UNIT – I

Strategy: - The concept of strategy helps us to grasp why some firms succeed and
others fail. In simple terms, strategy explains how a firm makes money. Good strategies
produce high profits and bad ones threaten the firm’s existence.
Def: - “Strategy means deciding the basic mission of a company, the objectives which it
seeks to achieve its objectives” – George. A. Steiner.
Strategic Management: - Strategic Management is the set of managerial decisions and
actions that determines the long – run performance of an organization. It includes
environmental scanning, strategy formulation, strategy implementation, evaluation and
control. Thus the study of strategic management therefore emphasizes the monitoring
and evaluating of external opportunities and threats and internal strengths and
weaknesses.
Nature and Scope: -
1. Acts as a decision for long term.
2. Aims to achieve advantage.
3. Issues are future oriented.
4. Stress both efficiency and effectiveness.
5. It is a process.
Importance: -
1. To shape the future of business.
2. To have effective strategic data.
3. To have decentralized management.
4. To increase productivity.
5. To make discipline.
Functions: -
1. Establishing the mission.
2. Formulating company philosophy.
3. Establishing policies.
4. Setting objectives.
5. Developing strategy.
6. Planning the organization structure.
Advantages: -
1. Financial benefits.
2. Problem prevention.
3. Improved decision making.
4. Greater employee motivation.
5. Minimum resistance to change.
Disadvantages: -
1. Expensive.
2. Unintended negative – If expectations not reached.
3. Unintended effect – If proper involvement is not shown.
4. Danger of rigidity – Which won’t bend in some people.
5. Process is a difficult exercise.
Process: -
1. Strategy Formulation: - It includes developing a vision and mission, identifying an
organization’s external opportunities and threats, determining internal strengths and
weaknesses, establishing long – term objectives, generating alternative strategies and
choosing particular strategies to pursue. It includes,
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a. Deciding what new businesses to enter.
b. How to allocate resources.
c. Whether to expand operations or diversify.
d. Whether to enter international markets.
e. Whether to go for mergers or acquisitions.
2. Strategy Implementation: - It includes a firm’s annual objectives, policies, motivates
employees and allocates resources so that formulated strategies can be executed, often
called action stage.
3. Strategy Evaluation: - It includes identifying the internal and external factors to
measure performance of strategy and to take corrective actions.
Vision: - A vision refers to the category of intentions and desires that are broad and
forward looking. It describes the aspirations for the future. A vision is quite literally a
mental image of the successful accomplishment of the mission and thus the purpose of
the organization.
Nature: -
1. Intangible.
2. Desirable.
3. Realistic.
4. Flexible.
5. Communicable.

Advantages: -
1. Inspiring.
2. Discontinuity.
3. Creation of identity.
4. Competitive and unique.
5. Risk taking.
Disadvantages: -
1. Incomplete.
2. Uninspiring.
3. Not forward looking.
4. Too broad.
5. Not that much unique.
How to develop a Strategic Vision: -
1. Learn everything you can about the organization.
2. Bring the organizations major issues in to visioning process.
3. Keep an open mind as you explore the options for a new vision.
4. Encourage input from your colleagues and subordinates.
5. Understand and appreciate the existing vision.
Communicating Strategic Vision: -
1. Formulation of organizational vision statement.
2. Integrating the vision with the organizational mission.
3. Developing the goals and objectives in accordance with the vision.
4. Communicating the vision to the middle – level management.
5. Communicating the vision to the lower – level management.
Mission: - A written declaration of an organizations core purpose and focus that normally
remains unchanged over time. A mission was earlier considered as the scope of the

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business activities a firm pursues. The definition of mission has gradually expanded to
represent a concept that embodies purpose behind the existence of an organization.
Characteristics: -
1. Market focus rather than product focus.
2. Achievable.
3. Specific.
4. Achievement of policies.
5. It should be broad and clear.
6. It should be motivating.
Need & Importance: -
1. To ensure unity.
2. To provide basis for motivating the use of organizational resources.
3. To have proper allocation of organizations resources.
4. To have proper organizational climate.
5. To serve as the main point.
6. To translate objectives and goals in to work structure.
Advantages: -
1. Helps organizations to know about the purpose of their existence.
2. Provides boundary for strategy formulation.
3. Helps to set standards for organizational performance.
4. Helps organization to make consistent decisions, to motivate, to build organizational
unity, to integrate short – term objectives with long – term goals and to enhance
communication.
