyses help them to identify threat from the external environment. Early identification of threat is always beneficial as it helps to diffuse off some threat. 5. Optimum use of resources: Proper environmental assessment helps to make optimum utilisation of scare human, natural and capital resources. Systematic analyses of business environment helps the firm to reduce wastage and make optimum use of available resources, without understanding the internal and external environment resources cannot be used in an effective manner. 6. Survival and growth: Systematic analyses of business environment help the firm to maximise their strength, minimise the weakness, grab the opportunities and diffuse threats. This enables the firm to survive and grow in the competitive business world. 7. To plan long-term business strategy: A business organization has short term and long-term objectives. Proper analyses of environmental factors help the business firm to frame plans and policies that could help in easy accomplishment of those organizational objectives. Without undertaking environmental scanning, the firm cannot develop a strategy for business success. 14 | P a g e

8. Environmental scanning aids decision-making: Decision-making is a process of selecting the best alternative from among various available alternatives. An environmental analysis is an extremely important tool in understanding and decisionmaking in all situation of the business. Success of the firm depends upon the precise decision making ability. Study of environmental analyses enables the firm to select the best option for the success and growth of the firm. External Environment of Organization In a simple way factor outside or organization are the elements of the external environment. The organization has no control over how the external environment elements will shape up. The external environment can be subdivided into 2 layers: the general environment and the task environment. • General Environment • Task Environment • General Environment of Organization The general environment consists of factors that may have an immediate direct effect on operations but nevertheless influences the activities of the firm. The dimensions of the general environment are broad and non-specific whereas the dimensions of the task environment are composed of the specific organization. Let’s see the elements or dimensions of the general environment. Economic Dimension The economic dimension of an organization is the overall status if the economic system in which the organization operates. The important economic factors for business are inflation, interest rates, and unemployment. These factors of the economy always affect the demand for products. During inflation, the company pays more for its resources and to cover the higher costs for it, they raise commodity prices. Technological Dimension It denotes to the methods available for converting resources into products or services. Managers must be careful about the technological dimension. Investment decision must be accurate in new technologies and they must be adaptable to them. Socio-cultural dimension Customs, mores, values and demographic characteristics of the society in which the organization operates are what made up the socio-cultural dimension of the general environment.

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The socio-cultural dimension must be well studied by a manager. It indicates the product, services, and standards of conduct that the society is likely to value and appreciate. The standard of business conduct vary from culture to culture and so does the taste and necessity of products and services. Political-Legal Dimension The politico-legal dimension of the general environment refers to the government law of business, business-government relationship and the overall political and legal situation of a country. Business laws of a country set the dos and don ts of an organization. International Dimension Virtually every organization is affected by the international dimension. It refers to the degree to which an organization is involved in or affected by businesses in other countries. Global society concept has brought all the nation together and modern network of communication and transportation technology, almost every part of the world is connected. Task Environment of Organization The task environment consists of factors that directly affect and are affected by the organization’s operations. These factors include suppliers, customers, competitors, regulators and so on. A manager can identify environmental factors of specific interest rather than having to deal with a more abstract dimension of the general environment. The different elements of the task environment may be discussed as under: Competitors Policies of the organization are often influenced by the competitors. Competitive marketplace companies are always trying to stay and go further ahead of the competitors. In the current world economy, the competition and competitors in all respects have increased tremendously. Customers “Satisfaction of customer”- the primary goal of every organization. The customer is who pays money for the organization’s product or services. They are the peoples who hand them the profit that the companies are targeting. Suppliers Suppliers are the providers of production or service materials. Dealing with suppliers is an important task of management. A good relationship between the organization and the suppliers is important for an organization to keep a steady follow of quality input materials. Regulators Regulators are units in the task environment that have the authority to control, regulate or influence an organization’s policies and practices. Government agencies are the main player in the environment 16 | P a g e

and interest groups are created by its members to attempt to influence organizations as well as government. Strategic Partners They are the organization and individuals with whom the organization is to an agreement or understanding for the benefit of the organization. These strategic partners in some way influence the organization’s activities in various ways. Internal Environment of Organization Forces or conditions or surroundings within the boundary of the organization are the elements of the internal environment of the organization. The internal environment consists mainly of the organization’s owners, the board of directors, employees and culture. Owners Owners are people who invested in the company and have property rights and claims on the organization. Owners can be an individual or group of person who started the company; or who bought a share of the company in the share market. They have the right to change the company’s policy at any time. Board of Directors The board of directors is the governing body of the company who are elected by stockholders, and they are given the responsibility for overseeing a firm’s top managers such as the general manager. Employees Employees or the workforce, the most important element of an organization’s internal environment, who performs the tasks of the administration. Individual employees and also the labor unions they join are important parts of the internal environment. If managed properly they can positively change the organization’s policy. But ill-management of the workforce could lead to a catastrophic situation for the company. Culture Organizational culture is the collective behavior of members of an organization and the values, visions, beliefs, habits that they attach to their actions. An organization’s culture plays a major role in shaping its success because culture is an important determinant of how well their organization will perform.

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As the foundation of the organization’s internal environment, it plays a major role in shaping managerial behavior. The environment irrespective of its external or internal nature, a manager must have a clear understanding of them. Normally, you would not go for a walk in the rain without an umbrella, because you understand the environment and you know when it rains you can get we Define business environment and factors affecting business. Business environment is the sum total of all external and internal factors that influence a business. You should keep in mind that external factors and internal factors can influence each other and work together to affect a business . The external environment can be subdivided into 2 layers: the general environment and the task environment. • General Environment • Task Environment • General Environment of Organization The general environment consists of factors that may have an immediate direct effect on operations but nevertheless influences the activities of the firm. The dimensions of the general environment are broad and non-specific whereas the dimensions of the task environment are composed of the specific organization. Let’s see the elements or dimensions of the general environment. Economic Dimension The economic dimension of an organization is the overall status if the economic system in which the organization operates. The important economic factors for business are inflation, interest rates, and unemployment. These factors of the economy always affect the demand for products. During inflation, the company pays more for its resources and to cover the higher costs for it, they raise commodity prices. Technological Dimension It denotes to the methods available for converting resources into products or services. Managers must be careful about the technological dimension. Investment decision must be accurate in new technologies and they must be adaptable to them. Socio-cultural dimension Customs, mores, values and demographic characteristics of the society in which the organization operates are what made up the socio-cultural dimension of the general environment.

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The socio-cultural dimension must be well studied by a manager.It indicates the product, services, and standards of conduct that the society is likely to value and appreciate. The standard of business conduct vary from culture to culture and so does the taste and necessity of products and services. Political-Legal Dimension The politico-legal dimension of the general environment refers to the government law of business, business-government relationship and the overall political and legal situation of a country. Business laws of a country set the dos and don ts of an organization. International Dimension Virtually every organization is affected by the international dimension. It refers to the degree to which an organization is involved in or affected by businesses in other countries. Global society concept has brought all the nation together and modern network of communication and transportation technology, almost every part of the world is connected. Task Environment of Organization The task environment consists of factors that directly affect and are affected by the organization’s operations. These factors include suppliers, customers, competitors, regulators and so on. A manager can identify environmental factors of specific interest rather than having to deal with a more abstract dimension of the general environment. The different elements of the task environment may be discussed as under: Competitors Policies of the organization are often influenced by the competitors. Competitive marketplace companies are always trying to stay and go further ahead of the competitors. In the current world economy, the competition and competitors in all respects have increased tremendously. Customers “Satisfaction of customer”- the primary goal of every organization. The customer is who pays money for the organization’s product or services. They are the peoples who hand them the profit that the companies are targeting. Suppliers Suppliers are the providers of production or service materials. Dealing with suppliers is an important task of management. A good relationship between the organization and the suppliers is important for an organization to keep a steady follow of quality input materials. Regulators

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Regulators are units in the task environment that have the authority to control, regulate or influence an organization’s policies and practices. Government agencies are the main player in the environment and interest groups are created by its members to attempt to influence organizations as well as government. Strategic Partners They are the organization and individuals with whom the organization is to an agreement or understanding for the benefit of the organization. These strategic partners in some way influence the organization’s activities in various ways. Internal Environment of Organization Forces or conditions or surroundings within the boundary of the organization are the elements of the internal environment of the organization. The internal environment consists mainly of the organization’s owners, the board of directors, employees and culture. Owners Owners are people who invested in the company and have property rights and claims on the organization. Owners can be an individual or group of person who started the company; or who bought a share of the company in the share market. They have the right to change the company’s policy at any time. Board of Directors The board of directors is the governing body of the company who are elected by stockholders, and they are given the responsibility for overseeing a firm’s top managers such as the general manager. Employees Employees or the workforce, the most important element of an organization’s internal environment, who performs the tasks of the administration. Individual employees and also the labor unions they join are important parts of the internal environment. If managed properly they can positively change the organization’s policy. But ill-management of the workforce could lead to a catastrophic situation for the company. Culture Organizational culture is the collective behavior of members of an organization and the values, visions, beliefs, habits that they attach to their actions. An organization’s culture plays a major role in shaping its success because culture is an important determinant of how well their organization will perform 20 | P a g e

5. Assess the impact of macro environmental factors on the likely level of enrollment at your university over the next decade. What are the implications of these factors for the job security and salary levels of your professors? Discuss the BCG matrix and its utility in strategic business planning. Boston Consulting Group (BCG) Matrix is a four celled matrix (a 2 * 2 matrix) developed by BCG, USA. It is the most renowned corporate portfolio analysis tool. It provides a graphic representation for an organization to examine different businesses in its portfolio on the basis of their related market share and industry growth rates. It is a two dimensional analysis on management of SBU’s (Strategic Business Units). In other words, it is a comparative analysis of business potential and the evaluation of environment. According to this matrix, business could be classified as high or low according to their industry growth rate and relative market share. Relative Market Share = SBU Sales this year leading competitors sales this year. Market Growth Rate = Industry sales this year - Industry Sales last year. The analysis requires that both measures be calculated for each SBU. The dimension of business strength, relative market share, will measure comparative advantage indicated by market dominance. The key theory underlying this is existence of an experience curve and that market share is achieved due to overall cost leadership. BCG matrix has four cells, with the horizontal axis representing relative market share and the vertical axis denoting market growth rate. The mid-point of relative market share is set at 1.0. if all the SBU’s are in same industry, the average growth rate of the industry is used. While, if all the SBU’s are located in different industries, then the mid-point is set at the growth rate for the economy. Resources are allocated to the business units according to their situation on the grid. The four cells of this matrix have been called as stars, cash cows, question marks and dogs. Each of these cells represents a particular type of business.

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10 x

1x

0.1 x

Figure: BCG Matrix

1. Stars- Stars represent business units having large market share in a fast growing industry. They may generate cash but because of fast growing market, stars require huge investments to maintain their lead. Net cash flow is usually modest. SBU’s located in this cell are attractive as they are located in a robust industry and these business units are highly competitive in the industry. If successful, a star will become a cash cow when the industry matures. 2. Cash Cows- Cash Cows represents business units having a large market share in a mature, slow growing industry. Cash cows require little investment and generate cash that can be utilized for investment in other business units. These SBU’s are the corporation’s key source of cash, and are specifically the core business. They are the base of an organization. These businesses usually follow stability strategies. When cash cows loose their appeal and move towards deterioration, then a retrenchment policy may be pursued. 3. Question Marks- Question marks represent business units having low relative market share and located in a high growth industry. They require huge amount of cash to maintain or gain market share. They require attention to determine if the venture can be viable. Question marks are generally new goods and services which have a good commercial prospective. There is no specific strategy which can be adopted. If the firm thinks it has dominant market share, then it can adopt expansion strategy, else retrenchment strategy can be adopted. Most businesses start as question marks as the company tries to enter a high growth market in which there is already a market-share. If ignored, then question marks may become dogs, while if huge investment is made, then they have potential of becoming stars.

