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The top management of an organization is concerned with the selection of a course of action
from among different alternatives to meet the organizational objectives. The process by which
objectives are formulated and achieved is known as strategic management and strategy acts as
the means to achieve the objective. Strategy is the grand design or an overall ‘plan’ which an
organization chooses in order to move or react towards the set of objectives by using its
resources. Strategies most often devote a general programme of action and an implied deployed
of emphasis and resources to attain comprehensive objectives. An organization is considered
efficient and operationally effective if it is characterized by coordination between objectives and
strategies. There has to be integration of the parts into a complete structure. Strategy helps the
organization to meet its uncertain situations with due diligence. Without a strategy, the
organization is like a ship without a rudder. It is like a tramp, which has no particular destination
to go to. Without an appropriate strategy effectively implemented, the future is always dark and
hence, more are the chances of business failure.
Meaning of strategy: The word ‘strategy’ has entered in the field of management from the
military services 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 as
used for the first time in 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 more broader terms. According to 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”
DEFINITIONS:
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Strategic management is “ a stream of decisions and actions, which leads to the
development of an effective strategy or strategies to help achieve corporate
objectives” – Glueck
Strategic Management is all about identification and description of the strategies that
managers can carry so as to achieve better performance and a competitive advantage for
their organization. An organization is said to have competitive advantage if its
profitability is higher than the average profitability for all companies in its industry.
Features of Strategy
1. Strategy is Significant because it is not possible to foresee the future. Without a perfect
foresight, the firms must be ready to deal with the uncertain events which constitute the
business environment.
2. Strategy deals with long term developments rather than routine operations, i.e. it deals
with probability of innovations or new products, new methods of productions, or new
markets to be developed in future.
3. Strategy is created to take into account the probable behavior of customers and
competitors. Strategies dealing with employees will predict the employee behavior.
Select strategies that build on the organisation’s strengths and correct its weaknesses
in order to take advantage of external opportunities and counter external threats.
These strategies should be consistent with the major goals and objectives of the
organisation
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The task of analyzing the organsation’s external and internal environments and then selecting
appropriate strategies constitutes strategy formulation. Strategy implementation involves putting
the strategy into action. These includes taking actions consistent with the selected strategies of
the company at the corporate , business and functional level; allocating roles and responsibilities
among managers (typically through the design of organization structure); allocating
resources( including capital and money ); setting short-term objectives; and designing the
organisation’s control and reward systems.
MISSION
Mission tells clearly why the organsiation exists and what it would be doing. Mission
statement is the statement of the role by which an organization intends to serve it’s
stakeholders. It describes why an organization is operating and thus provides a
framework within which strategies are formulated.
(eg) Wal-Mart’s mission is “To give ordinary folk the chance to buy the same thing as
rich people.
GOALS
Organisations set goals, which they set to achieve in the medium term to long term term
basis. Normally organizations work with hierarchy of goals such as sizeable market
share, maximizing shareholder’s wealth, profit and so on. A goal is a precise and
measurable desired state which the firm attempts to achieve
VISION
The vision of a company lays out some desired future state: it articulates often in bold
terms what the company would like to achieve. Nokia, the world’s largest manufacturer
of mobile phones, operates with a very simple but powerful vision: “If it can go mobile it
will”
VALUES
The values of a company state how managers and employees should conduct themselves,
how they should do business and what kind of organization they should build to help a
company achieve its mission. Values shape the behavior within a company and they play
a vital role in the accomplishment of organisation’s mission and goals. Values are
considered to be the vital ingredient of organizational culture and they prove to be a
source of competitive advantage (eg) Nucor steel is one of the most productive nad
profitable steel firms in the world. Its competitive advantage largely depends on its
productive work force which the company attributes directly to its cultural values.
EXTERNAL ANALYSIS
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The second component of the strategic management process is an analysis of the
organisation’s external operating environment. The essential purpose of the external
analysis is to identify strategic opportunities and threats in the organisation’s operating
environment that will affect how it pursues its mission. Three interrelated environments
should be examined when undertaking an external analysis: the industry environment in
which the company operates, the country or national environment and the wider
socioeconomic and macro environment.
INTERNAL ANALYSIS
Internal analysis, the third component of the strategic planning process , focuses on
reviewing the resources, capabilities and competencies of the company. The goal is to
identify the strengths and weaknesses of the company. Strengths lead to superior
performance and weaknesses to inferior performance.
