UNIT- I

1.1 Introduction
1.2 Strategic Management
1.3 Business Policy
1.4 Corporate Strategy
1.5 Basic Concept of Strategic Management
1.6 Mission, Vision, Objectives
1.7 Impact of Globalization
1.8 Basic Model of Strategic Management
1.9 Strategy Decision Making
1.10 Impact of Internet & E- Commerce
1.11 Role of Strategic Management in Marketing, Finance, HR and Global
Competitiveness
















1.1 Introduction

The word strategy has entered in the field of management from military where it refers to apply
the forces against an enemy to win a war. Originally, the word strategy has been derived from
Greek strategos which means generalship. The word was used first time around 400 BC. The
word strategy means the art of the general to fight in war.

The dictionary meaning of strategy is, the art of so moving or disposing the instrument of
warfare as to impose upon enemy, the place time and conditions for fighting by one self. In
management, the concept of strategy is taken in broader terms.

According Glueck, Strategy is the unified, comprehensive and integrated plan that relates the
strategic advantage of the firm to the challenges of the environment and is designed to ensure
that basic objectives of the enterprise are achieved through proper implementation process.

Another definition of strategy is given below which also relates strategy to its
environment. Strategy is organizations pattern of response to its environment over a period of
time to achieve its goals and mission.










1.2 Strategic management

Strategic management is not a box of tricks or a bundle of techniques. It is analytical thinking
and commitment of resources to action. -Peter Drucker

The on-going process of formulating, implementing and controlling broad plans guide the
organizational in achieving the strategic goods given its internal and external environment.

Alfred D Chandler (1962), Chandler defined strategy as: The determination of the basic long-
term goals and objectives of an enterprise and the adoption of the courses of action and the
allocation of resources necessary for carrying out these goals.


Features of Strategic Management -

1. On-going process:
Strategic management is an on-going process which is in existence throughout the life of
organization.

2. Shaping broad plans:
First, it is an on-going process in which broad plans are firstly formulated than implementing and
finally controlled.

3. Strategic goals:
Strategic goals are those which are set by top management. The broad plans are made in
achieving the goals.






Importance of Strategic Management

Strategic management provides the framework for all the major business decisions of an
enterprise such as decisions on businesses, products and markets, manufacturing facilities,
investments and organizational structure.

In a successful corporation, strategic planning works as the pathfinder to various business
opportunities; simultaneously, it also serves as a corporate defence mechanism, helping the firm
avoid costly mistakes in product market choices or investments. Strategic management has the
ultimate burden of providing a business organization with certain core competencies and
competitive advantages in its fight for survival and growth.

It seeks to prepare the corporation to face the future and even shape the future in its favour. Its
ultimate burden is influencing the environmental forces in its favour, working into the environs
and shaping it, instead of getting carried away by its turbulence or uncertainties.












1.3 Business Policy

Without Business Policy and Strategy, an organization is like a ship without rudder, going
around in circles. Its like a tramp; who has no place to go Joel Ross and Michael Kami.

Definition of Business Policy:
Business Policy as defined by Christensen and others is the study of the functions and
responsibilities of senior Management, the external problems that affect success in the total
enterprise and the decisions that determine the direction of the organization and shape its future.
The problems of policy in business, like those of policy in public affairs, have to do with the
choice of purposes for the molding of organizational identity and character, the continuous
definition of what needs to be done, and the mobilization of resources for the attainment of goals
in the face of competition or adverse circumstances.
Scope:
The above comprehensive definition covers many aspects of business policy.
1. It is considered; as the study of functions and the responsibilities of the senior management
related to those organizational problems, which affect the success of the total enterprise.
2. It deals with the determination of the future courses of the action that the organization has to
adopt.
3. It involves a choice of purposes and defining what needs to be done in order to mould the
character and identity of the organization.
4. It is concerned with the mobilization or resources by the help of which the organization can
achieve its goals.