5. Outlines norms for individual behaviour.
Objectives: - Objectives or goals are predetermined issues towards which all organized
efforts are directed. Objectives will be multiple because an organization wants to achieve
several economic and social objectives simultaneously example profit making, customer
satisfaction etc. The word goal and objective are often confused with each other. They
both describe things that a person may want to achieve or attain, but in relative terms
may mean different things.
Features: -
1. Objectives should be understandable.
2. Objectives should be perfect and specific.
3. Objectives should be related to a time frame.
4. Objectives should be measurable and controllable.
5. Objectives should be challenging.
Functions: -
1. Provides basis m for strategic decision – making.
2. Provides standards for performance appraisal.
3. Defines organizations relationship with its environment.
4. Helps organization to pursue its mission and purpose.
5. Describes the purpose of organizational establishment.

Process for setting Objectives: -

1. Classification of objectives.
2. Reasonable and attainable.
3. Realistic and practical.
4. Balancing short – range and long – range objectives.
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5. Change of objectives if needed.
Policies: - A policy is a principle to guide decisions and achieve rational outcomes. A
policy is a statement of intent and is implemented as a procedure or protocol. It is the set
of basic principles and associated guidelines formulated and enforced by the governing
body of an organization, to direct and limit its actions in search of long – term goals.
Policies are rules or guidelines to action. They help to define issues before they become
problems.
Features: -
1. Provides guidelines to the members in the organization.
2. Generally expressed in qualitative way.
3. Policy formulation is a function of all managers.
4. Policy formulation will be based on organizational objectives.
Types: -
1. Top management policies.
2. Upper middle management policies.
3. Middle management policies.
4. Foremen policies.
5. Operating force policies.
6. Sales policies.
7. Production policies.
8. Research policies.
9. Financial policies.
10. Costing policies. (Methods of costing, overheads etc).
Advantages: -
1. Easy to understand the view point of the organization establishment.
2. Easy to understand business environment.
3. Easy to understand the organization.
4. Helps the people to have personal development.

Disadvantages: -
1. Policies don’t give enough room to managers to solve the problems quickly.
2. Policies are not very fruitful in these days of rapidly changing business environment.
3. Policies do not cover each and every sort of problem.
4. Policies once3 setup, they will go for a longer period but today’s environment is
continuously changing.
Factors that shape a company's strategy: - Organizations do not exist in a vacuum.
Many factors enter into the forming of a company's strategy. Each exists within a
complex network of environmental forces. These forces, conditions, situations, events,
and relationships over which the organization has little control are referred to collectively
as the organization's environment. In general terms, environment can be broken down
into three areas,
1. The macro environment, or general environment (remote environment) i.e economic,
social, political and legal systems in the country;
2. The operating environment i.e competitors, markets, customers, regulatory agencies
and stakeholders.
3. The internal environment i.e employees, managers, union, and board directors.
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All organizations are affected by four macro environmental forces: political-legal,
economic, technological, and social.
1. Political and Regulatory Forces: - Political-legal forces include the outcomes of
elections, legislation, and court judgments, as well as the decisions rendered by various
commissions and agencies.
2. Economic Forces: - Economic forces refer to the nature and direction of the economy
in which business operates. Economic factors have a tremendous impact on business
firms.
3. Technological Forces: - Technological forces influence organizations in several
ways. A technological innovation can have a sudden and dramatic effect on the
environment of a firm. First, technological developments can significantly alter the
demand for an organizations or industry's products or services.
4. Social Forces: - Social forces include traditions, values, societal trends, consumer
psychology and societies expectations of business.
Crafting a strategy: - According to Thompson et al., (2010), crafting the Strategy is
primarily a market driven activity. It involves identifying the desired competencies and
capabilities to build into the strategy and help achieve competitive advantage. Crafting
strategy is concerned principally with forming responses to changes under way in the
external environment, devising competitive moves and market approaches aimed at
producing sustainable competitive advantage, building competitively valuable
competencies and capabilities, and uniting the strategic actions initiated in various parts
of the company. Successful strategy making depends on the business vision, perceptive
analysis of the situation, attracting and pleasing customers, and outcompeting rivals. An
effectively formulated strategy integrates, marshals, and allocates the firm’s internal
resources and makes appropriate use of external environmental information. The idea is
to formulate a mission-consistent strategy that will lead to sustained superior
performance. Poor strategy formulation can result in costly business failures.
