Introduction to Strategic Management and Business Policy:-
Strategic Management is the continuous planning, monitoring, analysis and assessment of all that is necessary for an organization to meet its goals and objectives.
Strategic Management is the art & science of formulating, implementing and evaluating , cross functional decisions that enable an organization to achieve it's objectives.
A Strategy can be defined as a step-by-step plan to achieve a goal.
Strategic management is an ongoing process of formulating strategies for the organization that bring profit to the organization and create harmony between organization and it's environment.
Importance of Strategic Management:- Strategic management has gained importance in recent years. During last century organization focused on long-term planning. Long-term planning supposed that external and internal environment will remain stable for long period of time and thus they made plans for long duration.
Today it is clear to the managers and entrepreneur's that environment can change at any point of time and their plans should follow a strategy that includes contingency planning too.
1. SM takes into account the future and anticipates for it.
2. A Strategy is made on rational and logical manner, thus its efficiency and its success are ensured.
3. Strategic Management reduces frustration because it has been planned in such a way that it follow a procedure.
4. It brings growth in the organization because it seeks opportunities.
5. Strategic Management also adds to the reputation of the organization because of consistency that results from organization's success.
6. Strategic management looks at the threats present in the external environment and thus companies can either work to get rid of them or else neutralizes the threats in such a way that they become an opportunity for their success.
7. Strategic management focuses on proactive approach which enables organization to grab every opportunity that is available in the market.
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Business Policy:- Business Policy is an implied overall guide setting up boundaries that supply the general limits and direction, in which managerial action will take place. - Prof. George Terry
A business policy is nothing more than a well developed statement of directions and goals. Goals involve definition of precisely what the business is or should be and the particular kind of company it should be. Direction guides the action of the firm to accomplish these goals. - Prof. peters and wotrube
Business policy deals with the decision regarding the future of an ongoing enterprise. These policy decisions are taken at the top level only after indepth and careful evaluation of the organizational strengths and weaknesses in relation to its environment.
A Business policy is one which focuses attention on the strategic allocation of scarce resources: human, financial, physical or intangible. Conceptually speaking, strategy in the direction of such resource allocation while planning is the timing of allocation. - Mr. David C. Rodgrs.
Business policy is a statement whether expressed or implied of those principles and the rules that are set up by executive leadership as guide and constant for the organization's thought and action.
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Features of Business Policy:- Features of Business Policy are as follows:-
1. Object Oriented:- A policy is formulated in the context of objectives as it seeks to contribute to the organizational objectives. Policy is a general statement of principles or principles for the attainment of objectives.
2. Hierarchy Studded:- Policy formulation is a function of all the managers at different levels of the organization. However, the policies are at each level. The corporate policies are determined by top management, divisional and departmental policies are determined by divisional & departmental heads and middle management and sectional or floor level policies by the supervisors representing bottom level management.
3. Delimiting of decision area:- A policy is a broad guide to thinking and action of organizational members. Policies delimit the area within which a decision is to be made and assure the decisions to be consistent and Contributory to the objectives pre-set.
4. Both Restrictive and Permissive:- Business policies are both restrictive and permissive in nature. They are restrictive in that they contain restraints for ensuring consistent action and behavior on the part of executives.
Policies are permissive in that the subordinates are given certain freedom to operate within specified constraints.
5. Longer lasting:- Policies have generally longer life. They are established only after a careful evaluation of various internal and external forces having an impact on the firm’s standing and performance.
6. Key Stone in the Arch:- Business policy is the key stone in the arch of management and the life blood for the successful working of an organization. Hence, the organization utilizes resources – Human, Financial, Physical by adhering to actions for conservation.
7. All Pervasive:- Business policies are found in all functional areas and at various levels within these areas.
A 8. Standard for measurement:- Business policy provides the general
guidelines that describe and prescribe the standard behavior thereby
controlling and performance in every field of human element in business.
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Importance of business policy:-
1. Quick and sound decision:- Business policies provided
definite Framework within which the dishes can be made by the subordinates at
lower level.
2. They help in administration:- Business Policy uses of
different areas of operations are properly guarded so as to reduce a repetitive
actions leading thereby to have perfect coordination.
3. Policies provide stability:- In Policy development two things are important as perpetual continuity
and promote stability in the organisation, which results in two dimension
frustration among members of the organisation.
4. Optimum utilisation of scarce resources:- Policies with
reasonableness help maximum use of squares resources available to stop this for
that helps them to have and efficient level of operations as per policies.
