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M.Com II (S.M)

Chapter 1
Nature & Value for Strategic Management
Q. 1 : What are the benefits & risk of strategic management ?
OR
Give the Advantages & Limitation of Strategic Management ?
(Guj. 2001, 2003, 2004, 2005)
Ans.:
Introduction :
The concept of strategic management became well accepted in the field of business
& that proves it utility. In modern time stability in organization. Control & also for the
development, Strategic management is considered necessary. To face the future
uncertainty, the concept of strategic management become more useful. Strategic process
ins not a short term process. For this the officers & employees have to sacrifice for a long
time. At the view point of management, strategies are economically advantageous but even
employees considered themselves responsible for the profit.
Thus, strategic management has both advantages & as well as limitations. So let us
discuss them in brief as under.

Advantages of strategic management :

Due to strategic management, company receive the following types of economic &
non economic advantages.
(1)
Increase in rate of return on investment :
Due to strategic management, these is a noble increase in the rate of return
on investment made in the project. On the basis of the information received through
analysis of internal & external environment. The managers can increase the rate of
return on investment by making maximum use of resources.
(2)
Increase in profitability :
The profitability of the unit depends up on the maximum use of the limited
resources. Through strategically management process. The managers can not only
make the maximum use of financial resources but also they can use maximum
manpower to increase the overall productivity & profitability of the unit.
(3)
Motivation to group activity :
By taking strategic decisions through the group integration between group
members increases on accepting various optional strategies. Which result in
co-operation & unity. Not only that but the managers can get the advantage of
special strength of group members.
(4)
Increase in the efficiency of the employees :
The officers & experienced employees of all the three levels of the
management are also included in the strategic management process. The necessary
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interprocess is done with them & for the success of the strategy, the necessary
training is also given to them. By this these is a notable increase in efficiency of
employees & they get inspiration to work more.
(5)
Prevention of overlapping work :
When the same activity is done by more than one employee. At that time
there is a wastage of time & materials. The problem of co-ordination also arises with
the help of strategic process. The managers can prevent the overlapping of work.
(6)
Prevention of organizational gap :
Out of departmental activities of organization, if any activity is not allotted to
any employee, that activity is known as organizational gap. If allotment of any
activity is left out by mistake then none of the employees can be help responsible for
it. In strategic management process, because of the interacting process being done
with each employee, all the employees are given equal works & so these does not
arise a question of organizational gaps.
Limitations :
The limitations of strategic management are as under.
(1)
Time consuming :
For taking strategic decisions, the managers make a study of internal &
external environment. For this the process of forecasting is being used.
Besides this, interacting process is being done with various officers &
employees. For all these work, a lots of time is being consumed.
(2)
Ignorance of other managerial functions :
The responsibility of chief officer is more who are connected with framing &
implementation of strategy & due to continuously following the work of strategies
they are unable to concentrate on other managerial works.
(3)
Depression due to failure in target :
Many times during the framing of strategy. High targets are being fixed & if
these targets are not achieved then dissatisfaction takes place among employees.
(4)
Demand for more rewards & facilities :
The extent to which strategies depend on financial resources. To that extent,
employees also demand more remuneration & facilities. If their demands are not
fulfilled, then industrial disputes & unrest are created.
(5)
Dependability :
If the employees are continuously demanded for co-operation for the
training & implementation of strategy then they also feel dependability of managers
over them. In these circumstances, the demand of employees go on increasing.
Q.2
Ans.

Explain characteristics of strategic decisions at the level of corporate, strategic

business unit & functional level (2000, 2002, 2004)
Introduction :
Basic of success of business unit is on effective strategy & its implementation.

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For this, it is necessary to take proper decision at corporate level, for increase in
production & control on cost, keeping mission of unit. Business unit, operating level
in to account companys internal & external environmental factors are affecting
decision making at all level & therefore management should examine
inter-relationship of factors, by making its proper analysis. Strategic decisions are
related with activities at all level & therefore proper study of it, has primary
importance.
Corporate
Strategy

CORPORATE LEVEL
BUSINESS

LEVEL
SBU 1
Strategy

SBU 2
Strategy

SBU 3
Strategy
FUNCTIONAL LEVEL

Marketing
Strategy

(1)

Production
Operation
Management
Strategy

Financial
Strategy

Personnel
Labour
Relation
Strategy

Accounting
Strategy

R&D
Strategy

Characteristics of strategic managerial activities & decisions :

Concept of strategic management can be understood at three levels. It is
natural that characteristics of such decisions are different because the
characteristics of activities at three level are different. The characteristics of strategic
management vary with the level of strategic activities are considered as under :
Corporate level decisions :
Corporate level decisions tend to be value oriented, conceptual & less
concrete than those at business or functional level of strategic formulation &
implementation. The corporate level decisions are also characterized by greater risk,
cost, profit potential as well as by longer time horizons & greater needs for flexibility.
The characteristics are logical consequences of the more far reaching futuristic,
innovative, pervasive nature of corporate level strategic activity. e.g. choice of
business, divided, policies, sources, of long term financing & priorities for growth.
The corporate level decisions are taken
[Horizons : kekes
Futuristic :
not traditional
Innovative : introduce something new
Pervasive :
Spread throughout]
for raising longterm funds, purchasing of assets & machinery. Decisions regarding

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new technology, distribution of profit etc.

Functional level decisions :
While functional level decisions principally involve action oriented
operational issue. These decisions are made periodically & lead directly to
implementation of some part of the overall strategy formulation at corporate &
business level. Therefore, functional level decisions are relatively short range &
involve low risk & modest costs because they are dependent on available resources.
Functional level decisions are taken for repairing & maintenance of machinery for
continuity in production, changes in quality of product as per competition, fashion &
business requirement, co-ordination of activities, wages to employees, bonus to
employees, nature of material, training in relation to work & reduction in accident
etc.
Business level decisions :
Business level decisions bridges corporate & functional level. Business level
decisions are less costly, less risky & potentially less profitable than corporate level
decisions. But they are more costly, more riskly & potentially more profitable than
functional level decisions. Business level decisions includes re-structuring of
machinery, purchase of direct materials, financial matters including promotion of
employees, development of new product etc.
e.g. Plant location, market segmentation, Geographic coverage & distribution
channels etc.
Characteristics
Corporate
Business
Functional
Strategy
Strategy
Strategy
Type
conceptual
mixes
operational
Frequency
periodic or sporadic periodic or sporadic periodic
Adaptability
low
medium
high
(change)
Relation to present innovative
mixed
supplementary
activities
Risk
wide range
moderate
low
Profit Potential
large
medium
small
Cost
major
medium
modest
Time horizons
long range
medium
short range
Flexibility
high
medium
low
Co-operation
considerable
moderate
little
Required

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