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Syllabus: MBA: BPSM: Semester III
• (301) BUSINESS POLICY & STRATEGIC
1. Strategy and the Quest for Competitive Advantage:
• Military origins of strategy –
• Evolution –
• Concept and Characteristics of strategic management –
• Defining strategy –
• Mintzberg’s 5 ‘P’s of strategy –
• Corporate, Business Levels of strategy –
• Strategic Management Process. (4)
Ulhas D. Wadivkar. B.E. (Elect), PGDIM,
Retired Vice President (Works),
Graphite India Limited. Nashik & Bangalore.
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Business Policy and Strategic Management
• “Without Business Policy and Strategy, an organisation
is like a ship without rudder, going around in circles. It’s
like a tramp; who has no place to go” – Joel Ross and
• Business Policy definition by Christensen :
• “Business Policy is the study of the function and
responsibilities of Senior Management, the crucial
problems that affect success in the total enterprise, and
the decisions that determine the directions of the
organisation and shape of its future.”
The problems of policy in the business, like those of
policy in public affairs, have to do with choice of
purposes, the moulding of organisational identity and
character, the continuous definition of what needs to be
done, and the mobilisation of resources for the
attainment of organisational Goals in the face of
competition or adverse circumstance.
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Evolution of Business Policy as discipline.
• Origin – 1911- Harvard Business School – Integrated
Course in Management aimed at providing general
• Hofer: Strategic Management – A Casebook in Policy
and Planning: The Business Policy evolution has
undergone four Paradigm Shifts. This transition is of
• Development of subject of Business Policy has always
followed the demands of real life business.
• 1930 -1960: Environment change: New Products:
Continuously changing market: Ford Foundation
recommended report, by Gordon and Howell, suggested
a “Capstone” course of Business Policy which would
give the students an opportunity to pull together what
they have learned in the separate business fields and
utilise this knowledge in the analysis of complex
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Evolution of Business Policy as discipline.
• 1969: The course was made mandatory by American
Assembly of Collegiate School of Business (AACSB)
• 1990: The course has become an integral part of
management education curriculum.
Evolution of Business Policy has undergone four
• Paradigm One: Ad-hoc Policy – making.
• 1900 -1930: Era of Mass Production – Maximising output,
Normally a Single Product, Standardised and low cost
product, catering to unique set of customers servicing limited
geographical area – Informal control and co-ordination. The
Strategic planning was centred on maximising output.
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Evolution of Business Policy has undergone four
• Paradigm Two – Integrated Policy Formulation.
• 1930 - 1940: Changes in Technology, Turbulence in
Political environment, Emergence of new industries,
Demand for novelty products even at higher costs,
Product Differentiation, Market segmentation in
increasingly competitive and changing markets. These all
made investment decisions increasingly difficult. This was
era of integrating all functional areas and framing policies
to guide managerial actions.
• Paradigm Three – The Concept of Strategy.
• 1940 - 1960: Planned policy became irrelevant due to
increasingly complex and accelerating changes. Firms
had to anticipate environmental changes. A strategy
needed to be formed with critical look at basic concept of
Business and its relationship to the existing environment
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Paradigm Four – The Strategic Management.
• 1980 & onwards: The focus of Strategic Management is on
the strategic process of business firms and responsibilities
of general management.
• Everything out side the four walls is changing rapidly and
this phenomenon is called as “Discontinuity” by Mr. Peter
Drucker. Past experiences are no guarantee for future, as
science and technology is moving faster. The future is no
more extension of the past or the present.
• The world is substantially compressed and managing the
External & Internal environment becomes crucial function.
• What to produce, where to market, which new business to
enter, which one to quit and how to get internally stronger
and resourceful are the new stakes.
• Strategic Planning is required to be done to endow the
enterprise with certain fundamental competencies /
distinctive strengths which could take care of eventualities
resulting from unexpected environmental changes.
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The Indian Scenario:
• However, the evolution of this fourth phase is still
continuing and is yet not formed into a theory of how to
manage an enterprise. But Strategic Management is a
very important tool for and way of thinking to resolve
• The Indian Scenario:
• IIMs and Administrative Staff College of India formed in
early sixties were based on American Model. IIM-A is
based on Harvard Model. The All India Council of
technical Education (AICTE), The Association of Indian
Management Schools (AIMS) have recommended a
standard curriculum including “Business Policy and
Strategic Management” as a compulsory course.
Business Policy is the preferred nomenclature but
Strategic Management is being progressively adapted.
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Evolution of Strategic Management in India is divided in three periods.
Till 1980 : Pre-liberalisation Stage:
• Strategic management on Government fringes.
• Entwining enterprise objectives into the national Planning
• Grabbing opportunities, high diversification, non-
competitive scales, and weak technology.
• Secretive & one man Strategic Management Process.
1980 - 2000 : Liberalisation Stage:
• ‘Foreign Complex’ governed strategy.
• Strategy of focus on rationalisation and operations
• Strategy of growth through acquisitions, internationalisation
and product market expansion.
• Employing international consulting firms in Strategic
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Evolution of Strategic Management in India is divided in three periods.
2000- Onwards: Post Liberalisation Stage:
• ‘Global maverick’ mindset & Acquire professional skills in
Strategic Management and synergise entrepreneurial
• Portfolio rationalisation, entry into emerging sectors.
• Mobilise resources and ensure adequate growth through
• De-merge businesses as independent companies and
improve market capabilities.
• Development of Technology capabilities
• Decentralise organisations, develop institutionalised
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Core concept of Strategy:
• A company’s concept of Strategy consists of the competitive
moves and business approaches that managers employ to
attract and please customers, compete successfully, grow
the business, conduct operations and achieve targeted
• Military Origins of Strategy: Strategy is a term that comes
from the Greek Strategia, meaning "Generalship“. In the
military, strategy often refers to manoeuvring troops into
position before the enemy is actually engaged. In this
sense, strategy refers to the deployment of troops. Once the
enemy has been engaged, attention shifts to tactics. Here,
the employment of troops is central.
• Military origins of strategy are century old. It seems sensible
to begin our examination of strategy with the military view.
• Substitute "resources" for troops and the transfer of the
concept to the business world begins to take form.
• Strategy also refers to the means by which policy is
effected, As per “Clauswitz” the war is the continuation of
political relations via other means.
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• Strategy According to B. H. Liddell Hart
• In his book, Strategy, Liddell Hart examines wars and
battles from the time of the ancient Greeks through World
War II. He concludes that Clausewitz’ definition of
strategy as "the art of the employment of battles as a
means to gain the object of war" is seriously flawed in that
this view of strategy intrudes upon policy and makes
battle the only means of achieving strategic ends.
• Wiser definition of strategy could be "the practical
adaptation of the means placed at a General’s disposal to
the attainment of the object in view." Thus, military
strategy is clearly a means to political ends.
• Concluding his review of wars, policy, strategy and
tactics, Liddell Hart arrives at this short definition of
strategy: "The art of distributing and applying military
means to fulfil the ends of policy."
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• Strategy According to George Steiner
• George Steiner, a professor of management and one of the
founders of The California Management Review. His book,
Strategic Planning, is close to being a bible on the subject.