GomezMejia and Balkin (2002) and Vallabhaneni (2009) stated that the formulation
includes the planning and decision making that lead to the establishment of the firm’s
goals and the development of a specific strategic plan. Thompson et al., (2010) says that
a firm's strategy is defined by six “How’s”:
1. How to grow the business.
2. How to please customers.
3. How to outcompete rivals.
4. How to respond to changing market conditions.
5. How to manage each functional piece of the business.
6. How to achieve targeted levels of performance.
Industry and Competitive Analysis: - The concept of Industry and Competitive analysis
is divided in to three categories.
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1. Industry Analysis: - An industry analysis is a market assessment tool designed to
provide a business with an idea of the complexity of a particular industry. It involves
reviewing the economical, political and market factors that influence the way the industry
develops. Major factors are condition of competitors, new market entrants etc.
2. Competition Analysis: - A competition analysis is identifying the competitors and
evaluating their strategies to determine their strengths and weaknesses relative to those
of the own product or service. It is a critical part of a company marketing plan. With this
evaluation, the organization can establish what makes its product or service unique and
what attributes it play up in order to attract its target market.
3. Competitor Analysis: - Competitor analysis is an assessment of the strengths and
weaknesses of current and potential competitors. This analysis will help to identify both
opportunities and threats for the organization. Competitor analysis is an essential
component of corporate strategy. Most of the organizations do not conduct this type of
analysis. Michael Porter presented a framework for analyzing competitors. It is based on
four key aspects of a competitor.
a. Competitors objectives.
b. Competitors assumptions.
c. Competitors strategies.
d. Competitors capability.
UNIT – II
Environmental Scanning: - It is a process of gathering, analyzing and dispensing
information for tactical or strategic purposes. The environmental scanning process entails
obtaining both realistic and subjective information on the business environments in which
a company is operating or considering entering.
Kinds: -
1. Ad – hoc scanning: - Short term, infrequent examinations usually initiated by a crisis.
2. Regular scanning: - Studies done on a regular schedule (e.g. once a year).
3. Continuous scanning: - Continuous structured data collection and processing on a
broad range of environmental factors.

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A scan of the external macro – environment in which the firm operates can be expressed
in terms of the following factors:
1. Political Factors: - Political factors include government regulations and legal issues
and define both formal and informal rules under which the firm must operate. Some
examples include,
a. Tax policy.
b. Employment laws.
c. Environment regulations.
d. Trade restrictions and tariffs.
e. Political stability.
2. Economic Factors: - Economic factors affect the purchasing power of potential
customers and the firm’s cost of capital. Some examples include,
a. Economic growth.
b. Interest rates.
c. Exchange rates.
d. Inflation rate.
3. Social Factors: - Social factors include the demographic and cultural aspects of the
external macro environment. These factors affect customer needs and the size of
potential markets. Some examples include,
a. Health consciousness.
b. Population growth rate.
c. Age distribution.
d. Emphasis on safety.
4. Technological Factors: - Technological factors can lower barriers to entry, reduce
minimum efficient production levels and influence outsourcing decisions. Some examples
include:
a. R&D activity.
b. Automation.
c. Technology incentives.
d. Rate of technological change.
Porter’s Five Forces Model: - It is a framework to analyze level of competition with an
industry and business strategy development. This model is mainly referred to micro
environment, to constraint it with the macro environment. Porter’s five forces include –
three forces from horizontal competition i.e. threat of new entrants, threat of substitute
products or services and threat of established rivals and two forces from vertical
competition i.e. bargaining power of suppliers and the bargaining power of customers.
1. Threat of New Entrant’s: - Profitable markets that yield high returns will attract new
firms. This result in many entrants’s which eventually will decrease profitability for all
firms in the industry. Unless the entry of new firms can be blocked by large companies,
the abnormal profit rate tends to be zero.
