Strategic Option Menu
Complimentary Strategic options: 1. Strategic Alliances &
Collaborative Partnerships ? 2. Merge with or acquire other companies?
3. Integrate backward or Foreword? 4. Outsourcing? 5. Initiate offensive
Strategies? 6. Defensive Strategic moves? 7. Using Internet as
Distribution Channel, if so, to what extent?
Functional Strategies to support above Strategic Choices: 1. R & D,
Engineering. 2. Production. 3. Marketing & Sales. 4. Human Resources.
Timing the Company’s Strategic move in marketplace: a) First Mover,
b) Fast Mover? And/or c) Late Mover.
• Having settled on one of the Competitive Generic
Strategy, we now need to decide on other Strategic
Actions to complement on the choice basic Competitive
• Grand Strategies are Corporate Level Strategies,
Setting a choice of Direction that a firm should adopt. It
could be a small entrepreneur firm with single location
and single business or a corporate conglomerate with
multi-location, diversified several different businesses.
The Corporate Strategy in both cases is about setting
the basic direction of the firm as a whole.
• Corporate Strategies are basic decisions about allocating
& transferring resources among different businesses and
managing & nurturing portfolios to achieve overall
Business Dimensions 1 & 2
1. Internal / External Dimensions:
a) When the Organisation is an independent entity, it is
operating under Internal Dimensions
b) When the Organisation adopts a strategy in association
with another entity, it operates under External Dimension.
2. Related / unrelated Dimensions:
a) When organisation adopts a Strategy related to its existing
Business Definition, the Related Dimension operates and
b) When organisation adopts a Strategy that is un-related to
its existing business either in terms of Customer Groups,
Customer functions or alternative Technology; the
unrelated dimension operates.
Business Dimensions 3 & 4
3. Horizontal / Vertical Dimensions:
a) The horizontal dimensions operates when an organisation
adopts a strategy which results in serving additional
customer groups and/or satisfying other customer functions
in such a way that they compliment the existing business
definition of one or more of its business.
b) The vertical dimension operates when an organisation
adopts a strategy which results in the expansion or
contraction of the existing business definition of one or
more businesses in terms of the utilisation of alternative
4. Active / Passive Dimensions:
a) The active dimension operates when an organisation
adopts an offensive strategy in anticipation of
environmental threats and opportunities.
b) The passive dimension operates when an organisation
adopts a defensive strategy as a reaction to environmental
threats and opportunities.
Thus combination of Four Grand Strategies, four
Dimensions and two types in each dimension give rise
to 32 possible mixed Strategies and if we consider three
dimensions of Business Definition, these possibilities
should be 32 x 3 = 96 and if we consider weight-ages
for each factor the Strategic alternatives could be mind
boggling. However, all alternatives are not feasible or
possible and we narrow down the choice of few major
1. Stability Strategies:
1.a) No-Change Policy: It is a conscious decision of not
doing anything new and continue with present business
definition. When environment is stable and predictable with
no new significant threats & opportunities in the
environment, it may not be worthwhile to alter strategy in
present situation. Also no new strengths have been
generated and no new weaknesses have been developed.
No new threat of substitutes and new entrants. However,
this should be a conscious decision and should not arise
out of in-activity and owing to inertia. It is dangerous to be
1.b) Profit Strategy: No change policy cannot sustain for
long and situations keep changing. However if company
believes that the changes like economic recession, govt.
rules, industry downturn, competitive pressures are
temporary and will turn favourable after some time,
then firm opts for maintain profit policy by artificial
measures like cut costs, hold investments /
replacements, raise prices, increase productivity and
some such measures to tide over the difficult days.
However, if the problems are not temporary, the
company position deteriorates.
Pause / Proceed – with – caution Strategy is a temporary
strategy like profit strategy and is used for consolidation.
It is used to test the ground before going ahead with full-
fledged Grand Strategy. Sometimes after a major
expansion firms need to stabilise, allow strategic change
to percolate through organisation structure and allowing
existing systems to adopt the strategy and the move for
further expansions. It is also used to bide the time for
more opportune time and move on with rapid strides
2. Expansion Strategies
If organisation is not moving ahead, it is actually going
Companies aim for substantial growth to take advantage of
Growing economy, liberalisation, burgeoning markets,
globalisation, Emerging technologies etc.
Expansion Strategies are of 5 types.
• 2.a) Expansion through Concentration: Firms tend
to rely on doing what they know they are best at doing.
Concentration Strategy involves investment of resources in
a product line for an identified market. The firm has proven
technology, market has high potential for growth and
industry is sufficiently attractive for concentration to take
place. The firm should also have financial strength to
sustain expansion. This is a first preference strategy of firm
doing what they are doing already and would like to invest
more in known business. (Bajaj, Maruti)
• Concentration strategy involves minimal organisation
changes, improves competitive advantage due to in depth
knowledge & expertise.
• The limitations are putting all resources at one project, it is
industry dependent and adverse condition in industry can
affect. In the Recession time, it is too difficult for concentrated
firms to withdraw. Product obsolescence is another threat for
the heavy investment.
• 2.b)Expansion through Integration: When firms use their
existing base to expand in the direction of their raw material
or the ultimate consumer or acquire adjacent businesses;
expansion through Integration takes place. This is exploring
Vertical and Horizontal dimensions of Grand Strategy.
Expansions are pivoted around present base of customers.
Scope of business definition is widened. Alternative
technologies are used for backward or forward integration.
The firm moves up or down the value chain. The firm aims at
cost economics. It is also one type of ‘Make or Buy’ decision.
All integration strategies require Trade-offs. There are two
types of Integrations.
• Vertical Integration: When an organisation start making new
products that serve its own need or is for self consumption.
• Backward Integration means retreating to source of raw
materials while forward integration moves the organisation to
its ultimate customers.
• Horizontal Integration: When an organisation takes up the
same type of products at the same level for production or for
marketing. Many a times Horizontal Integration is a merger of
• Integration strategy gives more control on Value chain but
carry a risk as industry is set to serve same customer group
and in case product fails or becomes obsolete.
• 2.c) Expansion through Diversification: Several
firms diversify to reduce the risk of dependence on product
and same set of customers. Diversification involves all
dimensions of Strategic Alternatives. It could be internal or
external, related or unrelated, horizontal or vertical,
technological etc. It changes business definition.
• Concentric Diversification: The activity is related to existing
business definition either in businesses, customer groups &
functions and /or alternative technology. It could be market
related concentric diversification as different products for
same set of customers or Technology related Diversification
as related technology to the present business or combination
of Market & Technology related diversification.
• Conglomerate diversification: Diversification in activities
which are totally unrelated to existing business definition of
one or more of its businesses. (ITC – Tobacco & Hotel,
Essar – Shipping & Steel, Shriram – Nylon Fibre & Ball
2.d) Expansion through Co-operation:
1. Mergers Strategy
2. Takeovers or Acquisitions Strategy.
3. Joint Ventures Strategy.
4. Strategic Alliances Strategy
2.e) Expansion through Internationalisation:
1. International Strategy.
2. Multi-domestic Strategy.
3. Global Strategy.
4. Trans-national Strategy.
3. Retrenchment Strategies.
• Retrenchment Strategy is followed when an organisation
substantially reduces scope of its activities. The
organisation need to find out problem areas and
diagnose the causes of the Problems, accordingly,
various types of Retrenchment Strategies are adopted.
• External Developments, Government Policies, Substitute
Products, Changing Customer needs, Wrong Strategies,
Obsolete Products, could be reasons for decline.
• Symptoms are noticed in poor performance, declining
profits, dwindling Cash flow, falling sales, Shrinking
markets, Shrinking market share, increasing debt.