Steiner points out in his notes that there is very little
agreement as to the meaning of strategy in the business
• Some of the definitions in use to which Steiner pointed
include the following:
• Strategy is that which top management does that is of great
importance to the organization.
• Strategy refers to basic directional decisions, that is, to
purposes and missions.
• Strategy consists of the important actions necessary to
realize these directions.
• Strategy answers the question: What should the
organization be doing?
• Strategy answers the question: What are the ends we seek
and how should we achieve them?
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Defining Strategy and Concept of Strategic Management
• Alfred D Chandler(1962) : “The determination of basic long-
term goals and the adoption of courses or the courses of
action and the allocation of resources necessary for carrying
out these goals”
• Alfred D Chandler(1984) : “Basically, a strategy is a set of
decisions-making rules for the guidance of organisational
• Kenneth Andrews(1965) : “The pattern of objectives,
purpose, goals, and the major policies and plans for
achieving these goals stated in such a way so as to define
what business the company is in or is to be and the kind of
company it is or to be
• ”Kenneth Andrews (1965) : “Business Strategy is a method
of describing the future position of the company, its
objectives, purposes, goals, policies, and plans that may be
required for guiding the company from its existing position to
where it desires to be”.
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Defining Strategy and Concept of Strategic Management
• Igor Ansoff(1965) : “The common thread among the
organisation’s activities and product-markets…that defines
the essential nature of business that the organisation was
or planned to be in future”
• William F Gleueck(1972) : “A 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 the basic objectives of the enterprise are
achieved through proper implementation process”
• Henry Mintzberg(1987) : “Strategy is Organisation’s
pattern of response to its environment over a period of
time to achieve its goals and mission.
• Michael E Porter(1996) : “Creation of a unique and valued
position involving a different set of activities. The company
that is strategically positioned performs different activities
from rivals or performs similar activities in different ways”
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If we sum up all the above definitions, then Strategy is :
• A plan or course of action or a set of decisions rules
forming pattern or creating a common thread.
• The pattern or common thread related to the
organisation’s activities which move an organisation from
its current position to a desired to a desired future stage
• Concerned with the resources necessary for
implementing a plan or following a course of action and,
• Connected to the strategic positioning of a firm, making
trade-offs between its different activities, and creating a
fit among these activities.
• Set a clear direction to the organisation.
• Enterprise knows its strengths & weaknesses compared
with those of its competitors.
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Essence Of Strategy
• Strategy includes the determination and evaluation of alternative
paths to an already established Mission and Objectives of
enterprise and choosing the alternative to be adapted. Four
important aspects of Strategy are:
1. Long Term Objectives: It emphasises on long term growth and
development. These Objectives give direction for implementing
2. Competitive Advantages: The external environment is
continuously monitored & Strategy is made to have the firm a
continuous Competitive Advantage.
3. Vector: is a Direction with Force. Series of actions are to be
taken & they should have same direction for whole organisation.
4. Synergy: Once a series of decisions are taken to accomplish
the objectives in same direction, there will be synergy. Synergy
can happen due to Competitive Advantages and Growth Vector.
The Objectives need be measurable and could be : ROI, Sales
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Strategy as Action & Nature of Strategy
Three types of actions are involved in Strategy:
1. Determination of Long Term Goals & Objectives.
2. Adoption of courses of action.
3. Allocation of resources.
• Therefore, Strategy is “Creation of unique & valued
position involving a different set of activities. The Company
that is strategically positioned performs different activities
from rivals or performs similar activities in different ways” –
Thus Nature of Strategy is:
• Strategy is a major course of action through which
organisation relates itself to its environment. (External)
• Strategy is blend of internal & external factors. Face
opportunities & threats provided by external factors,
internal factors are matched with them.
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Nature of Strategy – contd…
• Strategic actions are different for different situations. Strategy
is combination of actions to solve a certain problem to
achieve a desirable end.
• Strategy may involve contradictory actions simultaneously or
with a gap of time like closing down some operations and
expanding some at same time.
• Strategy is future oriented. New situations, which have not
arisen in past will require revised Strategic Actions.
• Strategy requires some systems and norms for its efficient
adoption in any organisation.
• Strategy provides overall framework for guiding enterprise
thinking and action.
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Strategy v/s Policies
• Strategy & Policy are not
• Policy is guideline for
decisions & actions to be
taken by subordinates for the
fulfilment of the set of
• Policies are commonly
accepted understanding of
• Policies are thought oriented.
• Policies have to be integrated
so that Strategy is
implemented successfully and
• Strategy and policies both are
the means directed towards
• Strategies are concerned with
the direction in which human
and physical resources are
deployed to maximise the
chances of achieving
organisational objectives in
face of variable environment.
• Strategies are specific actions
suggested to achieve
• Strategy is action oriented
and empowers concerned to
• Strategy cannot be delegated
• Strategy is rule for making
decision and Policy is
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Strategy v/s Tactics
• Strategy determines the major
plans to be undertaken.
• Goal of Strategy is to gain
competitive advantage, break
• Strategic decisions cannot be
• Strategy formulation is
dynamic, responding to
environment. It can be
continuous or irregular.
• Strategy has a long term
perspective & have a high
element of uncertainty.
• Strategy formulation is
affected by the personal
values of person involved in
• Tactics is means by which
previously determined plans are
• Goal of Tactics is to achieve
success in a given action.
• Tactics decisions can be
delegated to all levels of
• Tactics are determined on a
periodic basis with some fixed
• Tactical decisions are more
certain as they work upon
framework set by Strategy.
• Tactical decision implementation
• Tactical decisions are less
important than Strategic
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Strategic Management :
• Definition – “Strategic management is the process of
systematically analysing various opportunities and
threats vis-à-vis organisational strengths and
weaknesses, formulating, and arriving at strategic
choices through critical evaluation of alternatives and
implementing them to meet the set objectives of the
• Definition – “Strategic Management is concerned with
making decisions about an organisation’s future direction
and implementing those decisions”. - By Lloyd L Byras.
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Aspects of Strategic Management
• Vision Statement
• Mission Statement indicating methodology for achieving the
objectives, purposes and Philosophy of organisation as reflected
in vision statement.
• Company Profile, its internal culture, strengths and capabilities.
• Critical study of external environmental factors, threats and
• Finding out way and deciding the desirable course of actions for
accomplishing the Mission statement.
• Selecting long term objectives and deciding corresponding
• Evolving short term objectives, defining corresponding strategies
in tune with Mission and Vision Statements.
• Implementing chosen strategies in planned way, based on
budgets, allocating resources, outlining action plan and tasks.
• Installation of a continuous review system, creating a control
mechanism and Data generation for selecting future course of
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Five Tasks of Strategic Management
• Forming a strategic Vision of what the company’s future
business make up will be and where the organisation is
headed. (A long term vision to infuse the organisation
with a sense of purposeful action.)
• Setting objectives: converting Strategic vision into
specific measurable performance outcomes.
• Crafting a Strategy to achieve desired outcome.
• Implementing & Executing chosen strategy efficiently
• Evaluating performance & initiating corrective
adjustment in Vision, Long term directions, Objectives,
Strategy in light of actual experience, changing
conditions, new ideas & new opportunities.