Importance of a Business Policy:
A. From the view point of course itself:
1. Business policy seeks to integrate knowledge and experience gained in various functional
areas of management It enables the learner to understand-and make sense of the complex
interaction that takes place between different functional areas.
2. Business policy deals with the constraints and complexities of the real life business.
3. Business policy offers a very broad perspective to its learners.
4. Business policy makes the study and practice of management more meaningful a done can
view business decision making in its proper perspective.
B. For the understanding of Business Environment:
1. Regardless of the level of management Business Policy creates an understanding of how
policies are formulated. This helps in creating an appreciation of complexities of the
environment that the senior management faces in the policy formulation.
2. By gaining an understanding of the business environment managers become
more receptive to the ideas and suggestions of the senior management Such an attitude on the
part of the managers makes the task of policy implementation simpler.
3. By being able to relate the environmental changes to policy changes within the organization,
mangers feel themselves to be a part of a greater design. This helps in reducing their feelings
of isolation.
C For understanding the organization:
1. Business policy presents a basic frame work for understanding strategic decision making
while a person is at the middle level of the management.
2. Business policy brings to the organization and to its managers the benefit of years of
distilled experience in strategic decision making.
3. An understanding of Business policy may lead to an improvement in job performance.
D. For personal Development:
1. It is beneficial for an executive to understand the impact of policy shifts on the status of
ones department and on the position be occupies.
2. Business policy enables the executives to avail an opportunity or avoid a risk with regard to
career planning and development
3. Business policy offers a unique perspective to executives to understand the senior
management viewpoint
4. An interesting by-product of business policy course is the theoretical framework, provided in
the form of strategic management model. This model provides powerful insights in dealing
with policy-making at the macro level as well as at an individual level through self-analysis.
Purpose of Business policy:
The purpose of business policy is three fold:
1. To integrate the knowledge gained in various functional areas of management
2. To adopt a generalist approach to problem-solving and
3. To understand the complex inter-linkages operating within an organization through the use of
systems approach to decision making and relating them to changes taking place in the
external environment
Objectives of Business Policy:
A. In terms of knowledge:
1. The learner has to understand the various concepts like strategy, polices, plans and
programmes etc.
2. Knowledge about the environment (external & internal) and how it affects the functioning of
an organization is vital in understanding business policy. Through the tools of analysis and
diagnosis a learner can understand the environment in which the firm operates.
3. Information about the environment helps in the determination of the mission, objective and
strategies of a firm.
4. Through the knowledge gained in business policy, the learner is able to visualize how the
implementation of strategies can take place.
5. To survey the literature and learn about the searches taking place in the field of Business
Policy is also an important knowledge objective.
B. In terms of skills:
1. The attainment of knowledge should lead to the development of skills so as to apply what is
learnt.
2. The study of business policy should enable a student to develop analytical ability and use it
to understand the situation in a given case or incident
3. Business policy study should lead to the sills of identifying factors relevant in decision-
making. The analysis of strengths and weakness of an organization the threats and
opportunities present in the environment and the suggestion of appropriate strategies and
policies from the core content of general management decision making.
4. Increases the mental ability of learners and enables learners to link theory with practice.
5. Case analysis as a part of business policy study, leads to the development of oral as well as
written communication skills.
C. In terms of attitude:
1. Development of generalist attitudes enables the learner to approach and assess a situation
from all possible angles.
2. Dealing in a comprehensive manner, a generalist is able to function under conditions of
partial ignorance by using his judgement and infusion.
3. To possess a liberal attitude and be receptive to new ideas, information and suggestions is
important for a general manager to act like a professional manager.
4. An important attitude is to go beyond and think when faced with a problematic situation
developing a creative and innovative attitude is the hall mark of a general manager.














1.4 Corporate Strategy To understand Corporate Strategy before this we have
to understand the concept of Strategy
1.1. Concept of Strategy

Strategy is the determination of the long-term goals and objectives of an enterprise and the
adoption of the courses of action and the allocation of resources necessary for carrying out these
goals. Strategy is managements game plan for strengthening the organizations position,
pleasing customers, and achieving performance targets.

Types of strategy
Strategy can be formulated on three different levels:
Corporate Level
Business Unit Level
Functional or Departmental Level.











CORPORATE STRATEGY


BUSINESS STRATEGY


FUNCTIONAL STRATEGY

Corporate Level Strategy
Corporate level strategy fundamentally is concerned with the selection of businesses in which the
company should compete and with the development and coordination of that portfolio of
businesses.
Corporate level strategy is concerned with:
Reach - defining the issues that are corporate responsibilities; these might include
identifying the overall goals of the corporation, the types of businesses in which the
corporation should be involved, and the way in which businesses will be integrated and
managed.
Competitive Contact - defining where in the corporation competition is to be localized.
Take the case of insurance: In the mid-1990's, Aetna as a corporation was clearly
identified with its commercial and property casualty insurance products. The
conglomerate Textron was not. For Textron, competition in the insurance markets took
place specifically at the business unit level, through its subsidiary, Paul Revere. (Textron
divested itself of The Paul Revere Corporation in 1997.)
Managing Activities and Business Interrelationships - Corporate strategy seeks to
develop synergies by sharing and coordinating staff and other resources across business
units, investing financial resources across business units, and using business units to
complement other corporate business activities. Igor Ansoff introduced the concept of
synergy to corporate strategy.
Management Practices - Corporations decide how business units are to be governed:
through direct corporate intervention (centralization) or through more or less autonomous
government (decentralization) that relies on persuasion and rewards.
Corporations are responsible for creating value through their businesses. They do so by
managing their portfolio of businesses, ensuring that the businesses are successful over the long-
term, developing business units, and sometimes ensuring that each business is compatible with
others in the portfolio.




Business Unit Level Strategy
A strategic business unit may be a division, product line, or other profit center that can be
planned independently from the other business units of the firm.
At the business unit level, the strategic issues are less about the coordination of operating units
and more about developing and sustaining a competitive advantage for the goods and services
that are produced. At the business level, the strategy formulation phase deals with:
positioning the business against rivals
anticipating changes in demand and technologies and adjusting the strategy to
accommodate them
Influencing the nature of competition through strategic actions such as vertical
integration and through political actions such as lobbying.
Michael Porter identified three generic strategies (cost leadership, differentiation, and focus) that
can be implemented at the business unit level to create a competitive advantage and defend
against the adverse effects of the five forces.