5. Solving business Problems:- Policies are generally
framed for solving battery problems common questions of critical situation that
require a very often as they provides uniform and consistent guidance.
6. Ease of control:- Canada visa for evaluating
performance. the actual result can be compared with those of plant norms
deviation can be measured the prison for diffusion can be traced and if need be
necessary action can be taken. policies help in preventing unwanted deviations
from planned course of action.
7. Image building:- Corporate policies are
capable of building the corporate image. Song corporate policies create a
presence for the company in the minds of public.
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Mechanism of Policy Making:-
1. Identification of the situation:- It is the complex process, calling for the help of experts. The policies movie so designs as to reflect the good practices in society. the first step in the mechanism of formulating a policy is identification of the situation.
2.
Development of policy:- In the second stage of the draught should be given wide publicity among all the
all who may be expected to operate it because their constructive criticism and
suggestions would be very valuable
3.
Dissemination of the policy:- After the policy has been formulated i.e., set forth
systematically, in a precise simple statements in accordance with some
principle and rules of actions it must be disseminated to those who are
responsible for its application.
4.
Explanation of the policy:-
In the next stage, and the exact meaning of the policy must also be explained
(education) i.e., the person concerned should be explained in clear
terms, all aspects of the policy thoroughly.
5.
Acceptance of the policy:- We can be accepted the company personnel must understand the principle
underlying it and its rules of action. Is operative, question generally arises
as to its specific points.
Types of Policies:-
(a) Policies based on
Expression:-
Ø Oral Policy: When a company manager
issues policies by word of mouth, they are called as oral policies. This
type of policy is easy, simple and quick to exercise under any condition.
Ø
Stated or written policy:- The stated policies are put in black and white
with clear and simple words so as to enable the users to understand them for
necessary application when the time arises.
Ø Implies
Policies:- When the top officials demonstrate their ideas cryptically then it
is implied policy.
(b) Policies based on functions:-
Ø Personnel
policies:- This policy includes-
(1) Compensate employees at higher than prevailing rates
in the industry.
(2) Provide training and development opportunities
for all employees.
(3) Promote, wherever possible, from within the
firm.
(4) Deal all the financial costs of employee health
and welfare programme.
Ø
Marketing:-
(1) Distribute products on a national and
international level.
(2) Advertise only in media directed to the medical
profession.
(3) Sell a product line of various types and sizes.
Ø
Finance:-
(1) Secure capital whenever required by borrowing
from long-term creditors.
(2) Pay regular and stable dividends on both common
and preferred stock.
(3) Issue of Capital.
Ø
Production Policies:-
(1) Manufacturer products at safety tolerance
exceeding industry and governmental standards.
(2) Maintain rigid quality control tests at all
stages of production.
(3) Manufacture products only in the domestic
states.
Ø
Policies
based on Nature of origin:-
(1) Originated
Policy:- Originated policies are
those laid down by the top management to guide lower level executive.
(2) Appealed
Policy:- When the management
appeals to the workers to desist from some direct action, it is appealed
policy.
(3) Imposed
Policy:- Imposed policies or external
policies are those trust upon the enterprise by outside forces, such as government
trade unions, competitors trade association etc. Such policies tend to restrict
the freedom of management.
UNIT - II
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Responsibilities & Tasks of Top Management:-
“A manager is not a person who can do the work better than his team, he is a person who can get his team to do the work better than he can.” A good manager can truly define the success of his employees and the company as a whole.
- Envisioning Goals:- The first and most important task of any manager is providing a direction to the organization. This entails mapping out their visions and missions.
This is one task the manager must not delegate, but perform himself. Defining the company’s objectives helps unify the employees and gets them working towards a common goal.
- Managing Growth:- One of the main roles and responsibilities of the manager is to manage the growth and ensure the survival of the firm. There are both internal and external factors that are a threat to this growth and survival of the firm.
Internal factors (such as choosing the right technology, hiring the correct people etc) are mostly in the firm’s control. External factors (government policy, economic conditions) pose a concern the manager must deal with.
- Improving and Maintaining Efficiency:- The manager has many roles and responsibilities regarding the efficiency of the firm. Firstly he must ensure that the firm is efficient, i.e. resources are not being wasted. And then this efficiency has to be effectively maintained.
- Innovation:- It is the task of the manager to be innovative in his job. He must find new and creative solutions to the problems faced by the firm. Innovation not only means having new ideas but also cultivating and implementing them. This is one of the on-going jobs of a professional manager.