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4. Dogs- Dogs represent businesses having weak market shares in low-growth markets. They neither generate cash nor require huge amount of cash. Due to low market share, these business units face cost disadvantages. Generally retrenchment strategies are adopted because these firms can gain market share only at the expense of competitor’s/rival firms. These business firms have weak market share because of high costs, poor quality, ineffective marketing, etc. Unless a dog has some other strategic aim, it should be liquidated if there is fewer prospects for it to gain market share. Number of dogs should be avoided and minimized in an organization. Limitations of BCG Matrix The BCG Matrix produces a framework for allocating resources among different business units and makes it possible to compare many business units at a glance. But BCG Matrix is not free from limitations, such as1. BCG matrix classifies businesses as low and high, but generally businesses can be medium also. Thus, the true nature of business may not be reflected. 2. Market is not clearly defined in this model. 3. High market share does not always leads to high profits. There are high costs also involved with high market share. 4. Growth rate and relative market share are not the only indicators of profitability. This model ignores and overlooks other indicators of profitability. 5. At times, dogs may help other businesses in gaining competitive advantage. They can earn even more than cash cows sometimes. 6. This four-celled approach is considered as to be too simplistic Benefits of the BCG matrix • • • •

•

•

The key benefits of the BCG matrix are: It is very simple to use and explain, as there are only two dimensions and four quadrants It is a reputable and long-standing strategic model that has proved to be robust over time and significant changes in the competitive environment Usually the measurements required – market growth and relative market share – are available to the company, along with competitive measures, making it relatively easy to execute and prepare Clear guidance is provided for each quadrant in terms of the approach to investment and support of business units (or brands or products) – perhaps with the exception of the question mark quadrant (please see discussion of the question mark quadrant) It is an important model for allocating resources for firms pursuing market share goals and seeking experience curve benefits

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• •

The firm has a basis for allocating resources across its business units, based upon competitive position and market opportunity – making for a more strategic based decision Although the matrix is developed based upon historical/current position, the four quadrants of the BCG matrix provide some strategic guidance for the future

What is the BCG Matrix? The Boston Consulting group’s product portfolio matrix (BCG matrix) is designed to help with long-term strategic planning, to help a business consider growth opportunities by reviewing its portfolio of products to decide where to invest, to discontinue or develop products. It's also known as the Growth/Share Matrix. The Matrix is divided into 4 quadrants based on an analysis of market growth and relative market share, as shown in the diagram below. •

1. Dogs: These are products with low growth or market share.

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2. Question marks or Problem Child: Products in high growth markets with low market share.

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3. Stars: Products in high growth markets with high market share.

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4. Cash cows: Products in low growth markets with high market share

Members can use our guide exploring classical marketing models to learn more about how to apply them to real-world challenges. We also have a free guide for more recent digital marketing models including our Smart Insights RACE digital marketing planning framework. How to use the BCG Matrix? To apply the BCG Matrix you can think of it as showing a portfolio of products or services, so it tends to be more relevant to larger businesses with multiple services and markets. However, marketers in smaller businesses can use similar portfolio thinking to their products or services to boost leads and sales as we'll show at the end of this article. Considering each of these quadrants, here are some recommendations on actions for each: •

Dog products: The usual marketing advice here is to aim to remove any dogs from your product portfolio as they are a drain on resources.

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However, this can be an over-simplification since it's possible to generate ongoing revenue with little cost. For example, in the automotive sector, when a car line ends, there is still a need for spare parts. As SAAB ceased trading and producing new cars, a whole business emerged providing SAAB parts. •

Question mark products: As the name suggests, it’s not known if they will become a star or drop into the dog quadrant. These products often require significant investment to push them into the star quadrant. The challenge is that a lot of investment may be required to get a return. For example, Rovio, creators of the very successful Angry Birds game has developed many other games you may not have heard of. Computer games companies often develop hundreds of games before gaining one successful game. It’s not always easy to spot the future star and this can result in potentially wasted funds.

•

Star products: Can be the market leader though require ongoing investment to sustain. They generate more ROI than other product categories.

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Cash cow products: The simple rule here is to ‘Milk these products as much as possible without killing the cow! Often mature, well-established products. The company Procter & Gamble which manufactures Pampers nappies to Lynx deodorants has often been described as a ‘cash cow company’.

Use the model as an overview of your products, rather than detailed analysis. If market share is small, use the 'relevant market share' axis is based on your competitors rather than entire market. BCG Matrix Example: How it can be applied to digital marketing strategies? The BCG Model is based on products rather than services, however, it does apply to both. You could use this if reviewing a range of products, especially before starting to develop new products. Looking at the British retailer, Marks & Spencer, they have a wide range of products and many different lines. We can identify every element of the BCG matrix across their ranges: •

Stars

Example: Lingerie. M&S was known as the place for ladies underwear at a time when choice was limited. In a multi-channel environment, M&S lingerie is still the UK’s market leader with high growth and high market share. 25 | P a g e

•

Question Marks/Problem Child

Example: Food. For years M&S refused to consider food and today has over 400 Simply Food stores across the UK. Whilst not a major supermarket, M&S Simply Food has a following which demonstrates high growth and low market share. •

Cash Cows

Example: Classic range. Low growth and high market share, the M&S Classic range has strong supporters. •

Dogs

Example: Autograph range. A premium-priced range of men’s and women’s clothing, with low market share and low growth. Although placed in the dog category, the premium pricing means that it makes a financial contribution to the company. You can also apply the BCG model to areas other than your product strategy. For example, we developed this matrix as an example of how a brand might evaluate its investment in various marketing channels. The medium is different, but the strategy remains the same- milk the cows, don't waste money on the dogs, invest in the stars and give the question marks some experimental funds to see if they can become stars.

Other more tactical uses of matrixes to support your digital marketing strategy development include the Smart Insights: 26 | P a g e

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Content marketing matrix - Use to review your portfolio of content assets against competitors

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Content optimization matrix - Assess the value of your webs pages in generating leads and sales

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Content distribution matrix - Review your options for building traffic for a website using different channels - similar to the chart above

Under what circumstances might it be best to enter a new business area by acquisition, and under what circumstances might internal new venturing be the preferred entry mode? Step-by-Step Solution: •

Step 1

A new business should be acquired under following conditions: - When the company to be acquired shows below average performance due to poor management. Such companies can be acquired at reasonable rates and they can be revitalized by new management. - When a company is performing poor due to temporary cyclical economic factors. Such companies will revive after downturn is over. - When undervalued companies have hidden cash balances. 1. There are three vehicles that companies use to enter new business areas: internal ventures, acquisition, and joint ventures. 2. Internal new venturing is typically employed as an entry strategy when a company has a set of valuable competencies in its existing businesses that can be leveraged or recombined to enter the new business area. 3. Many internal ventures fail because of entry on too small a scale, poor commercialization, and poor corporate management of the internal venture process. Guarding against failure involves a structured approach toward project selection and management, integration of R&D and marketing to improve commercialization of a venture idea, and entry on a significant scale. 4. Many acquisitions fail because of poor postacquisition integration, overestimation of the value that can be created from an acquisition, the high cost of acquisition, and poor 27 | P a g e

preacquisition screening. Guarding against acquisition failure requires structured screening, good bidding strategies, positive attempts to integrate the acquired company into the organization of the acquiring one, and learning from experience. 5. Joint ventures may be the preferred entry strategy when (a) the risks and costs associated with setting up a new business unit are more than the company is willing to assume on its own and (b) the company can increase the probability of successfully establishing a new business by teaming up with another company that has skills and assets complementing its own. 6. Restructuring is often a response to A. excessive diversification, B. failed acquisitions, and C. Innovations in management process that have reduced the advantages of vertical integration and diversification. 7. Exit strategies include divestment, harvest, and liquidation. The choice of exit strategy is governed by the characteristics of the relevant business unit 6. Describe the relevance of organizational change as a strategic implementation process. REFER SAME QUESTION BELOW Strategic Management Assignment 6 Write the meaning, definitions and elements of strategy? Meaning of Strategy The word ‘strategy’ has entered in the field of management from the military services where it refers to apply the forces against an enemy to win a war. The word “strategy” came from the two Greek words i.e. Stratus (Army) and Agein (to lead). The Greeks felt that the strategy making is one of the responsibilities of the Army General. This concept today adopted even in the business. Even around the same time, the Chinese General Sun Dzu who wrote about strategy also suggested that the strategy making is one of the responsibilities so the leader. Definitions of Strategy Kennth Andrews defined strategy as “the pattern of major objectives, purposes or goals and essential policies or plans for achieving the goals, stated in such a way as to define what business the company is in or is to be in and the kind of company it is or is to be.” This definition of 28 | P a g e

strategy emphasizes on purpose and the means by which purpose will be achieved. It also emphasizes on the values and the cultures that the company stand for.

Kenichi Ohmae defines strategy as “the way in which a corporation endeavors to different itself positively from its competitors, using its relative strengths to better satisfy customer needs.” Ohmae’s definition highlights the competitive aspect of strategy and the strengths required to satisfy customer needs. This definition thus aims at customer satisfaction as the driver of the strategy. Elements 1. 2. 3. 4. 5.

Arenas. Where will we be active? Differentiators. How will we get there? Vehicles. How will we win in the marketplace? Staging. What will be our speed and sequence of moves? Economic logic. How will we obtain our returns?

Arenas Arenas are areas in which a firm will be active. Decisions about a firm’s arenas may encompass its products, services, distribution channels, market segments, geographic areas, technologies, and even stages of the value-creation process. Unlike vision statements, which tend to be fairly general, the identification of arenas must be very specific. Differentiators Differentiators are features and attributes of a company’s product or service that help it beat its competitors in the marketplace. Firms can be successful in the marketplace along a number of common dimensions, including image, customization, technical superiority, price, quality, and reliability. Vehicles Vehicles are the means for participating in targeted arenas. For instance, a firm that wants to go international can do so in different ways. In a recent drive to enter certain international markets (e.g., Argentina), Wal-Mart has opened new stores and grown organically—meaning that it developed all the stores internally as opposed to acquiring stores already based in the countries it wanted to enter. Staging and Pacing 29 | P a g e

Staging and pacing refer to the timing and speed, or pace, of strategic moves. Staging choices typically reflect available resources, including cash, human capital, and knowledge Economic Logic Economic logic refers to how the firm will earn a profit—that is, how the firm will generate positive returns over and above its cost of capital. Economic logic is the “fulcrum” for profit creation. Earning normal profits, of course, requires a firm to meet all fixed, variable, and financing costs. • •

• • •

Arenas. The specific geographic markets and the channels and value-chain activities in those markets. Differentiators. How being international differentiates the organization from competitors, makes products or services more attractive to future customers, and strengthens the effectiveness of the differentiators in the chosen arenas. Vehicles. The preference to use organic investment and growth, alliances, or acquisitions as expansion vehicles. Staging and pacing. When you start expanding, how quickly you expand and the sequence of your expansion efforts. Economic logic. How your international strategy contributes to the overall economic logic of your business and corporate strategies.

We begin with the four key elements of a sound and scalable business strategy: 1. 2. 3. 4.

Vision Purpose Values Methods / Processes

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Vision Statement A vision statement is an aspirational statement of where you want your unit to be in the future. “Future” is usually defined as the next three to five years, but it could be more. A vision should set the overall direction for the unit and team and should be bold and inspirational

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Mission Statement While a vision describes where you want to be in the future, a mission statement describes what you do today. It often describes what you do, for who, and how. Focusing on your mission each day should enable you to reach your vision. A mission statement could broaden your choices, and/or narrow them.

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• •

Core Values Core values describe your beliefs and behaviors. They are the things that you believe in that will enable you to achieve your vision and mission.

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SWOT Analysis SWOT stands for strengths, weaknesses, opportunities, and threats. A SWOT analysis sums up where you are now and provides ideas on what you need to focus on.

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Long-Term Goals Long-term goals are three to five statements that drill down a level below the vision and describe how you plan to achieve your vision.

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Yearly Objectives Each long-term goal should have a few (three to five) one year objectives that advance your goals. Each objective should be as “SMART” as possible: Specific, Measurable, Achievable, Realistic, and Time-based.

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Action Plans Each objective should have a plan that details how the objective will be achieved. The amount of detail depends on the complexity of the objective.