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A Weakness is an inherent limitation or constraint which creates strategic
disadvantages. An example of weakness is overdependence on a single product
line, which is potentially risky for a company in times of crisis
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SWOT ANALYSIS AND THE BUSINESS MODEL
Business level Strategies – Business strategies are the courses of action adopted by a
firm for each of its businesses separately to serve identified customer groups and provide
value to the customer by a satisfaction of their needs. It encompasses the business’s
overall competitive theme, the way it positions itself in order to gain competitive
advantage. The three generic business strategies are cost leadership, differentiation and
focus on a particular niche or segment of the industry or combination of these.
Corporate Level Strategies – They are basically about the choice of direction that a firm
adopts in order to achieve its objectives. There could be a small business firm involved in
a single business, or a large, complex, diversified conglomerate with several different
businesses. The corporate strategy in both these cases is about the basic direction of the
firm as a whole. They enable organisations to maximize the long run profitability of the
organization. Vertical integration( backward and forward integration), diversification,
strategic alliances, acquisitions and joint ventures are examples of corporate level
strategies
Global Strategies – They are pursued by organizations while they expand their
operations in international business so as to increase their profitability. International
strategy, multi domestic strategy, global strategy and transnational strategy are some of
the global strategies
STRATEGY IMPLEMENTATION
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It involves taking action at the functional, business and corporate levels to execute a
strategic plan. Implementation can include, for example, putting quality improvement
programmes into place, changing the way a product is designed, positioning the product
differently in the market place, segmenting the market, offering different versions of the
product to different customer groups, expanding through mergers or acquisitions etc
Designing control systems - The purpose of strategic control is to determine whether the
given strategy is effective in achieving the organizational objective and moving on the
right track. The organisational control can be classified as market control, output control
and bureaucratic control. Control system requires development of perceptible
organizational culture. Reward and incentive systems should also be decided towards this
end.
FEEDBACK
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To evaluate to what extent competitive advantage is being created and sustained
Managers must monitor and reevaluate for the next round of strategy formulation and
implementation
STRATEGIC INTENT:
The formal strategic planning model has been characterized as the fit model of strategy making
because it attempts to achieve a fit between the internal resources and capabilities of an
organisation and external opportunities and threats in the industry environment. Strategies
formulated with only the present in mind tend to be more concerned with today’s problem than
with tomorrow’s opportunities. Therefore companies are unlikely to develop competitive
advantage. This is particularly true in a dynamic competitive environment where new
competitors are continually arising and new ways of doing business are constantly invented.
Successful companies like Toyota, Canon, Komatsu have outstripped their existing resources and
capabilities. Strategic intent encompasses an active management process that includes, “
focusing the organisation’s attention on the essence of winning; motivating people by
communicating the value of the target; leaving room for individual and team contributions ;
sustaining enthusiasm by providing new operational definitions as circumstances change ; and
suing intent consistently to guide resource allocations.
STAKEHOLDERS IN BUSINESS
Stakeholders are individuals, groups or institutions who have a stake in or are significantly
influenced by an organization’s decisions and actions
A corporate stakeholder is that which can affect or be affected by the actions of the business as a
whole. Stakeholders may be defined as "those groups without whose support the organization
would cease to exist."
SHAREHOLDERS
They will be interested in their dividends and capital growth of their shares.
MANAGERS
They may also be shareholders – they will be interested in their job security, prospects
and pay.
Managers are usually well paid and some get bonuses. Some come with University
degree’s some work their way up from the bottom and others train in management for the
role.
They are responsible for a number of staff and usually have some voice in the daily
running of the business. They want to business to do well because their reputation and
CV’s rest on performance factors.
EMPLOYEES
Employees, like managers, want the business to do well as it pays their salary or wage.
They also want the business to be a good place to work which respects their employee
rights.
Employees agree to work a certain number of hours in return for a wage or salary
Their pay levels vary with skills, qualifications, age, location, types of work and industry
and other factors
CUSTOMERS
Businesses must understand and meet the needs of their customers, otherwise they
will fail to make a profit or survive due to losing them.
SUPPLIERS
They supply raw materials, parts etc. Suppliers value large reliable contracts with
profitable businesses because Secure, almost guaranteed income, large contracts = long
term profit
Supplier image is strengthened and associated with business names
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Likewise, businesses value reliable suppliers because of On time reliable deliveries of
stock, Consistent quality, Competitive prices – offer discounts for steady orders.