• The organisation with proper monitoring controls can
sense impending danger and position itself to find
Retrenchment Strategy Situations for Recovery
• Slatter has described four types of Retrenchment Strategy situations for
Realistically non recoverable situation with little chance of
Survival : Not competitive company, Low potential for Improvement,
Company with cost dis-advantage, Products or Services are in terminal
Temporary recovery situation but no sustained turn-around:
Possible product re-positioning, new forms of Competitive advantage, cost
reduction, revenue generation is possible.
Sustained survival situation but no potential for future growth:
Turnaround is possible but Industry is in slow decline, which cannot be
revived. Therefore, a very little potential for growth is possible. Divestment is
possible or Turn-around is possible by finding ‘niche’ market, where
organisation can be a leader.
Sustained recovery situation with genuine possibility of Turn-
around: A possible new developed product, Possible market
development or a possible market re-positioning. Industry has
attractiveness is still available and decline was caused more by internal
3.a) Retrenchment Strategies: Turnaround Strategies:
• 3.a.1.: If CEO has credibility with Banks and Financial
Institutions and if a qualified Consultant is available, then
management team handles the entire turn-around
strategy with support of advisory specialist external
• 3.a.2: In another situation, Turnaround specialist is
employed to do the job and existing team is temporarily
withdrawn. The person could be deputed by banks.
3.a.3: Replacement of existing team, especially CEO
and / or merging sick unit with a healthy one.
• Possible actions could be: Analysis of Product, market,
production processes, competition, market segment
positioning, production logic, Target setting, feedback,
3.b) Retrenchment Strategies : Divestment Strategies:
• 3.b.1: Divestment is done due to negative cash flows,
mismatch of business with the company, project feared
to be non-viable in long range, severe competition,
Technological up-gradation asking for funds which are
not available, Selling a part of company for survival of
organisation, a better alternative is available for
investment, Divestment as a part of merger plan of
• Divestment is done in two ways : A part of company is
divested or firm may sell a unit outright to a buyer, who
finds the purchase as a strategic fit.
3.c) Retrenchment Strategies : Liquidation Strategies:
• This is most un-attractive strategy, where company
shuts down and tries to sell its assets. It is a last
resort. Liquidation is difficult due to various legal
constraints and protection given to employees in
• Liquidation may be inevitable in spite of best efforts of
the entrepreneur. In case of Textile Mills of Mumbai,
writing was on wall as Mills did not invest in to new
technology for more than 50 years. Secondly, it could
be a planned liquidation, in view of prices of real
estate in Mumbai. The neglect may have been
deliberate. Some times liquidation can happen
through court order for compulsory winding up and
sometimes winding up can be voluntary.
• Combination Strategies are mixture of Stability,
Expansion and Retrenchment strategies. They are either
followed simultaneously or in a sequential way. It is very
difficult in the business environment to follow a single
pure Strategy. Situation is Complex and business
demands different strategies to suit the situational
demands made upon the organisation.
• As an example, observe a paint company following three
strategies together. Addition of new variety of
‘Decorative paint’ for widening customer base, (Stability),
and Adding an entirely new product like ‘Automotive
Paint’ with new set of customers & functions
(Expansion), while eliminating or closing the contract
division, which used to take Painting Contracts
Complimentary Strategic options:
• 1. Strategic Alliances & Collaborative Partnerships?
• 2. Merge with or acquire other companies?
• 3. Integrate backward or Foreword?
• 4. Outsourcing?
• 5. Initiate offensive Strategies?
• 6. Defensive Strategic moves?
• 7. Using Internet as Distribution Channel, if so, to what
Timing the Company’s Strategic move in marketplace:
• a) First Mover,
• b) Fast Mover? And/or
• c) Late Mover.
1. Strategic Alliances & Collaborative Partnerships?
• In the present era of Privatisation & Globalisation,
Industries have to face altogether different challenges not
faced hitherto. Rapid advances in technology, free
economy, new markets in developed & under developed
countries, and invasion of foreign companies are forcing
Industries to enter into race of building Global presence
and into race of adopting new technologies.
• Industries also find that they do not have expertise for
running the race of Global leadership. The global
environment requires diverse & expensive skills,
resources, technological skills. The fastest & surest way
to fill up the gap is Alliances with enterprises with desired
• Strategic Alliances are collaborative partnerships where
two or more companies join forces to achieve mutually
beneficial strategic outcomes. These alliances are more
than company to company give & take dealings but fall
short of Merger or JV. These alliances are mainly for
bridging gap of resources and technology.
Advantages of Alliance:
• Alliance is basically between equals, but alliances are
also done with suppliers, distributors as partners by
many big business houses. These alliances are mostly
done with Value chain contributors.
• It is now common for companies to pursue their
strategies in collaboration with suppliers, distributors,
makers of complimentary product and some select
companies. e.g. IBM & DELL.
Advantages of Alliance:
• Get into critical country markets quickly.
• Gain, in-side information & knowledge about unknown /
unfamiliar markets & cultures.
• Access valuable skills & competencies.
• Get a handle to participate in target technology or
• Master new technology; build new expertise &
• Open up broader opportunities.
Stability of Alliances:
• Alliances have a very high rate of divorce. In US only about
39% of Alliances are found to be stable. Others are either
outright failures or are limping along.
• Alliances to be successful should have partners working
together. Stability of alliances depend upon their success in
adopting to changing internal & external conditions,
willingness to bargain on issues, real collaboration and not
merely arm length exchange of ideas. Each partner must
bring in high value allied skills, resources and contributions
and respect each other. They should have co-operative
arrangements working for win-win solutions.
• Causes for failures of alliances could be, diverging objectives
and priorities, in-ability to work together, changing conditions
which make initial reason for alliance as obsolete, more
attractive technologies and / or rivalry at marketplace.
• Alliance partners should guard themselves from undue
dependence. Over a period the partners must learn skills and
technology. To be a market leader companies must develop
their own capabilities or alliance will ultimately lead to Merger
Merger & Acquisition Strategies:
• The phrase Mergers and Acquisitions (abbreviated
M&A) refers to the aspect of corporate strategy,
corporate finance and Management dealing with the
buying, selling and combining of different Companies
that can aid, finance, or help a growing company in a
given industry to grow rapidly without having to create
another business entity.
• In the pure sense of the term, a Merger happens when
two firms, often of about the same size, agree to go
forward as a single new company rather than remain
separately owned and operated. This kind of action is
more precisely referred to as a “Merger of equals."
Both companies' stocks are surrendered and new
company stock is issued in its place. For example, both
Daimler-Benz and Chrysler ceased to exist when the two
firms merged, and a new company, DaimlerChrysler,
Merger & Acquisition Strategies-2:
• When one company takes over another and clearly
established itself as the new owner, the purchase is called an
Acquisition. From a legal point of view, the Target Company
ceases to exist, the buyer "swallows" the business and the
buyer's stock continues to be traded.
• Whether a purchase is considered a Merger or an
Acquisition really depends on whether the purchase is
friendly or hostile and how it is announced. In other words, the
real difference lies in how the purchase is communicated to
and received by the target company's Board of Directors,
employees and Shareholders.
• M & A have not produced hoped-for results on many
instances. Resistance of rank and file employees of two large
companies is some times too formidable to resolve. Conflicts
of management styles and difference in Corporate Cultures
create problems in integration. Cost savings, expertise
sharing, and enhanced competitive capabilities take
substantially long time to materialise in view of above
Strategic objectives of Mergers & Acquisitions:
1. To pave the way for the acquiring company to gain
more market share and, further, create a more efficient
operation out of combined companies by closing high
cost plants and eliminating surplus capacity industry-
2. To expand companies geographic coverage.
3. To extend company’s business into new product
categories or international markets.