Discuss the history, scope and objectives of strategic management. History of strategic management (Faulkner and Campbell, 2003, 3-4) -•

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Business Policy, 1950s and 1960s -- Strategic management is about charting how to achieve a company's objectives, and adjusting the direction and methods to take advantage of changing circumstances. It was taught in the 1950s and 1960s under the title of Business Policy. The teaching was often in the form of case studies by ex-senior executives familiar with them. This teaching attempted to draw out lessons with more than idiosyncratic relevance. This is learning by anecdote. Long-Range Planning movement, 1970s -- Out of business policy developed long-range planning, which became a fashionable process, but often involved little more than extrapolation of recent events, or in negative situations the development of the optimistic 'hockey stick' approach to future performance. Most long range plans were either not used or failed to meet their declared targets. Portfolio management of business units, 1970s -- Portfolio matrices from the likes of BCG, McKinsey, and Arthur D. Little became fashionable, but it soon became apparent that the use of such tools was very mechanistic and a somewhat unsubtle approach to attempting to develop a corporation. Given the shortcomings of the case study anecdotes, long-range planning, and portfolio matrices, the stage was set for more substantive intellectual frameworks.

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•

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Strategic Management, late 1970s -- Michael Porter's arrival on the scene in 1979 began to turn what had by now come to be renamed Strategic Management into a subject with some claims to being an academic discipline with a degree of required academic rigor. Positional view, 1980s -- Michael Porter's 1980. Scope and Essential Elements -Strategic management encompasses a broad scope and has specific essential elements -Elements of Strategic Management --

• • • • • •

•

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strategy -- Strategic management is about managing strategy -- see strategy to set the stage for strategic management. organizational dynamics -- Strategy and strategic management are not separable from organizational dynamics. organization evolution -- the organization must evolve to a favorable advantage over other organizations novelty -- The evolution of the organization brought on by strategic management requires novelty. exploration and exploitation -- finding the new sources of advantage while exploiting the current sources continuity and transformation -- continuity of identity with the potential to change that identity Scope of strategic management -- Organizations are made up of people, people's behavior makes up organizational behavior, managers are people, strategies address the organization, and strategies require operational execution. For the purpose of understanding how to strategically manage an organization, these are not separable disciplines which can be addressed separately. They are interwoven into one discipline - herein titled strategic management. Ultimately there is nothing associated with a business organization outside the purvey of strategic management, as such, it is one perspective of the overall collective management of the organization. Economics -1. The strategic management field is-positively-the scientific study of the plans that firms build and implement in order to achieve and maintain competitive advantage, andnormatively-the attempt to identify optimal plans for achieving and maintaining competitive advantages 2. A field aimed at understanding competitive heterogeneity 3. Strategic management is the interdisciplinary field that studies the behavior of companies and other market parties, in terms of their strategic behavior, the choices they make with regard to organizing their production, their interrelationships, and their competitive positioning. All of this is set against a thorough understanding of the broader environment in which companies have to operate Sociology -1. The study of firms' performance from a platform of tangible and intangible resources in an evolving environment that includes their market and value network 32 | P a g e

•

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2. I think of the field relatively broadly. I would say that it encompasses the definition and implementation of an organizational course of action. Central to the determination of those actions is an understanding of the relationship between choices available to a manager and firm performance (which I would define far more broadly than profitability to include dimensions such as innovation and survival). Hence, most research in the field either concerns understanding the links between organizational actions (routines) and performance outcomes, or considers how one actually goes about changing these routines 3. The study of how organizations create value, including not only 'the plan' but also the organizational configuration that it is combined with Marketing -1. It is a field about what drives performance of certain businesses and which strategy works 2. I view the field of strategic management as eclectic, involving all the various business functions such as finance, marketing, supply chain, economics, psychology, statistics, etc. More specifically, it involves firm boundaries, market and competitive analysis, strategic positions and dynamics, and internal organization 3. The field looks at substantive and process issues such as strategy content, governance mechanisms, strategy choices, market driven strategy, choices of markets, advantage, value propositions, configuration, reacting to markets, and structure, Governance, CEO, leader, strategic choices Management -1. Developing an explanation of firm performance by understanding the roles of external and internal environments, positioning and managing within these environments and relating competencies and advantages to opportunities within external environments 2. Strategic management is the process of building capabilities that allow a firm to create value for customers, shareholders, and society while operating in competitive markets 3. The study of decisions and actions taken by top executives/TMTs for firms to be competitive in the marketplace

Scope of Strategic Management J. Constable has defined the area addressed by strategic management as "the management processes and decisions which determine the long-term structure and activities of the organization". This definition incorporates five key themes: * Management process. Management process as relate to how strategies are created and changed. * Management decisions. The decisions must relate clearly to a solution of perceived problems (how to avoid a threat; how to capitalize on an opportunity). 33 | P a g e

* Time scales. The strategic time horizon is long. However, it for company in real trouble can be very short. * Structure of the organization. An organization is managed by people within a structure. The decisions which result from the way that managers work together within the structure can result in strategic change. * Activities of the organization. This is a potentially limitless area of study and we normally shall centre upon all activities which affect the organization Objectives of strategic management n strategic management, there are strategic objectives and financial objectives. Additionally, all objectives are either short-run or long-run types. When planning a firm's strategy it is important to have objectives in mind and to understand the differences between the types of objectives. Strategic Objectives Strategic objectives deal with the firm's position in the model. You might do this, for example, by positioning the firm relative to the external forces – bargaining power of customers, bargaining power of suppliers, threat of new entrants, threat of substitutes, and competition within the industry – that can impact a business. Strategic objectives might include expanding market share, changing market position or under-cutting a competitor's costs. Financial Objectives Managers use financial objectives to measure strategic performance. For example, if the firm's strategic objective is to increase efficiency, the financial objective could be to increase return on assets or return on capital. Financial objectives, derived from management accounting, are more concrete. Short-run Objectives Financial and strategic objectives can either be short-run or long-run objectives. Short-run objectives deal with the immediate future. They typically focus on tangible goals that management can realize in a short time. An example of a short-run objective might be to increase monthly sales. Long-run Objectives Long-run objectives target the firm's long-term position. While short-run objectives focus on a firm's annual or monthly performance, long-run objectives concern themselves with the firm's 34 | P a g e

development over several years. Examples of long-term objectives might be to become the market leader or to attain sustainable growth. Strategic goals for finance: • • • • • • • • • • • • •

Create and launch new product(s) Increase customer conversion Become market leader Sales: Company’s sales growth/Market sales Growth -> must be >1 Customer satisfaction: Gain market position Explore new customer segments Increase revenues Attract investment Return on Assets Shareholders dividend Diversified revenue streams Number of products in portfolio (BCG matrix)

Examples of strategic goals for learning and growth: • • • • • • • • • • • • • • • • • • • •

Improve internal communications Number of Online and in person team updates Number of Reporting tools Number of internal newsletter a week Communication skills training programs Surveying your teams (monthly survey?) Build on momentum Implement performance review and reward system Build culture and align across organization Open new locations Number of locations per city/region/country Going international Percentage of sales abroad/local Number of exported products Create and implement training program Decrease employee turnover Improve employee satisfaction (Employee Engagement) Employee Net Promoter Score : eNPS = (promoters-detractors)/total respondents Balance employee utilization rate Improve training programs

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Examples of strategic goals for customers: • • • • • • • • • • • •

Improve customer satisfaction Decrease the number of product returns Increase net promoter score % of defaults on products Response time to complaints Number of followers/like on social media Number of returning customers Improve our service approach for new and existing customers. Strategic partnerships Create impact measurement Customer Delivery time Increase in new customers

Examples of strategic goals for business processes: • • • • • • • • • • • • • • • • • • • •

Increase web traffic Number of publications Number of back links Vendor performance Restructure organization Implement software project Grow through acquisition Increase value of projects and manage growth Lower production costs Build capacity for the future Decrease defects Improve supplier relationships Increase team size Find new volunteers Launch and complete special projects Per unit costs Per unit yield R&D development time Improve resource allocation Reduce financial waste

What do you think are the sources of sustained superior profitability? There are two ways to achieve superior profitability: 36 | P a g e

1) Increasing Revenue 2) Reducing Costs The superior profitability becomes sustained when the company develops some unique abilities which are difficult for competitors to copy. Generally such abilities are in form of intangible assets as they are difficult to imitate Sustained superior profitability means to sustain the profits period on period and to increase the profits every period. It can be achieved by either increasing the revenues or decreasing the expenses or both. It can also be sustained only if the competition cannot copy the business. Therefore, the below are the main sources of sustained profitability. a. The intangible resources like management insight and inculcating culture that nourishes creativity. b. Cost-cutting Under what environmental conditions are price wars most likely to occur in an industry? What are the implications of price wars for a company? How should a company, try to deal with the threat of a price war? In an environment/industry where there are multiple substitutes for a product, price wars are likely to occur. For a company that innovates a new product and deals with the high R&D costs, price wars amongst competitors will promote a challenge. In the long run, the company who can make the best product for the best price will win the price war. To deal with this threat a company should always attempt to improve processes to cut costs. They should plan for competition with the full knowledge that if the initial company that has created a product does not have the best process for manufacturing it, someone else will find a way to do it better/cheaper. 2. Identify a growth industry, a mature industry, and a declining industry. For each industry, identify the following: (a) the number and size distribution of companies. (b) The nature of barriers to entry. (c) the height of barriers to entry, And (d) the extent of product differentiation. Step-by-step solution: •

Step 1 of 3

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The Competitive force analysis for Airline Industry is explained as follows: 1. Threat of New entrants: Entering an Airline industry is a bit tougher as it involves a high amount of investment. The airline companies are not able to pool the capital easily as they need financial clearances from banks or creditors. However, if the interest rates on loan fall down, new entrants are motivated to enter into the airline industry. 2. Bargaining Power of Suppliers: This kind of situation basically occurs, when the product has a high demand and supplier have a few substitutes of products. In such a case, the bargaining power of supplier increases. The airline business industry generally falls under the control of two main organizations i.e. Boeing and Airbus. Hence, it is often seen that few suppliers are available to supply the parts and machinery of the aircraft. 3. Bargaining Power of Buyers: This kind of situation basically occurs, when the buyers have many choices to choose from. In case of the airline industry, if the air tickets are costly, then the consumers can choose to travel with another airline if it offers a reasonable deal. 4. Availability of substitutes: This particular element is closely associated with the bargaining power of buyers. If the price of air tickets does not suit the passenger’s budget, then he/she can switch to other travel options, such as train or bus. 5. Competitive Rivalry: If the new entrants offer affordable prices than the existing competitors, then the customers would in no time switch to other options. •

Step 2 of 3

There are many reasons that lead to the low profitability in Airline Industry. They are as follows: • Price: This is one such factor that can affect the airline business in a huge way. An increase in fuel prices, urges airline companies to raise the travel prices so as to cover the additional expenses. • Comfort & Flexible: Costumers prefer travelling by air when they have good disposable income. Moreover, if any king of glitch is noticed in airline services, then it can harm the airline’s profitability. • Competitors: The business arena is incomplete without competitors or rivals. If the new entrants offer a better deal by offering discounts on air tickets, the customers are likely to be wooed by the offer. This kind of strategy poses a threat to its closest competitors. • Suppliers: If the cost of production rises, there would be less number of suppliers that would be interested in creating the inputs at a higher price. 38 | P a g e

• Non stable pricing: The Airline industry follows the non-stable pricing that gives an impression to the customers that high prices are charged for the tickets. As the customers will not have any idea on the prices of the air tickets they are not interested to opt for it. •

Step 3 of 3

Therefore, it is clearly stated that the above reasons are the main causes for the low profitability in the Airline industry. What do these factors tell you about the nature of competition in each industry? What are the implications for the company in terms?

Write a note on the SWOT Analysis and its importance in strategic management? SWOT Analysis - Definition, Advantages and Limitations SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats. By definition, Strengths (S) and Weaknesses (W) are considered to be internal factors over which you have some measure of control. Also, by definition, Opportunities (O) and Threats (T) are considered to be external factors over which you have essentially no control.