Firms get the resources they need to produce goods and services from suppliers
Businesses should have effective relationships with their suppliers in order to get quality
resources at reasonable prices
This is a two-way process, as suppliers depend on the firms they supply
BANKS AND OTHER FINANCIAL ORGANISATIONS
Banks and Financiers – are another stakeholder. Most businesses deal with banks and
borrow money.
Businesses will want a good interest rate and banks will want to lend to profitable
businesses so that they get paid back with interest.
GOVERNMENT
Economic policies affect businesses costs (through taxation and interest rates)
Successful businesses are good for government as they create wealth and employment
which saves them paying out job seekers allowance
LOCAL COMMUNITY
Businesses must have a two way relationship with the communities they exist in.
The local community will most likely be the source of the businesses staff and customers
Businesses must be careful not to upset the local community by some aspects of how they
run their activities.
Businesses pay business rates to the local council so are important to the local economy.
The business often supplies goods and services vital to the local area
But at times the community can feel aggrieved by some aspects of what a firm does
PRESSURE GROUPS – who are interested in whether the business is acting appropriately
towards their area of interest.
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It is important to distinguish between a STAKEHOLDER and a SHAREHOLDER.
They sound the same – but the difference is crucial!
Shareholders hold shares in the company – that is they own part of it.
Stakeholders have an interest in the company but do not own it (unless they are
shareholders).
Often the aims and objectives of the stakeholders are not the same as shareholders and
they come into conflict.
The conflict often arises because while shareholders want short-term profits, the other
stakeholders’ desires tend to cost money and reduce profits. The owners often have to
balance their own wishes against those of the other stakeholders or risk losing their
ability to generate future profits Stakeholders may be distinguished into two – primary
and secondary stakeholders.
'Primary Stakeholders' - usually internal stakeholders, are those that engage in economic
transactions with the business. (For example stockholders, customers, suppliers, creditors, and
employees)
Secondary Stakeholders - usually external stakeholders, are those who - although they do not
engage in direct economic exchange with the business - are affected by or can affect its actions.
(For example the general public, communities, activist groups, business support groups, and the
media)
Vision: outlines what the organization wants to be, or how it wants the world in which it operates
to be (an "idealised" view of the world). It is a long-term view and concentrates on the future. It
can be emotive and is a source of inspiration. For example, a charity working with the poor might
have a vision statement which reads "A World without Poverty."
Organizations sometimes summarize goals and objectives into a mission statement and/or a
vision statement. Others begin with a vision and mission and use them to formulate goals and
objectives.
Many people mistake the vision statement for the mission statement, and sometimes one is
simply used as a longer term version of the other. However they are distinct; with the vision
being a descriptive picture of a desired future state; and the mission being a statement of a
rationale, applicable now as well as in the future. The mission is therefore the means of
successfully achieving the vision.
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For an organization's vision and mission to be effective, they must become assimilated into the
organization's culture. They should also be assessed internally and externally. The internal
assessment should focus on how members inside the organization interpret their mission
statement. The external assessment — which includes all of the businesses stakeholders — is
valuable since it offers a different perspective. These discrepancies between these two
assessments can provide insight into their effectiveness.
ITC:
ITC Vision statement: Sustain ITC's position as one of India's most valuable corporations
through world class performance, creating growing value for the Indian economy and the
Company's stakeholders
ITC Mission Statement: To enhance the wealth generating capability of the enterprise in a
globalising environment, delivering superior and sustainable stakeholder value
L&T Vision Statement: L&T Power shall be india's most preferred provider of equipment,
services and turnkey solutions for fossil fuel-based power plants and a leading contributor to the
nation's power generation capacity.
L&T Mission Statement: L&T Power shall provide products based on efficient and enviroment-
friendly technology, consistently surpassing customer expectations of quality and on-time
delivery.
Vision Statement
Vision statement provides direction and inspiration for organizational goal setting. It is a
single statement dream or aspiration.
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).
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”
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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 aconnect between the
vision/mission and people’s 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
There are some general principles that it may be worth bearing in mind when defining a new
mission statement, or reviewing a current one.
BUSINESS DEFINITION:
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An organization or enterprising entity engaged in commercial, industrial or professional
activities. A business can be a for-profit entity, such as a publicly-traded corporation, or a
non-profit organization engaged in business activities, such as an agricultural
cooperative.
Any commercial, industrial or professional activity undertaken by an individual or a
group.
To "do business" with another company, a business must engage in some kind of
transaction or exchange of value with that company.
In this sense, the word "business" can be used to refer to a specific industry or activity,
such as the "real estate business" or the "advertising business".