4. To gain quick access to new technologies and avoid
the need for a time consuming R & D effort.
5. To try to invent new industry and lead the convergence
of industries whose boundaries are being blurred by
changing technologies and new market opportunities
6. To fill resource gaps
• Unlike Integration; outsourcing is narrowing boundaries
of the business. Integration has problems of mismatch of
capacities, as economic size for individual items in value
chain could be different and hence such specialised
skilled processes or items in value chain could be
outsourced to specialists.
• A company should generally not perform any value chain
activity internally that can be performed more efficiently
or effectively by its outside business partners – the
exception is when an activity is strategically crucial and
internal control over the activity is deemed essential.
Advantages of Outsourcing:
1. Cost reduction – An activity cane be performed more
cheaply by outside specialists.
2. A particular skilled activity can be performed better by
3. The activity not connected with core competence and
not crucial to firm’s ability to achieve sustainable
competitive advantage and will not affect the technical
‘Know-how’ can be outsourced to advantage.
4. Outsourcing reduces company’s risk due to changes in
technology and/ or change in buyer preferences.
5. Outsourcing streamlines the Company operations in
ways that cut time it takes to get the newly developed
product in to the market.
6. Outsourcing allows the company to concentrate on
strengthening and leveraging its core competencies.
• Offensive Strategic moves include yielding a cost
advantage, a differentiation advantage, a resource
advantage. These advantages, when used with initiative
are termed as Offensive Strategy giving Competitive
advantage to the initiator.
• However, competent, resourceful rivals won’t take lightly
and exert pressure to overcome the disadvantage they
are facing because of initiative taken by one of their
• The initiator of the Offensive Strategy has to come up
follow-up offensive & defensive moves to sustain the
initially won competitive advantage.
Types of Offensive Strategies-1
1. Initiatives to match or exceed the competitor strengths:
When rivals have strong competitive advantage, then
firms are forced to take an initiative and take an
offensive stand to whittle away from pressure.
In second instance, when competitor is very strong
and established, an offensive strategy to offer alternate
products at faster pace and at cheaper price
sometimes works and afterwards people get used to
alternate product. e.g AMD & Intel.
One of the options is to offer equally good product at
Other option could be to outsmart competitor by
bringing in latest version of product in market before
him and making his product obsolete.
Adding new features, running Comparison ads, having
plant in backyard of rival, superior customer service
capability are some other options.
Types of Offensive Strategies-2
2. Initiatives to capitalise on weaknesses of the
competitor: This option has better chance than
challenging strengths of competitor.
Options could be going after rival whose product lag in
quality & features, or making special sales campaign,
Service camps where rival lacks in service department,
or Win away customers with your strong brand appeal
over his weak brand,
or take advantage of geographic reasons, where rival
has weak presence in market,
or paying special attention to market segment which
your rival is neglecting.
Types of Offensive Strategies-3
• 3. Simultaneous initiatives on many fronts: Company
may launch a Grand Offensive on many fronts
simultaneously and compel rivals to take defensive
Such offensive may include, price cuts, increased
advertising, additional performance features, new models
& styles, customer service thrust & improvements, free
samples, coupons, rebates, in store displays, etc.
When a product has sufficient Brand image & when a new
specifically attractive product or service is being launched,
such an offensive measure has more chances of success
Types of Offensive Strategies- 4
4. End-run offensives: involves going around competitors
instead of taking them head on and change rules of game
This may include, introducing new products that redefine
the market & terms of competition, e.g. digital camera,
It could also include launching initiative in geographic
area where competitors have not yet reached, introduce
products in new market segments for selected buyers
with different attributes & performance features, e.g.
sport-utility-vehicles of Honda Accura or ford Lexus.
Taking a jump ahead- leapfrogging by using next
generation technology, which support existing business &
technology such as 3 G hand sets, blackberries, i-phone,
Types of Offensive Strategies- 5
5. Guerrilla offensives: This is adopted by small
challenger companies, who do not have resources or
market visibility to challenge the leaders. This is hit &
Challenger Companies attack in areas neglected by
biggies or where they have become vulnerable.
Offering quality, when leaders have some quality
or having a big discount sale week,
or offering products at shortest & confirmed deliveries
when leaders are facing delivery problems,
a short offensive and win away selected client account,
prompt technical support when clients are frustrated
with leaders. etc.
Types of Offensive Strategies - 6
6. Pre-emptive strikes: This is one of a kind offensive move.
Whosoever is first gains maximum competitive advantage!
Pre-emptive strategies involve being first to secure an
advantageous position, where rivals are kept away and
cannot duplicate and then strike competitors by
a) May be securing a big renowned distributor,
b) New geographic area, new shopping mall,
c) Good location for to cheap transportation & raw materials,
d) Choose which rivals to attack. It could be leaders, who are
always vulnerable or
e) Second run firm with weaknesses, here the challenger
must be strong to strike weak company,
f) Struggling enterprises who are on the verge of going under,
g) Small local & regional firms with limited capabilities.
The pre-emptive strikes are done on the basis of core
competency of challenger, where they are best in areas like
Resource strengths and competitive capabilities, otherwise
chance of success are dim.
In competitive environment every successful company has to
face the threat of challenges from rivals and new entrants.
The defensive strategies are used to lower the risk of being
attacked and weakening the impact of attack.
The defensive strategies do not improve competitive edge but
they help to fortify company’s competitive position, protect
valuable resources and prevent possibilities of imitation. Two
forms of Defensive Strategies are:
1. Blocking the avenues open to Challengers:
Defender can participate in alternative Technology to reduce
attack of better Technology which may be offered by rivals.
• New Products, new features, broaden the product range, close
• Have economy priced product range to ward off price wars.
• Lengthening warranty periods, free service training or camps.
• Developing capability to provide spare parts.
• Providing free coupons, give away samples, sponsoring gift
• Search & appoint creditable distributors & book them with
volume discounts & other finance terms so as to discourage
them from trying other suppliers.
2. Signalling Challengers that retaliation is likely & let
challengers that the battle will cost more than its worth.
• Publicly announcing management’s commitment to maintain the
firm’s present share.
• Publicly committing the company to match competitors’ terms &
• Maintaining a war chest & marketable securities.
• Making an occasional strong reaction on moves of weak
competitor to enhance the company’s image of tough defender.
Strategies for Using Internet as distribution channel
• The internet era has brought second wave of Internet
Companies need to address how best to make internet as
part of the business to use as distribution channel.
How much emphasis to be placed for use of internet?
Managers must decide how to use the Internet in positioning
the company in marketplace?
• Using Internet Just to Disseminate Product Information:
and use internet to direct customers to distribution channel
partners for sales transaction or indicate locations retail
stores. This is to avoid conflict with already existing
distribution channel partners. Direct sale on net will indicate
weakening commitment to distributors.
Dealers are considered better positioned to deal with “brick &
click” Strategy for Company products / services. Company
considers that strong support and good will of dealer network
is essential. Web is considered in partnership with dealers
and not in competition.
Using Internet as Minor Distribution Channel:
Here, the strategy is to use Internet to gain online sale
experience, doing market research, testing product,
getting feed back from web surfers and create
sufficient interest about Company’s Product and
Services in web community.
e.g. ‘Nike’ selling some footwear on line, giving buyers
option for colour & features so as to gain more & first
hand knowledge about customers’ choices.