- Looking out for the competition:- A manager has to plan and prepare for the competition in the market. He must never be caught unaware, he must prepare for new and/or increased competition.
- Leadership:- The quality of the leadership usually dictates the future of a firm. Hence the manager must also be a good leader. He should be able to inspire and motivate people to work towards the goals of the company.
A leader leads from the front, and the manager must also possess exceptional qualities and work ethic that his team members can learn from.
- Change Management:- In any company or organization, change is a given. The manager has to be the agent of change in such cases. It is his roles and responsibilities to ensure the process of change is smooth and uneventful for the company.
- Choosing correct Information Technology:- This is a problem that all managers of today’s era are facing. There are so many choices available in the market for various IT processes.
It is a challenge to use the best and most suitable technology for your organization. So this entails choosing the correct software, communication system, network system etc.
Tasks of top level management:
The main tasks of top level management are as follows:
(a) Determine objectives for the organisation: Objectives may relate to profit, business growth, survival, prestige, competitive pricing, marketing method, widening the area of sales, relations with workers, customers, public etc.
(b) Frame the policy: To frame the policy and chalk out the plans to carry out the objectives and policies. Policies may relate to different aspects of the organisation. For example, production policy deals with the quality, product variety, scheduling of production to meet the market demand etc.
1) Market policy: this policy deals with such matters as advertising and sales promotion techniques, pricing product, channel of distribution, commission, discount, placements, training, remuneration promotion, appraisal of performance etc. of the personnel.
2) Financial policy: This relates to the procurement of funds, source of finance, management of earning, etc.
(c) Organisational Frame Work: Top management determines the organisational structure for the purpose of executing the plans that have been laid down. Execution of plans is necessary to carry out the objectives and policies.
(d) Assemble the Resources: For the purpose of executing the plans, the resources of men, machines, materials and money have to be assembled. This again is the task of top management.
(e) Control the operations through organisation: Controls the top management regarding operations through budgets, cost and statistics quality control and accounting devices.
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Objective
of Strategic Business:
For a company to survive, it needs to operate intentionally and strategically.
Strategic business objectives are concrete goals that can be measured and
quantified, which is vital because a non-measurable goals serves no practical
Purpose for a company. Company management & leadership are often tasked
with setting these business objectives and establishing the direction of the
company is aiming to go in. The following are the six examples of strategic
goals and objectives.
1. Improved
Operational Efficiency:-
Efficiency in operation is one the vital measures of a company’s strength. In order to achieve higher profits, companies
continuously aim to improve the efficiency and productivity their operations.
2. New
means of making money:-For
a company to sustain competitiveness, it needs to introduce new products,
services and business models every so often. Business models are the processes
in which businesses make money from their product and services, and remaining
stagnant is a sure-fire way for a company to become irrelevant.
3. Customer
and supplier relationship:-
When a company truly knows its customers well, that allows them to serve those customers better. They know
what their customers want, when they want it and how they want it. In return, customers tend to become loyal and
increase spending over time, which, of course, increase a company’s revenue and
profits.
4. Improving
the decision making:- Before
the prevalence of easily accessed and readily available data, most company
leadership had to make decisions based on best guesses and forecasts by analysts. Now, with the availability of
real-time data, company management is much more equipped to set company’s strategic objectives based on accurate, real
time information. Data driven decision-making
is much more effective for improving business functions.
5. Keeping
a competitive advantage:- Whether it is a company’s ability to
perform a service more efficiently, charge less for a product or provide better
customer service, they must maintain a competitive advantage to remain viable in the marketplace.
6. Survival of the fittest:- The
business landscape is steadily changing, and with an increase in innovation and
available information, it is showing no
signs of slowing down or becoming
stagnant. To survive, companies must adjust with the times.