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Who performs these five tasks of Strategic Management?
• CEO is most important Strategy Manager, who is most visible also. He
performs various roles such as, Chief direction setter, Chief objective
setter, Chief strategy maker, Chief Strategy implementer.
• Vice Presidents of various functions have role to play in strategy making
and implementing. Functional heads like Production, Marketing,
Finance, HR etc have responsibilities to deliver measurable
performance as per Strategic Planning.
• All major organisational units, business units, divisions, Staff, Plant
support groups, district offices have leading and supporting roles in
company’s strategic game plan.
• CEO & Senior Corporate executives have responsibility & personal
authority for major strategic decisions.
• Managers with Profit & Loss responsibilities for individual business units
• Functional Heads & Departmental heads with direct responsibility over a
major business areas.
• Managers of operating plants: Strategy making is a job for all the line
managers. Doers should be strategy makers. It should not be left to staff
of Planners. Strategic Planning is not a stand alone function. It is an
integrated team effort.
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Aspects of Strategic Planning - 1
• Strategic Planning provides the route map for the
enterprise. It lends a framework which can ensure that
decisions concerning future are taken in a systematic and
• Strategic Planning provides a hedge against uncertainty,
against totally unexpected developments.
• Strategic Planning helps in understanding trends in a better
way and generates a reference frame for investment
• Strategic Planning provides the frame work for all major
business decisions, decisions on business, products,
markets, manufacturing facilities, investments, and
organisational structure. It is a path finder for business
opportunities and it is also a defence mechanism to avoid
costly mistakes in choice of product market or investments.
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Aspects of Strategic Planning - 2
• The more intense the environmental uncertainty, more critical
is the need for strategic planning.
• The success of the efforts and activities of the enterprise
depends heavily on the quality of strategic planning.
• Considerable thought and effort must go in vision, insight,
experience, quality of judgement and the perfection of
methods and measures.
• Strategic Planning is a management task concerned with
growth and future of the business enterprise.
• As a management tool, Strategic Planning utilises both
intuition and logic. Logic is through Planning and information
process and intuition is through experience, knowledge and
vision of top people in Management.
• All vital aspects of corporate governance are perfected
through strategic planning, starting from corporate mission,
philosophy and core values, down to choice of businesses
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Aspects of Strategic Planning - 3
• Through analytical process aspect, involved in Strategic
Planning, corporation understands where its core
competencies are, identifies the competitive advantages,
pinpoints the gaps, formulate steps to bridge them.
• Main aspects of Strategic Planning are Future, Growth,
Environment, basket of businesses of the firm for additions
and deletions, Strategy and not day to day routine matters,
creation of core competency and competitiveness and finally
integration. It views the organisation / business in its totality
and not a particular function. Thus Strategic Planning is
• Strategic Planning differs from other operative and
administrative functions of management. Strategic Planning
provides objective – strategy design: A) Growth Objective –
Performance levels, Profitability target, B) Product Market
scope, its penetration, C) Growth Vector – Product Market
posture, development or diversification, D) Competitive
Advantages, E) Synergy, strength obtained from new
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Mintzberg’s 5Ps of strategy –
• Henry Mintzberg, in his 1994 book, The Rise and Fall of
Strategic Planning, points out that people use "Strategy"
in several different ways, the most common being these
1. Strategy is a Plan, a "how," a means of getting from here
2. A strategy can be a Ploy too; really just a specific
manoeuvre intended to outwit an opponent or competitor.
3. Strategy is a Pattern in actions over time; for example, a
company that regularly markets very expensive products
is using a "high end" strategy.
4. Strategy is Position; that is, it reflects decisions to offer
particular products or services in particular markets.
5. Strategy is Perspective, that is, vision and direction.
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• Mintzberg argues that strategy emerges over time as
intentions collide with and accommodate a changing
• Thus, one might start with a perspective and conclude
that it calls for a certain position, which is to be
achieved by way of a carefully crafted plan, with the
eventual outcome and strategy reflected in a pattern
evident in decisions and actions over time.
• This pattern in decisions and actions defines what
Mintzberg called "realized" or emergent strategy.
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Henry Mintzberg (pictured above,) Bruce Ahlstrand and
Joseph Lampell, in their 2005 book “Strategy Bites Back”,
present 5 "P's" as a way to define strategy. Each "P" shines a
spotlight on what strategy is / means / encompasses from a
different angle, to provide a comprehensive overview that is
probably more useful than definitions that try to fit all into a
couple of sentences.
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Mintzberg’s 5Ps of strategy –
The 5 "P's," adjusted where necessary to fit into the
professional services / Industrial firms, are as follows:
1. Strategy is a PLAN
To almost anyone you care to ask, strategy is a plan - some
sort of consciously intended course of action, a guideline (or
set of guidelines) to deal with a situation. A kid has a
"strategy" to get over a fence; a firm has one to dominate a
market for a particular service or practice area. By this
definition, strategies have two essential characteristics: they
are developed consciously and purposefully.
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• 2. Strategy as a PLOY: Strategy can be a ploy, too, which is
really just a specific "manoeuvre" intended to outwit an
opponent or competitor. The kid may use the fence as a ploy
to draw a bully into his yard, where his Doberman Pincher
awaits intruders. Likewise, a firm may threaten to establish a
new practice area in order to discourage a competitor from
trying to do the same. Here the real strategy (as plan, that is,
the real intention) is the threat, not the new practice area
itself, and as such is a ploy. Threatened litigation often falls
into this category.
• 3. Strategy is a PATTERN: Strategy (whether as general
plans or specific ploys) is pointless if it cannot be realized. In
other words, defining strategy as a plan or ploy is not
sufficient; we also need a definition that encompasses the
resulting behaviour. Thus, strategy is also a pattern -
specifically, a pattern in a stream of actions. By this
definition, strategy is consistent in behaviour, whether or not
intended. The outcome of strategy does not derive from the
design, or plan, but from the action that is taken as a result.
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• 4. Strategy is a POSITION: Strategy is also a position;
specifically a means of locating a firm in its environment. In
ecological terms: strategy becomes that firm's "niche." In
management terms: a "domain" consisting of a particular
combination of services, clients and markets. Position is often
defined competitively (literally so in the military, where it
becomes the site of a battle.)
• 5. Strategy is a PERSPECTIVE: While position is outwardly
focused, perspective looks inward into the firm; even into the
heads of the strategists themselves. Strategy in terms of this
definition becomes an ingrained way of perceiving the world.
Some firms are aggressive pacesetters; others build
protective shells around themselves. Almost every profession
has about it unique perspectives, that indelibly flavour the
strategies that firms practicing those professions craft for
themselves. A law firm's view of their business is
fundamentally different to that of an accounting firm, and
engineering firm or a graphic design studio, yet all are staffed
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• The Plan provides the roadmap by which the firm
intends to achieve its goals. Ploys add a dimension of
feint and manoeuvre, where one firm's gain is another's
loss and competitive advantage is critical. Pattern
emphasizes that strategy is not a once-off event but a
constant stream of decisions and resultant actions that
drive the firm forward, over time, towards its goal.