Potential Factors: -
a. Entry barriers if high.
b. Government policies.
c. Capital requirements.
d. Switching costs.
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e. Customer loyalty to established brands.
2. Threat of substitute products or services: - The existence of products outside of
the realm of the common product boundaries increases the propensity of customers to
switch to alternatives. Ex: - Tap water for Coke, Smart phone for traditional phone.
Potential Factors: -
a. Buyer propensity to substitute.
b. Buyer switching.
c. Perceived level of product differentiation.
d. Number of substitute products available in the market.
e. Relative price performance of substitute.
3. Threat of established rivals: - For most of the industries the intensity of competitive
rivalry is the major determinant of the competitiveness of the industry.
Potential Factors: -
a. Sustainable competitive advantage through innovation.
b. Level of advertising expense.
c. Powerful competitive strategy.
d. Firm concentration ratio.
e. Degree of transparency.
4. Bargaining power of suppliers: - Suppliers of raw materials, components, labour and
services to the firm can be a source of power over the firm when there are few
substitutes. If you are making biscuits and there is only one person who sells flour, you
have no alternative but to buy it from him.
Potential Factors: -
a. Supplier switching costs relative to firm switching costs.
b. Presence of substitute inputs.
c. Strength of distribution channel.
d. Supplier concentration to firm concentration ratio.
e. Degree of differentiation of inputs.
5. Bargaining power of customers: -The ability of customers to put the firm under
pressure, which also effects the customers sensitivity to price changes. The buyer power
is high, if the buyer has many alternatives. If a large number of customers will act with
each other and ask to make prices low, the company will have no other choice because
of large number of customer’s pressure.
Potential Factors: -
a. Buyer concentration to firm concentration ratio.
b. Degree of dependency up on existing channels of distribution.
c. Availability of existing substitute products.
d. Force down prices.
e. Buyer price sensitivity.
Techniques/Methods of Environmental scanning: - Environmental scanning is a
technique of detail study of the environment. It is done to assess the trend of the
environment and prepare the organization accordingly. There are different
techniques/methods of environmental scanning. They are discussed below:
1. Executive opinion method: - It is also called executive judgement method. Under this
environment is forecasted on the basis of opinion and views of top executives. A panel is
formed consisting of these executives.
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2. Expert opinion method: - Under this environment forecasting is based an opinion of
outside experts or specialist. The experts have better knowledge about market conditions
and customer taste and preferences. This method is similar to executive opinion method.
However, it uses external experts.
3. Delphi method: - This method is extension of expert opinion method. It involves
forming a panel of experts and questioning each member of the panel about the future
environmental trend. Later, the responses and summarized and returned to the members
for assessment. This process continues till the acceptable consensus is achieved.
4. Extrapolating method: - Under this method, the past information is used to predict
the future. Different methods used to extrapolate the future are time series, trend
analysis and regression analysis.
SWOT Analysis: - SWOT stands for Strengths, Weaknesses, Opportunities and Threats.
SWOT analysis is defined as the rational and overall evaluation of a company’s
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.
Strengths: - Firms strengths are its resources and capabilities that can be used as a
basis for developing a competitive advantage. Examples of such strengths include,
a. Patents.
b. Strong brand names.
c. Good reputation among customers.
d. Access of high grade natural resources.
e. Distribution networks.
Weaknesses: - The absence of certain strengths may be viewed as weaknesses.
Examples of such weaknesses include.
a. Lack of patent protection.
b. Weak brand name.
c. Poor reputation among customers.
d. Lack of access of high grade natural resources.
e. Lack of access to key distribution networks.
Opportunities: - The external environment analysis may reveal certain new
opportunities for profits and growth. Examples of such opportunities include,
a. Unfulfilled customer needs.
b. Arrival of new technologies.
c. Loosening of regulations.
d. Online sales.
e. Expanding in to new geographic markets.
Threats: - The changes in the external environment also may present threats to the firm.
Examples of such threats include,
a. Shifts in consumer tastes.
b. Emergence of substitute products.
c. New regulations.
d. Increased trade barriers.
e. Increased competition.