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Classification
of Business Objectives:
1. Economic Objectives:
a)
Yielding an adequate return on
investment in the form of profits.
b)
Creating customers and
capturing more markets for the products of the business.
c)
Introducing innovative ideas in
technology, methods and procedure of work, in products or services etc.
d)
Ensuring adequate income or
returns to the factors of production and its prompt payment.
e)
Generating new employment
opportunities through growth and expansion.
f)
Providing ample scope for
growth, expansion, diversification etc.
a)
Treating employees as human
beings and partners in the business.
b)
Developing and improving new
skills and abilities among the employees.
c)
Creating, developing and
preserving a sense of commitment among the employees by their participation in
management (in decision making process).
d)
Ensuring job satisfaction by
making it more interesting and challenging.
e)
Ensuring adequate, satisfactory
wages, salaries and other non-economic amenities and benefits.
f)
Ensuring consumers satisfaction
in terms of fair treatment like courtesy, understanding, honesty, no
adulteration and no black marketing etc. Not resorting to malpractices.
g)
Maintaining satisfied work
force with high morals.
h)
Motivating the employees
continuously for higher efficiency.
a)
Adopting the policy of
ploughing back of profit for strengthening the business and self-reliance in
capital raising.
b)
Implementing the schemes of
growth and expansion so that the business can prosper day-by-day.
c)
Carrying the activities of
research and development for innovation in business. Innovative ideas must be
implemented.
d)
Attaining the ample size
(Optimum size) of business operations for its prosperity.
e)
Enhancing the goodwill,
reputation and image of the business organisation.
4. Micro Level Objects:
a)
Providing facilities for the
spread of literacy, education, training etc.
b)
Improving standard of living by
providing quality goods and services.
c)
Taking precaution to avoid
environment pollution.
d)
Providing economic or
non-economic help to religious, cultural, charitable, institutions for
betterment of community at large.
e)
Providing all types of help to
backward and remote regions by establishing industrial units in these areas.
f)
Helping in maintaining a
regional balance in industrial development.
a)
Performing the business
activities within the frame work of national priorities.
b)
Strengthening the national
economy by giving their adequate contribution.
c)
Entering into new areas of
production and distribution according to national priorities.
d)
Improving import substitution.
e)
Promoting export in variety of
products.
f)
vi. Achieving self-sufficiency
and self-reliance.
g)
vii. Encouraging small scale
business units and providing all facilities for their development.
h)
viii. Ensuring the community at
large for productive investment.
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Characteristics of Business
Objectives:-
a. It
must be understandable.
b. It
should be concrete and specific.
c. It
should be related to a time frame.
d. It
should be measurable and controllable.
e. Different
objectives must correlate with each other.
f. It
must be set within constraints.
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Hierarchy of Business Objectives:-
Business Objectives -
is a goal set by a business, usually in the medium to long term. They can be
set at any level of the business and can cover financial and non-financial
issues importat to the business's success
Corporate objectives -
Measurable, clearly defined targets for how to achieve business aims. Effective
objectives should be SMART (specific, measurable, achievable, realistic and
time specific)
Mission statement -
is a short term statement of the company's vision and values which helps to set
aims and objectives. This enables employees, managers and customers and
possible some suppliers to understand the conduct of the business. It is a
statement of purpose, such as 'grow our market share in the UK'. Nike's mission
statement is; "To bring inspiration and innovation to every world
athlete".
Aim -
is a generalised statement of what the business plans to achieve in the longer
term. A goal or purpose of the business for the future, to inspire a range of
stakeholders, including employees and customers.
Internal
and external influences on Corporate Objectives
Corporate objectives are influenced
by a variety of factors that are within the control of management (internal) as
well as factors that a business can do nothing about - except respond to them
if significant (external)
|
Internal
influences and External influences on Corporate Objectives |
|
|
Internal |
External |
|
Business ownership – Who are the business owners and what do they want
to achieve? |
Economic environment – Perspective on key economic indicators such as economic
growth, consumer spending and interest rates? |
|
Attitude and Profit – Is the business run to earn profit or is it a non-profit? |
Political/Legal environment
– Impact of uncertainty about
changes in the political and legal environment? |
|
Ethical stance – Do ethics play a role in the business decision making? |
Competitors – Do competitor actions and strategies shape what a business
thinks it can achieve? |
|
Strategic position and resources
– What options does the business
realistically have based on its existing market position and resources? |
Social and Technological change
– How rapid is the pace of social
and technological change in a business’ markets? Does this make
objective-setting and decision-making easier or harder? |
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UNIT - III
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Strategic
Planning:- Strategic
planning is the art of creating specific business strategies, implementing
them, and evaluating the results of executing the plan, in regard to a
company’s overall long-term goals or desires. It is a concept that focuses on
integrating various departments (such as accounting and finance, marketing,
and human resources) within a company to accomplish its strategic goals. The
term strategic planning is essentially synonymous with strategic management.
The concept of strategic
planning originally became popular in the 1950s and 1960s, and enjoyed favor in
the corporate world up until the 1980s, when it somewhat fell out of favor.