SWOT Analysis is 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. In other words, it is the foundation for evaluating the internal potential and limitations and the probable/likely opportunities and threats from the external environment. It views all positive and negative factors inside and outside the firm that affect the success. A consistent study of the environment in which the firm operates helps in forecasting/predicting the changing trends and also helps in including them in the decision-making process of the organization. An overview of the four factors (Strengths, Weaknesses, Opportunities and Threats) is given belowStrengths - Strengths are the qualities that enable us to accomplish the organization’s mission. These are the basis on which continued success can be made and continued/sustained. Strengths can be either tangible or intangible. These are what you are well-versed in or what you have expertise in, the traits and qualities your employees possess (individually and as a team) and the distinct features that give your organization its consistency. 39 | P a g e

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. Weaknesses - Weaknesses are the qualities that prevent us from accomplishing our mission and achieving our full potential. These weaknesses deteriorate influences on the organizational success and growth. Weaknesses are the factors which do not meet the standards we feel they should meet. Weaknesses in an organization may be depreciating machinery, insufficient research and development facilities, narrow product range, poor decision-making, etc. Weaknesses are controllable. They 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. Opportunities - Opportunities are presented by the environment within which our organization operates. These arise when an organization can take benefit of conditions in its environment to plan and execute strategies that enable it to become more profitable. Organizations can gain competitive advantage by making use of opportunities. Organization should be careful and recognize the opportunities and grasp them whenever they arise. Selecting the targets that will best serve the clients while getting desired results is a difficult task. 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. 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. Advantages of SWOT Analysis SWOT Analysis is instrumental in strategy formulation and selection. It is a strong tool, but it involves a great subjective element. It is best when used as a guide, and not as a prescription. Successful businesses build on their strengths, correct their weakness and protect against internal weaknesses and external threats. They also keep a watch on their overall business environment and recognize and exploit new opportunities faster than its competitors. SWOT Analysis helps in strategic planning in following manner40 | P a g e

1. 2. 3. 4. 5. 6. 7. 8.

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. 9. SWOT Analysis provide information that helps in synchronizing the firm’s resources and capabilities with the competitive environment in which the firm operates.

SWOT ANALYSIS FRAMEWORK

SWOT Analysis Limitations of SWOT Analysis SWOT Analysis is not free from its limitations. It may cause organizations to view circumstances as very simple because of which the organizations might overlook certain key strategic contact which may occur. Moreover, categorizing aspects as strengths, weaknesses, opportunities and threats might be very subjective as there is great degree of uncertainty in market. SWOT Analysis does stress upon the significance of these four aspects, but it does not tell how an organization can identify these aspects for itself.

There are certain limitations of SWOT Analysis which are not in control of management. These include41 | P a g e

• • • • • • • • • •

Price increase; Inputs/raw materials; Government legislation; Economic environment; Searching a new market for the product which is not having overseas market due to import restrictions; etc. Internal limitations may includeInsufficient research and development facilities; Faulty products due to poor quality control; Poor industrial relations; Lack of skilled and efficient labor; etc

Discuss the forces having impact on an organization’s competitive advantage. Porter's Five Forces is an alternate model to SWOT (Strengths, Weaknesses, Opportunities, Threats) an analysis tool which is credited to Albert Humphrey at the Stanford Research Institute to help companies get a sense of their position within a competitive landscape. Porter taught his students at Harvard about SWOT analysis, but felt the tool had limitations because it placed too much focus on individual companies rather than on industries. Porter saw the need for a framework that also looked at the competitive landscape holistically, in the context of an entire industry. The simple framework that Porter developed for achieving a competitive advantage in the marketplace is still being taught in business schools today. Porter’s Five Forces Model of Competition Michael Porter (Harvard Business School Management Researcher) designed various vital frameworks for developing an organization’s strategy. One of the most renowned among managers making strategic decisions is the five competitive forces model that determines industry structure. According to Porter, the nature of competition in any industry is personified in the following five forces: Threat of new potential entrants Threat of substitute product/services Bargaining power of suppliers Bargaining power of buyers Rivalry among current competitors Porters Five Forces Model of Competition 42 | P a g e

FIGURE: Porter’s Five Forces model

The five forces mentioned above are very significant from point of view of strategy formulation. The potential of these forces differs from industry to industry. These forces jointly determine the profitability of industry because they shape the prices which can be charged, the costs which can be borne, and the investment required to compete in the industry. Before making strategic decisions, the managers should use the five forces framework to determine the competitive structure of industry.

Let’s discuss the five factors of Porter’s model in detail: Risk of entry by potential competitors: Potential competitors refer to the firms which are not currently competing in the industry but have the potential to do so if given a choice. Entry of new players increases the industry capacity, begins a competition for market share and lowers the current costs. The threat of entry by potential competitors is partially a function of extent of barriers to entry. The various barriers to entry areEconomies of scale Brand loyalty Government Regulation Customer Switching Costs Absolute Cost Advantage 43 | P a g e

Ease in distribution Strong Capital base Rivalry among current competitors: Rivalry refers to the competitive struggle for market share between firms in an industry. Extreme rivalry among established firms poses a strong threat to profitability. The strength of rivalry among established firms within an industry is a function of following factors: Extent of exit barriers Amount of fixed cost Competitive structure of industry Presence of global customers Absence of switching costs Growth Rate of industry Demand conditions Bargaining Power of Buyers: Buyers refer to the customers who finally consume the product or the firms who distribute the industry’s product to the final consumers. Bargaining power of buyers refer to the potential of buyers to bargain down the prices charged by the firms in the industry or to increase the firms cost in the industry by demanding better quality and service of product. Strong buyers can extract profits out of an industry by lowering the prices and increasing the costs Bargaining Power of Suppliers: Suppliers refer to the firms that provide inputs to the industry. Bargaining power of the suppliers refer to the potential of the suppliers to increase the prices of inputs( labour, raw materials, services, etc) or the costs of industry in other ways. Strong suppliers can extract profits out of an industry by increasing costs of firms in the industry. Threat of Substitute products: Substitute products refer to the products having ability of satisfying customers needs effectively. Substitutes pose a ceiling (upper limit) on the potential returns of an industry by putting a setting a limit on the price that firms can charge for their product in an industry. The power of Porter’s five forces varies from industry to industry. Whatever be the industry, these five forces influence the profitability as they affect the prices, the costs, and the capital investment essential for survival and competition in industry. This five forces model also help in making strategic decisions as it is used by the managers to determine industry’s competitive structure. 44 | P a g e

Porter ignored, however, a sixth significant factor- complementariness. This term refers to the reliance that develops between the companies whose products work is in combination with each other. Strong complementary might have a strong positive effect on the industry. Also, the five forces model overlooks the role of innovation as well as the significance of individual firm differences. It presents a stagnant view of competition. 1. The primary analytical tool of strategic cost analysis is a value chain identifying the separate activities, functions and business processes, discuss. How the four generic building blocks of competitive advantage are relate to each other? T h e f o u r ge n e r i c b u i l di n g b l o c k s o f c o m p e t i t i v e a d v a n t a ge : e f f i c i e n c y, q u a l i t y, innovation, and responsiveness to customers. T h e y a r e f i r m l y e l a t e d t o e a c h o t h e r . S i n c e i t r e d u c e s w a s t e , t h e t i m e spent settling imperfections, and the expense of after deals administration and support, accomplishing prevalent quality has a key positive effect on potency. Besides, seeing that su peri or qu al i t y i s es t eem ed b y cl i e nt s bui l ds t he com pan y’s cust om e r respo nsi venes s . Correspondingl y, the capacit y to rapidl y develop inventive new items w i l l b u i l d a n organization’s capacity to serve its customers interests. Lastly, it is critical to stay as a primary concern that accomplishing predominant potency, quality, and advancement are all 50% of accomplishing prevalent customer responsiveness. The four generic building blocks are nearly identified with each other. Since it lessens waste, the time spent settling imperfections, and the expense of after-deals administration and bolster, accomplishing unrivaled quality has a critical positive effect on productivity. Additionally, insofar as unrivaled quality is esteemed by customers, it expands the organization's client responsiveness. Plus, development in both items and techniques can upgrade proficiency, quality, and client responsiveness. For instance, process developments, for example, Toyota's lean creation framework, can all the while expand proficiency and quality. Additionally, the capacity to quickly create imaginative new items builds an organization's capacity to serve its clients. At long last, it is vital to remember that attaining to unrivaled effectiveness, quality, and development are all piece of accomplishing predominant client responsiveness. As compared to growth strategies, retrenchment strategies are more face-saving strategies. Find out the reasons for this while discussing about types of retrenchment strategies. What is meant by organizational change? What is planned change? What are the objectives of planned change? Organizational change is about the process of changing an organization'sstrategies, processes, procedures, technologies, and culture, as well as the effect of such changes on the organization. Planned change 45 | P a g e

An alteration of the status quo by means of a carefully formulated program that follows four step s: unfreezing the presentlevel, establishing a change relationship, moving to a new level, and free zing at the new level. The programs can beimplemented by collaborative, coercive, or emulative means.

1. To allow changes while, at the same time, maintaining or improving service stability and availability. 2. To increase the probability of change success. 3. To reduce or minimize the ratio of changes that needs to be backed out of due to inadequate preparation. 4. To ensure that all parties affected are informed of planned changes. 5. To provide a record of changes implemented to assist with and shorten problem determination time. 6. To ensure that technical and management accountability for all changes is identified. 7.To assist with the accuracy of predictions of impact, such as response time, utilization, etc.

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8.To ensure that all affected parties are not only informed, but necessary documentation and training is in place prior to the implementation. Strategic Management Assignment 6 Differentiate between Plan & Policy Plans

Policies

Plan is a roadmap to achieve the goal

Policies are the guidelines/set of principles which guide the concerned authority in its course of action

Planning is about making plans on how to achieve the objective

Policy is the guideline to achieve the objective

Plan is a course of action intended for future

Policy is a set of rules and regulations

It is set of future actions which are needed to achieve the objective

It is set of principles which are needed to govern the future actions

It is made for both short term and long term objective accomplishment

It is made considering the long term impact on the changing conditions and situations

It usually deals with complex and multi-sectoral problems

It usually deals with unisectoral problems and simple problems

Plans are made with moderate consideration to the analytic and quantitative techniques

Policies are made with huge emphasis and consideration to the analytic and quantitative technique like cost benefit analysis, statistical analysis etc

Plans are made at all levels from strategic level to operational level

These are made by the senior level management

Plans are made within the boundary of the policies

Policies are high level strategic governance

Planning is the work that we do considering the policy

Policies are set of rules around which we work

What do you understand by strategic management process? What are its benefits? Strategic management Strategic management is the continuous planning, monitoring, analysis and assessment of all that is necessary for an organization to meet its goals and objectives. Fast-paced innovation, emerging technologies and customer expectations force organizations to think and make 47 | P a g e

decisions strategically to remain successful. The strategic management process helps company leaders assess their company's present situation, chalk out strategies, deploy them and analyze the effectiveness of the implemented strategies. Importance of strategic management Strategic management necessitates a commitment to strategic planning, which represents an organization's ability to set both short- and long-term goals, then determining the decisions and actions that need to be taken to reach those goals. The strategic management process is a management technique used to plan for the future: Organizations create a vision by developing long-term strategies. This helps identify necessary processes and resource allocation to achieve those goals. It also helps companies strengthen and support their core competencies. By determining a strategy, organizations can make logical decisions and develop new goals quickly to keep pace with the changing business environment. Strategic management can also help an organization gain competitive advantage and improve market share. He strategic management process means defining the organization’s strategy. It is also defined as the process by which managers make a choice of a set of strategies for the organization that will enable it to achieve better performance. Strategic management is a continuous process that appraises the business and industries in which the organization is involved; appraises it’s competitors; and fixes goals to meet all the present and future competitor’s and then reassesses each strategy. Strategic management process has following four steps: 1. Environmental Scanning- Environmental scanning refers to a process of collecting, scrutinizing and providing information for strategic purposes. It helps in analyzing the internal and external factors influencing an organization. After executing the environmental analysis process, management should evaluate it on a continuous basis and strive to improve it. 2. Strategy Formulation- Strategy formulation is the process of deciding best course of action for accomplishing organizational objectives and hence achieving organizational purpose. After conducting environment scanning, managers formulate corporate, business and functional strategies. 3. Strategy Implementation- Strategy implementation implies making the strategy work as intended or putting the organization’s chosen strategy into action. Strategy implementation includes designing the organization’s structure, distributing resources, developing decision making process, and managing human resources. 48 | P a g e

4. Strategy Evaluation- Strategy evaluation is the final step of strategy management process. The key strategy evaluation activities are: appraising internal and external factors that are the root of present strategies, measuring performance, and taking remedial / corrective actions. Evaluation makes sure that the organizational strategy as well as it’s implementation meets the organizational objectives. These components are steps that are carried, in chronological order, when creating a new strategic management plan. Present businesses that have already created a strategic management plan will revert to these steps as per the situation’s requirement, so as to make essential changes.