Position adds that different firms have different mixes of
markets, clients and services that they provide to those
clients. Finally Perspective provides an insight onto how
the firm and its strategists are informed by their own
professions, their perceptions of business, and the
unique characteristics of each firms own "world."
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What Is Strategy? - 1
What, then, is strategy? Is it a plan? Does it refer to how we will
obtain the ends we seek? Is it a position taken? Just as military
forces might take the high ground prior to engaging the enemy;
might a business take the position of low-cost provider? Or does
strategy refer to perspective, to the view one takes of matters,
and to the purposes, directions, decisions and actions stemming
from this view? Lastly, does strategy refer to a pattern in our
decisions and actions? For example, does repeatedly copying a
competitor’s new product offerings signal a "me too" strategy?
Just what is strategy?
Strategy is all these—it is perspective, position, plan, ploy and
pattern. Strategy is the bridge between policy or high-order
goals on the one hand and tactics or concrete actions on the
other. Strategy and tactics together straddle the gap between
ends and means.
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What Is Strategy? - 2
• In short, strategy is a term that refers to a complex web of
thoughts, ideas, insights, experiences, goals, expertise,
memories, perceptions, and expectations that provides
general guidance for specific actions in pursuit of
• Strategy, then, has no existence apart from the ends
sought. It is a general framework that provides guidance
for actions to be taken and, at the same time, is shaped
by the actions taken.
• The ends to be obtained are determined through
discussions and debates regarding the company's future
in light of its current situation. A SWOT analysis (an
assessment of Strengths, Weaknesses, Opportunities and
Threats) is conducted based on current perceptions.
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A Company’s Situation
•Industry & Competitive
•“PESTEL” – Political,
Technological, Environmental &
•Internal Factors like
strengths & Capabilities,
Weaknesses & Threats.
Adopt / Abandon Strategy
New Initiatives &
from prior periods
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• It is a simple and undeniably relevant matter for managers
to periodically ask the following questions of the
employees reporting to them:
• What have you done to improve customer service?
• What have you done to improve customer satisfaction?
• What have you done to reduce costs?
• What have you done to increase productivity?
• What have you done to increase revenues from new
products and services?
• Some Fundamental Questions
• Regardless of the definition of strategy, or the many
factors affecting the choice of corporate or competitive
strategy, there are some fundamental questions to be
asked and answered. These include the following:
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•Related to Mission & Vision 1.Who are we?
2.What do we do?
3.Why are we here?
4.What kind of company are we?
5.What kind of company do we want to
6.What kind of company must we
•Related to Corporate Strategy 1.What is the current strategy, implicit or
2.What assumptions have to hold for the
current strategy to be viable?
3.What is happening in the larger, social
and educational environments?
4.What are our growth, size, and
5.In which markets will we compete?
6.In which businesses?
7.In which geographic areas?
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•Related to Competitive
1.What assumptions have to hold for the current
strategy to be viable?
2.What is happening in the industry, with our
competitors, and in general?
3.What is the current strategy, implicit or explicit?
4.What are our growth, size, and profitability
5.What products and services will we offer?
6.To what customers or users?
7.How will the selling/buying decisions be made?
8.How will we distribute our products and
9.What technologies will we employ?
10.What capabilities and capacities will we
11.Which ones are core competencies?
12.What will we make, what will we buy, and
what will we acquire through alliance?
13.What are our options?
14.On what basis will we compete?
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Some Concluding Remarks -1
1. Strategy has been borrowed from the military and adapted for
business use. In truth, very little adaptation is required.
2. Strategy is about means. It is about the attainment of ends, not
their specification. The specification of ends is a matter of
stating those future conditions and circumstances toward which
effort is to be devoted until such time as those ends are
3. Strategy is concerned with how you will achieve your aims, not
with what those aims are or ought to be, or how they are
established. If strategy has any meaning at all, it is only in
relation to some aim or end in view.
4. Strategy is one element in a four- part structure. First are
the ends to be obtained. Second are the strategies for
obtaining them, the ways in which resources will be deployed.
Third are tactics, the ways in which resources that have been
deployed are actually used or employed. Fourth and last are
the resources themselves, the means at our disposal. Thus it is
that strategy and tactics bridge the gap between ends and
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Some Concluding Remarks -2
5. Establishing the aims or ends of an enterprise is a matter
of policy and the root words there are both Greek: politeia
and polites—the state and the people. Determining the
ends of an enterprise is mainly a matter of governance not
management and, conversely, achieving them is mostly a
matter of management not governance.
6. Those who govern are responsible for seeing to it that the
ends of the enterprise are clear to the people who
manages that enterprise and that these ends are
legitimate, ethical and that they benefit the enterprise and
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Some Concluding Remarks - 3
7. Strategy is the joint province of those who govern and those
who manage. Tactics belong to those who manage. Means
or resources are jointly controlled. Those who govern and
manage are jointly responsible for the deployment of
resources. Those who manage are responsible for the
employment of those resources—but always in the context
of the ends sought and the strategy for their achievement.
8 Over the time, the employment of resources yields actual
results and these, in light of intended results, shape the
future deployment of resources. Thus it is that "realized"
strategy emerges from the pattern of actions and decisions.
And thus it is that strategy is an adaptive, evolving view of
what is required to obtain the ends in view.
Ulhas D Wadivkar 44
Criteria for Effective Strategy
A) Clear, decisive, measurable objectives,
B) Maintaining the initiative proactively,
C) Concentration on what will make the enterprise superior in
D) Flexibility must be built in use of resources, buffers,
reserved capabilities, manoeuvrability and repositioning,
E) Coordinated and committed leadership,
F) Surprise the opponent by use of speed, secrecy and
G) Security: the organisation should secure & develop
resources required, securely maintain all vital operating
points for the enterprise, an effective intelligence system to
prevent effects of surprise by the competitors.
Ulhas D Wadivkar 45
Importance of Strategy
• Modern era witnesses the tremendous increase in the
External Threats. Companies must have clear Strategies &
must implement them effectively so as to survive.
• We can see some companies like Jessops, Martin Burn
have become extinct and some companies like Reliance,
Infosys have become market leaders.
• The basic factor responsible is not the Government or
infrastructure or labour relations, but the Strategic thinking
that different companies have shown in conducting the
1. Strategy helps an organisation to take decisions on long
2. It allows the firm to deal with a new trend and meet
competition in the effective manner.
3. With the help of strategy, management develops capacity to
be flexible to meet unanticipated changes.
4. Efficient strategy formation and implementation result into
financial benefits to the organisation in the form of
Ulhas D Wadivkar 46
Importance of Strategy -2
5. Strategy provides focus in terms of organisational objectives
and provides clarity of direction for achieving the objectives.
6. Strategy contributes towards organisational effectiveness by
providing satisfaction to the personnel.
7. It gets managers into habit of thinking, makes them proactive
and more conscious of their environment.
8. It provides motivation to employees as they can shape their
work in the context of shared corporate goals and make them
work for achieving these goals.
9. Strategy formulation & implementation gives opportunity to
the management to involve different of management in the
10. It improves Corporate communication, coordination and
allocation of resources.