This path will be beneficial to dealers & will not create
• Using “Brick and Click” Strategy:
Sell directly to customers on line and at the same time use
traditional whole sale & retail channels.
This policy is beneficial in certain circumstances. e.g.
“Software Programmes”, where direct downloading is more
comfortable than going to shop and getting a CD.
Internet has more reach and geographic constraints are
taken care of with help of dealers in that area, though
Distribution channels are necessary and customer need to
have a physical contact with Product / Services,
On-line sell improves profitability as dealer commission
could be up to 35 – 40% of retail price.
Customers visiting web site are automatic prospective
Also where the technology is more suitable for ‘build to
First / Fast / Late Mover Strategy
• ‘When’ to make a Strategic move is equally important as
‘what’ move to make. It will depend upon the product life
cycle, technology requirement. First mover has many
advantages, but fast & late mover can also be a profitable
• First mover builds up reputation & image.
• First mover’s early commitment to new technology, new
features, new distribution channels can give a cost
advantage over rivals.
• Being first mover is an offensive move of ‘pre-emptive
strike’. Rivals are not ready & this makes imitation difficult.
Bigger the first mover advantage, more attractive the
• First mover’s customers are likely to retain brand loyalty
giving him firm footage in market. However, first mover
has to have good financial resources, important
competencies, competitive capabilities and high quality
• The first move cannot be for name sake. First mover
must time his product entry with precise combination of
features, customer value & sound revenue – cost – profit
economics to sustain the edge over rivals and maintain
• Being a Fast follower and late starter can also be an
advantageous move with wait and see policy. It may be
easier to copy first mover and improve upon by learning
from errors on part of first mover and de-bug the
• Being the first mover need competency and cost. It may
be cheaper to copy. If the product life cycle is long, the
initial advantages of first mover can be nullified over a
time and with safety. A follower and late mover assume
that first mover to be slow in learning and updating his
Long Term /
ROI, ROE, New
Advantages of Annual Objectives:
– Tangible Growth targets.
– Focus on Growth.
– Role clarity to managers and sub-ordinates.
– Mobilise people and enable them to participate in
direction of growth.
– Unifying all groups in one direction.
– Basis for strategic control.
– Motivate employees.
– Provide challenges for functional groups
– Tool to Operationalising strategies.
1. Project Implementation:
• Conception Phase: Extension of Strategy Formulation
Phase. Prioritising projects conceived.
• Definition Phase: Preparation of Detailed Project Report
considering marketing, technical, financial (eligible for
scrutiny by financial institutes, economic and ecological
aspects), feasibility study,
• Organisation, location, whether new or Modernisation or
expansion or diversification, backward integration, nature of
Industry, nature of products.
• Project promoters & Financial details of the company.
• Project details detailed Cost of project.
• Means of financing, Profitability and cash flow.
• Marketing arrangements
• Economic considerations like competition, economic
benefits to country or region, contribution to
development, ancillaries etc.
• Environment aspect
• Govt. consents like licence, capital goods, foreign
Exchange, technical collaboration permission etc.
• Planning and organising phase: Designs, budgets,
finance, schedules, manpower, systems and procedures.
• Implementation Phase : detailed engineering, order
placement, testing, trial and commissioning of the
• Clean up phase : disbanding the project set up and
handing over of the facility to operation.
2. Procedural Implementation
• Formation of the company
• Licensing procedures
• SEBI requirements
• MRTP requirements
• Foreign collaborations procedures
• FEMA requirements
• Import and Export Licences / requirements
• Patenting and trade mark requirement
• Labour legislation requirement
• Environmental requirement and Pollution board
• Consumer protection requirements
• Procedures for availing Incentives and facilities to
3. Resource Allocation
• Resource allocation deals with procurement and commitment of
financial, physical and human resources to strategic tasks.
• Project related resources are generally one time requirements and
for on-going concern the resources are required on continuous
• Finance is primary resource. It is required for creation and
maintenance of other resources. Long term resources are
required for creation of capital assets and short term finance is
required for working capital.
• Resources could be internal or external. Internal resources are
retained earnings, depreciation provisions, other reserves etc.
• External resources are equity and long term loans. Also money
market resources such as bank credits, hire purchase debt,
instalment credit and fixed deposits.
• Resource allocation : This could be top down where resources are
allocated by top level to all other levels of organisation based on
budgets. In a bottom up scenario budgets are drawn by operation
group as required. However Strategic Budgeting is a mix of both
and is dynamic. It involves to and fro communications and actions
between all levels of management based on strategic decisions.
Marketing & past
Types of Strategic Budgets
High Relative Market Share
BCG Matrix for Strategic Decisions
SBUs / Multi-
divisions / Multi-
Cash flows are
based on their
strengths in BCG
Types of Strategic Budgets
• PLC Based Budget: Product / SBU Life Cycle: Resources are
allocated based on different stages Product / SBU Life Cycle.
• Capital Budgeting: A separate budget is drawn for Capital
requirement in case of new SBU or new product or expansion
or modernisation. In case of capital sources fund raising are
• Zero based Budgeting: ZSB is based on present evaluation
and not based on past performance. Each requirement is to be
justified by operation group on the basis of fresh calculation of
costs and targets. In other words the resource allocation
demand is based on “ground zero”
• Parta System: This system is mainly used by conservative
business houses where CEO is basically a financial wizard.
This system is based on daily net cash flow (before tax and
dividend) statement. The net cash flow is pre determined and
agreed figure between SBU In-charge / Operating
Management and the Chairperson / owner / major stock holder
of the company. This is a daily budgeting and reporting
Factors affecting Resource Allocation:
• Objectives of the Organisation – Realisation of Strategic Intent.
• Dominant Strategists – Powerful Lobbying, influential departmental
heads, CEO preferences etc.
• Internal Politics – Resource allocation is construed a Power
Statement and SBU In-charges, departmental heads strive for
grabbing more resources for their departments.
• External Influences – Government policies, statutory requirements,
demands from financial institutes, Share holders, Community,
necessity of Pollution control and safety equipments.
• Scarcity of Resources – Financial, physical and human resources,
cost of capital and that of cash credits, Government Policies with
regards to raw materials and Technology.
• Credit-worthiness of organisation– ability to raise funds.
• Overstatement of needs – Bottom up or democratic ways of
resource allocation gets developed in to every one grabbing his
share of pie by overstating and dramatising their needs.
• It is a role for CEO for managing resources. He need to have a
Strategic Plan and communicate the same to all executives and
ensure that resource allocation decisions are taken amicably.
4. Structural Implementation
Entrepreneurial: Owner - Manager
LegalProduction Finance Marktg. Personnel
Corporate Finance Legal / PR
Gen. Manager- DIV. A Gen. Manager- Div. BDivision
Marktg., Operations, Pers., Marktg., Operations, Pers.,
Divisional / Product
Owner - Manager
• SBU Based
Head SBU 1 Head SBU 2 Head SBU 3
Div. A,B,C Div. D,E,F Div. G,H,K
Finance Operations Personnel Marketing
Head – A
Head – B
Head – C
• Product based Structures: In large volume scenario it
makes a sense to have a separate organisation
dedicated to a product. This enables optimum use of
specialised skills. Product separation helps organisation
in addition /deletion decisions.
• Customer based Structures: Assuming that sales volume
justifies the need of separate setup; it enables
organisation to concentrate on specific customer group
and provide exclusive attention required for that
particular product / services. It helps in creating
specialised skills and timely response to changing needs
of the customers.