An organization or economic system where goods and services are exchanged for one
another or for money. Every business requires some form of investment and enough
customers to whom its output can be sold on a consistent basis in order to make a profit.
Businesses can be privately owned, not-for-profit or state-owned
Definitions
Both terms imply the target that one's efforts is desired to accomplish.
A goal is defined as
An objective has a similar definition but is supposed to be a clear and measurable target.
• Objectives and goals are used interchangeably in management literature but the recent
SM literature shows a subtle difference between these two terms
• Objective is the end through which the organisation tries to accomplish through its
operations
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• Goal is an open ended statement which does not quantify what needs to be accomplished
and the time frame for completion
• (eg) Growth is a goal whereas increase growth by 10% in terms of market share and
sales over last year is an objective
• Objective and strategy put together explain the firm’s concept of business
Differences in scope
Goals are broader than objectives in the sense that goals are general intentions and are not
specific enough to be measured. Objectives are narrow and are set for certain tasks in particular.
Specificity
Goals are general while objectives are specific. Goals are just general intentions towards the
attainment of something while objectives are precise actions for accomplishment of a specific
task.
Tangibility
Goals may be intangible while objectives ought to be tangible. Goals may be directed at
achieving non-measurable things while objectives may be targeted at getting measurable things
or tasks.
Both have a certain time frame. Goals usually have a longer time-frame than objectives.
Objectives are usually precise targets set for a short term. Goals may be set for a longer term but
many objectives may be set within that goal.
Goals may or may not be measured but in most cases objectives are measurable.
Examples
"I want to achieve success in the field of genetic research and do what no one has ever done."
This is a goal. "I want to complete the thesis on genetic research within this month." This is an
objective.
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OBJECTIVE SETTING AREAS:
• Profitability
• Market share
• Productivity
• Technology
• Image
FORMULATION OF OBJECTIVES:
The government regulations, powerful consumer groups, trade unions and influential
suppliers exert enormous influence on organisation.
Material and human resource are always scarce and powerful dominant groups always
take an upper hand and exercise power over other groups in framing objectives of their
choice and allocate scarce resources in their favour
Values are enduring beliefs, about what is good or bad, desirable or undesirable.
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The to managements may have entrepreneurial value or philanthropic value or social
responsibility value which in turn will influence their goal setting
• PAST STRATEGIES
Strategies and objectives followed in the recent past is likely to have deep impact and
radical deviation from them will not be possible. The changes from current objectives
will be marginal and incremental in nature
• Objectives help to coordinate decisions. All employees are aware of the objectives and
stated objectives prove to be a means of coordination
CORPORATE GOVERNANCE
A Corporation is a business entity in which different stakeholders contribute capital, know-how
and labour for their mutual benefit. Management runs the business without being personally
responsible for providing fund. The stakeholders share the profit without being responsible for
the operations and they have limited liability. They elect the directors who have the authority and
responsibility to establish basic corporate policies. The Board of Directors normally approves all
decisions that affect long term performance of the Corporation. Board of directors, who
supervises top management with the concurrence of the shareholders governs the corporation.
Corporate governance generally refers to the set of mechanisms that influence the decisions
made by managers when there is a separation of ownership and control. The evolution of public
ownership has created a separation between ownership and management. Before the 20th
century, many companies were small, family owned and family run. Today, many are large
international conglomerates that trade publicly on one or many global exchanges. In an attempt
to create a corporation where stockholders interests are looked after, many firms have
implemented a two-tier corporate hierarchy. On the first tier is the board of directors: these
individuals are elected by the shareholders of the corporation. On the second tier is the upper
management: these individuals are hired by the board of directors.
SHAREHOLDERS:
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The right to sell their shares
The right to vote on the directors nominated by the board
The right to nominate directors and propose shareholder resolutions
The right to dividends if they are declared,
The right to purchase new shares issued by the company
GOVERNANCE MECHANISMS
Governance mechanisms are mechanisms that principals put in place to align incentives
between principals and agents and monitor and control agents
The purpose of governance mechanisms is to reduce the scope and frequency of the
agency problem - to help ensure that agents act in a manner that is consistent with the
best interest of their principals.
There are four types of governance mechanisms that align stockholder and management
interests. They are
BOARD OF DIRECTORS
STOCK BASED COMPENSATION
FINACIAL STATEMENTS AND AUDITORS
THE TAKEOVER CONSTRAINT
BOARD OF DIRECTORS:
Board of Directors are elected by the shareholders. The board of directors is made up of two
types of representatives.