However, enthusiasm for strategic business planning was revived in the 1990s
and strategic planning remains relevant in modern business.
Strategic Planning
Process:- The strategic planning process
requires considerable thought and planning on the part of a company’s
upper-level management. Before settling on a plan of action and then
determining how to strategically implement it, executives may consider many
possible options. In the end, a company’s management will, hopefully, settle on
a strategy that is most likely to produce positive results (usually defined as
improving the company’s bottom line) and that can be executed in a
cost-efficient manner with a high likelihood of success, while avoiding undue
financial risk.
The
development and execution of strategic planning are typically viewed as
consisting of being performed in three critical steps:
1. Strategy Formulation:- In the process of formulating a strategy, a company will first assess its current situation by performing an internal and external audit. The purpose of this is to help identify the organization’s strengths and weaknesses, as well as opportunities and threats (SWOT Analysis). As a result of the analysis, managers decide on which plans or markets they should focus on or abandon, how to best allocate the company’s resources, and whether to take actions such as expanding operations through a joint venture or merger.
Business
strategies have long-term effects on organizational success. Only upper
management executives are usually authorized to assign the resources necessary
for their implementation.
2. Strategy Implementation:- After a strategy is formulated,
the company needs to establish specific targets or goals related to putting the
strategy into action, and allocate resources for the strategy’s execution. The
success of the implementation stage is often determined by how good a job upper
management does in regard to clearly communicating the chosen strategy
throughout the company and getting all of its employees to “buy into” the
desire to put the strategy into action.
Effective
strategy implementation involves developing a solid structure, or framework,
for implementing the strategy, maximizing the utilization of relevant
resources, and redirecting marketing efforts in line with the strategy’s goals
and objectives.
3. Strategy Evaluation:- Any savvy business person knows
that success today does not guarantee success tomorrow. As such, it is
important for managers to evaluate the performance of a chosen strategy after
the implementation phase.
Strategy
evaluation involves three crucial activities: reviewing the internal and
external factors affecting the implementation of the strategy, measuring
performance, and taking corrective steps to make the strategy more effective.
For example, after implementing a strategy to improve customer service, a
company may discover that it needs to adopt a new customer relationship
management (CRM) software program in order to attain the desired improvements
in customer relations.
All three
steps in strategic planning occur within three hierarchical levels: upper
management, middle management, and operational levels. Thus, it is imperative
to foster communication and interaction among employees and managers at all
levels, so as to help the firm to operate as a more functional and effective
team.
Importance of Strategic Planning:- The
volatility of the business environment causes many firms to adopt reactive
strategies rather than proactive ones. However, reactive strategies are
typically only viable for the short-term, even though they may require spending
a significant amount of resources and time to execute. Strategic planning helps
firms prepare proactively and address issues with a more long-term view. They
enable a company to initiate influence instead of just responding to
situations.
Among the
primary benefits derived from strategic planning are the following:
1. Helps formulate better strategies using a
logical, systematic approach:- This is often the most important benefit. Some studies show that the
strategic planning process itself makes a significant contribution to improving
a company’s overall performance, regardless of the success of a specific
strategy.
2. Enhanced communication between employers and
employees:- Communication is crucial to the
success of the strategic planning process. It is initiated through
participation and dialogue among the managers and employees, which shows their
commitment to achieving organizational goals.
Strategic
planning also helps managers and employees show commitment to the organization’s
goals. This is because they know what the company is doing and the reasons
behind it. Strategic planning makes organizational goals and objectives real,
and employees can more readily understand the relationship between their
performance, the company’s success, and compensation. As a result, both
employees and managers tend to become more innovative and creative, which
fosters further growth of the company.
3. Empowers individuals working in the organization:-
The increased dialogue and
communication across all stages of the process strengthens employees’ sense of
effectiveness and importance in the company’s overall success. For this reason,
it is important for companies to decentralize the strategic planning process by
involving lower-level managers and employees throughout the organization. A
good example is that of the Walt Disney Co., which dissolved its separate
strategic planning department, in favor of assigning the planning roles to
individual Disney business divisions.
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Corporate Strategy:- Corporate
strategy concerns itself
with the entirety of the organization, where decisions are made with
regard to the overall growth and direction of a company. Corporate
strategies are arguably the most essential and broad-ranging strategy level
within organizational strategy.
