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reveals the opportunities and threats for the firm. An analysis of strengths, weaknesses, opportunities, and
threats, popularly called SWOT analysis, is an essential exercise every firm has to carry out to evolve an
appropriate strategy to achieve the given goal.
(d) Develop and Evaluate alternative strategies There could be some alternative strategies to pursue a
given goal. If the goal is to expand the business, the following could be the three alternatives:
(e) Select the best strategy For the firm to be more successful, it is necessary to focus its strategies
around its strengths and opportunities. It is a prerequisite that the members of the team or organization
agree on a strategic plan. Such a plan, which has been generally agreed upon, is normally considered as the
best strategy. Such strategies ensure a better degree of participation and involvement of its members in the
process of achieving the goals.
(f) Establish strategic business units: It is more strategic to define a business unit in terms of customer
groups, needs, and/or technology and set up the business unit accordingly. A business must be viewed as a
customer-satisfying process, not as a goods-producing process. Hence, the focus of marketing definition for
the ones products and services should be more on satisfying the customer needs. Defining business units in
comprehensive terms comes handy here.
Each strategic business unit (SBU) is managed by a person responsible for strategic planning and
performance. It is a single business, planned separately from the rest of the company. It has its own set of
competitors.
(g) Fix targets and allot resources to each SBU The purpose of identifying the companys strategic
business units is to develop separate strategies and assign appropriate funding. The top management knows
that its portfolio has certain old, established, relatively new, and brand new products. It cannot rely just on
opinions; it needs to classify its business by profit potential by using analytical tools. The major factors
indicating market attraction are : overall market size, rate of annual increase in the market size, profit
margin, degree of competition, technological standards, rate of inflation, energy needs, impact on
environmental issues, socio-political and legal implications, and others. These factors affect the decisionmaking at the macro level. Judging the business strength at the enterprise level also is equally important.
The strength of a business proposal is affected by varied factors such as market share, percentage of annual
growth in the market share, quality parameters, brand reputation and loyalty, promotion campaigns and
distribution network, operating capacity, per unit costs, material and inventory management, research and
development strength, need for key managerial professionals, and so on.
(h) Developing operating plans The operating or tactical plans explain how the long-term goals of the
organization can be met. The corporate plans reveal how much the projected sales and revenues are. Most
often, the management would like to have performed better than these projections. Where the top
management finds a significant gap between the targeted sales and actual sales, it can either develop the
existing business or acquire a new one to fill the gap.
(i) Monitor performance The results of the operating plans should be well monitored from time to time.
In the case of poor or low performance, check up with the members of the team to find out their practical
problems and sort these out. Also, it is essential to verify whether there are any gaps in formulating the
operating-tactical plans.
(j) Revise the operating plans, where necessary It is necessary to revise the operational plans particularly
when the firm does not perform as well as expected. The operating plans can be initiated to the organization
structure itself. This would ensure adequate authority or freedom for the members of the team and enable
them to achieve the targets.
Q).( 3) ENVIRONMENTAL SCANNING
The process of environment scanning has been far from being systematic except with regard to
information relating to current developments. Environmental scanning requires information inputs which
can be devised from different strategies like:
iii.
iv.
v.
The economic and business daily newspapers like The Economic Times, Business Standard,
Business Line and Financial Express.
Journals and periodicals like Business India, Business World, Business Today, Update, Fortune
India, Main Stream, Long Range Planning Journal, Economist, IMF World Economic Outlook,
Harvard Business Review, Foreign Trade, Finance and Development, Environmental Trends &
Scenarios, etc.
Institutional publications like Mumbai Stock Exchange Directory, the Centre for Monitoring
Indian Economy, Kothari Industrial Directory of India, Publications of Market Research,
Agencies like Operations Research Group, the National Council for Applied Economic Research,
etc.,annual reports of various companies, publications of professional organizations like
Federation of Indian Chamber of Commerce and Industry.
Government publications like Economic Survey, Guidelines to India Bulletins, ICICI Portfolio
Studies, Business Intelligence and Data, The State of Nation Report, Quarterly Survey of
Industries, Indian Trade Journal, Yojana, etc.
Other publications include: United Publications, World Economic Survey, International
Financial Statistics, Economic Survey of Asia and the Far East, Commodity Trade Statistics,
Year Book of International Trade Statistics, etc.