The first type involves individuals chosen from within the company. This can be a CEO,
CFO, manager or any other person who works for the company on a daily basis.
The other type of representative is chosen externally and is considered to be independent
from the company. The role of the board is to monitor the managers of a corporation,
acting as an advocate for stockholders. In essence, the board of directors tries to make
sure that shareholders interests are well served. Board members can be divided into three
categories
Chairman – Technically the leader of the corporation, the chairman of the board is
responsible for running the board smoothly and effectively. His or her duties typically
include maintaining strong communication with the chief executive officer and high-level
executives, formulating the companys business strategy, representing management and
the board to the general public and shareholders, and maintaining corporate integrity. A
chairman is elected from the board of directors.
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Inside Directors – These directors are responsible for approving high-level budgets
prepared by upper management, implementing and monitoring business strategy, and
approving core corporate initiatives and projects. Inside directors are either shareholders
or high-level management from within the company. Inside directors help provide
internal perspectives for other board members. These individuals are also referred to as
executive directors if they are part of companys’ management team.
Outside Directors – While having the same responsibilities as the inside directors in
determining strategic direction and corporate policy, outside directors are different in that
they are not directly part of the management team. The purpose of having outside
directors is to provide unbiased and impartial perspectives on issues brought to the board.
MANAGEMENT TEAM:
Management Team As the other tier of the company, the management team is directly
responsible for the day-to-day operations (and profitability) of the company.
Chief Executive Officer (CEO) – As the top manager, the CEO is typically responsible
for the entire operations of the corporation and reports directly to the chairman and board
of directors. It is the CEOs responsibility to implement board decisions and initiatives
and to maintain the smooth operation of the firm, with the assistance of senior
management. Often, the CEO will also be designated as the companys’ president and
therefore also be one of the inside directors on the board (if not the chairman).
Chief Operations Officer (COO) – Responsible for the corporations operations, the
COO looks after issues related to marketing, sales, production and personnel. More
hands-on than the CEO, the COO looks after day-to-day activities while providing
feedback to the CEO. The COO is often referred to as a senior vice president.
Chief Finance Officer (CFO) – Also reporting directly to the CEO, the CFO is
responsible for analyzing and reviewing financial data, reporting financial performance,
preparing budgets and monitoring expenditures and costs. The CFO is required to present
this information to the board of directors at regular intervals and provide this information
to shareholders and regulatory bodies such as the Securities and Exchange Commission
(SEC). Also usually referred to as a senior vice president, the CFO routinely checks the
corporations financial health and integrity.
BOD Typical Responsibilities
Setting corporate strategy, overall direction , mission and/or vision
Succession: Hiring, compensating and firing the CEO and top management
Control: monitoring, evaluating, and/or supervising top management
Reviewing and approving the use of organizational resources
Caring for stockholders’ interest
In legal terms, BOD’s are required to direct the affairs of the corporation but not to manage them
(act with due care)
Role of BOD In The Strategic Management Process
Monitor:
Keep abreast of developments both outside & inside the company
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Bring to management’s attention developments it might have overlooked.
Evaluate and influence:
Examine mgt’s proposals, decisions, & actions.
Agree or disagree with them; give advice, offer suggestions & outline alternatives (if
any).
Initiate and determine:
Delineate a company’s mission & vision; and specify strategic options to management.
Degree Of Involvement Is Dependent On Extent To Which It Perform The Three
Tasks:
Monitoring (LOW LEVEL OF INVOLVEMENT)
Evaluating and influencing (MEDIUM LEVEL OF INVOLVEMENT)
Initiating and determining (HIGH LEVEL OF INVOLVEMENT)– e.g., GM, Mead Corp.
BOD involvement is a continuum. Composition Of Board of Directors
Increasing numbers of institutional investors (pension funds, etc) and other outsiders on
the board
Larger stock ownership by directors and executives; and
A greater willingness of the board to balance the economic goal of profitability with the
social needs of society
STOCK BASED COMPENSATION
To overcome the agency problem , stockholders have urged many companies to
introduce stock based compensation schemes for their senior executives. These
schemes are designed to align the interests of managers with those of stockholders
In addition to their regular salary senior executives are given stock option in the
firms. Stock options gives managers the right to purchase the company’s shares at a
predetermined price, which may often be less than the market price of the company’s
stock
The idea behind stock options is to motivate managers to adopt strategies that
increase the share price of the company .