• Geographic Structures: Set ups at different sites
sometimes evolve due to expansions and mergers. It
also offers advantage of nearness to raw materials or to
markets / customers. It helps in fair degree of de-
centralisation. It needs a very good top level co-
ordination and communication amongst all locations and
• Intrapreneurial Structure: This is a cluster of various owner
driven set-ups. It encourages entrepreneurial abilities of its
employees. Employees as entrepreneurs with support of
parent organisation can apply its full attention to his part of
business for development of new ideas for products and
• There are also “Horizontal Organisations” and “Delaminated
• In horizontal type; the structure corresponds to process of
providing products or services directly served to customer
thereby eliminating special corporate functions like
marketing, finance etc. Executives have to be multi-
functional in such a case as the core process is managed by
cross functional teams.
• Delaminated Matrices are combination of Horizontal
organisations with a Functional structure. The firm employs
both process oriented horizontal teams and functional
departments. These two layers of matrix organisation are
separated providing depth of expertise and capabilities to
• Organisations are structured to implement strategic plan in
best possible way. All functions and activities that are
critical from strategy view point are required to be
considered. Thus key activities performed to achieve
Objectives and realise the Mission are required to be
considered in Organisational design.
1. Identification of key activities necessary to be performed for
achieving Objectives and realising the Mission through the
2. The activities which are similar in nature and skills are
3. Different groups of activities are accommodated in the
4. Creation of Departments, Divisions; Regions and so on to
which the group of activities are assigned.
5. Design establishes an interrelationship between these
different departments for the purpose of coordination and
• Organisations are structured to implement strategic plan in
best possible way. All functions and activities that are critical
from strategy view point are required to be considered. Thus
key activities performed to achieve Objectives and realise
the Mission are required to be considered in Organisational
1. Identification of key activities necessary to be performed for
achieving Objectives and realising the Mission through the
2. The activities which are similar in nature and skills are
3. Different groups of activities are accommodated in the
4. Creation of Departments, Divisions; Regions and so on to
which the group of activities are assigned.
5. Design establishes an interrelationship between these
different departments for the purpose of coordination and
Traditional Organisations Emerging Organisations
One large firm Small business units with
Vertical Communication Horizontal Communication
Centralised and Top-down
Decentralised and participative
Vertical Integration Outsourcing and virtual
Work / Quality based Teams Autonomous work teams
Functional Work teams Functional Work teams
Minimum Training Extensive Training
value chain team-focussed Job
• Control Systems – The measurement and correction of
the performance of activities of all the people in
structure in order to make sure that enterprise
objectives and plan devised to achieve the same is
• Information Systems – The Organisational
Arrangements that provides information to managers
to perform their tasks and relate their works to others.
This is also known as MIS
• Appraisal Systems – Evaluating managerial
performance. Appraisals are used for salary fixation,
awards, incentives, management development, etc.
• Motivation Systems – to enforce desirable behaviour.
Motivation can be monetary such as Salary, Bonus,
Rewards and non monetary such as recognition,
• Planning Systems – Planning is basically formulating
strategy. Planning can be centralised or decentralised
depending upon Organisational Character. Plans are
provided as packaged plan for implementation in
centralised planning by planning committee. In
decentralised planning corporate strategy performs a
directive role for divisions, who in turn does planning
taking environment into consideration.
• Development systems – is a process of gradual,
systematic improvement in knowledge, skills and
performance of mangers to enable them to perform
The process of management Development
Performance Experience Learning
5. Behavioural Implementation.
• Behaviour of the strategist has a huge impact on
implementing the chosen strategy. Implementation of
strategy has thus many behavioural issues.
• Corporate Culture.
• Corporate Politics.
• Use of Power.
• Personal Values and Business Ethics.
Leadership in Implementation:1:
• Leadership plays a critical role in the success and failure of an
enterprise. It is one of the most important elements affecting
• Leaders have Personality traits and Qualities.
• Leaders Influence relationship between individuals.
• Behaviour of leader lead to actions around.
• Situation in which leader has to operate decides the mettle of
a leader. Subordinates and situation at times show
dependence on a leader.
• This generates Contingency behaviour within the leader.
• Leader transacts with sub-ordinates and indicates Role
• Leader with absence of a real concepts provides anti
• Leadership thrives on entire organisational Culture.
• Leader uses his influence and creates intrinsic motivation and
bring about Transformation of the organisation
• Risk Taking Leader: Willingness to take high risks. This is
required at times depending on the strategy which involves
Leadership in Implementation:2:
• Technocracy: Optimum decisions based on technical
• Organicity: The flexibility and adaptability in changing
requirements is required to satisfy an agile operating staffs.
• Participation: Inviting participation at all levels in the
decision-making, Process and strategy implementation.
• Coercion involves domination, authoritarianism by top
management complied with wishes given in Mission and
• Key role of Leaders: CEO: Identifying Strategy and
implement. He remains accountable for success or failures.
He should identify changes in environment and should
operate a trigger. He should have interpersonal skills and
creativity to Mobilise people.
• CEO should develop and choose future strategists. Their
career planning and establish a succession plans.
Normally a promotion within, is useful for moral of the
• Corporate Culture is a set of important assumptions-
often un-stated but most members share in common.
Something like “people at top do not understand” or
“Whether you work or don’t work, you will get salary”,
“there is stagnation at Top” or “Turnover is important.”
• Thus shared things like uniforms, Shared sayings,
shared actions like service oriented approach, shared
feelings like “hard work is not rewarded here” creates a
• Strategists have four approaches to create a strategy
related supportive culture. This depends on strategy-
required are very high
and compatibility of
change is low, then
To adapt strategy
implementation to suit
Changes required are
very high and
compatibility of change
is also high, then
To change strategy to
fit corporate culture
Changes required are
very low and
compatibility of change
is also low, then
To change corporate
culture to suit strategic
required are very low
and compatibility of
change is high, then
• Corporate Politics and Power: Power is an ability to
influence others and politics is carrying out activities
though not prescribed by any Policy to gain advantages
and influence distribution.
• Corporate politics is not good or bad but it creates
divisiveness which is not good.
• Sources of Power : ‘Reward Power’ – ability of Manager
to reward people of his choice. ‘Coercive Power’ – Ability
to penalise negative results. ‘Legitimate Power’ Abilty of
Mangers to influence behaviour of sub ordinates.
Referent Power is Managers to create liking among
subordinates due to charisma or knowledge. Expert
Power is due to competence, knowledge and experience
Personal Values and Business Ethics
• Value is a view of life and a judgement of what is
desirable and what is correct. These views forms
personality of a leader and creates a group’s morale.
Business ethics are traditionally been considered as core
values like honesty, trust, respect & fairness.
To inculcate these value and ethics:
• Consider Values & Ethics of a person during recruitment.
• Incorporate in new comer trainees and in training
• Top management to set examples.
• Communicate Values & Ethics through wide publicity.
• Consistently monitor and nurture values and build ethics.
Social Responsibility and Strategic Management
• Social Responsibility along with ethics becomes a stated or
un-stated requirement. It gets attended in Strategic Planning
through environmental appraisals. It has differing views, while
some do not want it to be considered in business operations,
others boast around it. However, most business houses
observe a balance and undertake to deliver social
responsibility and business objectives without contradicting
• Social Responsibility extends beyond the workforce and
stakeholders and many business houses take up activities for
community welfare, rural development, sports etc.
• Presently, with ISO:14001:2004 which concerns Environment
Management Systems, it has become a necessity to address
the mode and means of delivering social responsibility.
• Like any other strategic functions, for successful
implementation, Organisations need to allocate resources,
create Organisation Structure and evaluate its effectiveness.
But all said and done, the society in large remains a major
stake holder and we cannot escape our dues to society and
towards social responsibility.
Functional and Operational Implementation.