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Advantages: -
1. Helps in strategic planning.
2. Helps to reverse weaknesses.
3. Helps to overcome organizational threats.
4. Helps to identify opportunities to develop.
5. Helps in setting objectives of strategic planning.
Disadvantages: -
1. Insufficient research.
2. Poor industrial relations.
3. Government legislations.
4. Lack of skilled and efficient labour.
5. Doesn’t provide solutions or offer alternative decisions.
Strategy and Competitive Advantage in Diversified Companies and its evaluation: -
1. Does the strategy contain an appropriate vision?
2. Are the elements of the corporate strategy internally consistent?
3. Does the strategy fit with the external environment?
4. Does the corporate strategy build and fully exploit a corporate advantage?
5. Is the overall Corporate Strategy achievable?
6. It will be done by using BCG Matrix.
Strategic Analysis and Choice: -
The first step in evaluating and choosing a strategy is to review the results of the
strategic situation assessment consisting of an analysis of the general, industry, and
internal environments, in terms of factors critical to the success of the business.
George Steiner stated that three types of data are required to perform a situation audit:
identifying threats, strengths, and weaknesses.
1. Past performance of the firm.
2. Data about the current situation, including:
a. Analysis of customers and markets.
b. Resources of the company.
c. Competition.
d. Environmental setting.
e. Other performance measures or areas of interest.
3. Forecasts of the future.
Tools & Techniques to apply to Strategic Analysis: -
1. VMOST: This stands for Vision, Mission, Objectives, Strategy, and Tactical. Success
in an organization happens with top-down or bottom-up alignment. I was recently
reminded of is when working with a client who stated that their tactical is not
connected to the strategy. VMOST analysis is meant to help make that connection.
2. SWOT: The standard analysis tool, defined as Strengths, Weaknesses, Opportunities,
and Threats. Strengths and weaknesses are internal to the organization, opportunities
and threats are external. SWOT requires you to be candid and provide an honest

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 assessment of the state of things. It forces you to create a dialogue with stakeholders
to get different viewpoints. Eventually, you focus in on the key issues.
3. PEST: This is a great tool to use in tandem with SWOT. The acronym stands for
Political, Economic, Social and Technology. PEST reveals opportunities and threats
better than SWOT, the direction of business change, projects that will fail beyond your
control, and country, region and market issues through helping you create an
objective view.
4. SOAR: This stands for Strengths, Opportunities, Aspirations, and Results. This is a
great tool if you have a strategic plan completed, and you need to focus on a specific
impact zone.
5. Boston Matrix (product and service portfolio): This tool requires you to analyze your
business product or service and determine if it is a cash cow, sick dog, questionable,
or a flying star.
6. Porter’s Five Forces: This tool helps you understand where your business power
lies in terms of present competitiveness and future positioning strength. It forces you
to analyse the bargaining power of suppliers and customers, the threats to new
entrants and substitutes, and competitive rivalry in your marketplace.
7. Maturity Models: There are many maturity models that can be applied to a business.
From the evolution model, the technology model, to the team model. The idea is that
every business or department goes through a maturity cycle. The standard cycle is
chaotic, reactive, proactive, service, and value.
8. Root Cause Analysis: This is important, as there are times in the strategy analysis
process you need to dig deeper into a problem. This is where RCA is used. The key is
that you need to identify and specify the problem correctly, analyse the root cause
using a systematic approach, verify the causes, and determine the corrective actions
STRATEGIC LEADERSHIP AND STYLES: - Leadership is a process of social influence
in which one person can enlist the aid and support of others in the accomplishment of a
common task. It is an important element of directing process. It is an influence process
influencing the behaviour of subordinates to work willingly and enthusiastically for
achieving predetermined goals.
Nature: -
1. Influence process.
2. Followers.
3. Relationship.
4. Common goals.
5. Situation bound.
6. Continuous process.
Functions: -
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1. Motivating members.
2. Morale boosting.
3. Satisfying needs of members.
4. Accomplishing common goals.
5. Creating confidence.
6. Resolving conflicts.
Importance: -
1. To guide & inspire subordinates.
2. To secure co – operation of members.
3. To create confidence among employees.
4. To create good work environment.
5. To maintain discipline among members.
6. To implement change.
7. To represent members.
Qualities of a good leader: -
I. Inner qualities: -
1. Physical features.
2. Intelligence.
II. Acquirable qualities: -
1. Emotional stability.
2. Human relations.
3. Empathy Observing from others view.
4. Objectivity.
5. Motivating skills.
6. Technical skills.
7. Communication skills.
8. Social skills.
Strategic Leadership Models: -
1. Great Man Theories: - "Great leaders are born, not made"? This quote sums up the
basic tenant of the great man theory of leadership, which suggests that the capacity for
leadership is inborn. According to this theory, you're either a natural born leader or you're
not. The term "Great Man" was used because, at the time, leadership was thought of
primarily as a male quality, especially in terms of military leadership.