FINANCIAL STATEMENTS & AUDITORS
It is required for publicly trading companies to prepare annual reports to give consistent,
detailed and accurate information about how efficiently and effectively the agents of
stockholders- the managers – are running the company.
The accounts also need to be audited by an independent and accredited accounting firm
If the system works properly than the stockholders can confidence that the information
contained in the financial statements accurately represents the state of affairs at a
company. (eg) Enron in U.S
THE TAKEOVER CONSTRAINT
Due to imperfections in corporate governance mechanisms , agency problems still exist
in certain companies.
But stockholders have the right to sell the shares . If they start doing so in large numbers ,
the price of the company’s shares will decline which in turn will result in the fall in the
company’s value in the stock market.
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The company may become an attractive acquisition target and runs trhe risk of being
purchased by another enterprise which is termed as takeover constraint.
3) Merit Based Management: A strong Board of Directors is necessary to lead and support
merit based management. The board has to be an independent, strong and non- partisan body
where the sole motive should be decision-making through business prudence.
Boards are getting more involved not only in reviewing & evaluating company strategic
but also in shaping.
Institutional investors such as pension’s funds, mutual funds, & insurance companies are
becoming active on boards, and are putting increase pressure on top management to
improve corporate performances.
Boards are getting smaller, partially because of the reduction in the number of insiders
but also because boards desire new directors to have specialized knowledge & expertise
instead of general experience.
Boards continue to take more control of board functions by either splitting the combined
chair/CEO position into two separate positions or establishing a lead outside director
position.
As corporations become more global, they are increasingly looking for international
experience in their board members
Corporate social responsibility is the term used to describe the way that a business takes into
account the financial, environmental and social impacts of decisions and actions it is involved in.
It is an increasingly important issue in business, as managers, consumers, investors and
employees have begun to understand how economic growth is linked to social and environmental
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well-being. Corporate social responsibility is a key issue for any organization aiming for long
term sustainability. Whilst it is a mostly voluntary concept, there is increasing pressure on
organizations to make a positive contribution to society, or at the least, reduce their negative
impact. Internationally, governments are also moving towards the enforcement of certain
elements of corporate social responsibility, particularly in regards to the protection of the
environment.
Social responsibility is a doctrine that claims that an entity whether it is state, government , corporation ,
organization or individual has a responsibility to society. This responsibility can be negative in that it is a
responsibility to refrain from acting, or it can be positive meaning a responsibility to act. It can also imply
that corporations have an implicit obligation to give back to society. The responsibility to profitably
serve employees and customers in an ethical and lawful manner. An organization's obligation
to maximize its positive impact and minimize its negative impact on society. The concern for the
consequences of a person's or institution's acts as they might affect the interests of others,
including the environment and involuntary customers. The concept that businesses should be
actively concerned with the welfare of society at large. A business’s collective code of ethical
behavior towards the environment, its customers, its employees, and its investors. Ethical
obligations to customers, employees, and the general community The responsibility of a
responsible agent who chooses to participate in a society and acquire the benefits thereof.
Corporate social responsibility has become an integral part of corporate strategy. It means open and
transparent business practices that are based on ethical values and respect for employees community and
the natural environment. It is designed to deliver sustainable value to society at large as well as
to shareholders. Some of the benefits of being socially responsible is that they can attract good
employees who prefer working for a responsible firm . Bowen argued that corporate social
responsibility rests on two premises: social contract, which is an implied set of rights and
obligations that are inherent to social policy and assumed by business, and moral agent, which
suggests that businesses have an obligation to act honorably and to reflect and enforce values
that are consistent with those of society.
The Three Perspectives of Social Responsibility: The three perspectives of corporate social
responsibility are economic responsibility, public responsibility, and social responsiveness. The
three perspectives represent a continuum of commitment to social responsibility issues, ranging
from economic responsibility at the low end and social responsiveness at the high end. The
economic responsibility perspective argues that the only social responsibility of business is to
maximize profits within the “rules of the game.” Moreover, the proponents of this viewpoint
argue that organizations cannot be moral agents. Only individuals can be moral agents. In
contrast, the public responsibility perspective argues that businesses should act in a way that is
consistent with society’s view of responsible behavior, as well as with established laws and
policy. Finally, the proponents of the social responsiveness perspective argue that businesses
should proactively seek to contribute to society in a positive way. According to this view,
organizations should develop an internal environment that encourages and supports ethical
behavior at an individual level.