Components of Strategic Management Process

Explain benefits of strategic management approach by making an accurate assessment of the impact of strategy formulation on the organization. The Advantages of Strategic Management Discharges Board Responsibility The first reason that most organizations state for having a strategic management process is that it discharges the responsibility of the Board of Directors. Forces an Objective Assessment Strategic management provides a discipline that enables the board and senior management to actually take a step back from the day-to-day business to think about the future of the organization. Without this discipline, the organization can become solely consumed with working through the next issue or problem without consideration of the larger picture. Provides a Framework for Decision-Making Strategy provides a framework within which all staff can make day-to-day operational decisions and understand that those decisions are all moving the organization in a single direction. Supports Understanding & Buy-In

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Allowing the board and staff participation in the strategic discussion enables them to better understand the direction, why that direction was chosen, and the associated benefits. For some people simply knowing is enough; for many people, to gain their full support requires them to understand. Enables Measurement of Progress A strategic management process forces an organization to set objectives and measures of success. The setting of measures of success requires that the organization first determine what is critical to its ongoing success and then forces the establishment of objectives and keeps these critical measures in front of the board and senior management. Provides an Organizational Perspective Addressing operational issues rarely looks at the whole organization and the interrelatedness of its varying components. Strategic management takes an organizational perspective and looks at all the components and the interrelationship between those components in order to develop a strategy that is optimal for the whole organization and not a single component. How does strategic planning improve the performance of the organization? Creates focus Do you every feel like you are going in many directions, but not making any progress? It’s a common situation. We are constantly bombarded with demands from customers, employees, stakeholders and community. But when we try to be all things to everyone – we almost never succeed! We usually end up burning ourselves out and using up our resources without seeing significant return. By having the clear direction of a strategy, we know the exact actions and sequencing that we need to follow to achieve our goals. We can focus our limited resources on these actions. And often, the more we focus on specific actions, the better we become at it. That is, we get more efficient. Thus, there is an additive performance improvement over time. It also sends a clear message to our customers, employees and stakeholders that “this is what we specialize in”. Once again, successful companies are ones that set themselves up as providing a unique value that is distinctly different from competitors. Reduces risks An effective strategic plan involves extensive research and analysis on both your internal strengths and weaknesses, and external opportunities and threats. Knowing the possibilities, you can now be prepared by either mitigating risks or having processes in place to minimize the impact. While it’s not realistic to assume we can avoid every risk, a strategic plan will provide you with the knowledge you need to manage risk effectively. 50 | P a g e

One of the biggest risks that is often over looked is one of allowing your core competencies to erode. Often, businesses don’t have a clear understanding of their true strengths. And so they focus on the wrong things. For example – trying to copy your competitors rather than leveraging your unique strengths. And we can waste resources doing that. For example – investing in new technology at the expense of training, developing and retaining key employees. Often the first thing to go in budget reductions are training and research and development. So if these were actually your core competencies (and it often does lie in unique knowledge..), you trade a short term gain but eventually lose your competitive edge. Guides decision making and operations When the strategy is effectively communicated, everyone knows the end goal. Thus, we can evaluate day-to-day decisions based on our strategic direction. When you are faced with numerous demands, it’s essential to know what you can say NO to. So consider, if doing X doesn’t support our strategy – why would we do it? Or can we somehow adapt it to fit our strategy? By communicating this down through all levels of the organization, employees can be empowered to find new and better ways of achieving your goals. They may find efficiencies, or innovative new approaches. And it can help them in communicating with customers and other stakeholders when they understand the focus and the value of your strategy. By knowing their direction, it can help reduce the inefficiencies of reacting to different interest groups. I know it can be tough for businesses to say “we do X, we don’t do Y”. It can be tempting to grasp at all the suggestions of what others think you should do (and there’s no shortage of opinions!). But once you start finding the superior results from focus, you won’t want to go back! So be sure to frequently measure improvements in business performance and celebrate small successes to build momentum and support. Explain the culture environment and its alignment with corporate image of an organization. Organizational Culture and Its Corporate Image One of the major communicative challenges facing the modern corporation is the need to communicate its identity and its values in order to distinguish itself from competitors and to promote the corporate brand in a highly competitive and international business context in which branding becomes increasingly important. Hatch & Schultz (2009).The culture of an organization shapes its corporate image both for its internal and external customers. It also contributes significantly to the organization's brand image and brand promise. Organizational culture is known as the values, beliefs and basic assumptions that are guided by leaders and shared by employees, and that explain “how things are done around here.” Organizational culture has primarily been viewed as an internal phenomenon, having an impact on staff behaviour and attitudes, and ultimately influencing organizational performance. Yet, it has more recently been conceptualized as a factor in shaping a company's image in the 51 | P a g e

marketplace. Corporate image is an overall perception of the company held by different segments of the public (Villanova, Zinkhan and Hyman, 1990). The two key phrases in the definition "overall perception" and "different segments," indicate that corporate image is more than a mere sum of the impressions of individual attributes and that it encompasses all of the company functions and roles. Corporate image includes information and inferences about the company as an employer, as a seller, as an investment and as a corporate citizen. A company will have more than one image depending on the nature of the interaction it has with the different groups. Since people tend to "humanize" companies (Bayton, 1959), corporate image may also include characteristics often attributed to humans such as "caring", "friendly", and "ruthless" and so on. The public segments which corporations are most concerned with are their stakeholder groups. Each major stakeholder group has different characteristics, needs and expectations and may hold a different image of a company. Also, the increasing demand in society for authenticity and transparency in the business world in general requires the corporation to speak with one, identifiable voice Christensen &Morsing, (2008), while at the same time addressing groups of multiple stakeholders with potentially different or conflicting agendas. Shelley (2005) disclosed that organizations' relations with stakeholders constitute a prominent feature of organizational identity, that relations with external and internal stakeholders are perceived as tightly coupled, that both pure and hybrid identity orientation types are relatively common, and that identity orientation varies widely among business organizations. A strong corporate identity and a clear internal awareness of “who we are and what we stand for” Hatch & Schultz (2000) depend on a successful and balanced interplay between corporate image, corporate culture and corporate vision. In brand related narratives, the question of identity is reflected at different levels. Discuss Porter’s five forces model with reference to what you know about the Indian Airline Industry. What does the model tell you about the level of competition in this industry? Let’s discuss the five factors of Porter’s model in detail: Risk of entry by potential competitors: Potential competitors refer to the firms which are not currently competing in the industry but have the potential to do so if given a choice. Entry of new players increases the industry capacity, begins a competition for market share and lowers the current costs. The threat of entry by potential competitors is partially a function of extent of barriers to entry. The various barriers to entry areEconomies of scale Brand loyalty Government Regulation Customer Switching Costs

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Absolute Cost Advantage Ease in distribution Strong Capital base Rivalry among current competitors: Rivalry refers to the competitive struggle for market share between firms in an industry. Extreme rivalry among established firms poses a strong threat to profitability. The strength of rivalry among established firms within an industry is a function of following factors: Extent of exit barriers Amount of fixed cost Competitive structure of industry Presence of global customers Absence of switching costs Growth Rate of industry Demand conditions Bargaining Power of Buyers: Buyers refer to the customers who finally consume the product or the firms who distribute the industry’s product to the final consumers. Bargaining power of buyers refer to the potential of buyers to bargain down the prices charged by the firms in the industry or to increase the firms cost in the industry by demanding better quality and service of product. Strong buyers can extract profits out of an industry by lowering the prices and increasing the costs Bargaining Power of Suppliers: Suppliers refer to the firms that provide inputs to the industry. Bargaining power of the suppliers refer to the potential of the suppliers to increase the prices of inputs( labour, raw materials, services, etc) or the costs of industry in other ways. Strong suppliers can extract profits out of an industry by increasing costs of firms in the industry. Threat of Substitute products: Substitute products refer to the products having ability of satisfying customers needs effectively. Substitutes pose a ceiling (upper limit) on the potential returns of an industry by putting a setting a limit on the price that firms can charge for their product in an industry. The power of Porter’s five forces varies from industry to industry. Whatever be the industry, these five forces influence the profitability as they affect the prices, the costs, and the capital investment essential for survival and competition in industry. This five forces model also help in 53 | P a g e

making strategic decisions as it is used by the managers to determine industry’s competitive structure. •

Step 1 of 3

The Competitive force analysis for Airline Industry is explained as follows: 1. Threat of New entrants: Entering an Airline industry is a bit tougher as it involves a high amount of investment. The airline companies are not able to pool the capital easily as they need financial clearances from banks or creditors. However, if the interest rates on loan fall down, new entrants are motivated to enter into the airline industry. 2. Bargaining Power of Suppliers: This kind of situation basically occurs, when the product has a high demand and supplier have a few substitutes of products. In such a case, the bargaining power of supplier increases. The airline business industry generally falls under the control of two main organizations i.e. Boeing and Airbus. Hence, it is often seen that few suppliers are available to supply the parts and machinery of the aircraft. 3. Bargaining Power of Buyers: This kind of situation basically occurs, when the buyers have many choices to choose from. In case of the airline industry, if the air tickets are costly, then the consumers can choose to travel with another airline if it offers a reasonable deal. 4. Availability of substitutes: This particular element is closely associated with the bargaining power of buyers. If the price of air tickets does not suit the passenger’s budget, then he/she can switch to other travel options, such as train or bus. 5. Competitive Rivalry: If the new entrants offer affordable prices than the existing competitors, then the customers would in no time switch to other options. •

Step 2 of 3

There are many reasons that lead to the low profitability in Airline Industry. They are as follows: • Price: This is one such factor that can affect the airline business in a huge way. An increase in fuel prices, urges airline companies to raise the travel prices so as to cover the additional expenses. • Comfort & Flexible: Costumers prefer travelling by air when they have good disposable income. Moreover, if any king of glitch is noticed in airline services, then it can harm the airline’s profitability.