2. Trait Theories: - The trait model of leadership is based on the characteristics of many
leaders - both successful and unsuccessful - and is used to predict leadership
effectiveness. The resulting lists of traits are then compared to those of potential leaders

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to assess their likelihood of success or failure. These traits are not responsible solely to
identify whether a person will be a successful leader or not, but they are essentially seen
as preconditions that endow people with leadership potential.
3. Behavioural Theories: - Behavioural theories of leadership do not seek inborn traits
or capabilities. Rather, they look at what leaders actually do. If success can be defined in
terms of describable actions, then it should be relatively easy for other people to act in
the same way. Assumption, leaders can be made, rather than are born. Successful
leadership is based in definable, learnable behavior.
4. Situational & Contingency Theories: - Leadership is a process whereby, the
situation can influence which type of leadership behavior to take. Leaders are most
effective when they make their behavior contingent with the situation, this is also known
as the contingency approach to leadership. Both internal and external environments can
have a significant impact on leader effectiveness. The overall situational leadership
approach suggests that the leader must act in a flexible manner. The leader should be
able to diagnose the leadership style appropriate to the situation, and be able to apply
the appropriate style.
5. Hersey-Blanchard Situational Leadership Theory: - The Hersey-Blanchard
Situational Leadership Theory was created by Dr Paul Hersey, a professor and author of
"The Situational Leader," and Ken Blanchard, author of the best selling "The One-Minute
Manager," among others. The theory states that instead of using just one style,
successful leaders should change their leadership styles based on the maturity of the
people they're leading and the details of the task. Using this theory, leaders should be
able to place more or less emphasis on the task, and more or less emphasis on the
relationships with the people they're leading, depending on what's needed to get the job
done successfully.
6. Transactional Theory: - This style of leadership starts with the idea that team
members agree to obey their leader totally when they accept a job. The "transaction" is
usually the organization paying the team members in return for their effort and
compliance. The leader has a right to "punish" team members if their work doesn't meet
the predetermined standard. Team members can do little to improve their job satisfaction
under transactional leadership. Transactional leadership is really a type of
management, not a true leadership style, because the focus is on short-term tasks. It
has serious limitations for knowledge-based or creative work, however it can be effective
in other situations.
7. Transformational & Laissez Faire Theory: - Transformational Leadership: People
with this leadership style are true leaders who inspire their teams constantly with a
shared vision of the future. Laissez-Faire: This French phrase means "leave it be," and
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it's used to describe leaders who leave their team members to work on their own. It can
be effective if the leader monitors what's being achieved and communicates this back to
the team regularly. Most often, laissez-faire leadership is effective when individual team
members are very experienced and skilled self starters.
Styles: -
I. Autocratic (or) Authoritative Style: - In this style leader centralises power & decision
making in himself. Subordinates have no opportunity to make suggestions or to take part
in decision making function.
Limitations: -
1. Results in job dissatisfaction.
2. Employees efficiency tends to decline.
3. Potential people do not get opportunity to show their capabilities.
Suitability: -
1. Where subordinates are inexperienced.
2. Where leader wants to be dominated.
3. Where leader is highly experienced.
II. Democratic (or) Participative Style: - In this style leader takes decisions in
consultation with the subordinates. It enables subordinates to satisfy their social needs &
ego needs. It also makes them more committed to the organisation.
Benefits: -
1. Opportunity to subordinates to develop skills.
2. Provides job satisfaction.
3. Helps to take right decision.
Limitations: -
1. Time consuming process.
2. Few dominant subordinates influence.
3. Many cook’s spoil the food.
Suitability: -
1. Where subordinates are experienced.
2. Where leader prefers democratic style.
3. Where organisation made its objectives transparent to employees.
III. Laissez Faire Style: - In this style manager leaves decision making to subordinates &
he gives up his role. The biggest limitation is full freedom to subordinates creates
mismanagement in decision making.