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The stockholder view is much narrower, and only views the stockholders (i.e.,owners) of a
firm. The stockholder view of the organization would tend to be alignedcloser to the economic
responsibility view of social responsibility. The stakeholder view of the organization argues that
anyone who is affected by or can affect the activitiesof a firm has a legitimate “stake” in the firm.
This could include a broad range of population. The stakeholder view can easily include actions
that might be labeled public responsibility and social responsiveness.
The Stakeholders:
All those who are affected by or can affect the activities of an organization.
Primary Stakeholders: The primary stakeholders of a firm are those who have a formal,
official, or contractual relationship with the organization. They include owners
(stockholders), employees, customers, and suppliers.
Secondary Stakeholders: The secondary stakeholders of a firm are other societal
groups that are affected by the activities of the firm. They include consumer groups,
special interest groups, environmental groups, and society at large.
The globalization of the business environment has had a remarkable impact on issues of social
responsibility. As organizations become involved in the international field, they often find that
their stakeholder base becomes wider and more diverse. As a result, they must cope with social
responsibility related issues across a broad range of cultural and geographic orientations. The
four strategies for social responsibility represent a range, with the reaction strategy on one end
(i.e., do nothing) and the proaction strategy on the other end (do much). The defense and
accommodation strategies are in the middle. (reaction, defense, accommodation, and proaction).
The reason why companies must look beyond profits is also due to the peculiar situation that
humanity finds itself in the second decade of the 21st century. Given the political, economic,
social and environmental crises that humans as a race are confronting, corporations have a role to
play since they contribute the most to the economic well being of humanity and in turn influence
the political and social trends.
The evolution of CSR as a concept dates back to the 1950’s when the first stirrings of social
conscience among management practitioners and theorists were felt. The writings of Keith
Davis starting in the 1950’s and continuing into the 1970’s speak of the need for businesses to
engage in socially responsible behavior and to ensure that society as a whole does not lose out in
the process of profit making behavior by businesses. CSR as a concept was starting to be taken
seriously by the time the 1970’s dawned and through the tumultuous decade when big business
and their minions were accused of several misdemeanors pertaining to rampant disregard for the
environment and society as a whole.
Managers should acknowledge and actively monitor the concerns of all legitimate
stakeholders, and should take their interests appropriately into account in decision-
making and operations.
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Managers should listen to and openly communicate with stakeholders about their
respective concerns and contributions, and about the risks that they assume because of
their involvement with the corporation.
Managers should adopt processes and modes of behavior that are sensitive to the
concerns and capabilities of each stakeholder constituency.
Managers should recognize the interdependence of efforts and rewards among
stakeholders, and should attempt to achieve a fair distribution of the benefits and burdens
of corporate activity among them, taking into account their respective risks and
vulnerabilities.
Manages should work cooperatively with other entities, both public and private, to insure
that risks and harms arising from corporate activities are minimized and, where they
cannot be avoided, appropriately compensated.
Managers should avoid altogether activities that might jeopardize inalienable human
rights (e.g., the right to life) or give rise to risks which, if clearly understood, would be
patently unacceptable to relevant stakeholders.
Managers should acknowledge the potential conflicts between (a) their own role as
corporate stakeholders, and (b) their legal and moral responsibilities for the interests of
stakeholders, and should address such conflicts through open communication, appropriate
reporting and incentive systems, and, where necessary, third party review.
Many Indian companies carry out socially responsible activities. Some examples are cited below:
Organizations tend to forget their customers once the deal is done. After sales service is
essential and ensures long term growth and profits for the organization. Assurance should be
made to have touch with customers even after the deal to survive the cut throat competition. If
the customer is not satisfied with the product, it is the responsibility of organizations to replace
it or provide a solution. Customer feedbacks are important and help you understand the
satisfaction level of your esteemed customers and how you can make your product better in due
course of time.
Employees are said to be the true assets of an organization. Even the best of technology or best
of infrastructure would not be of much use if employees do not perform up to the mark and are
not satisfied with their current profiles. Employees should be provided an environment where
they can hone their skills with time. Problems arise when management puts a full stop on the
growth of employees. Employees can be asked to interchange roles, so that everyone gets to
work on something new. Timely appraisals are important. It is the responsibility of the
management to ensure that employees who are working really hard and showing progress are
suitably rewarded. Incentives, cash prizes, bonuses go a long way in not only motivating the
employees but also creating a healthy and positive ambience at the workplace.