• Enterprise Vision, Mission, Objectives and Goals are of
• We create various functions like Marketing, Operation,
Finance, HRD etc. for effective implementation of the
• Natural derivation is to develop Functional Plans and
• Functional Strategy deals with limited restricted plan
which provides objectives for a specific function.
• Resources are allocated function wise for their optimal
contribution to the achievement of Business and
Corporate level Objectives.
Functional Plans and Policies:
• Functional Strategies are implemented through defined
plans and policies for various functions.
1. The strategic decisions are implemented by all the
functions of the organisations.
2. A basis is created for controlling activities of all different
functional areas of business.
3. Plans are laid down clearly for all functional
departments and Policies provide discretionary
framework. Thus functional mangers do not spend time
groping in dark.
4. Functional mangers can handle similar situations
5. Co-ordination across the different functions takes place
Nature of Product
Nature of market Manner in
is to be
11. Behavioural issues in implementation:
• Corporate culture –
• Mc Kinsey’s 7s Framework –
• Concepts of Learning Organization
Description of the 7-S Frame work of MC Kinsey
Description of the 7-S Frame work of MC Kinsey
• The 7-S framework of McKinsey is a Value Based Management
(VBM) model. Together these factors determine the way in which
a corporation operates.
• Shared Value: The interconnecting centre of McKinsey's model is:
Shared Values. What does the organization stands for and what it
believes in. These are Central beliefs and attitudes.
• Strategy: Strategy is a Plan for the allocation of a firm’s scarce
resources, over a time to reach identified goals. Strategy considers
Environment, Competition and Customers.
• Structure: The way the organization's units relate to each other:
centralized, functional divisions (top-down); decentralized (the
trend in larger organizations); matrix, network, holding, etc.
• System: The procedures, processes and routines that characterize
how important work are to be done: financial systems; hiring,
promotion and performance appraisal systems; information
• Staff: Numbers and types of personnel within the organization.
• Style: Cultural style of the organization and how key managers
behave in achieving the organization’s goals.
• Skill: Distinctive capabilities of personnel or of the organization as
a whole. (Core Competencies).
The McKinsey 7S Framework
• Ensuring that all parts of your organization work in
• While some models of organizational effectiveness go in and
out of fashion, one that has persisted is the McKinsey 7S
framework. Developed in the early 1980s by Tom Peters and
Robert Waterman, two consultants working at the McKinsey
& Company consulting firm, the basic premise of the model is
that there are seven internal aspects of an organization that
need to be aligned if it is to be successful.
• The McKinsey 7S model can be applied to elements of a
team or a project as well. The alignment issues apply,
regardless of how you decide to define the scope of the
areas you study
The 7S model can be used in a wide variety of situations where
an alignment perspective is useful, for example:
• Improve the performance of a company;
• Examine the likely effects of future changes within a
• Align departments and processes during a merger or
The Seven Elements
Hard Elements Soft Elements
•"Hard" elements are easier to define or identify and
management can directly influence them: These are
strategy statements; organization charts and reporting
lines; and formal processes and IT systems.
•"Soft" elements, on the other hand, can be more difficult
to describe, and are less tangible and more influenced by
culture. However, these soft elements are as important as
the hard elements if the organization is going to be
• The way the model is presented in Figure depicts the
interdependency of the elements and indicates how a
change in one affects all the others.
• Placing Shared Values in the middle of the model
emphasizes that these values are central to the
development of all the other critical elements. The
company's structure, strategy, systems, style, staff and
skills all stem from why the organization was originally
created, and what it stands for. The original vision of the
company was formed from the values of the creators. As
the values change, so do all the other elements
How to Use the Model
• The model is based on the theory that, for an
organization to perform well, these seven elements need
to be aligned and mutually reinforcing. So, the model can
be used to help identify what needs to be realigned to
improve performance, or to maintain alignment (and
performance) during other types of change.
• Whatever the type of change - restructuring, new
processes, organizational merger, new systems, change
of leadership, and so on - the model can be used to
understand how the organizational elements are
interrelated, and so ensure that the wider impact of
changes made in one area is taken into consideration.
• You can use the 7S model to help analyze the current
situation (Point A), a proposed future situation (Point B)
and to identify gaps and inconsistencies between them.
It's then a question of adjusting and tuning the elements
of the 7S model to ensure that your organization works
effectively and well once you reach the desired endpoint.
• However, it is not simple. Changing your organization
probably will not be simple at all! Whole books and
methodologies are dedicated to analyzing organizational
strategy, improving performance and managing change.
The 7S model is a good framework to help you ask the
right questions - but it won't give you all the answers. For
that you'll need to bring together the right knowledge,
skills and experience.
• When it comes to asking the right questions, we've
developed a Mind Tools checklist and a matrix to keep
track of how the seven elements align with each other.
Supplement these with your own questions, based on
your organization's specific circumstances and
7S Checklist Questions
• Here are some of the questions that you'll need to explore to
help you understand your situation in terms of the 7S
framework. Use them to analyze your current (Point A) situation
first, and then repeat the exercise for your proposed situation
• What is our strategy?
• How to we intend to achieve our objectives?
• How do we deal with competitive pressure?
• How are changes in customer demands dealt with?
• How is strategy adjusted for environmental issues?
• How is the company/team divided?
• What is the hierarchy?
• How do the various departments coordinate activities?
• How do the team members organize and align themselves?
• Is decision making and controlling centralized or decentralized?
Is this as it should be, given what we're doing?
• Where are the lines of communication? Explicit and implicit?
• What are the main systems that run the organization? Consider
financial and HR systems as well as communications and
• Where are the controls and how are they monitored and
• What internal rules and processes does the team use to keep on
• Shared Values:
• What are the core values?
• What is the corporate/team culture?
• How strong are the values?
• What are the fundamental values that the company/team was
• How participative is the management/leadership style?
• How effective is that leadership?
• Do employees/team members tend to be competitive or
• Are there real teams functioning within the organization or are
they just nominal groups?
• What positions or specializations are represented within
• What positions need to be filled?
• Are there gaps in required competencies?
• What are the strongest skills represented within the
• Are there any skills gaps?
• What is the company/team known for doing well?
• Do the current employees/team members have the
ability to do the job?
• How are skills monitored and assessed?
7S Matrix questions
• Using the information you have gathered, now examine
where there are gaps and inconsistencies between elements.
Remember you can use this to look at either your current or
your desired organization.
• Check off alignment between each of the elements as you go
through the following steps:
• Start with your Shared Values: Are they consistent with your
structure, strategy, and systems? If not, what needs to
• Then look at the hard elements. How well does each one
support the others? Identify where changes need to be made.
• Next look at the other soft elements. Do they support the
desired hard elements? Do they support one another? If not,
what needs to change?
• As you adjust and align the elements, you'll need to use an
iterative (and often time consuming) process of making
adjustments, and then re-analyzing how that impacts other
elements and their alignment. The end result of better
performance will be worth it.
• Key points:
• The McKinsey 7Ss model is one that can be applied to
almost any organizational or team effectiveness issue.
• If something within your organization or team isn't working,
chances are there is inconsistency between some of the
elements identified by this classic model.
• Once these inconsistencies are revealed, you can work to
align the internal elements to make sure they are all
contributing to the shared goals and values.
• The process of analyzing where you are right now in terms
of these elements is worthwhile in and of itself.
• But by taking this analysis to the next level and determining
the ultimate state for each of the factors, you can really
move your organization or team forward.