Benefits: -
1. Full freedom to subordinates.
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2. Development of subordinates.
3. Free flow of communication.
Limitations: -
1. No leader’s inspiration.
2. Mismanagement.
3. Ignores manager’s contribution.
Suitability: -
1. Where leader leaves powers to subordinates.
2. Where subordinates are well knowledged.
3. Where organisational objectives are well communicated to the employees.
5 Key Strategic Leadership Actions: -
If strategic leaders want to effectively manage complex change, they can follow Ken
Blanchard’s five actions strategic leaders take:
1. Provide a vision.
2. Ensure members are developed with the right skills.
3. Provide incentives.
4. Provide resources.
5. Present a clear action plan.
Human Capital: - Human capital refers to the skill and knowledge of human beings.
Human capital is the attributes of a person that are productive in some economic context.
Human capital is the stock of competencies, knowledge, social and personality attributes,
including creativity, embodied in the ability to perform labor so as to produce economic
value.
Human Capital Development: - In the words of Prof. Harbinson: The process of
acquiring and increasing the number of person who have the skills, education and
experience which are critical for the economic and political development of a country.
Human capital development is the act of increasing the productive qualities of labor force
by providing more education and by increasing skill, health and nutrition level. If the
people of a country are well educated, well nourished, skilled and healthy that will be
said to have more human capital.
Role of Human Capital: -
1. Country develops if the human capital is developed.
2. Improve quality life.
3. Create positive attributes.
4. Eradication of social backwardness.
Problems of Human Capital Formation: -
1. Rapidly Growing Population.
2. Lack of Awareness.
3. Unequal Distribution of Wealth.
4. Investment in Buildings and Equipments.

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5. Inappropriate Education.
6. Ill-health and Ill-nutrition Facilities.
7. No Proper Training for Employees.
8. Less Promotion for Employees.
9. Agriculture, the Main Occupation.
10. No Manpower Planning.
Benefits of Human Capital: -
1. Human resource development system can be designed to help to raise production of
essential goods and services.
2. Human capital preserves and enhances the freedom, dignity and the worth of labor
force.
3. Human capital development is not only meaningful indicator of modernization but it is
essential for the development of technology and skill which can be a substitute for
physical capital.
4. Human capital in improving the economic productivity.
Social Capital: - The concept of social capital became fashionable only relatively
recently, but the term has been in use for almost a century while the ideas behind it go
back further still. “Social capital” may first have appeared in a book published in 1916 in
the United States that discussed how neighbours could work together to oversee
schools. Author Lyda Hanifan referred to social capital as “those tangible assets [that]
count for most in the daily lives of people: namely goodwill, fellowship, sympathy, and
social intercourse among the individuals and families who make up a social unit”
Varieties of social capital: -
There’s much debate over the various forms that social capital takes, but one fairly
straightforward approach divides it into three main categories:
1. Bonds: - Links to people based on a sense of common identity (“people like us”) –
such as family, close friends and people who share our culture or ethnicity.
2. Bridges: - Links that stretch beyond a shared sense of identity, for example to distant
friends, colleagues and associates.
3. Linkages: - Links to people or groups further up or lower down the social ladder.
Balanced Scorecard: - Balanced Scorecard is a strategy performance management tool
– a semi – standard structured report, supported by design methods & automation tools
that can be used by managers to keep track of the execution of activities by the staff
within their control & to monitor the consequences arising from these actions. This
technique is widely adopted in English speaking western countries. It is the most widely
adopted performance management framework reported in the annual survey of
management tools undertaken by Bain & company.
Features: -
1. Internal Management system.
2. Clarity of strategy.
3. Communication plan.
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4. Reporting process.
5. Clear objectives.
6. Measurements.
7. Stretch targets.
8. Personal score cards.
9. Strategy – driven budgets.
10. Planning process.
Benefits: -
1. Organizational alignment.
2. Motivation.
3. Evaluation of strategy.
4. Focused workforce.
5. Accountability & Integrity.
6. Vision for the Mission.
7. Effective resource utilization.
8. Commitment & Productivity.
9. Support budget development.
10. Supports in annual planning.

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