Ulhas D Wadivkar 4747
Identifying a Company’s Strategy – What to look For:
The Pattern of
Actions to gain sales & Market share
via lower prices, more performance
features, more appealing design,
better quality or customer service,
wider production selection etc.
Actions to respond
entering into new
Actions to enter new
geographic or product
markets or exit existing
Actions to strengthen
competitive capabilities &
Actions & approaches
that define how the
production, sales &
marketing, finance &
other key activities
threats to the
Actions to form
merge with or
Ulhas D Wadivkar 4848
The Strategy Hierarchy
• In most (large) corporations there are several levels of strategy. Strategic
management is the highest in the sense that it is the broadest, applying to all
parts of the firm. It gives direction to corporate values, corporate culture,
corporate goals, and corporate missions. Under this broad corporate strategy
there are often functional or business unit strategies
Different Levels of StrategyDifferent Levels of Strategy
Levels Structure Strategy
Corporate Corporate Level
SBU - A SBU - B SBU - CSBU Business level
Finance Marketing Operations
Ulhas D Wadivkar 49
• Corporate Strategy: The companywide game plan for managing a set of
businesses. The levels involved are CEO and other Senior Executives.
• Business & Corporate Strategy
• Business strategy, which refers to the aggregated operational strategies
of single business firm or that of an SBU in a diversified corporation, refers
to the way in which a firm competes in its chosen arenas.
• Corporate strategy, then, refers to the overarching strategy of the
diversified firm. Such corporate strategy answers the questions of "in which
businesses should we compete?" and "how does being in one business
add to the competitive advantage of another portfolio firm, as well as the
competitive advantage of the corporation as a whole
• Business Strategy for Strategic Business Units: One for each
business, the company has diversified into. Actions to build competitive
capabilities and strengthen market position. Executed by General
Mangers, Plant Heads, Division heads of each business with inputs from
Corporate and Functional levels.
• Many companies feel that a functional organizational structure is not an
efficient way to organize activities so they have re –engineered according
to processes or strategic business units (called SBUs). A Strategic
Business Unit is a semi-autonomous unit within an organization. It is
usually responsible for its own budgeting, new product decisions, hiring
decisions, and price setting. An SBU is treated as an internal profit centre
by corporate headquarters. Each SBU is responsible for developing its
business strategies, strategies that must be in tune with broader corporate
Ulhas D Wadivkar 50
• Functional Strategies
• Functional strategies include Marketing Strategies, New product
development strategies, Human resource strategies, Financial strategies,
Legal strategies, Supply-chain strategies, and Information technology
management strategies. The emphasis is on short and medium term plans
and is limited to the domain of each department’s functional responsibility
and is executed by Functional heads. Each functional department
attempts to do its part in meeting overall corporate objectives, and hence
to some extent their strategies are derived from broader Corporate &
• Operational Strategy
• The “lowest” level of strategy is operational strategy. At this level,
detailing is done to add completeness to Business & Functional
Strategies. It is very narrow in focus and deals with day-to-day operational
activities such as scheduling criteria. It must operate within a budget but is
not at liberty to adjust or create that budget. Operational level strategy
was encouraged by Peter Drucker in his theory of Management By
Objectives (MBO). Operational level strategies are informed to business
level strategies which, in turn, are informed to corporate level strategies.
These strategies are executed by ‘Brand Managers’, ‘Operating
Managers’, ‘Plant managers’. Important activities like Advertising, Web
site operations, distributions are involved at this level.
Ulhas D Wadivkar 51
• Dynamic Strategy
• Since the turn of the millennium, there has been a tendency in some firms
to revert to a simpler strategic structure. This is being driven by
information technology. It is felt that Knowledge Management Systems
should be used to share information and create common goals. Strategic
divisions are thought to hamper this process. Most recently, this notion of
strategy has been captured under the rubric of Dynamic Strategy,
popularized by the strategic management textbook authored by Carpenter
and Sanders. This work builds on that of Brown and Eisenhart as well as
Christensen and portrays firm strategy, both business and corporate, as
necessarily embracing ongoing strategic change, and the seamless
integration of strategy formulation and implementation. Such change and
implementation are usually built into the strategy through the staging and
• Strategists - Their Roles & Levels:
• Strategists are individuals or groups who are primarily involved in the
formulation, implementation, and evaluation of Strategy.
• In a limited sense, all managers are Strategists. But we may have outside
agencies involved in various aspects of Strategic Management, who are
Ulhas D Wadivkar 52
• Board of Directors:- Board is an ultimate legal authority of an
organisation. Board is responsible to owners, share holders,
government, controlling agencies, and financial institutes. They get
elected and appointed by holding or parent company. Board is requires
to direct and is involved in reviewing and screening executive decisions
in light of their environmental, business and organisational implications.
Role of Board of Directors is to guide the senior management in setting
and accomplishing objectives, reviewing and evaluating organisational
performance, and appointing senior executives. Board is involved in
setting strategic direction, establishing objectives & strategy, monitoring
and reviewing achievement.
• Chief Executive Officer:- is responsible for all aspects of strategic
management from the formulation to evaluation of strategy. CEO plays
a pivotal role in setting mission, objectives and goals. He formulates
and implements strategy and ensures that organisation does not
deviate from a predetermined path. CEO is primarily responsible for
strategic management of the organisation
• Entrepreneur:- is the person who starts a new business, is a venture
capitalist. He has to play a proactive role to provide sense of direction,
set objectives and formulate strategies. He is different from formal
system and plays all strategic roles simultaneously.
Ulhas D Wadivkar 53
• Senior management:- consists of higher management level starting
from CEO to functional managers and profit centre or SBU heads. They
are responsible for implementing the strategies and plans and for a
periodic evaluation of their performance. Organisationally they come
together in the form of committees, task forces, work groups, think tanks
and play a very important role in Strategic management.
• SBU level Executives:- SBUs are formed with each business having a
clearly defined product – market segment and a unique strategy. They
are CEOs for their SBUs and hence SBU level strategy formulation and
implementation is their main role.
• Corporate Planning:- It assists management in all aspects of strategy
formulation, implementation and evaluation. They are responsible for
preparation and communication of strategic plans, provides
administrative support and plays a measurement and controlling role.
They do not from strategy and do not initiate a process on their own.
• Consultants:- in absence of a Corporate planning many organisation
take an outside help in the form of a consultants or consulting
companies. Besides providing corporate strategy and strategic
planning, they are specialist, knowledgeable, outsider, unbiased and
provide objective evaluation. E.g. AF Ferguson, PWC, KPMG,
Billimoria, Mckinsey etc.
Ulhas D Wadivkar 54
• Middle Level Managers:- They relate to operational
matters and are seldom play active role in Strategic
Management. They form departmental / functional plan in
light of broad objectives and goals of organisation
provided in vision, mission, goals and objective
statements of the organisation. They are implementers,
followers of guide lines, receivers of communication about
strategic plans. They are basically involved in in the
implementation of functional strategies.