5. Cross-impact analysis: Researchers identify a set of key trends (those high in importance and/or
probability) and ask, If event A occurs, what will be the impact on all other trends? The results are then
used to build sets of domino chains, with one event triggering others.
6. Multiple scenarios: Researchers build pictures of alternative futures, each internally consistent and with
a certain probability of happening. The major purpose of the scenarios is to stimulate contingency planning.
7. Demand/hazard forecasting: Researchers identify major events that would greatly affect the firm.
Each event is rated for its convergence with several major trends taking place in society and for its appeal to
each major public group in the society. A higher convergence and appeal increases the probability that the
event will occur. The highest-scoring events are then researched further.
Q).(4). SWOT ANALYSIS
Definition:
SWOT analysis is defined as the rational and overall evaluation of a companys strengths,
weaknesses, opportunities, and threats which are likely to affect the strategic choices significantly.
In every business organization, the top management carries out this evaluation. However, the
companies with a participatory approach involve their managers in such an evaluation process. Individual
managers and their advisers in such organizations consider the situation, separately and then jointly, to
discuss about
(a) the nature of the organizational issues such as increasing competition, eroding resources,
changing technology, and so on
(b) the importance of each of these issues as likely determinants of future strategy
External Environment Analysis (Opportunity and Threat analysis)
The external environment has a profound impact on the business operations irrespective of the nature and
size of the business. The business has to monitor its key macro-environment forces and microeconomic
parties. The key forces both in the macroeconomic and microeconomic environment are very dynamic.
With the result, these forces affect the business operations, both in the short run and the long run.
Opportunities It is necessary that the company should identify what opportunities are available to it to
focus upon. The latest technology, deregulated or free markets, liberalized rules and regulations, and others,
may make a lot of difference for a business organization provided it can envision how to avail these.
Visionaries identify opportunities from threats. To illustrate, during times of increasing competition, some
entrepreneurs are very happy that they can perform better their competitors.
Threats Some developments in the external environment represent threats. A threat is a challenge posed by
an unfavorable trend or a development that results in the loss of sales or profit till a defensive marketing
action is initiated. A few examples of threat could be outlined as change in government policy such as
liberalization, privatization and globalization, changing technologies, changing value systems,
environmental constraints, deteriorating law and order, and so on.
One of the strategies to protect oneself from this threat may be to prepare contingency plans spelling
out the changes the company can make much before or during the threat. Threat is a common factor for
every business irrespective of its nature and size. Technology-based companies are more threat-prone. The
unrealistic expectations of shareholders also can pose a threat to the company
developing the necessary competencies among the workforce by investing moderately in the latest
technology, and thus, offering products of the best quality to its customers. Thus, the market
segment for technologically-superior products can also be successfully covered.
c) The Strength-Threat (ST) Strategy This strategy enables the firm to address the threats through its
strengths. The focus is to maximize the strengths and minimize the weaknesses. As a part of this
strategy, the firm can seek long-term and low-interest loans to minimize the cost of its operations.
d) The Strength-Opportunity (SO) Strategy This is the most preferred strategy. Here, the firm can take
advantage of the available opportunities through its present strengths. As a part of this strategy, the
firm can consider expanding into new markets with the existing products and services. Every firm
tries to optimize its resources to make use of its strengths and opportunities. An intelligent and
progressive firm converts, over a period of time, its weaknesses into strengths and the threats in
opportunities, by careful planning and implementation.
Add new
Drop old
Products
while
Retrench
Business
Definition
Find new
uses
Stabilize
Business
Pace
Drop old
products
Definition
Decrease
product
Development
changes,
adding new
Quality
products
improvements
Pace
Maintain
Drop dis-
Reduce
tribution
market
Channels
shares,
while
Focus on
finding
Market
new ones
Functions Forward,
Increase
improve
increase
Vertical
capacity
production capacity
Integration
efficiency
and
Become
captive
company
Maintain
share
Decrease
maintain
process
R and D
improve
efficiency
Q). (5). STEPS IN STRATEGY FORMULATION AND IMPLEMENTATION:
Strategy formulation refers to the process of choosing the most appropriate course of action for the
realization of organizational goals and objectives and thereby achieving the organizational vision. The
process of strategy formulation basically involves six main steps. Though these steps do not follow a
rigid chronological order, however they are very rational and can be easily followed in this order.