The Components of
Corporate Strategy are:
a)
Visioning
b)
Objective Setting (Organisational Design)
c) Allocation of Resources
d)
Strategic Trade-offs (Prioritization)
- Visioning involves setting the high-level direction of the
organization - namely the vision, mission, and
potentially corporate values.
- Objective
Setting involves developing
the visioning aspects created and turning them into a series of high-level
(sometimes still rather abstract) objectives for the company, typically
spanning 3-5 years in length.
- Allocation
of Resources refers to
decisions which concern the most efficient allocation of human and capital
resources in the context of stated goals and aims.
- Strategic Trade-Offs are at the core of corporate strategic planning. It's not
always possible to take advantage of all feasible opportunities. In addition,
business decisions almost always entail a degree of risk. Corporate-level
decisions need to take these factors into account in arriving at the optimal
strategic mix.
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Strategy Formulation:- Strategy Formulation is an analytical process of selection of the best
suitable course of action to meet the organizational objectives and vision.
It is one of the steps of the strategic
management process. The strategic plan allows
an organization to examine its resources, provides a financial plan and
establishes the most appropriate action plan for increasing profits.
It is examined through SWOT analysis.
SWOT is an acronym for strength, weakness, opportunity and threat. The
strategic plan should be informed to all the employees so that they know the
company’s objectives, mission and vision. It provides direction and focus to
the employees.
Steps of Strategy Formulation:- The steps of
strategy formulation include the following:
1.
Establishing Organizational Objectives:
This involves establishing long-term goals of an organization. Strategic
decisions can be taken once the organizational objectives are determined.
2.
Analysis of Organizational Environment:
This involves SWOT analysis, meaning identifying the company’s strengths and
weaknesses and keeping vigilance over competitors’ actions to understand
opportunities and threats.
Strengths and weaknesses are internal factors which the
company has control over. Opportunities and threats, on the other hand, are
external factors over which the company has no control. A successful
organization builds on its strengths, overcomes its weakness, identifies new
opportunities and protects against external threats.
3.
Forming quantitative goals:
Defining targets so as to meet the company’s short-term and long-term
objectives. Example, 30% increase in revenue this year of a company.
4.
Objectives in context with divisional
plans: This involves setting up targets for every department so that
they work in coherence with the organization as a whole.
5.
Performance Analysis:
This is done to estimate the degree of variation between the actual and the
standard performance of an organization.
6.
Selection of Strategy:
This is the final step of strategy formulation. It involves evaluation of the
alternatives and selection of the best strategy amongst them to be
the strategy of the organization.
formulation process is an integral part of strategic
management, as it helps in framing effective strategies for the organization,
to survive and grow in the dynamic business environment.
Levels of
strategy formulation:- There are three levels of
strategy formulation used in an organization:
·
Corporate level strategy:
This level outlines what you want to achieve: growth, stability, acquisition or
retrenchment. It focuses on what business you are going to enter the
market.
·
Business level strategy:
This level answers the question of how you are going to compete. It plays a
role in those organizations which have smaller units of business and each is considered
as the strategic business unit (SBU).
·
Functional level strategy:
This level concentrates on how an organization is going to grow. It defines
daily actions including allocation of resources to deliver corporate and
business level strategies.
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Strategic Evaluation:-
Strategic Evaluation is defined as the process of determining the effectiveness
of a given strategy in achieving the organizational objectives and taking
corrective action wherever required 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.
- There has to be a way of finding out whether the strategy being implemented will guide the organisation towards its intended objectives. Strategic evaluation and control, therefore, performs the crucial task of keeping the organisation on the right track.
- During the strategic management process, the strategists formulate the strategy to achieve a set of objectives and then implement the strategy. Nature of Strategic Evaluation.
- In the absence of such a mechanism, there would be no means for strategists to find out whether or not the strategy is producing the desired effect.
Importance of Strategic Evaluation:-
·
Strategic evaluation can help to assess whether
the decisions match the intended strategy requirements.
·
Strategic evaluation, through its process of
control, feedback, rewards and review, helps in a successful culmination of the
strategic management process.
·
The process of strategic evaluation provides a
considerable amount of information and experience to strategists that can be
useful in new strategic planning.
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Environmental analysis:- The environmental
analysis process consists of the following steps:-
- Identify Environmental Factor:- To conduct an environmental analysis, start by selecting environmental factors to evaluate. This depends on your type of industry. For instance, if you work for a healthcare facility, you may want to consider legal factors, such as health and safety regulations. When selecting factors, choose ones that have the potential to impact how you do business.