Concepts of Learning Organization
• Organisational Learning vs. Learning Organisation
• There is a difference between Organisational Learning
and Learning Organisation. Argyris (1977) defines
Organisational Learning as the process of "detection and
correction of errors"
• while Senge (1990) defines Learning Organisation as "a
group of people continually enhancing their capacity to
create what they want to create". Senge further remarks
that "the rate at which organizations learn may become
the only sustainable source of competitive advantage".
• Organisational Learning is a Process and Learning
Organisation is a Structure.
• A Learning Organisation is an Organisation that learns
and encourages learning among its people in an effort to
create a more knowledgeable and flexible workforce
capable to adapt to cultural changes.
• A Learning Organization is the term given to a company that
facilitates the learning of its members and continuously
transforms itself. Learning Organizations develop as a result of
the pressures facing modern organizations and enables them to
remain competitive in the business environment. A Learning
Organization has five main features; systems thinking,
personal mastery, mental models, shared vision and team
• Donald Schon. He provided a theoretical framework linking the
experience of living in a situation of an increasing change with the
need for learning.
• The loss of the stable state means that our society and all of its
institutions are in continuous processes of transformation. We
cannot expect new stable states that will endure for our own
lifetimes. We must learn to understand, guide, influence and
manage these transformations. We must make the capacity for
undertaking them integral to ourselves and to our institutions.
• We must, in other words, become adept at learning. We must
become able not only to transform our institutions, in response to
changing situations and requirements; we must invent and develop
institutions which are ‘learning systems’, that is to say, systems
capable of bringing about their own continuing transformation.
(Schon 1973: 28)
• Subsequently, we have seen very significant changes in
the nature and organization of production and services.
Companies, organizations and governments and we
have to operate in a global environment and that has
altered its character in significant ways.
• Productivity and competitiveness are, by and large, a
function of knowledge generation and information
processing. Firms and Territories are organized in
networks of production, management and distribution.
The core economic activities are global – that is they
have the capacity to work as a unit in real time, or
chosen time, on a planetary scale. (Castells 2001: 52)
• A failure to attend to the learning of groups and
individuals in the organization spells disaster in this
context. As Leadbeater (2000: 70) has argued,
companies need to invest not just in new machinery to
make production more efficient, but in the flow of know-
how that will sustain their business. Organizations need
to be good at knowledge generation, appropriation and
Why do Learning Organizations develop?
• Organizations do not organically develop into Learning
Organizations; there are usually factors prompting their change.
• It has been found that as organizations grow, they lose their natural
capacity to learn as company structures and individual thinking
• When problems arise in the company, the solutions that are
proposed often turn out to be only short term (single loop learning)
and re-emerge in the future.
• To remain competitive, many organizations have restructured,
which has resulted in fewer people in the company. This means
those who remain need to work more effectively.
• To create a competitive advantage, companies need to be able to
learn faster than their competitors and also develop a customer
• Modern organizations need to maintain knowledge about new
products and processes, understand what is happening in the
outside environment and produce creative solutions using the
knowledge and skills of all employed within the organization.
• This requires co-operation between individuals and groups, free
and reliable communication, and a culture of trust. These needs
can be met through embracing the tenets of the Learning
Learning Organisation : Definitions
• The Learning Company is a vision of what might be possible. It
is not brought about simply by training individuals; it can only
happen as a result of learning at the whole organization level.
(Pedler et. al. 1991: 1) Pedler et al, later redefined this concept
to “an organization that facilitates the learning of all its
members and consciously transforms itself and its
context”, reflecting the fact that change should not happen just
for the sake of change, but should be well thought out.
• "Organisations where people continually expand their capacity to
create the results they truly desire, where new and expansive
patterns of thinking are nurtured, where collective aspiration is
set free, and where people are continually learning to learn
together" (Peter Senge, 1990).
• Learning organizations are characterized by total employee
involvement in a process of collaboratively conducted,
collectively accountable change directed towards shared values
or principles. (Watkins and Marsick 1992: 118)
• According to Sandra Kerka (1995) most conceptualisations of
the learning organisations seem to work on the assumption that
‘learning is valuable, continuous, and most effective when
shared and that every experience is an opportunity to learn’.
Characteristics of a Learning Organization-1
• Learning Organization exhibits five main characteristics;
Systems thinking, Personal mastery, Mental models, a
Shared vision and Team learning.
• Systems thinking
• This is a conceptual framework that allows people to study
businesses as bounded objects.
• Learning Organizations employ the method of thinking when
assessing their company and develops information systems
that measures the performance of the organization as a
whole and of its various components.
• Systems thinking also state that all the characteristics listed
must be apparent at once in an organization for it to be a
Learning Organization. If any of these characteristics is
missing, then the organization will fall short of its goal.
• However O’Keeffee believes that the characteristics of a
Learning Organization are factors that are gradually
acquired, rather than developed simultaneously.
Characteristics of a Learning Organization-2
• Personal Mastery
• Personal mastery is the commitment by an individual to
the process of learning. There is a Competitive
Advantage for an organisation whose workforce can
learn quicker than the workforce of other organisations.
• Individual learning is acquired through staff training and
development. However learning cannot be forced upon
an individual if he or she is not receptive to learning.
• Research has shown that most learning in the workplace
is incidental, rather than the product of formal training;
therefore it is important to develop a culture where
personal mastery is practiced in daily life.
• A Learning Organisation has been described as the sum
of individual learning, but it is important for there to be
mechanisms by which individual learning is transferred
into Organisational Learning.
Characteristics of a Learning Organization-3
• Mental models
• Mental Models are the terms given to ingrained assumptions
held by individuals and organisations.
• To become a Learning Organisation, these mental models
must be challenged.
• Individuals tend to espouse theories, which they intend to
follow, and theories-in-use, which is what they actually do.
• Similarly, organisations tend to have ‘memories’ which
preserve certain behaviours, norms and values. In the
creation of a learning environment it is important to replace
confrontational attitudes with an open culture that promotes
inquiry and trust.
• To achieve this, the Learning Organisation will have
mechanisms for locating and assessing organisational
theories of action. If there are unwanted values held by the
organisation, these need to be discarded in a process called
‘unlearning’ Wang and Ahmed refer to this as ‘triple loop
Characteristics of a Learning Organization-4
• The development of a shared vision is importantly provides
incentive to the workforce to learn as it creates a common
identity that can provide focus and energy for learning.
• The most successful visions are built on the individual visions
of the employees at all levels of the organisation
• The creation of a shared vision is likely to be hindered by
traditional structures where a company vision is imposed
from above. Therefore…
• Learning Organisations tend to have flat, decentralised
• The topic of shared vision is often to succeed against a
competitor, however Senge states that these are transitory
goals and suggests that there should also be long term goals
that are intrinsic within the company.
Characteristics of a Learning Organization-5
• Team learning is the accumulation of individual learning.
• The benefit of sharing individual learning is that employees
grow more quickly and the problem solving capacity of the
organisation is improved through better access to knowledge
• Learning Organisations have structures that facilitate team
learning with features such as boundary crossing and
• Team learning requires individuals to engage in dialogue and
discussion, therefore it is important that team members
develop open communication, shared meaning and
• Learning Organisations also have excellent knowledge
management structures, which allow creation, acquisition,
dissemination, and implementation of this knowledge
throughout the organisation.
Characteristics of a Learning Organization-6
• The basic rationale for such organisations is that in situations
of rapid change, only those that are flexible, adaptive and
productive will excel.
• For this to happen, it is argued that organisations need to
‘discover how to tap people’s commitment and capacity to
learn at all levels’ (Peter Senge, 1990)
• And that “the pressure of change in the external
environments of organisations... is such that they need to
learn more consciously, more systematically, and more
quickly than they did in the past...