1. Setting Organizations objectives - The key component of any strategy statement is to set the
long-term objectives of the organization. It is known that strategy is generally a medium for
realization of organizational objectives. Objectives stress the state of being there whereas Strategy
stresses upon the process of reaching there. Strategy includes both the fixation of objectives as well
the medium to be used to realize those objectives. Thus, strategy is a wider term which believes in
the manner of deployment of resources so as to achieve the objectives.
2. Evaluating the Organizational Environment - The next step is to evaluate the general economic
and industrial environment in which the organization operates. This includes a review of the
organizations competitive position. It is essential to conduct a qualitative and quantitative review of
an organizations existing product line. The purpose of such a review is to make sure that the factors
important for competitive success in the market can be discovered so that the management can
identify their own strengths and weaknesses as well as their competitors strengths and weaknesses.
After identifying its strengths and weaknesses, an organization must keep a track of competitors
moves and actions so as to discover probable opportunities of threats to its market or supply sources.
3. Setting Quantitative Targets - In this step, an organization must practically fix the quantitative
target values for some of the organizational objectives. The idea behind this is to compare with long
term customers, so as to evaluate the contribution that might be made by various product zones or
operating departments.
4. Aiming in context with the divisional plans - In this step, the contributions made by each
department or division or product category within the organization is identified and accordingly
strategic planning is done for each sub-unit. This requires a careful analysis of macroeconomic
trends.
5. Performance Analysis - Performance analysis includes discovering and analyzing the gap between
the planned or desired performance. A critical evaluation of the organizations past performance,
present condition and the desired future conditions must be done by the organization. This critical
evaluation identifies the degree of gap that persists between the actual reality and the long-term
aspirations of the organization. An attempt is made by the organization to estimate its probable
future condition if the current trends persist.
6. Choice of Strategy - This is the ultimate step in Strategy Formulation. The best course of action is
actually chosen after considering organizational goals, organizational strengths, potential and
limitations as well as the external opportunities.
Strategy implementation is the translation of chosen strategy into organizational action so as to achieve
strategic goals and objectives. Strategy implementation is also defined as the manner in which an
organization should develop, utilize, and amalgamate organizational structure, control systems, and culture
to follow strategies that lead to competitive advantage and a better performance. Organizational structure
allocates special value developing tasks and roles to the employees and states how these tasks and roles can
be correlated so as maximize efficiency, quality, and customer satisfaction-the pillars of competitive
advantage. But, organizational structure is not sufficient in itself to motivate the employees.
An organizational control system is also required. This control system equips managers with
motivational incentives for employees as well as feedback on employees and organizational performance.
Organizational culture refers to the specialized collection of values, attitudes, norms and beliefs shared by
organizational members and groups.
Follwoing are the main steps in implementing a strategy:
Developing an organization having potential of carrying out strategy successfully.
Disbursement of abundant resources to strategy-essential activities.
Creating strategy-encouraging policies.
Employing best policies and programs for constant improvement.
Linking reward structure to accomplishment of results.
Making use of strategic leadership.
Excellently formulated strategies will fail if they are not properly implemented. Also, it is essential to note
that strategy implementation is not possible unless there is stability between strategy and each
organizational dimension such as organizational structure, reward structure, resource-allocation process, etc.
Strategy implementation poses a threat to many managers and employees in an organization. New power
relationships are predicted and achieved. New groups (formal as well as informal) are formed whose values,
attitudes, beliefs and concerns may not be known. With the change in power and status roles, the managers
and employees may employ confrontation behaviour.
Following are the main differences between Strategy Formulation and Strategy ImplementationStrategy Formulation
Strategy Implementation
Strategy Formulation includes planning and Strategy Implementation involves all those means
decision-making
involved
in
developing related to executing the strategic plans.
organizations strategic goals and plans.
In short, Strategy Formulation is placing the Forces In short, Strategy Implementation is managing
before the action.
forces during the action.
Strategy Formulation is an Entrepreneurial Strategic
Implementation
is
mainly
an
Activity based on strategic decision-making.
Administrative Task based on strategic and
operational decisions.
Strategy Formulation emphasizes on effectiveness.
specific
Strategic
Formulation
Implementation.
Strategy
precedes
Strategy Strategy
Implementation
Formulation.
follows