- Gather Information:- Once you decide which factors to evaluate, collect information related to your selected environmental factors. Here you may observe your factors and do some research. There are two main types of information to collect: verbal and written Information. Individual obtain verbal information through hearing, such as listening to a radio broadcast, whereas they obtain written information by reading sources, such as a newspaper or magazine. Using the above example, this would involve researching online and in medical magazines to see if there were any changes to health and safety regulations that may impact your health facility.
- Evaluate your competitors:- To determine if there are any threats from your competitors, you may want to collect information about them. You can do this using a technique called spying, where you collect information in a nontraditional way. Using the same scenario, you may spy on a nearby health facility to learn about their recent activities, such as a new branch opening.
- Forecast the impact:- Forecasting allows you to predict how certain environmental factors may impact your business. This allows you to anticipate potential threats or opportunities. When forecasting, there are a variety of methods to use, such as brainstorming and surveying. Continuing with the same example, the health facility may forecast that the new branch opening at their competitor's facility may take away some of their Patients.
- Assess your Strategies:- Finally, assess your current and potential strategies to determine how the projected environmental changes may affect your organization. This helps you resolve potential challenges that may have resulted from the factors. For instance, the health facility may want to create a new strategy for how they plan to address the decrease in clients due to their competitor's new branch.
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Resource Analysis:- Businesses use strategic planning as a necessary tool for all
decisions made. Deciding to launch a new product or to expand an internal team
should be based on research. And that investigation comes from analysis. Resource
analysis is another way firms understand an organization’s
competencies and the value of resources.
Considering resources are necessary
for business growth and success, it’s important to see if the current set of
supplies will help or
hurt the business.
Principles of
Resources:- What
is necessary to gain a competitive advantage, which strategies are in place,
and whether the organization is competent needs to be highlighted to
stakeholders. Because you could have the most sought after resource, but if you
don’t know how to use the benefits to better the company?
It’s useless.
Resources tend to fall into four
principles:
·
Financial: Funds, investment, and investors.
·
Human:
Demographics and skill levels.
· Physical: Anything that can be touched such as buildings, office
space, technology. Age can warrant whether it’s useful, depending on the
businesses ideals.
·
Intellectual: Reputation, brand identity, client databases and
engagement.
Unit V
Understanding Synergy:- Synergy
definition suggests two or more individuals or organizations collaborating to
achieve a common goal. The combined entities may benefit from shared research
and decision-making. Merger and acquisition (M&A) in the organizational setup are some of the most
prominent examples of how it works. Factors impacting synergy measurement
include the size of the group, the probability of the desired outcome, and
time. While in mathematics 1+1=2, the concept advocates that 1+1 > 2.
For
example, when two people combine their knowledge and insights to solve a
problem, they offer different solutions. It is because there is someone on the
opposite side to compliment or criticize the ideas, and hence the solution that
emerges has no flaws. On the other hand, when working alone on an issue, the
solution obtained may not be optimum.
Synergy In Business:- Businesses
emphasize teamwork since collective efforts yield better results than
individual efforts. Also, it has numerous advantages for enterprises, such as
increased profits, reduced costs, competitive
advantage, customer satisfaction, market share, etc.
Furthermore, it assists in developing economies
of scale.
The concept also exists in the
feedback system, where businesses ask customers to share their experiences
about a particular product or service. Customer reviews help companies learn
what they are missing, allowing them to improve and perform even better.
Types of Synergy:- Based on its application in business, synergy
definition can be of three types, including cost or operational, revenue, and
financial:
a)
Cost Synergy:- When two companies merge, the new entity can lower operational costs
and eliminate unnecessary expenses. For example, if firms A
and B unite, they can utilize each other’s resources without owning them
separately. As a result, they will both benefit financially from the
collaboration.
b)
Revenue Synergy:- The merger or acquisition of firms may result in increased sales revenue compared to their
separate operations. For example, suppose that firm X, worth $1 million, merges
with company Y, valued at $500,000, and they cross-sell each
other’s products. As a result of this deal, the turnover is likely to be $1.5
million. But the strategy makes the combined revenue exceed the individual
sales of both companies, totaling more than $1.5 million.
c)
Financial Synergy:- It occurs where small businesses take up loans to start and grow.
However, they need to repay more than they borrow, which may affect their
financial situation. By applying the idea, they may unite with a mid-sized firm
and operate as part of it rather than borrowing a large sum from lenders. In
brief, the strategy provides more value to merged companies in terms of debt,
tax, revenue, capital cost, and cash flow than their
performances.