• Executive Assistant:- An executive assistant is a person
who assists the chief executive in the performance of his
duties like data collection and analysis, suggesting
alternatives. He prepares brief for various plans,
proposals, and projects. He helps in public relations and
liaison functions. He coordinates activities with the internal
staff and outsiders. He is a corporate planner for CEO.
Generally, he orients from finance background ensuring
and opining on ROI and strategic positioning of the
Ulhas D Wadivkar 55
• We will now look at a framework developed by Richard Rumlet for
evaluating alternative strategies. It is described in a series of tests:
Consistency: The strategy must not present mutually inconsistent
goals and policies.
• Consonance: The strategy must represent an adaptive response to
the external environment and to the critical changes occurring within it.
• Advantage: The strategy must provide for the creation and/or
maintenance of a competitive advantage in the selected area of activity.
• Feasibility: The strategy must neither overtax available resources
nor create unsolvable sub-problems
We shall now look into the advantages and disadvantages of the
• Strategy sets direction, but can also serve as a set of blinders to hide
• Strategy focuses efforts, there may be no peripheral vision and can
become heavily embedded into the fabric of the organization.
• Strategy defines the organization, but defining it too sharply results in
the rich complexity of the system being lost.
• Strategy provides consistency, but could hinder creativity.
Ulhas D Wadivkar 56
Kinds of Corporate Strategy -1
• There are four Grand Strategic alternatives:
a) Stability Strategy: Main aim here is Stabilising and
improving Functional Performance.
a.1) No Change Strategy.
a.2) Profit Strategy.
a.3) Pause / Proceed with caution Strategy.
b) Expansion Strategy: Main aim is here High Growth.
Mergers, Takeovers, Joint Ventures, Strategic Alliances, Global
Strategy, Trans-national Strategy, International Strategy,
Ulhas D Wadivkar 57
Kinds of Corporate Strategy - 2
c) Retrenchment Strategy: Main aim here is contraction of its
activities. It is done through Turnaround, divestment and
liquidation in modes like
c.1) Compulsory winding up.
c.2) Voluntary winding up.
c.3) Winding up under supervision of Court.
d) Combination Strategies: It is combination of all above three
policies simultaneously in different businesses or at different
i) Merger of TTK Chemicals with TTK pharma.
ii) TT industries and Textiles Ltd. expanded through JV.
iii) TTK Ltd., diversified into cooking utensils.
iv) TTK maps and publications into the general publishing
business after a turn-around.
Ulhas D Wadivkar 58
Schools of Thought on Strategy Formation-1
• The fourth paradigm (1980 onwards) says that subject of
Strategic Management is still under evolution. Strategic decision
making is at the core of Managerial activity, their Strategic
behaviour is outcome of Formation of Strategy.
• Mintzberg and other doyens in field of Strategy have formed
various perspectives called as Schools of Thought:
The Perspective Schools:
1. Design School-(Sleznic & Andrews): Strategy is unique. The
process of Strategy formation is based on Judgement and
2. Planning School-(Ansoff): Strategy is seen as a plan divided into
sub-strategies and programmes. The lead role in Strategy
formation is played by Strategy Planners.
3. The Positioning School-(Schendel –Hatten & Porter): Under this
school Strategy is seen as set of planned generic positions
chosen by a firm on the basis of an analysis of the competition
and the industry in which they operate.
Ulhas D Wadivkar 59
Schools of Thought on Strategy Formation-2
The Descriptive Schools:
4. Entrepreneurial School -(Schumpeter & Cole): Strategy
formation is mainly intuitive, visionary & deliberate. Strategy
is an outcome of a personal & unique perspective to create a
5. Cognitive School -(Simon & March): Strategy formation is
mental process. The lead role is played by thinker
6. Learning School -(Weick, Quinn, Senge & Lindblom): This
school perceives Strategy formation as an emergent process.
The process is informal and messy and lead role is played by
7. Power School - (Allison & Astley): Strategy is seen as political
& cooperative process or pattern. This school perceives
Strategy formation as negotiation process. The process of
Strategy formation is messy, emergent & deliberate.
Ulhas D Wadivkar 60
Schools of Thought on Strategy Formation-3
8. Cultural School - (Rhenman & Normann): Strategy is seen as
collective perspective. The process of Strategy formation is
ideological, constrained & deliberate.
9. Environmental School -( Hanan, Freeman & Pugh): The lead
role in strategy formation is played by environment as an
entity. The process of Strategy formation is reactive, passive
& imposed and hence deliberate.
The Integrative School: -(Chandler, Miles & Snow):
10. The Strategy is viewed in relation to a specific context and
any of the nine schools mentioned above can be used to
form the Process. The Strategy formation process is
integrative, episodic & sequential.
Ulhas D Wadivkar 6161
Strategic Management Process - an Overview
Definition of Strategic Management: Strategic management
is defined as the dynamic process of formulation,
implementation, evaluation and control of strategies to realise
the Organisation’s Strategic intent.
Strategic Management is a continual, evolving, iterative
process. It is not rigid, stepwise activities arranged in a
sequential order. It is repeated over time as situation
Ulhas D Wadivkar 62
Strategic Management Process-1
1. Creating & Communicating the Vision.
2. Defining the Business.
3. Designing a Mission Statement.
4. Adopting the Business Model.
5. Clarifying the business mission, purpose & setting broad
Objectives and Goals.
Formulation of Strategies:
6. External Environment Survey. SWOT Analysis.
7. Internal Appraisal of the firm.
8. Setting Corporate Objectives.
9. Formulating the Corporate objectives.
10. Formulating the Corporate strategies.
11. Exercising Strategic Choice.
12. Preparing a Strategic Plan.
Ulhas D Wadivkar 64
2. Strategic Intent & Strategy Formulation:
Vision, mission and purpose –
Business definition, objectives and goals –
Stakeholders in business and their roles in strategic
Corporate Social Responsibility,
Ethical and Social considerations in Strategy
Ulhas D Wadivkar 65
• Strategic Intent is combination of four levels in the Management.
It involves discussions of Vision, Mission, Business Definition &
Goals and Objectives.
• Strategic Intent refers to the purposes the Organisation strives
• Strategic Intent lays down the frame work within which firms
would operate, adopt a predetermined direction, and attempt to
achieve the Goals.
• Hamel & Prahalad considered Strategic Intent as an obsession
with an Organisation.
• Strategic Intent envisions a desired leadership positioning and
establishes the criterion the Organisation will use for charting
its progress. In addition to ambitions of the Organisation; it
encompasses active Management Process that includes
focussing the organisation’s attention on winning. It covers
motivating the people by communicating the values, targets. The
intent encourages individual and team contributions and
attempts sustaining enthusiasm by providing new operational
definitions. The Strategic Intent guides the organisation through
changing circumstances and guides use of resource allocations.
Ulhas D Wadivkar 66
Vision, Mission and Purpose,
• A vision is more dreamt of than it is. Vision Statement is permanent
statement of a company. Vision is future aspirations that lead to an
inspiration. It defines the very purpose of existence of a company.
• The vision of a company is a direction for action for employees. The
essence of a vision is forward looking view of what an organisation
wishes to become.
• Kotter(1990) defines Vision as “ a description of an enterprise. (an
organisation, corporate culture, a business, a technology, an
activity) in future”.