• They must learn not only in order to survive but also to thrive
in a world of ever increasing change” (Pearn, 1997).
• The key ingredient of the Learning Organisation is in how
organisations process their experiences and how they learn
from their experiences rather than being bound by their past
Learning Organisation Concepts
• The concept of organisational learning evolved from the
individual learning process, but organisational learning is
not simply the collectively of individual learning
processes, but it engages interaction between:
• Individuals in the organisation
• Interaction between organisations as an entity
• Interaction between the organisation and its environment
• The major Learning Organisational concepts focus on
“Continuous Improvement”, “Culture” and “Innovation
Focus The concept of Learning Organisation Practices
“A learning organisation should consciously and
intentionally devote to the facilitation of individual
learning in order to continuously transform the
entire organisation and its context “ (Pedler et al.
The adoption of
“A learning organisation should be viewed as a
metaphor rather than a distinct type of structure,
whose employees learn conscious communal
processes for continually generating, retaining and
leveraging individual and collective learning to
improve performance of the organisational system
in ways important to all stakeholders and by
monitoring and improving performance” (Drew &
adopting to cultural
ve team working,
Organisation learning is the process by which
the organisation constantly questions existing
product, process and system, identify
strategic position, apply various modes of
learning, and achieve sustained competitive
quality and value
Problems / issues that may be encountered in a Learning
• Even within a Learning Organisation, problems may be
encountered that stall the process of learning or cause it to
• Most of the problems arise from an Organisation not fully
embracing all the facets outlined above that are necessary in
a Learning Organisation.
• If these problems can be identified, work can begin on
Organisational barriers to learning:
• Some organisations can find it hard to embrace personal
mastery because as a concept it is intangible and the benefits
cannot be quantified. Additionally, personal mastery can be
seen as a threat to the organisation.
• This threat can be real, as Senge points out, that “to empower
people in an unaligned organisation can be
Organisational barriers to learning: (Contd.)
• In other words, if individuals do not engage with a shared
vision, personal mastery could be used to advance their
• In some organisations a lack of a pro-learning culture can
be a barrier to learning.
• It is important that an environment is created where
individuals can share learning without it being devalued and
• So more people can benefit from their knowledge and the
individual becomes empowered.
• A Learning Organisation needs to fully embrace the removal
of traditional hierarchical structures. These are a barrier to
the development of shared vision and to the sharing of
Individual barriers to learning
• Resistance to learning can occur within a Learning
Organisation if there is not sufficient “buy in” at an individual
• This is often encountered by people who feel threatened by
change or believe that they have the most to lose.
• The same people who feel threatened by change are likely to
have closed mind sets are not willing to embrace
engagement with mental models.
• Unless implemented coherently across the whole
organisation, learning can be viewed as elitist and restricted
to more senior levels within the organisation.
• If this is the case, learning will not be viewed as a shared
• If training and development is compulsory, it can be viewed
as a form of control, rather than a form of personal
• Learning and the pursuit of personal mastery needs to be an
individual choice, therefore enforced take up will not work.
Ideas on the "Why Learning Organisation?"
• Because we want superior performance and competitive
• For customer relations
• To avoid decline
• To improve quality
• To understand risks and diversity more deeply
• For innovation
• For our personal and spiritual well being
• To increase our ability to manage change
• For understanding
• For energized committed work force
• To expand boundaries
• To engage in community
• For independence and liberty
• For awareness of the critical nature of interdependence
• Because the times demand
Functional Plans & Policies:
• Functional Strategies are derived from Business &
Corporate Strategies and are implemented through
Functional & operational Implementation.
• Functional Strategies deal with limited plan designed to
achieve Objectives in a specific Functional area, allocation
of resources for that functional area and coordination
among different functional operations to achieve Functional
• Functional Plans & Policies are developed for:
1. The Strategic decisions are implemented by all parts of an
2. There is a basis available for controlling activities in
different functional areas of Operation.
3. Plans are laid down for what is to be done and Policies
provide guideline for discretions and Functional Manager’s
time in decision making is reduced.
4. Required Coordination amongst different functions takes
Financial Plans & Policies
Sources of Funds:
1. Capital Mix Decisions.
2. Capital Structure.
3. Procure of Capital.
4. Working Capital Borrowings.
5. Reserves & Surpluses as source of Funds.
6. Relationships with Lenders, Banks & FIs.
Plans & Policies related to sources of funds determine how
financial resources will be made available for implementation of
Usage of Funds:
1. Investment or Asset mix decisions.
2. Capital Investments,
3. Fixed Asset acquisitions,
4. Current Assets, Loans & Advances,
5. Dividend decisions,
6. Relationship with Shareholders,
Usage of Funds relates to efficiencies & effectiveness of
resource utilisation in the process of Strategy Implementation.
Management of Funds:
1. System of Finance,
2. Accounting & Budgeting,
3. Management Control Systems,
4. Cash, Credit and Risk Management,
5. Cost control, cost reduction and Tax planning
6. Aiming at Conservation and Optimum utilisation of Funds.
Organisations which implement business strategies of cost
leadership must practice proper management of Funds. Good
management of funds often creates the difference between
strategically successful or unsuccessful Company.
Marketing Plans & Policies
• These are 4Ps of Marketing
Product: Goods & Services offered by Organisation to its
Target market. (Choice of Models, Quality, Features, Brand
names, Packaging etc.)
Pricing : Money that Customers pay in exchange of Goods &
Services. (Discounts, Mode of payment, Allowances,
Payment period, Credit terms)
Promotion: Marketing communications intended to convey
the company and product or service image to prospective
buyers. (Advertising, Personal Selling, Sales Promotion and
Place: Distribution process by which goods or services are
made available to the customers. (Transportation, logistics,
inventory storage management, coverage of markets, etc.,)
Integrative & Systematic Factors:
• This part of the plans & policies related to Marketing
Management. (Marketing mix, Segmentation, Targeting,
Positioning, Market Standing, Company Image, Marketing
Organisation, Marketing System, Marketing Management
Operations Plans & Policies:
Production System – Capacity, Location, Layout, Product or
Service design, Work systems, Degree of Automation, extent
of vertical integration. Operation Plans & Policies deals with
vital issue affecting the capability of the Organisation to
Operational Planning & Control – Production Planning,
Materials supply, inventory, Cost, Quality Management,
Maintenance of Plant and Equipment.
Research & Development
Personnel Plans & Policies:
• HRM Plans & Policies relate to providing & maintaining
Personnel System: Manpower Planning, Selection,
Development, Compensation, Communication and Appraisal
Organisational & Employee Characteristics: Corporate
image, Quality of Managers, Staff & Workers, Image of
Organisation as an Employer, availability of Development
opportunities for employees, working conditions etc.,
Industrial Relations: Union – Management relationship,
Collective bargaining, Safety & Security, Employee
satisfaction & morale.
Information management Plans & Policies:
Information capability factors relate to design & management
of the flow of information within and from outside. The value
of information is source of Strategic Advantage.
• Acquisition and Retention of Information: Sources,
Quantity, Quality, and timeliness of Information, retention
capacity and security of information.
• Processing and Synthesis of Information: Database
management, Computer Systems, Software capability and
ability to synthesise information.
• Retrieval & Usage of Information: Availability and
appropriateness of Information formats and the capacity to
assimilate and use information.
• Transmission & Dissemination of Information: speed,
scope, width & depth of coverage of information with
willingness to accept the information.
• Integrative, Systematic and Supportive Factors: availability
of IT infrastructure and its relevance, compatibility to
organisational needs, up gradation facilities, investing in state
of art systems, Computer professionals, top management