Synergy as a component of Strategy and its Relevance:- In Business, people may either to work together as a team or work separately to attain goals. Synergy occurs when a company to utilize teams to increase performance, drive strategic growth and reach common goals. Companies may use a synergistic approach to enhance communications, promote knowledge sharing, streamline processes and bridge the generation gap.
a) Enhance Communications:- Synergy extends communication across departments, and teamwork is encouraged to reach strategic goals. For example, the sales department and IT department work together and share skills set to create a new customer service portal and increase market share. A company that promotes synergy could use technology, such as tablet computers and video conferencing, to provide mobility, ease of access and real time discussions. This may help employees improve communication skills and deliver exemplary customer service.
b) Promote knowledge sharing:- Knowledge sharing permits feedback from co-workers and collaboration between internal and external stakeholders. May involve the use of customer relationship management product suggest Sales force and social networking sites such as Facebook Twitter and LinkedIn change of ideas and to solidify relationships. When individuals work together in a synergistic fashion Expectations, rules and best practices are Apparent. The environment learning and growth and Spurs innovation which is advantages to a company's competitive is finding and intrinsic value.
c) Streamline processes:- Collaboration and knowledge sharing occurs the organisations can lead to business processes improvement by eliminating redundancy reducing cycle time and increasing efficiency. If for example, a marketing department and sales department enter customer account information on separate computer systems former streamlining the process will prevent replication of aphids and free up resources. This poses of opportunities for process automation and A reduction of labour cost which can positively affect a company's bottom line.
d) Efficient performance:- Eliminating the structural redundancy also can increase energy by LT find ways to streamline operations, allowing each department to focus on being maximally efficient within its own role. For instance, forcing several departments to deal with customers in addition to their production responsibilities is less efficient than creating a single dedicated department for handling customer service. With the creation of the new customer service departments, the Other departments can hand off difficult clients issues to the experts.
e) Alliances:- You can also create synergistic alliances with other businesses that have resources for strategic that sync well with yours. A chocolate maker for example might supply its products at a discounted rate to a local Bakery which in turn will promote the chocolate supplied to its patron's. Both business benefits from the synergistic connection in ways that neither could alone.
Organizational
capabilities:- Organization
capabilities (OC) are the intangible, strategic assets that an organization
draws from to get work done, execute its business strategy, and satisfy its
customers.
These capabilities cannot
originate from a single effort or by following an external template. Instead,
they are acquired and refined internally from multiple interactions to be
organization-specific. They can include expertise, activities,
information, knowledge, procedures, processes, skills, systems, technologies,
or unique adaptive features.
The strength and alignment of such assets
define a company’s identity and differentiate it from competitors. Each
organization develops and integrates these attributes into its culture over
time, so they are challenging for others to pinpoint and replicate. For
instance, Coca-Cola could sell its soft drink formula to another company, but
that company would not be able to emulate the same emotional connection
customers have with Coke.
Building organizational capabilities is an
indispensable part of the organizational development process.
We will go into these in more
depth below, but some organizational capabilities examples are:
·
Organizational culture
·
Leadership performance
·
Strategic unity
·
Innovation
·
Agility
·
Talent
·
Customer connectivity
Importance of organizational capabilities:- The most successful and admired
companies have distinct combinations of attributes that make them stand out
from the competition. People respect organizations like Starbucks, Apple, and
Disney because of their capabilities, not their structures. It’s their knack
for innovation and their willingness to adapt to consumers’ changing needs that
make them trustworthy and relevant.
Boston Consulting Group (BCG) conducted a
detailed survey and interview of senior executives from international
corporations in various industries to determine why their companies are
thriving. The results pointed to a clear correlation between organizational
capabilities and success.
The right mix of organizational capabilities
helps businesses operate effectively and deliver excellent service and
satisfaction to customers. Organizational capabilities are a driving force in:
·
Gaining competitive advantage –
The ability to manage resources and information effectively helps focus an
organization on meeting customer demands with its distinctive products and
services. This leads to surpassing competitors and gaining prominence in the
marketplace.
·
Adapting to change – An organization
that makes effort to align with employees, customers, and emerging trends and
markets can better foresee and plan for the new directions it must take.
·
Driving business performance –
Investing in the development of organizational capabilities hones a company’s
strengths and identity. Harnessing this intangible value promotes stability and
makes the most of what everyone has to offer. This delivers optimal
performance.