• El-namaki(1992) defines vision as a “mental perception of the kind
of environment an individual, or an organisation, aspires to create
within a broad time horizon and underlying conditions for the
actualisation of this perception”
• Miller and Dess(1996) defines vision as “category of intentions that
are broad, all inclusive, and forward thinking”
Ulhas D Wadivkar 67
Characteristics of a Vision Statement
• Inspiring and exhilarating.
• It represents, a discontinuity, a step, a jump ahead to dream what
it is to be.
• Creation of common identity and share sense of purpose.
• Competitive, original and unique and practical.
• Foster risk taking and experimentation.
• Foster long term thinking.
• A vision is a statement about what your organization wants to
• It should resonate with all members of the organization and help
them feel proud, excited, and part of something much bigger than
• A vision should stretch the organization’s capabilities and image
of itself. It gives shape and direction to the organization’s future.
• Visions range in length from a couple of words to several pages.
• Shorter vision statements is recommended because people will
tend to remember their shorter organizational vision.
Ulhas D Wadivkar 68
• Vision Statement Samples:
• "Year after year, Westin and its people will be regarded as the best
and most sought after hotel and resort management group in North
America." (Westin Hotels)
• "To be recognized and respected as one of the premier associations
of HR Professionals." (HR Association of Greater Detroit)
• Vision Statement of “TATA STEEL”
“TATA Steel enters the new millennium with the confidence of
learning, knowledge based and happy organisation. We will
establish ourselves as a supplier of choice by delighting our
customers with our service and products. In the coming decade, we
will become the most cost competitive steel plant and so serve the
community and the nation”.
• Vision Statement of Farm Fresh Produce
• “We help the families of Main Town live happier and healthier lives
by providing the freshest, tastiest and most nutritious local produce:
From local farms to your table in under 24 hours.”
Ulhas D Wadivkar 69
Developing a Vision Statement
• The vision statement includes vivid description of the organization
as it effectively carries out its operations.
• Developing a vision statement can be quick culture-specific, i.e.,
participants may use methods ranging from highly analytical and
rational to highly creative and divergent, e.g., focused
discussions, divergent experiences around daydreams, sharing
stories, etc. Therefore, visit with the participants how they might
like to arrive at description of their organizational vision.
• Developing the vision can be the most enjoyable part of planning,
but the part where time easily gets away from you
• Note that originally, the vision was a compelling description of the
state and function of the organization once it had implemented
the strategic plan, i.e., a very attractive image toward which the
organization was attracted and guided by the strategic plan.
Recently, the vision has become more of a motivational tool, too
often including highly idealistic phrasing and activities which the
organization cannot realistically aspire.
Ulhas D Wadivkar 70
• Strategic Vision is a road map showing the route a company
intends to take in developing and strengthening the business. It
defines Company’s destination and provides rational for going there. It
culminates in to a Mission Statement. Strategic Vision points an
Organisation in a particular direction, charts a strategic path to follow
for future and moulds the organisation’s identity.
• Strategic Vision is different from Mission Statement: Strategic
Vision deals with where we are going, where as Mission Statement
deals with Company’s present business scope and purpose.
• A company Mission is guided by the buyer’s needs it seeks to satisfy,
the customer groups and market segments it is endeavouring to
serve, and the resources and technologies that it is deploying in trying
to please customers and achieve a Market and Industry position.
Ulhas D Wadivkar 71
Example of Strategic Vision
• “The San Antonio Express News” developed this
• "EXPAND” our customer base and enhance the
franchise by pursuing multimedia opportunities.
• “DELIVER” an award-winning level of journalistic
excellence, building public interest, trust and pride.
• “PROVIDE” vigorous community leadership and support.
• “INSTILL” an environment of internal and external
excellence in customer service.
• “EMPOWER” and recognize each employee's unique
• “ACHIEVE” the highest standards of quality.
• “IMPROVE” financial strength and profitability."
Ulhas D Wadivkar 72
• Thompson(1997) defines Mission as “the essential
purpose of the organisation, concerning particularly, why it
is in existence, the nature of businesses it is in, and the
customers it seeks to serve and satisfy”
• Hunger and Wheelen(1999) say that “mission is the
purpose and reason for the organisation’s existence”
• Mission statements could be formulated on the basis of
vision that an entrepreneur decides on in the initial stages.
• A business mission helps to evolve an executive action.
• Mission of organisation is what it is and why it exists. It
represents common purpose which the entire organisation
shares and pursues. It is a guiding principle.
Ulhas D Wadivkar 73
• Mission of a company is expressed it terms of products and
geographical scope. It includes a methodology of attaining
the desired goal in vision. It defines the competitive strength
of a company and it emanates from corporate vision and
strategic posture of a company.
• Thus the mission of a business is a statement, a build-up
philosophy of its current and future expected position with
regards to its products, market leadership.
• Mission is statement which defines the role of organisation
plays in a society.
• The corporate mission is growth ambition of the firm.
Ulhas D Wadivkar 74
Characteristics of a Mission Statement
1. It should be feasible, achievable & It should be precise.
2. It should be clear & It should be distinctive.
3. It should be motivating.
4. It should be indicative of major component of strategy &
5. It should be indicative of how objectives are to be accomplished.
6. It should be indicative of how Policies will be achieved.
7. It should focus Market Rather than Product.
Ulhas D Wadivkar 75
Mission Statement Creation
• To create your mission statement, first identify your
organization’s “winning idea”.
This is the idea or approach that will make your organization
stand out from its competitors, and is the reason that
customers will come to you and not your competitors.
• Next identify the key measures of your success. Make sure
you choose the most important measures (and not too many
• Combine your winning idea and success measures into a
tangible and measurable goal.
• Refine the words until you have a concise and precise
statement of your mission, which expresses your ideas,
measures and desired result.
Ulhas D Wadivkar 76
Developing a Mission Statement
1. At is most basic; the mission statement describes the
overall purpose of the organization.
2. If the organization elects to develop a vision statement
before developing the mission statement, ask “Why does
the image, the vision exist -- what is it’s purpose?” This
purpose is often the same as the mission.
3. Developing a mission statement can be quick culture-
specific, i.e., participants may use methods ranging from
highly analytical and rational to highly creative and
divergent, e.g., focused discussions, divergent
experiences around daydreams, sharing stories, etc.
Therefore, visit with the participants how they might like to
arrive at description of their organizational mission.
4. When wording the mission statement, consider the
organization's products, services, markets, values, and
concern for public image, and maybe priorities of activities
Ulhas D Wadivkar 77
5. Consider any changes that may be needed in wording
of the mission statement because of any new
suggested strategies during a recent strategic planning
6. Ensure that wording of the mission is to the extent that
management and employees can infer some order of
priorities in how products and services are delivered.
7. When refining the mission, a useful exercise is to add or
delete a word from the mission to realize the change in
scope of the mission statement and assess how
concise is its wording.
8. Does the mission statement include sufficient
description that the statement clearly separates the
mission of the organization from other organizations?