Functional Level Strategy
The functional level of the organization is the level of the operating divisions and departments.
The strategic issues at the functional level are related to business processes and the value chain.
Functional level strategies in marketing, finance, operations, human resources, and R&D involve
the development and coordination of resources through which business unit level strategies can
be executed efficiently and effectively.
Functional units of an organization are involved in higher level strategies by providing input into
the business unit level and corporate level strategy, such as providing information on resources
and capabilities on which the higher level strategies can be based. Once the higher-level strategy
is developed, the functional units translate it into discrete action-plans that each department or
division must accomplish for the strategy to succeed.






1 STRATEGIC DECISIONS AT DIFFERENT LEVELS


Dimensions Levels
CORPORATE BUSINESS FUNCTIONAL
Type Of Decision Conceptual Mixed Operational
Impact Significant Major Insignificant
Risk Involved High Medium Low
Profit Potential High Medium Low
Time Horizon Long Medium Low
Flexibility High Medium Low
Adaptability Insignificant Medium Significant
















1.5 Basic Concept of Strategic Management

Strategic management is defined as the art and science of formulating, implementing, and
evaluating cross-functional decisions that enable the organization to achieve its objectives."
Generally, strategic management is not only related to a single specialization but covers cross-
functional or overall organization.
Strategic management is a comprehensive area that covers almost all the functional areas
of the organization. It is an umbrella concept of management that comprises all such
functional areas as marketing, finance & account, human resource, and production &
operation into a top level management discipline. Therefore, strategic management has an
importance in the organizational success and failure than any specific functional areas.
Strategic management deals with organizational level and top level issues whereas
functional or operational level management deals with the specific areas of the business.
Top-level managers such as Chairman, Managing Director, and corporate level planners
involve more in strategic management process.
Strategic management relates to setting vision, mission, objectives, and strategies that can
be the guideline to design functional strategies in other functional areas
Therefore, it is top-level management that paves the way for other functional or
operational management in an organization

Definition:

The determination of the basic long-term goals & objectives of an enterprise and the adoption
of the course of action and the allocation of resources necessary for carrying out these goals.-
Chandler







1.6 Vision, Mission and Purpose
1. Vision Statement
Vision statement provides direction and inspiration for organizational goal setting.

Vision is where you see your self at the end of the horizon OR milestone therein. It is a single
statement dream OR aspiration. Typically a vision has the flavors of 'Being Most admired',
'Among the top league', 'Being known for innovation', 'being largest and greatest' and so on.

Typically 'most profitable', 'Cheapest' etc. dont figure in vision statement. Unlike goals, vision is
not SMART. It does not have mathematics OR timelines attached to it.

Vision is a symbol, and a cause to which we want to bond the stakeholders, (mostly employees
and sometime share-holders). As they say, the people work best, when they are working for a
cause, than for a goal. Vision provides them that cause.

Vision is long-term statement and typically generic & grand. Therefore a vision statement
does not change unless the company is getting into a totally different kind of business.

Vision should never carry the 'how' part. For example ' To be the most admired brand in
Aviation Industry' is a fine vision statement, which can be spoiled by extending it to' To be the
most admired brand in the Aviation Industry by providing world-class in-flight services'. The
reason for not including 'how' that how is may keep on changing with time.


Challenges related to Vision Statement:

Putting-up a vision is not a challenge. The problem is to make employees engaged with it. Many
a time, terms like vision, mission and strategy become more a subject of scorn than being looked
up-to. This is primarily because leaders may not be able to make a connect between the
vision/mission and peoples every day work. Too often, employees see a gap between the vision,
mission and their goals & priorities. Even if there is a valid/tactical reason for this mis-match, it
is not explained.

Horizon of Vision:
Vision should be the horizon of 5-10 years. If it is less than that, it becomes tactical. If it is of a
horizon of 20+ years (say), it becomes difficult for the strategy to relate to the vision.

Features of a good vision statement:
Easy to read and understand.
Compact and Crisp to leave something to peoples imagination.
Gives the destination and not the road-map.
Is meaningful and not too open ended and far-fetched.
Excite people and make them get goose-bumps.
Provides a motivating force, even in hard times.
Is perceived as achievable and at the same time is challenging and compelling, stretching
us beyond what is comfortable.

Vision is a dream/aspiration, fine-tuned to reality:
The Entire process starting from Vision down to the business objectives, is highly iterative. The
question is from where should we start. We strongly recommend that vision and mission
statement should be made first without being colored by constraints, capabilities and
environment. This can said akin to the vision of armed forces, thats 'Safe and Secure country
from external threats'. This vision is a non-negotiable and it drives the organization to find ways
and means to achieve their vision, by overcoming constraints on capabilities and resources.
Vision should be a stake in the ground, a position, a dream, which should be prudent, but should
be non-negotiable barring few rare circumstances.