Tata Group:
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Tata Group in India has a range of CSR projects, most of which are community improvement
programs. For example, it is a leading provider of maternal and child health services, family
planning, and has provided 98 percent immunization in Jamshedpur. The company also endorses
sports as a way of life. It has established a football academy, archery academy, and promotes
sports among employees. It offers healthcare services all over the country with programs like
rural health development.
Tata Group also has an organized relief program in case of natural disasters, including long-term
treatment and rebuilding efforts. It did laudable work during the Gujarat earthquakes and Orissa
floods. It also supports education, with over 500 schools, and also is a benefactor of the arts and
culture. It has done abundant work in improving the environment and local populations around
its industries.
Infosys
The management team at Infosys continues to set examples in the area of corporate citizenship
and has involved itself vigorously in key national bodies. They have taken initiatives to work in
the areas of research and education, community service, rural outreach programs, employment,
healthcare for the poor, education, arts and culture, and welfare activities undertaken by the
Infosys Foundation.
PART A
1. Define Strategy.
Strategy is “a determination of the basic long term goals and objectives of an enterprise, and
the adoption of courses of action and allocation of resources necessary to carry out these
goals” – Alfred Chandler
2. What is Strategic Management?
Strategic management is “a stream of decisions and actions, which leads to the development
of an effective strategy or strategies to help achieve corporate objectives” – Glueck
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• Technology
• R&D and Innovation
• Corporate social Responsibility
• Image
• Worker performance & Attitude
• Manager Performance & Development
5. What is business ethics?
Business Ethics are the accepted principles of right or wrong governing the conduct of
business people. Ethical decisions are in accordance with those accepted principles, whereas
unethical decisions violate accepted principles
6. Define ethics.
The basic concepts and fundamental principles of decent human conduct. It includes study
of universal values such as the essential equality of all men and women, human or natural
rights, obedience to the law of land, concern for health and safety and, increasingly, also for
the natural environment. Ethics refers to the moral rights and wrongs of any decision a
business makes. It is a value judgment that may differ in importance and meaning between
different individuals.
7. Define Corporate Governance.
Corporate governance essentially involves balancing the interests of the many stakeholders in
a company - these include its shareholders, management, customers, suppliers, financiers,
government and the community. Corporate governance also provides the framework for
attaining a company's objectives and it can be defined as a system of rules, practices and
processes by which a company is directed and controlled.
8. Draft a Statement for vision and mission
ITC Vision statement: Sustain ITC's position as one of India's most valuable
corporations through world class performance, creating growing value for the Indian
economy and the Company's stakeholders
ITC Mission Statement: To enhance the wealth generating capability of the
enterprise in a globalising environment, delivering superior and sustainable
stakeholder value
9. What is Environmental Scanning?
Environmental scanning refers to possession and utilization of information about occasions,
patterns, trends, and relationships within an organization’s internal and external environment.
It helps the managers to decide the future path of the organization.
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To utilize specific resources to achieve
To identify clear broader goals that advances the
Purpose sub-goals that supports the defined
overall organization and organizes resources.
mission.
Held accountable to overall health Held accountable to specific resources
Accountability
of organization. assigned.
A subset of resources used in a plan or
All the resources within the organizations, as
process. Tactics are often specific tactics
Scope well as broader market conditions including
with limited resources to achieve broader
competitors, customers, and economy.
goals.
Shorter Term, flexible to specific market
Duration Long Term, changes infrequently.
conditions.
Uses experience, research, analysis, thinking, Uses experiences, best practices, plans,
Methods
then communication. processes, and teams.
Produces clear organizational goals, plans,
Produces clear deliverables and outputs
Outputs maps, guideposts, and key performance
using people, tools, time.
measurements.
23. List out the different level of Strategic Management. (June 2014)
Strategy can be formulated on three different levels:
Corporate level , Business unit level ,Functional or departmental level.
PART B
1. Explain the model of Strategic Management (or)
Discuss the process of crafting and executing strategy of the firm (or)
Describe the Conceptual Framework of Strategic Management (or)
Why is Strategic Planning necessary? Discuss the various steps of Strategic Formulation.(or)
Explain the steps/process involved in strategic development with example
2. Discuss the Corporate Governance and social responsibility scenario in Indian Industry.(or)
Define Social responsibility. Explain the categories of social responsible behaviour. (or)
Explain how Corporate Governance can be made effective.
3. Enumerate the roles and responsibilities of Top Level Management. (or)
Discuss the roles and responsibilities of Board of Directors in Corporate Governance
4.As a Corporate Planner in a large MNC, how would you plan the environment for the different
units located at different places and belonging to different industries?
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