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• Competitors: The business arena is incomplete without competitors or rivals. If the new entrants offer a better deal by offering discounts on air tickets, the customers are likely to be wooed by the offer. This kind of strategy poses a threat to its closest competitors. • Suppliers: If the cost of production rises, there would be less number of suppliers that would be interested in creating the inputs at a higher price. • Non stable pricing: The Airline industry follows the non-stable pricing that gives an impression to the customers that high prices are charged for the tickets. As the customers will not have any idea on the prices of the air tickets they are not interested to opt for it. •

Step 3 of 3

Therefore, it is clearly stated that the above reasons are the main causes for the low profitability in the Airline industry. What do you understand by cost advantage and value chain? Value chain analysis is a strategy tool used to analyze internal firm activities. Its goal is to recognize, which activities are the most valuable (i.e. are the source of cost or differentiation advantage) to the firm and which ones could be improved to provide competitive advantage. M. Porter introduced the generic value chain model in 1985. Value chain represents all the internal activities a firm engages in to produce goods and services. VC is formed of primary activities that add value to the final product directly and support activities that add value indirectly. Value Chain Model. It shows primary activities: inbound logistics, operations, outbound logistics, marketing & sales, logistics and secondary activities: firm infrastructure, procurement, human resource management, technology. If managed properly, a combination of primary and secondary activities result in profit. Although, primary activities add value directly to the production process, they are not necessarily more important than support activities. Nowadays, competitive advantage mainly derives from technological improvements or innovations in business models or processes. Therefore, such support activities as ‘information systems’, ‘R&D’ or ‘general management’ are usually the most important source of differentiation advantage. On the other hand, primary activities are usually the source of cost advantage, where costs can be easily identified for each activity and properly managed. Firm’s VC is a part of a larger industry's VC. The more activities a company undertakes compared to industry's VC, the more vertically integrated it is. Below you can find an industry's value chain and its relation to a firm level VC. 55 | P a g e

Organization's value chain in relation to industry's value chain. In this picture, industry's value chain comprises of raw materials, intermediate goods, manufacturing, marketing & sales and after sales services. Company's value chain is usually just a part of industry's value chain. Using the tool There are two different approaches on how to perform the analysis, which depend on what type of competitive advantage a company wants to create (cost or differentiation advantage). The table below lists all the steps needed to achieve cost or differentiation advantage using VCA. Cost advantage To gain cost advantage a firm has to go through 5 analysis steps: Step 1. Identify the firm’s primary and support activities. All the activities (from receiving and storing materials to marketing, selling and after sales support) that are undertaken to produce goods or services have to be clearly identified and separated from each other. This requires an adequate knowledge of company’s operations because value chain activities are not organized in the same way as the company itself. The managers who identify value chain activities have to look into how work is done to deliver customer value. Step 2. Establish the relative importance of each activity in the total cost of the product. The total costs of producing a product or service must be broken down and assigned to each activity. Activity based costing is used to calculate costs for each process. Activities that are the major sources of cost or done inefficiently (when benchmarked against competitors) must be addressed first. Step 3. Identify cost drivers for each activity. Only by understanding what factors drive the costs, managers can focus on improving them. Costs for labor-intensive activities will be driven by work hours, work speed, wage rate, etc. Different activities will have different cost drivers. Step 4. Identify links between activities. Reduction of costs in one activity may lead to further cost reductions in subsequent activities. For example, fewer components in the product design may lead to less faulty parts and lower service costs. Therefore identifying the links between activities will lead to better understanding how cost improvements would affect he whole value chain. Sometimes, cost reductions in one activity lead to higher costs for other activities. Step 5. Identify opportunities for reducing costs. When the company knows its inefficient activities and cost drivers, it can plan on how to improve them. Too high wage rates can be dealt with by increasing production speed, outsourcing jobs to low wage countries or installing more automated processes. What role can top management play in helping a company achieve superior efficiency, quality, innovation and responsiveness to customers? 56 | P a g e

Top management must be the foresight of the company and be willing to accept input from any source that proves to be of benefit. A company where the upper management works just as hard as the employees in the firm, makes intelligent and well thought out decisions, changes and implementation of programs, incentive or otherwise, is a company that can't help but be successful. If efficiency is to be achieved, particularly superior efficiency, a system known as Lean manufacturing should be implemented. For instance in the Company my husband owns, he directs all employees to seek out ways to become as efficient as possible and he has implemented a 3 step rule. If an employee must walk more than 3 steps to complete a task then he is working too hard. Quality, this is something that comes down to the heart of the Company...the employees. If disgrunted employees exist quality suffers because nobody cares. Those who do care get tired quickly of covering everyone else's butt. The management has to have an ear to the ground and know when quality is in jeopardy and the ability to always know how your company is functioning on all levels is one that every upper manager with any wherewithall, will have developed long before s/he rose to the position they are now in. Innovation...sometimes reinventing the wheel is just not necessary, but enhancing it just might be. So, being open to suggestions, ideas and even goals is an important factor that a Company needs to rely on, even unviable ideas are at least proof that the company staffing is at least thinking effectively. The upper management has to remember that the Company started from nothing and built progressively upward due to dedicated, hard working, idea oriented people...changing that mid stream isn't viable if it has been working. Innovation is not being afraid to try something different, know when something isn't working and being able to accept feedback both supportive and constructively critical. Responsiveness to customers...this is the one area that no company wants to short change. It is the client that makes or breaks the company and regardless what upper management or employees think, the company will not succeed if it isn't in tune with its clients and willing to do what it takes to ensure the client is happy. These four generic aspects do indeed create the competitive advantage and each are closely related to the other regardless what some upper managers believe. A company can not stand on its own if each of these areas are not strong factors within the business because each needs the other. Without efficiency deadlines, requirements, deliveries, etc cannot be met effectively. Without quality there is nothing more than a bad name to show for the lack of it. The lack of innovation 57 | P a g e

can set the company back years in comparison to its competitors. Lack of responsiveness to customers drives those customers to competitors who can meet and surpass all of the above qualities without question Describe the relevance of organizational change as a strategic implementation process. Getting Your Strategy Ready for Implementation For those businesses that have a plan in place, wasting time and energy on the planning process and then not implementing the plan is very discouraging. Although the topic of implementation may not be the most exciting thing to talk about, it’s a fundamental business practice that’s critical for any strategy to take hold. The strategic plan addresses the what and why of activities, but implementation addresses the who, where, when, and how. The fact is that both pieces are critical to success. In fact, companies can gain competitive advantage through implementation if done effectively. In the following sections, you’ll discover how to get support for your complete implementation plan and how to avoid some common mistakes. Avoiding the Implementation Pitfalls Because you want your plan to succeed, heed the advice here and stay away from the pitfalls of implementing your strategic plan. Here are the most common reasons strategic plans fail: • Lack of ownership: The most common reason a plan fails is lack of ownership. If people don’t have a stake and responsibility in the plan, it’ll be business as usual for all but a frustrated few. • Lack of communication: The plan doesn’t get communicated to employees, and they don’t understand how they contribute. • Getting mired in the day-to-day: Owners and managers, consumed by daily operating problems, lose sight of long-term goals. • Out of the ordinary: The plan is treated as something separate and removed from the management process. • An overwhelming plan: The goals and actions generated in the strategic planning session are too numerous because the team failed to make tough choices to eliminate noncritical actions. Employees don’t know where to begin. • A meaningless plan: The vision, mission, and value statements are viewed as fluff and not supported by actions or don’t have employee buy-in. • Annual strategy: Strategy is only discussed at yearly weekend retreats. • Not considering implementation: Implementation isn’t discussed in the strategic planning process. The planning document is seen as an end in itself. • No progress report: There’s no method to track progress, and the plan only measures what’s easy, not what’s important. No one feels any forward momentum. 58 | P a g e

• •

No accountability: Accountability and high visibility help drive change. This means that each measure, objective, data source, and initiative must have an owner. Lack of empowerment: Although accountability may provide strong motivation for improving performance, employees must also have the authority, responsibility, and tools necessary to impact relevant measures. Otherwise, they may resist involvement and ownership.

Making Sure You Have the Support Often overlooked are the five key components necessary to support implementation: people, resources, structure, systems, and culture. All components must be in place in order to move from creating the plan to activating the plan. People The first stage of implementing your plan is to make sure to have the right people on board. The right people include those folks with required competencies and skills that are needed to support the plan. In the months following the planning process, expand employee skills through training, recruitment, or new hires to include new competencies required by the strategic plan. Resources You need to have sufficient funds and enough time to support implementation. Often, true costs are underestimated or not identified. True costs can include a realistic time commitment from staff to achieve a goal, a clear identification of expenses associated with a tactic, or unexpected cost overruns by a vendor. Additionally, employees must have enough time to implement what may be additional activities that they aren’t currently performing. Structure Set your structure of management and appropriate lines of authority, and have clear, open lines of communication with your employees. A plan owner and regular strategy meetings are the two easiest ways to put a structure in place. Meetings to review the progress should be scheduled monthly or quarterly, depending on the level of activity and time frame of the plan. Systems Both management and technology systems help track the progress of the plan and make it faster to adapt to changes. As part of the system, build milestones into the plan that must be achieved within a specific time frame. A scorecard is one tool used by many organizations that incorporates progress tracking and milestones. Culture 59 | P a g e

Create an environment that connects employees to the organization’s mission and that makes them feel comfortable. To reinforce the importance of focusing on strategy and vision, reward success. Develop some creative positive and negative consequences for achieving or not achieving the strategy. The rewards may be big or small, as long as they lift the strategy above the day-to-day so people make it a priority. Determine Your Plan of Attack Implementing your plan includes several different pieces and can sometimes feel like it needs another plan of its own. But you don’t need to go to that extent. Use the steps below as your base implementation plan. Modify it to make it your own timeline and fit your organization’s culture and structure. •

Finalize your strategic plan after obtaining input from all invested parties.

•

Align your budget to annual goals based on your financial assessment.

•

Produce the various versions of your plan for each group.

•

Establish your scorecard system for tracking and monitoring your plan.

•

Establish your performance management and reward system.

•

Roll out your plan to the whole organization.

•

Build all department annual plans around the corporate plan.

•

Set up monthly strategy meetings with established reporting to monitor your progress.

•

Set up annual strategic review dates, including new assessments and a large group meeting for an annual plan review.

1. Describe the process of management of change. How will you identify facilitating and restraining forces in a change program? Strategic Management Assignment 6 1.

Why do firms have objectives and why are they important to strategic planning?

The main objectives of firms are: 1. 2. 3. 4.

Profit maximisation Sales maximisation Increased market share/market dominance Social/environmental concerns

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5. Profit satisfying 6. Coopératives/ Sometimes there is an overlap of objectives. For example, seeking to increase market share, may

lead to lower profits in the short-term, but enable profit maximization in the long run. 1. Profit maximisation Usually, in economics, we assume firms are concerned with maximizing profit. Higher profit means: 1. Higher dividends for shareholders. 2. More profit can be used to finance research and development. 3. Higher profit makes the firm less vulnerable to takeover. 4. Higher profit enables higher salaries for workers.

• Profit satisfaction However, in the real world, firms may pursue other objectives apart from profit maximization.

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5.

6.

7.

8.

In many firms, there is a separation of ownership and control. Those who own the company (shareholders) often do not get involved in the day to day running of the company. This is a problem because although the owners may want to maximize profits, the managers have much less incentive to maximize profits because they do not get the same rewards, (share dividends) Therefore managers may create a minimum level of profit to keep the shareholders happy, but then maximize other objectives, such as enjoying work, getting on with other workers. (e.g. not sacking them) This is the problem of separation between owners and managers. This ‘principal-agent‘ problem can be overcome, to some extent, by giving managers share options and performance related pay although in some industries it is difficult to measure performance.

2. Sales maximisation Firms often seek to increase their market share – even if it means less profit. This could occur for various reasons: 1. Increased market share increases monopoly power and may enable the firm to put up prices and make more profit in the long run. 2. Managers prefer to work for bigger companies as it leads to greater prestige and higher salaries. 3. Increasing market share may force rivals out of business. E.g. the growth of supermarkets has lead to the demise of many local shops. Some firms may actually engage in predatory pricing which involves making a loss to force a rival out of business. 3. Growth maximization This is similar to sales maximization and may involve mergers and takeovers. With this objective, the firm may be willing to make lower levels of profit in order to increase in size and gain more market share. More market share increases their monopoly power and ability to be a price setter. 4. Long run profit maximisation In some cases, firms may sacrifice profits in the short term to increase profits in the long run. For example, by investing heavily in new capacity, firms may make a loss in the short run but enable higher profits in the future. 5. Social/environmental concerns

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A firm may incur extra expense to choose products which don’t harm the environment or products not tested on animals. Alternatively, firms may be concerned about local community / charitable concerns. Some firms may adopt social/environmental concerns as part of its branding. This can ultimately help profitability as the brand becomes more attractive to consumers. Some firms may adopt social/environmental concerns on principal alone – even if it does little to improve sales/brand image. 6. Coopératives Co-operatives may have completely different objectives to a typical PLC. A co-operative is run to maximize the welfare of all stakeholders – especially workers. Any profit the co-operative makes will be shared amongst all members.