1.2 Mission Statement
Mission of an organization is the purpose for which the organization is. Mission is again a single
statement, and carries the statement in verb. Mission in one way is the road to achieve the vision.
For example, for a luxury products company, the vision could be 'To be among most admired
luxury brands in the world' and mission could be 'To add style to the lives'

A good mission statement will be :
Clear and Crisp: While there are different views, We strongly recommend that mission
should only provide what, and not 'how and when'. We would prefer the mission of
'Making People meet their career' to 'Making people meet their career through effective
career counseling and education'. A mission statement without 'how & when' element
leaves a creative space with the organization to enable them take-up wider strategic
choices.
Have to have a very visible linkage to the business goals and strategy: For example you
cannot have a mission (for a home furnishing company) of 'Bringing Style to Peoples
lives' while your strategy asks for mass product and selling. Its better that either you start
selling high-end products to high value customers, OR change your mission statement to
'Help people build homes'.
Should not be same as the mission of a competing organization. It should touch upon
how its purpose it unique.

Mission follows the Vision:
The Entire process starting from Vision down to the business objectives is highly iterative. The
question is from where should be start. I strongly recommend that mission should follow the
vision. This is because the purpose of the organization could change to achieve their vision.
For example, to achieve the vision of an Insurance company 'To be the most trusted Insurance
Company', the mission could be first 'making people financially secure' as their emphasis is on
Traditional Insurance product. At a later stage the company can make its mission as 'Making
money work for the people' when they also include the non-traditional unit linked investment
products.

TOYOTA
Vision
-Toyota aims to achieve long-term, stable growth economy, the local communities it serves, and
its stakeholders.
Mission
-Toyota seeks to create a more prosperous society through automotive manufacturing.
IBM
Vision
Solutions for a small planet
Mission
At IBM, we strive to lead in the invention, development and manufacture of the industry's most
advanced information technologies, including computer systems, software, storage systems and
microelectronics.
We translate these advanced technologies into value for our customers through our professional
solutions, services and consulting businesses worldwide.


Business, Objectives And Goals

A business (also known as enterprise or firm) is an organization engaged in the trade
of goods, services, or both to consumers. Businesses are predominant in capitalist economies, in
which most of them are privately owned and administered to earn profit to increase the wealth of
their owners. Businesses may also be not-for-profit or state-owned. A business owned by
multiple individuals may be referred to as a company, although that term also has a more precise
meaning.

Goals: It is where the business wants to go in the future, its aim. It is a statement of purpose, e.g.
we want to grow the business into Europe.
Objectives: Objectives give the business a clearly defined target. Plans can then be made to
achieve these targets. This can motivate the employees. It also enables the business to measure
the progress towards to its stated aims.
1.3 The Difference between goals and objectives

Goals are broad; objectives are narrow.
Goals are general intentions; objectives are precise.
Goals are intangible; objectives are tangible.
Goals are abstract; objectives are concrete.
Goals can't be validated as is; objectives can be validated.



1.6 Basic Model of Strategic Management or Strategic Planning
Process

In today's highly competitive business environment, budget-oriented planning or forecast-based
planning methods are insufficient for a large corporation to survive and prosper. The firm must
engage in strategic planning that clearly defines objectives and assesses both the internal and
external situation to formulate strategy, implement the strategy, evaluate the progress, and make
adjustments as necessary to stay on track.

2 The process of Strategic Management (MODEL) is cyclical. The elements within it interact
among themselves. Figures 2.1 and 2.2 present the process for single SBU firm and multiple
SBU firm. The process has to be adjusted for multiple SBUs firm because there it is
conducted at corporate level as well as SBUs levels as these firms insert SBU strategy
between corporate strategy and functional strategy. Initially, the process of strategy was
discussed in terms of four phases which are
Identification phase
Development phase
Implementation phase
Monitoring phase




The process of strategy does not have the same steps as stated by different authors. According to
C.K. Prahalad, the process comprises of 5 steps:
Strategic Intent
Environmental Analysis
Evaluation of strategic alternatives and choice.
Strategy Implementation
Strategy Evaluation and Control

For our understanding, the process has been given in terms of the following steps:
Strategic Intent
Environmental & Organizational Analysis
Identification of Strategic Alternatives
Choice of Strategy
Implementation of Strategy
Evaluation & Control

A simplified view of the strategic planning process is shown by the following diagram:

1. STRATEGIC INTENT

Setting of organizational vision, mission and objectives is the starting point of strategy
formulation. The organizations strive for achieving the end results which are vision, mission,
purpose, objective, goals, targets etc. The hierarchy of strategic intent lays the foundation
for the strategic management of any organization. The strategic intent makes clear what an
organization stands for. It is reflected through vision, mission, business definition and objectives.
Vision serves the purpose of stating what an organization wishes to achieve in long run. The
process of assigning a part of a mission to a particular department and then further sub dividing
the assignment among sections and individuals creates a hierarchy of objectives. The objectives
of the sub unit contribute to the objectives of the larger unit of which it is a part. From strategy
formulation point of view, an organization must define why it exists, how it justifies that
existence, and when it justifies the reasons for that existence. The answer of these questions
lies in the organizations mission, business definition, objectives & foals. These terms become
the base for strategic decisions and actions.


Vision & Mission

The vision of an organization is the expectation of the owner of the organization and putting this
vision into action is mission. Often these terms are used interchangeably. But both are different.
The dictionary meaning of mission is that, mission relates to that aspect for which an individual
has been or seems to have been sent into the world.

Mission is relatively less abstract, subjective, qualitative, philosophical and not
imaginative. Mission has a societal orientation; It is a statement which reveals what an
organization intends to do for a society. It is a public statement which gives direction for
different activities which organizations have to carry on. It motivates employees to work in the
interest of the organization.

Business Definition
The answer to the question that how an organization justifies its existence is defining business
of the organization. A business definition is the clear cut statement of the business or a set of
businesses, the organization engages or wishes to pursue in the future. It also defines the scope of
the organization. An organization can face its competitors not by doing what they do but by
doing it differently. Business can be defined along three dimensions product, customer and
technology. In whatever dimensions, it is defined, it must reflect two features:

focus
differentiation

Focus of business is defined in terms of the kind of functions the business performs rather than
the broad spectrum of industry in which the organization operates. A sharp focus on business
definition provides direction to a company to take suitable actions including positioning of the
companys business.

The next feature involved in business definition is differentiation i.e. how an organization
differentiates itself from others so that the business concentrates on achieving superiors
performance in the market. Differentiation can be on several bases like quality, price, delivery,
service or any other factor which the concerned market segment values.

For example, an organization can charge comparatively lower price as compared to its
competitors in the same product quality segment, then price is not the differentiating factor. As
against this, if the organization is charging a much lower price in the same product group
excluding quality, price becomes a differentiating factor. For example, in synthetic detergent
market, HLL and Nirma provide for such a differentiation.

Objectives and Goals

Once the organization mission has been determined, its objective, desired future positions that it
wishes to reach, should be identified. Organizational objectives are defined as ends which the
organization seeks to achieve by its existence and operation. Objectives represent desired results
which the organization wishes to attain. They indicate the specific sphere of aims, activities and
accomplishments. An organization can have objectives in terms of profitability and productivity.
Objectives provide a direction to the organization and all the divisions work towards the
attainment of the set objectives. Objectives and goals are the terms which are used
interchangeably.

It is necessary for the organization to assess the process identifying the objectives of each
functional area. After accomplishment of these objectives, the overall objectives of the
organization are achieved. Organizations mission becomes the cornerstone for strategy.
Objectives are other factors which determine the strategy. By choosing its objectives, an
organization commits itself for these.

2. ENVIRONMENTAL AND ORGANISATIONAL ANALYSIS

Every organization operates within an environment. This environment may be internal or
external. For conducting an environmental analysis, the strategic intent has to be very clear. This
clarity in definition of mission and objectives helps in the detailed analysis of the environment.
Environmental analysis, also known as environmental scanning or appraisal, is the process
through which an organization monitors and comprehends various environmental factors and
determines the opportunities and threats that are provided by these factors. There are two aspects
involved in environmental analysis:

Monitoring the environment i.e. environmental search and
Identifying opportunities and threats based on environmental monitoring i.e. environmental
diagnosis.

Environmental analysis is an exercise in which total view of environment is taken. The
environment is divided into different components to find out their nature, function and
relationship for searching opportunities and threats and determining where they come from,
ultimately the analysis of these components is aggregated to have a total view of the
environment. Some elements indicate opportunities while others may indicate threats.

A large part of the process of environmental analysis seeks to explore the unknown terrain, the
dimensions of future. The analysis emphasizes on what could happen and not necessarily what
will happen. The factors which comprise firms environment are of two types
factors which influence environment directly including suppliers, customers and
competitors, and
factors which influence the firm indirectly including social, technological, political, legal,
economic factors etc.

The environmental analysis plays a very important role in the process of strategy formulation.
The environment has to be analysed to determine what factors in the environment present
opportunities for greater accomplishment of organizational objectives and what factors present
threats. Environmental analysis provides time to anticipate the opportunities and plan to meet the
challenges. It also warns the organization about the threats. The analysis provides for
elimination of alternatives which are inconsistent with the organizations objectives. Due to the
element of uncertainty, environmental analysis provides for certain anticipated changes in the
organizations network. The organization equips itself to meet the unanticipated changes and
face the ever increasing competition.

For doing the environmental analysis, there can be the strategic advantage profile which provides
for analysis of internal environment, and the organization capability profile as well. For
analyzing the external environment, environmental threat opportunity profile could be adopted.
An organization has to continuously grow in term of its core business and develop core
competencies.

Through organizational analysis, the organization has to understand its strengths and
weaknesses. It has to identify the strengths and emphasize on them. At the same time, it has to
identify its weaknesses and improve them or try to eliminate them. Organizational threats and
opportunities, strengths and weaknesses help in identifying the relevant environmental factors for
detailed analysis.

Therefore, after developing the strategic intent, environmental analysis becomes the next
important step in the process of strategy formation.

3. IDENTIFICATION OF STRATEGY ALTERNATIVE

After environmental analysis, the next step is to identify the various strategic alternatives. After
the identification of strategic alternatives they have to be evaluated to match them with the
environmental analysis. According to Glueck & Jauch, strategic alternatives revolve around the
question whether to continue or change the business, the enterprise is currently improving the
efficiency or effectiveness with which the firm achieves its corporate objectives in its chosen
business sector the process may result into large number of alternatives through which an
organization relate itself to the environment. All alternatives cannot be chosen even if all of these
provide the same results. Obviously, managers evaluate them and limit themselves.