Why they are important to strategic planning Strategic planning is important to an organization because it provides a sense of direction and outlines measurable goals. Strategic planning is a tool that is useful for guiding day-to-day decisions and also for evaluating progress and changing approaches when moving forward. In order to make the most of strategic planning, your company should give careful thought to the strategic objectives it outlines, and then back up these goals with realistic, thoroughly researched, quantifiable benchmarks for evaluating results. The Mission

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Strategic planning starts with defining a company mission. A mission is important to an organization because it synthesizes and distills the overarching idea linking its practical strategies, enabling management and employees to align the specifics of their actions and decisions with a clearly defined vision and direction. Define your strategic mission in a way that is broad enough to guide both management and employees, and narrow enough to focus their efforts. "To help humanity," is too broad a mission, even for a nonprofit. "To feed the hungry by connecting home gardeners with food banks," is a mission that is both general and actionable. Setting Goals The nuts and bolts of the strategic planning process are expressed in measurable goals. Measurable goals set specific, concrete objectives expressed in terms of quantities and timelines. Measurable goals are important to an organization because they enable managers and employees to evaluate progress and pace developments. "To grow substantially during the next few years" is not a measurable goal, but "To increase sales by 30 percent during the upcoming year" provides a concrete objective to be achieved in a specific time frame. Evaluating Progress Strategic objectives are of necessity based on the best information you have at the time and your most realistic assessments of what your company can achieve. Organizations also benefit from building a stage into the strategic planning process that involves evaluating goals and progress after an elapsed period of time in light of the company's success in achieving these goals and developments that have arisen in the interim. For example, if you plan to grow your hardware store business 20 percent during a specific year, but a formidable competitor opens a superstore down the road, you'll probably redefine your objectives and evaluate progress in terms of preserving market share. The Strategic Planning Process The process of strategic planning can be as important to an organization as the results. Strategic planning can be an especially valuable process when it includes employees in all departments and at all levels of responsibility thinking about how their activities and responsibilities fit into the larger picture, and about their potential contributions. 4.

Discuss about the components of the strategic management model.

5.

What is mission statement? What are its characteristics? What are the steps for developing effective mission statement?

What is mission statement? A mission statement is a brief description of why a company or nonprofit organization exists. In one to three sentences, it explains what the company does, who it serves, and what differentiates 64 | P a g e

it from competitors. It’s used to provide focus, direction, and inspiration to employees while it tells customers or clients what to expect from the business. A mission statement is often part of a business plan. OR A mission state ment is a short statement of an organization's purpose, identifying the goal of its operations: what kind of product or service it provides, its primary customers or market, and its geographical region of operation. It may include a short statement of such fundamental matters as the organization's values or philosophies, a business's main competitive advantages, or a desired future state the "vision". A mission is not simply a description of an organization by an external party, but an expression, made by its leaders, of their desires and intent for the organization. The purpose of a mission statement is to focus and direct the organization itself. It communicates primarily to the people who make up the organization its members or employees giving them a shared understanding of the organization have intended direction. Organizations normally do not change their mission statements over time, since they define their continuous, ongoing purpose and focus. According to Chris Bart, professor of strategy and governance at McMaster University, a commercial mission statement consists of three essential components: 1. Key market: the target audience 2. Contribution: the product or service 3. Distinction: what makes the product unique or why the audience should buy it over another Characteristic of mission statement 1. It should be feasible A mission should always aim high but it should not be an impossible statement. It should be realistic and achievable its followers must find it to be credible. But feasibility depends on the resources available to work towards a mission. In the sixties, the US National Aeronautics and Space Administration (NASA) had a mission to land on the moon. It was a feasible mission that was ultimately realized. 2. It should be precise. A mission statement should not be so narrow as to restrict the organization’s activities nor should it be too broad to make itself meaningless. For instance, ‘Manufacturing bicycles’ is a narrow mission statement since it severely limits the organization’s activities, while mobility business’ is too broad a term, as it does not define the reasonable contour within which the organization could operate. 3. It should be clear.

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A mission should be clear enough to lead to action. It should not be a high-sounding set of platitudes meant for publicity purposes. Many organizations do adopt such statements but probably they do so for emphasizing their identity and character. For example, Asian Paints stresses leadership through excellence. 4. It should be motivating. A mission statement should be motivating for members of the organization and of society, and they should feel it worthwhile working for such an organization or being its customers. A bank, which lays great emphasis on customer service, is likely to motivate its employees to serve its customers well and to attract clients. Customer service therefore is an important purpose for a banking institution. 5. It should be distinctive. A mission statement, which is indiscriminate, is likely to have little impact. If all scooter manufacturers defined their mission in a similar fashion, there would not be much of a difference among them. But if one defines it as providing scooters that would provide ‘value for money, for years’ it will create an important distinction in the public mind. 6. It should indicate major components of strategy. A mission statement along with the organizational purpose should indicate the major components of the strategy to be adopted. 7. It should indicate how objectives are to be accomplished. Besides indicating the broad strategies to be adopted a mission statement should also provide clues regarding the manner in which the objectives are to be accomplished. Steps for developing Effective mission statement: 1. Get full leadership buy-in. Leadership should be involved from the very beginning. If your leadership team doesn’t’t feel ownership over the mission statement or if those leaders don’t agree with it, the rest of your employees won’t, either. And don’t forget that each member of your leadership team has a unique perspective on the company, which can be a huge asset in crafting a comprehensive statement that works for everyone. 2. Decide on your mission statement’s pur pose. Mission statements can serve a variety of purposes, so before diving into the nitty-gritty details, decide what you want your statement to communicate. Should it talk about what you do? How you do it? Who you do it for? Why you do it? Also consider who the mission statement will be directed toward: Your customers? Your employees? Your partners? The community? All of the above? 66 | P a g e

3. Hold a discovery session (or a few). Set up meetings with your leadership team and ask the following questions: • What inspired you to start the company? • What image do you want to convey to clients, employees, and the public? • Will the mission statement be public or just used internally? • What is the nature of your service or product? What determines pricing and quality? How do those factors relate to why your organization exists? How will they change over time? • What sets you apart from the competition? • What are the fundamental values and beliefs that guided your answers to the previous questions? 4. Individualise It. Ask each leadership team member to craft individual mission statements for the organization. Identify the key terms and themes, and use them to craft a version of the company mission statement. 5. Refine, refine, refine. Edit and edit again until everyone feels like you’ver. got the perfect statement that speaks to your company’s pur pose. 6. Reveal your finished statement. Share it with your team! Like core values, a mission statement that no one knows about or understands won’t do you any service. Bring your company together and share your mission to rally everyone around your purpose. Above all, stay true to your organization. It’s helpful to research some of your favorite brands and their mission statements to get ideas, but don’t let that research limit you. Be unique and come up with a statement that truly fits your company and its goals. Not only does a mission statement unite your employees and strengthen advocacy, but it also fuels your company’s content strategy. Your content should align with your brand, who you are, and what you do. Document a statement that communicates exactly that, and your team will have a much easier time creating content that reinforces it. 4. Define goals and objects. What are the characteristics of objectives? Goals are defined as the lifelong aims, which an individual or entity endeavor to achieve something. It determines what the company is attempting to accomplish. On the other hand, Objectives are the specific milestones which a person plans to achieve in a limited period. These are precise, measurable, time-based, actions that assist in the achievement of goal. The following are the objectives of business objectives: 67 | P a g e

1. Objectives should be understandable: In order for a company to establish a business objective, it must first understand where it stands and where it has been. It then determines what its goals are and how it will attain them. Once the objectives are set, it must be properly understood by the team members because it helps in proper implementation for achievement of the objectives. The business objectives should be made in an understandable way. This helps in communicating your objectives to your investors, employees, partners etc. Without this communication of business objectives, it becomes very difficult to reach them. 2. Objectives should be measurable: Objectives of an organization must be measurable. Unless the objectives are set the organization will not be able to compare the actual performance with the planned target. Objectives give the business a clearly defined target. It also enables the business to measure the progress towards to its stated aims. To avoid this, organization must state the objectives that are capable of being measured in terms of performance. 3. Hierarchy of objectives: Hierarchy means level. Business objectives are structured according to its hierarchy. All the objectives are not equally important. It should be achieved according to its priority and importance. The most important objective should be achieved first. For example: In a hierarchy survival of a business firm comes first following growth and then the prestige and goodwill. 4. Multiplicity of objectives: Business does not have a single objective. They are multiple in natures. The primary objective of every business is profit followed with customer satisfaction. Business also has objectives towards society that comprises of employees, shareholders, creditors, government etc. Business objectives are classified as organic objectives, economic objectives, social objectives, human objectives and national objectives. 5. Achievable: Business goals must be achievable. The organisation should frame those goals, which can be achieved taking into consideration its capabilities and resources. The objective must be feasible enough to keep team members motivated to strive towards its achievement. While setting the objectives, the organisation must concentrate on the limitations also. 6. Objectives should be specific: 68 | P a g e

Objectives must be specific in terms of time, quality and quantity. Specific objectives help in the accomplishment of those objectives in the specified time frame and resource availability. If the objectives are specific it gives precise results. Specific objectives help in understanding the objectives in the correct manner. Specific objectives help the firm to understand where they stand with respect to the completion of the objective. 7. Quantitative and Qualitative: Objectives can be expressed in quantitative and qualitative terms i.e. volume, number or value terms, increase in sales, market share, rate of production etc. are the examples of quantitative objectives. Some objectives are qualitative in nature such as goodwill, worker's job satisfaction etc. 8. Flexible: Flexibility means, 'that keeps on changing'. Business objectives should be flexible. It must not be rigid. Business environment keeps on changing. Therefore the objectives should be changed or modified according to the changing situation. The objectives must be able to reframe in the light of changes in the environment. 4.

Define internal analysis and VRIO analysis

→Internal analysis is the analysis of the internal strengths and weaknesses of a firm. Strengths are the features which the firm can leverage to establish its dominance in the market or win over customers. Example:Cost leadership or product insubstituability. Weaknesses are the loopholes in the functioning of a firm. Example:- Low employee productivity. Internal analysis gives the firm an insight into its competencies and desirable improvements, which can be useful in directing the way forward and help the business to improve operations and attain customer satisfaction and higher profits. Internal Analysis tells where a company has a scope of improvement and which are the areas where the company is doing good. It is primarily a way of understanding the pros and cons through self evaluation. →VRIO is a business analysis framework that forms part of a firm's larger strategic scheme. The basic strategic process that any firm goes through begins with a vision statement, and continues on through objectives, internal & external analysis, strategic choices (both business-level and corporate-level), and strategic implementation. The firm will hope that this process results in a competitive advantage in the marketplace they operate in. VRIO falls into the internal analysis step of these procedures, but is used as a framework in evaluating just about all resources and capabilities of a firm, regardless of what phase of the strategic model it falls under. 69 | P a g e

VRIO is an initialism for the four question framework asked about a resource or capability to determine its competitive potential: the question of Value, the question of Rarity, the question of Imitability (Ease/Difficulty to Imitate), and the question of Organization (ability to exploit the resource or capability). 1. The Question of Value:"Is the firm able to exploit an opportunity or neutralize an external threat with the resource/capability?" 2. The Question of Rarity:"Is control of the resource/capability in the hands of a relative few?" 3. The Question of Imitability:"Is it difficult to imitate, and will there be significant cost disadvantage to a firm trying to obtain, develop, or duplicate the resource/capability?" 4. The Question of Organization:"Is the firm organized, ready, and able to exploit the resource/capability?""Is the firm organized to capture value?" 5.

Identify a growth industry, a mature industry and a declining industry. For each industry, identify the following: (a) the number and size distribution of companies(b)the nature of barrier to entry (c)the height of barriers to entry and (d)the extend of product differentiation. What do these factors tell you about the nature of competition in each industry? What are the implications for the company in terms of opportunities and threats?

6.

Discuss GE Nine Cell Planning Grid.