According to Glueck, there are basically four grand strategic alternatives:

Stability
Expansion
Retrenchment
Combination

These are together known as stability strategies/ basic strategies.

Stability In this, the company does not go beyond what it is doing now. The company serves
with same product, in same market and with the existing technology. This is possible when
environment is relatively stable. Modernization, improved customer service and special
facility may be adopted in stability.
Expansion This is adopted when environment demands increase in pace of activity.
Company broadens its customer groups, customer functions and the technology. These may be
broadened either singly or jointly. This kind of a strategy has a substantial impact on internal
functioning of the organization.
Retrenchment If the organization is going for this strategy, them it has to reduce its scope in
terms of customer group, customer function or alternative technology. It involves partial or total
withdrawal from three things. For example L & T getting out of the cement business. The
objective varies from company to company.
Combination When all the three strategies are taken together, this is known as combination
strategy. This kind of strategy is possible for organizations with large number of portfolios.

Apart from these four grand strategies, different commonly used strategies are given below:

Modernization In this , technology is used as the strategic tool to increase production and
productivity or reduce cost. Through modernization, the company aims to gain competitive and
strategic strength.
Integration The company starts producing new products and services of its own either
creating facility or killing others. Integration can either be forward or background in terms of
vertical integration. In forward integration it gains ownership over distribution or retailers, thus
moving towards customers while in backward integration the company seeks ownership over
firms suppliers thus moving towards raw materials. When the organization gains ownership
over competitors, it is engaged in horizontal integration.
Diversification Diversification involves change in business definition either in terms of
customer functions, customer groups or alternative technology. It is done to minimize the risk by
spreading over several businesses, to capitalize organization strength and minimize weaknesses,
to minimize threats, to avoid current instability in profit & sales and to facilitate higher
utilization of resources. Diversification can be either related or unrelated, horizontal or vertical,
active or passive, internal or external. It is of the following types:
o Concentric diversification
o Conglomerate diversification
o Horizontal diversification

Joint Ventures - In joint ventures, two or more companies form a temporary partnership (
consortium). Companies opt for joint venture for synergistic advantages to share risk, to
diversify and expand, to bring distinctive competences, to manage political and cultural
difficulty, to take technological advantage and to explore unexplored market.

Strategic Alliance- When two or more companies unite to pursue a set agreed upon goals
but remain independent it is known as strategic alliance. The firms share the benefits of the
alliance and control the performance of assigned tasks. The pooling of resources, investment and
risks occur for mutual gain.

Mergers- It is an external approach to expansion involving two or more than two
organizations. Companies go for merger to become larger, to gain competitive advantage, to
overcome weakness and sometimes to get tax benefits. Merger takes place with mutual consent
and common goals.

Acquisition - For the organization which acquires another it is acquisition and for
organization which is acquired, it is merger.

Takeovers In takeovers, there is strong motive to acquire others for quick growth and
diversification.

Divestment In divestment, the company which is divesting has no ownership and control
in that business and is engaged in complete selling of a unit. It is referred to the disposing off a
part of the business.

Turnaround Strategy- When the company is sick and continuously making losses, it goes
for turnaround strategy. It is the efforts in reversing a negative trend and it is the efforts to keep
an organization alive.

All these alternatives are available to an organization are available to an organization and
according to its objectives, it can decide on the one which is most suitable.


4. CHOICE OF STRATEGY

The next logical step after evaluation of strategic alternatives is choice of the most suitable
alternative. For a business group, it may be possible to choose all strategic alternatives but for a
single company it is quite difficult. The strategic alternatives has to be the matched with the
problem. While making a choice, two types of factors have to be considered

Objective factors
Subjective factors

Objective factors are the ones which can be quantified which subjective factors are the ones
which cannot be quantified and are based on experience and opinion of people. Strategic choice
is like a decision making process. There are four objective ways to make a choice:

Corporate Portfolio Analysis
SWOT Analysis
Industry Analysis
Competitive Analysis

Corporate Portfolio Analysis

When the company is in more than one business, it can select more than one strategic alternative
depending upon demand of the situation prevailing in the different portfolios. It is necessary to
analysis the position of different business of the business house which is done by corporate
portfolio analysis. This analysis can be done by using any of the seven technologies given below:

Experience curve
PLC concept
BCG Matrix
GE nine cell Matrix
Space Diagram
Hofers product market evaluation matrix
Directional Policy Matrix

In the experience curve technique, technology the experience of the strategist enables him to
decide which businesses to enter or quit.

Depending upon the stage of the product life cycle of the business, one can make a strategic
choice for different portfolio.

Boston consultancy developed a matrix called BCG Matrix which is helpful to make strategic
choice. In this, the products are positioned based on various external and internal factors to know
the continuity, growth and discontinuing product. The factors given are specific in nature and
attempt has been made to quantify them.

The GE Nine Cell Matrix is a matrix in which nine positions are defined in terms of business
strength factors and industry attractiveness factors. The business strength factors include market
share, profit margin, ability to compete, market knowledge, competitive position, technology,
and management caliber and the industry attractiveness factor include market size, growth rate,
profit, competition, economics of scales, technology and other environmental factors. Nine cells
are divided into three zones and depicted by different colours i.e. green, yellow and red. Each
zone of matrix presents a specific type of strategy or set of strategies.

The strategic position and action evaluation (SPACE) is an extension of two dimensional
portfolio analysis which helps an organization to hammer out an appropriate strategic posture. It
involves consideration of dimensions like organizations competitive advantage, organizations
financial strength, environmental stability etc. Various SPACE factors are measured in terms of
degrees, often quantified from 0 to 5 with 0 in indication most unfavourable and 5 indicating
most favourable. On basis of four dimensions organization can choose its strategy.

Hofer and Schendel suggested the product market evaluation matrix. They constructed a 15 cell
matrix taking competitive position and stages of product / market evolution dimensions.

The directional policy matrix was developed by shell chemicals, U.K. It used two dimensions
business sector prospects and companys competitive capabilities to choose strategies. Each
dimension is further divided into unattractive, average and attractive (for business sector
prospects) and weak, average and strong (for companys competitive capabilities. Each quadrant
shows a different strategy which the organization may adopt.

Competitor Analysis
In this analysis, we try to assess what the competitor has and what he does not have. We
explore everything with respect to the competitor. In competitor analysis, focus is on external
environment as one of the components of external environment is the competitor. The difference
between SWOT analysis and competitor analysis is that in competitor analysis we are concerned
with only one component of the environment i.e. competitor while in SWOT analysis we take
about all the factors of the environment.

Industry Analysis

In industry analysis, all the competitors belonging to the particular industry with which the
organization is associated are looked at. All the members of the industry are considered as a
whole. In competitive analysis, only the major competitors are assessed while in industry
analysis all the competitors belonging to the industry are looked at.

The strategic choice is a decision making process which looks into the following steps:

Focusing on strategic alternatives
Evaluating strategic alternatives
Considering decision factors objective factors and subjective factors.
Finally, making the strategic choice.

5. IMPLEMENTATION OF STRATEGY


After the evaluation of the alternatives, the choice of strategy is made. This choice now needs to
be implemented i.e. strategy is now put into action. This step of strategy process is the
implementation step. This includes the activation of the strategic alternatives chosen. Strategy
making and strategy implementation are two different things. Strategy making requires person
with vision while strategy implementation requires a person with administrative ability. If the
strategy made is not implemented properly then the objectives would be lost. Strategy
implementation is as good as starting a new business. The stage requires looking at the problems
and eliminating them. In strategy implementation, one has to pass through different steps:

Project Implementation
Procedural Implementation
Resource Allocation
Structural Implementation
Functional Implementation
Behavioral Implementation

Project implementation is a comprehensive plan of action from acquiring land to the installation
of machinery within a time frame.

Procedural implementation takes place by following the Law of the Land i.e. the rules and
regulation in terms of wastage cost, utility etc. It involves completing all those procedural
formalities that have been prescribed by the governments both central and state. A procedure is a
series of related tasks that make up the chronological sequence and the established way of
performing the work to be accomplished. Procedural implementation involves different steps.
These steps vary from industry to industry. Also these may change as per the changes in the
government policies. The major procedural requirements are

Licensing Requirements
FEMA Requirements
Foreign Collaboration Procedure
Capital Issue Requirements
Import and Export requirements
Incentives and benefits

After procedural implementation there comes resource allocation. The organization has to
allocate resource both inside the company and outside the company. It has to make decisions
regarding short term and long term allocation. The problems associated with resource allocation
is the problem involved in to process. The problems emerge because:

Resources are limited
There are competing organizational units with each trying to have the major portion.
Organizations past commitment.

The structural implementation of strategy involves designing of the organization structure and
interlinking various units and sub units of the organization. It involves issues like

How the work of the organization will be divided
How will the work be assigned among various positions, groups, department, divisions,etc.
The coordination among these for achievement of organizational objectives.

There are basically two aspects
Differentiation and
Integration

Differentiation refers to, the differences in cognitive and emotional orientations among
managers in different functional departments.

Integration refers to, the quality of the state of collaboration that are required to achieve unity of
efforts in the organization.

The organization has to emphasize on both aspects and therefore, it must design organization
structure and provide systems for integration and coordination among organizations parts and
members.

Functional implementation deals with the development of policies and plans in different areas of
functions which an organization undertakes. The major functions of the organization include
Production
Marketing
Finance
Personnel

Each and every function makes its own policies and plans in tune with the whole organizations
strategy and then implements to fulfill the objectives. For example, the production function may
involve decisions relating to size and location of plants, technology to be used, cost factor,
production capacity, quality of the product, research and development etc. Similarly marketing
function may include the decisions relating to type of products, price of products, product
distribution and product promotion.

The financial function deals with decisions like sources of funds, usage of funds and
management of earnings. Likewise, the major consideration in personnel policies include
recruitment of right personnel, development of personnel, motivation system, retaining
personnel, personnel mobility, industrial relations etc.