This matrix was developed in 1970s by the General Electric Company with the assistance of the consulting firm, McKinsey & Co, USA. This is also called GE multifactor portfolio matrix. This matrix consists of nine cells (3X3) based on two key variables: i)Business Strength ii)Industry Attractiveness 70 | P a g e

The horizontal axis represents business strength and the vertical axis represents industry attractiveness. The business strength is measured by considering such factors as: • • • • • • •

relative market share profit margins ability to compete on price and quality knowledge of customer and market competitive strengths and weaknesses technological capacity caliber of management

Industry attractiveness is measured considering such factors as : • market size and growth rate • industry profit margin • compétitive intensity • economies of scale • technology • social, environmental, legal and human aspects. The industry product-lines or business units are plotted as circles. The area of each circle is proportionate to industry sales. The pie within the circles represents the market share of the product line or business unit. The nine cells of the GE matrix represent various degrees of industry attractiveness (high, medium or low) and business strength (strong, average and weak). After plotting each product line or business unit on the nine cell matrix, strategic choices are made depending on their position in the matrix. Spotlight Strategy: GE matrix is also called “Stoplight” strategy matrix because the three zones are like green, yellow and red of traffic lights. 1) Green indicates invest/expand – if the product falls in green zone, the business strength is strong and Industry is at least medium in attractiveness; the strategic decision should be to expand, to invest and to grow. 2) Yellow indicates select/earn – if the product falls in yellow zone, the business strength is low but 71 | P a g e

Industry attractiveness is high, it needs caution and managerial discretion for making the strategic choice. 3) Red indicates harvest/divest – if the product falls in the red zone, the business strength is average or Weak and attractiveness is also low or medium, the appropriate strategy should be divestment. When is company likely to choose related diversification and when unrelated diversification? Discuss with reference to an electronics manufacturer and an ocean shipping company. Step-by-Step Solution: •

Step 1

In related diversification companies tend to have a strategic fit with their current business. A company is likely to choose related diversification strategy due to following reasons: - Sharing skills and competencies - To capitalize on a brand name - To use shared knowledge and marketing skills - To use sales and distribution capacity - Exchanging manufacturing skills and know how - To have easy access to research and development and new product capabilities - To realize economies of scale For example, HP or Dell are the companies mainly manufacturing and selling PCs. If these companies will start manufacturing and selling related products like DVD players, music systems, LED TVs, it would be related diversification for them. Every business house aims to expand the operational activities, as this will help in approaching maximum number of clients from the national and international market. In this process, it is quite important to understand the terms of related and unrelated diversification. In related diversification, the management of the company proposes to expand the operational activities that include selling of products of the similar nature. This includes upgrading the current products and its quality. Through such a step, it is possible for the company to cater the changing needs of the potential buyers. Ocean shipping company renders related diversification type of services. In this process, the services and its type remains the same for the company. The type of services that has been selected by the clients depends upon the requirements. 72 | P a g e

In case of unrelated diversification, the manufacturer of the company concentrate on the production of different types of goods and products that are intended to handle the needs of the clients. Example: We probably now Samsung best for its smartphones, tablets and televisions. However, Samsung's business activities and operations are spread much wider than just those two important markets. The electronics giant also makes military hardware, apartments, ships and operates a Korean amusement park! Imagine how complicated it would be if you were asked to compose a Boston Matrix for Samsung's entire product or business unit portfolio! In this process, different types of products are sold by the company under the same brand name. In case of electronic manufacturing companies, the method adopted is usually of unrelated diversification. The company manufactures different types of electronic products that will cater the needs of the potential buyers.

7.

What is meant by organizational change? What is planned change? What are the objectives of planned change?

Organisational change

Organizational Change looks both at the process in which a company or any organization changes its operational methods, technologies, organizational structure, whole structure, or strategies, as well as what effects these changes have on it. Organizational change usually happens in response to – or as a result of – external or internal pressures. It is all about reviewing and modifying structures – specifically management structures – and business processes. Small commercial enterprises need to adapt to survive against larger competitors. They also need to learn to thrive in that environment. Large rivals need to adapt rapidly when a smaller, innovative competitor comes onto the scene. To avoid falling behind, or to remain a step ahead of its rivals, a business must seek out ways to operate more efficiently. It must also strive to operate more cost effectively.

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According to Beckard defines that “Organization Development is an effort planned, organization-wide, and managed from the top, to increase organization effectiveness and health through planned interventions in the organization's 'processes,' using behavioralscience knowledge.

Ever since the advent of the Internet, the business environment today has been changing at a considerably faster pace compared to forty years ago. Organizational change is a requirement for any business that wants to survive and thrive.

Process of Organizational Change: Unless the behavioral patterns of the employees change, the change will have a little impact on the effectiveness of the organisation. A commonly accepted model for bringing change in people was suggested by Kurt Lewis in terms of three phase process:-

(1) Unfreezing: The essence of unfreezing phase is that the individual is made to realize that his beliefs, feelings and behaviour are no longer appropriate or relevant to the current situation in the organisation. Once convinced, people may change their behaviour. Reward for those willing to change and punishment for others may help in this matter. (2) Changing: Once convinced and ready to change, an individual, under this phase, learns to behave in new ways. He is first provided with the model in which he is to identify himself. Gradually he will accept that model and behave in the manner suggested by the model. In another process (known as internalisation), the individual is placed in a situation where new behaviour is demanded of him if he is to operate successfully. (3) Refreezing: 74 | P a g e

During this phase, a person has to practice and experiment with the new method of behaviour and see that it effectively blends with his other behavioural attitudes. Reinforcement, for creating a permanent set in the individual, is provided through either continuous or intermittent schedules. Planned changes Planned - carefully thought through; based on data; documented .

Objective of planned change 1. Develop new goals and objectives: The managers must identify as to what new outcomes they wish to achieve. This may be a modification of previous goals due to changed internal and external environment or it may be a new set of goals and .objectives. 2. Select an agent for change: The management must decide as to who will initiate and oversee this change. A manager may be assigned this duty or even outside specialists and consultants can be brought in to suggest the various methods to bring in the change and monitor the change process. 3. Diagnose the problem: It is important to gather all pertinent data regarding the area or the problem where the change is needed. This data should be critically analyzed to pinpoint the key issues. Then the solutions can be focussed on those key issues. 4. Select methodology: Because of natural resistance to change, it is very important to chart out a methodology for change which would be correct and acceptable to all. Members’ emotions must be taken into consideration when devising such methodology. 5. Develop a plan: This step involves putting together a plan as to what is to be done. For example, if a company wants to develop and implement flexitime policy, it must decide as to what type of workers will be affected by it or whether flexitime should be given to all members or only to some designated members. 6. Select a strategy for implementation of the plan: In this stage, the management must decide on the “when” “where” and “how” of the plan. This includes the right timing of putting the plan to work, how the plan will be communicated to workers in order to have the least resistance and how the implementation will be monitored. 75 | P a g e

7. Implement the plan: Once the right timing and right channels of communication have been established, the plan is put into action. It may be in the form of a simple announcement or it may require briefing sessions or in-house seminars so as to gain acceptance of all the members and specially those who are going to be directly affected by the change. 8. Receive and evaluate feedback: Evaluation consists of comparing actual results to the set goals. Feedback will confirm if these goals are being met so that if there is any deviation between the goals and the actual performance outcomes, the corrective measures can be taken. 9.What is meant by resistance to change? What are the factors or causes of resistance to change?

Resistance to change Resistance to change is the action taken by individuals and groups when they perceive that a change that is occurring as a threat to them. Factors or causes of resistance to change (any 10) •

Threat of power on an individual level. It is more likely that managers will resist changes that will decrease their power and transfers it to their subordinates. In such a way, threat of power is one of the causes of resistance to change;

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Threat of power on an organizational level. With the change process, some groups, departments or sectors of the organization become more powerful. Because of that, some persons will be opposed to such a proposal or processes where they will lose their organizational power;

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Losing the control by employees. The change process sometimes can reduce the level of control that managers can conduct. In such a way managers can resist the proposed changes if the change process will require reduction of their control power;

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Increasing the control of the employees. Organisational changes can increase the managerial control of the employees, and this process can produce employees to become resistant to such proposal proposals of change;

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• Economic factors. Organizational changes sometimes can be seen from the employee’s side simply as something that will decrease or increase their salary or other economic privileges that some workplace brings to them in the moment before implementation of the change process. It is normal to expect that those people who feel that they will lose theportion of their salary will resist the change. • Image, prestige and reputation. Each workplace brings adequate image, prestige and reputation that are important to all employees. Organizational changes can make a drastic shift in these employee’s benefits. If this is the case with the proposed change, then it will produce dissatisfaction. So, image, prestige and reputation is one of the causes of resistance to change; • Threat of comfort. Organizational changes in many cases results in personal discomfort and make employee’s life more difficult. They make a transfer from the comfort of the status quo to the discomfort of the new situation. Employees have the skills to do an old job without some special attention to accomplishing the task. Each new task requires forgetting the old methods of doing the job and learning new things that lead to waste of energy, and causes dissatisfaction; •

Job’s security. Organizational change can eliminate some work places, can produce technological excess, layoffs and so on. Job’s security simply is one of the causes of resistance to change.

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Reallocation of resources. With organizational changes, some groups, departments or sectors of the organization can receive more resources while others will lose. So, this will bring resistance from the individuals, groups or departments who will lose some of their currently available resources.

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Already gained interests of some organized groups in the company. Organizational change can make new groups more significant for the success of the organization. That’s a big threat for old coalitions that will cause resistance to change in those groups that will become more insignificant with the proposals;

• Implications on personal plans. Organizational change can stop other plans, projects or other personal or family activities. In such a way this become one of the causes of resistance to change for those persons who will be reached by this change; 77 | P a g e

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Too much dependence on others. In an organization there are employees who too much depend on other individuals. This dependence is based on current support that they receive from powerful individuals. If the change process brings the threat of that dependence, it will cause resistance to change of those persons that will be threatened by this change;

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Misunderstanding the process. Organizational individuals usually resist change when they do not understand the real purpose of the proposed changes. When employees don’t understand the process, they usually assume something bad. This will cause resistance to change;

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Mistrust to initiators of change. When employees don’t have trust to the initiators of the process, the process will not be accepted and this will cause resistance to change;

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Different evaluation and perception. Different evaluation and perception can affect the organizational changes if there are persons who consider the proposed changes as a bad idea. Because of that they are resistant to proposed changes.

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Fear of unknown. Organizational change, in many cases leads to uncertainty and some dose of fear. It is normal people to feel the fear of uncertainty. When employees feel uncertainty in a process of transformation, they think that changes are something dangerous. This uncertainty affects organizational members to resist the proposed change;

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Organizational members’ habits. Employees work in large part is based on habits, and work tasks are performed in a certain way based on those habits. Organizational changes require shifts of those habits and because of that dissatisfaction from these proposals.

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Previous Experience. All employees already have some experience with a previous organizational change process. So, they know that this process is not an easy process. That experience simply will tell them that most of the change processes in the past was a failure. So, this can cause resistance to change

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Threat to interpersonal relations.

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Employees are often friends with each other and they have a strong social and interpersonal relationship inside and outside organization. If an organizational change process can be seen as a threat to these powerful social networks in the organization, the affected employees will resist to that change. •

Weakness of the proposed changes Sometimes proposed change might have a weakness that can be recognized by the employees. So, those employees will resist the implementation of the process until these weaknesses will not be removed or solved

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Limited resources. A normal problem in every organization is to have limited resources. When resources are limited, and with the proposed organizational changes those resources are threatened, the resistance to change is more likely to occur;

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Bureaucratic inertia. Every organization has their own mechanisms as rules, policies, and procedures. Sometimes, when individuals want to change their behavior these mechanisms in many cases can resist to the proposed changes;

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Selective information processing. Individuals usually have selective information processing, or hear only something that they want to hear. They simply ignore information that is opposite of the current situation, and with this, they don’t want to accept important aspects of the proposed changes. Because of that, appear resistance to change;

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Uninformed employees. Often times employees are not provided with adequate information about organizational changes that must be implemented. And normally, this can cause resistance to change;

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Peer pressure. Often, we utilize some kind of informal punishment for colleagues who supports change which others don’t support. This situation can have a large impact on increasing the level of resistance to change;

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Skepticism about the need for change. If the problem is a not a personal thing of employees, they will not see the real need why they must change themselves. Those that can’t see the need for change, will have a low readiness level of the change process;

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Increasing workload. In the process of organizational change, except normal working activities, employees usually will must implement activities of a new change process. These increases of workloads, affects appearing of resistance to change;

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Short time to perform the change process. Because organizational systems are open systems and they are interactive with their environment, the need of change often comes from outside. In such a way the performing time is dictated from the outside of an organization. These situations lead to a short time for implementation of the organizational change process and cause resistance to change.

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