Behavioral implementation deals with those aspects of strategy implementation that have impact
on behavior of people in the organizations. Since human resources form an integral part of the
organization their activities and behavior need to be directed in a certain way. Any departure
may lead to the failure of strategy. The five issues in this context relevant to strategy
implementation are:

Leadership
Organization Culture
Values and Ethics
Corporate Governance, and
Organizational Politics

EVALUATION AND CONTROL
This is the last step of the strategy making process. This is an ongoing process and evaluation
and control have to be done for future course of action as well. To get successful results and to
achieve organizational objectives, there has to be continuous monitoring of the implementation
of strategy. The evaluation and control of strategy may result in various actions that the
organization may have to take for successful well being, such actions may involve any kinds of
corrective measures concerned with any of the steps involved in the whole process be it choice
for setting mission or objectives. The process of strategy formulation is considered as a dynamic
process wherein corrective actions are taken and change is brought in any of the factors affecting
strategy.

Evaluation of strategy is done by the top managers to determine whether their strategic choice is
implemented in a manner that it is meeting the organizations objectives. Evaluation emphasizes
measurement of results of a strategic action. On the other hand, control emphasizes on taking
necessary action in the light of gap that exists between intended results and actual results in the
strategic action.

When evaluation and control is carried out efficiently, it contributes in three basic areas:

Measurement of organizational process.
Feedback for future actions, and
Linking performance and rewards.

The board of directors, the chief executive and other managers all play a very important role in
strategy evaluation and control. Control can be of three types:

Control of inputs that are required in an action, known as feed forward control
Control at different stages of action process, known as concurrent control
Past action control based on feedback from completed action known as feedback control

Control is exercised by mangers in the form of four steps:

Setting performance standards
Measuring actual performance
Analyzing variance
Taking corrective actions

After evaluation and control, the strategy process continues in an efficient manner. The
effectiveness could be assessed only when the strategy helps in the fulfillment of organizational
objectives.

1.12 Impact of Internet & E- Commerce

The impact of e-commerce on business activity

Selling through websites is the fastest growing method of trading worldwide. There are two main
forms of e-commerce:
Business to business (B2B) trading where companies trade and exchange information
using the World Wide Web.
Business to consumer (B2C) trading where companies deal directly
with customers through web pages, and ordering is carried out online.

There are many different types of products and services that are traded on line including books,
CDs, cars, holidays, and insurance. In response to e-tailing and e-trading, most businesses have
now set up their own websites.

Trading online
Trading online enables businesses to reach much wider audiences while cutting the costs of
traditional retailing methods. For example, an e-tailer does not have to spend so much on an
expensive High Street presence.

Impact of Internet and E-Commerce on Strategy

There is a positive relationship between e-commerce and firm strategy. Companies that
incorporate e-commerce with strategy will implement firm strategy effectively.

Matching e-commerce with internal and external situation

The choice of e-commerce model is one of many strategic decisions that organizations make
when conducting business activities in the e-commerce environment. Current literature on both
strategic decision making and the development of e-commerce models does not adequately
address. In developing the framework, organizations need to have a good understanding on the
types of models available for adoption. While there is no single unique classification system for
the types of e-commerce models available. For example, B2B e-commerce models are generally
classified into four generic categories: merchant models; manufacturer models; the buy-side
model; and brokerage models.

Each of these models has different functional characteristics resulting in different models being
more applicable or suitable to particular industries, markets or situations. In addition, the focus
of these models varies from buyer centric (such as the buy-side model) to supplier centric (such
as the manufacturer model) with some being neutral (such as the mega-exchange model). Based
on these four categories, a recent study has identified 10 specific e-commerce models as being
used for conducting B2B e-commerce in the agribusiness industry.
In addition to the complexity of the models, many factors are known to influence the strategic
decision making process of organizations, which are also likely to impact on the choice of e-
commerce models. The choice of e-commerce model is a strategic decision as the model chosen
will form the framework for the organisation to pursue its business activities in the e-commerce
environment and will also affect an organisations overall strategic direction.

E-commerce is generally less complex than any IT solution, so a firm must start with normal IT
initiatives before creating e-commerce tasks (John A. Rodgers, David C. Yen and David C.
Chou, 2002). E-commerce includes two basic types, business to consumer (B2C) and business to
business (B2B), that are two separate concepts. The former refers primarily to the buying and
selling activities over the Internet, including such transactions as placing orders, making
payments, and tracking delivery of orders on the Internet. So, the focus of B2C is typically on the
customer side as well. All other stakeholders of the organization, including employees and
suppliers, are generally not the main concern for B2C. It relies on client-to-server or port-to-port
data flow (Moltzen, E, 2000). B2B generally refers to the use of the web and Internet-related
technology to connect the extended organization, including such entities as suppliers, employees,
and regulatory authorities.
In general, expectations of B2B are high and in most cases justified. However, B2B is not just an
application program and thus not a plug and play solution. B2B is a contingency approach,
meaning that there is no one best way for the B2B transformation. Each case needs separate
evaluation. It takes a conscious, thorough and extensive internal and external analysis of the
organization, clear and appropriate goals, a deliberate strategic concept and change management
at its best, to turn an organization into an successful e-company and hence to be able to leverage
the opportunities of e-commerce in an optimal way. Therefore, we propose that e-commerce
matched with internal and external situation would be a great benefit to the implementation of
strategy.