Ulhas D Wadivkar 78
• Mission Statement of Ranabaxy
“To become a $ 1 Billion research based global
(International) pharmaceutical company”
• Mission Statement of Graphite India Limited
“To be within top three companies in the world by
achieving 1,00,000 MT Production of Graphite Electrodes
• The mission statement of Farm Fresh Produce is:
“To become the number one produce store in Main Street
by selling the highest quality, freshest farm produce, from
farm to customer in under 24 hours on 75% of our range
and with 98% customer satisfaction.”
• "Our goal is simply stated. We want to be the best service
organization in the world." (IBM)
• "To give ordinary folk the chance to buy the same thing as
rich people." (Wal-Mart)
Ulhas D Wadivkar 79
• "FedEx is committed to our People-Service-Profit Philosophy.
We will produce outstanding financial returns by providing
totally reliable, competitively superior, global, air-ground
transportation of high-priority goods and documents that
require rapid, time-certain delivery." (Federal Express)
• "Our mission is to earn the loyalty of Saturn owners and grow
our family by developing and marketing U.S.-manufactured
vehicles that are world leaders in quality, cost, and customer
enthusiasm through the integration of people, technology,
and business systems." (Saturn)
• "In order to realize our Vision, our Mission must be to exceed
the expectations of our customers, whom we define as
guests, partners, and fellow employees. (mission) We will
accomplish this by committing to our shared values and by
achieving the highest levels of customer satisfaction, with
extraordinary emphasis on the creation of value. (strategy) In
this way we will ensure that our profit, quality and growth
goals are met." (Westin Hotels and Resorts)
Ulhas D Wadivkar 80
• Values are traits or qualities that are considered
worthwhile; they represent an individual’s highest priorities
and deeply held driving forces. (Values are also known as
core values and as governing values; they all refer to the
• Value statements are grounded in values and define how
people want to behave with each other in the
organization. They are statements about how the
organization will value customers, suppliers, and the
internal community. Value statements describe actions
which are the living enactment of the fundamental values
held by most individuals within the organization.
Ulhas D Wadivkar 81
• The values of each of the individuals in your workplace,
along with their experience, upbringing, and so on, held
together to form your corporate culture. The values of your
senior leaders are especially important in the development
of your culture. These leaders have a lot of power in your
organization to set the course and environment and they
have selected the staff for your workplace.
• If you think about your own life, your values form the
cornerstones for all you do and accomplish. They define
where you spend your time, if you are truly living your
values. Each of you makes choices in life according to
your most important top ‘ten’ values. It is necessary to
take the time to identify what is most important to you and
to your organization.
Ulhas D Wadivkar 82
Developing a Values Statement
• Values represent the core priorities in the organization’s
culture, including what drives members’ priorities and how
they truly act in the organization, etc. Values are
increasingly important in strategic planning. They often drive
the intent and direction for “organic” planners.
• Developing a values statement can be quick culture-
specific, i.e., participants may use methods ranging from
highly analytical and rational to highly creative and
divergent, e.g., focused discussions, divergent experiences
around daydreams, sharing stories, etc. Therefore, visit with
the participants how they might like to arrive at description
of their organizational values.
• Establish four to six core values from which the organization
would like to operate. Consider values of customers,
shareholders, employees and the community.
Ulhas D Wadivkar 83
Developing a Values Statement
• Notice any differences between the organization’s preferred
values and its true values (the values actually reflected by
members’ behaviours in the organization). Record each
preferred value on a flash card, then have each member
“rank” the values with 1, 2, or 3 in terms of the priority
needed by the organization with 3 indicating the value is
very important to the organization and 1 is least important.
Then go through the cards again to rank how people think
the values are actually being enacted in the organization
with 3 indicating the values are fully enacted and 1
indicating the value is hardly reflected at all. Then address
discrepancies where a value is highly preferred (ranked
with a 3), but hardly enacted (ranked with a 1).
• Incorporate into the strategic plan, actions to align actual
behaviours with preferred behaviours.
Ulhas D Wadivkar 84
Samples of Values and Value Statements
• "To preserve and improve human life." (Merck)
At Merck, "corporate conduct is inseparable from the conduct of
individual employees in the performance of their work. Every Merck
employee is responsible for adhering to business practices that are
in accordance with the letter and spirit of the applicable laws and
with ethical principles that reflect the highest standards of corporate
and individual behaviour...
• "At Merck, we are committed to the highest standards of ethics and
integrity. We are responsible to our customers, to Merck employees
and their families, to the environments we inhibit, and to the
societies we serve worldwide. In discharging our responsibilities, we
do not take professional or ethical shortcuts. Our interactions with all
segments of society must reflect the high standards we profess."
• Patriot Ledger (SouthofBoston.com): "We have a total commitment
to these values, shaping the way we do business for our employees,
our customers and our company.
• Our employees are the most valued assets of our company,
essential participants with a shared responsibility in fulfilling our
• We recognize that the quality, motivation and performance of our
employees are the key factors in achieving our success.
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Goals, Objectives and Action Plans
• After you have developed the key strategies, turn your
attention to developing several goals that will enable you to
accomplish each of your strategies. Goals should be
S M A R T : Specific, Measurable, Achievable, Realistic and
• Once you have enabled strategy accomplishment through
setting SMART Goals, you will want to develop action plans
to accomplish each goal. You will need to follow an action
• Establish a cross section of professionals as a committee
and meet to plan the sessions.
• Determine budget.
• Select topics based on member needs assessment.
• Plan advertising strategies, and so forth.
• Make action plans as detailed as you need them to be and
integrate the individual steps into your planning system. An
effective planning system, whether it uses a personal
computer, a paper and pen system, a handheld computer or
a Palm, will keep your goals and action plans on track and
Ulhas D Wadivkar 86
Areas of Objectives
• Objectives represent managerial commitment to achieve
specific results in specific period of time. Objectives could be
• : Profitability
• : Markets
• : Productivity
• : Innovation
• : Product
• : Financial Resources
• : Physical facilities
• : Organisation Structure & Activities
• : Manager Performance & Development
• : Employee performance & Activities.
• : Customer Service
• : Social Responsibility.
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Defining the business
• A clear-cut statement of the business, the firm is engaged in
or planning to enter. It is elaboration of the business arena
and the boundaries in which it will play.
• What is our business? What will it be? What should it be?
• Defining business involves three dimensions, namely
“Customer Functions”, “Customer Groups” and “Alternative
• Business Definition sets and limits the contours of the
business. It clarifies the opportunities business can pursue
and the areas in which these opportunities are to be looked
for. It clarifies to the firm the various sources from which
threats and competition will come for.
• Defining Customer functions and Customer groups provides
Blue Print and a reference point for Product-market strategy.
Mission Statement provides the basic inputs for Business
definition and provides a broad frame work.
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Objectives of Business Policy:
• Understand various concepts, like. Strategy, policies,
• Knowledge of internal and external environment and how it
affects the functioning of the organisation.
• Application of generalised approach to deal with wide
variety of situations.
• Development of analytical ability to understand situation.
Identify factors relevant to decision making. Analyse
strength, weakness, opportunities and threats to
organisation. Development of attitude of generalist and
asses a situation from all angles.
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Some Business definitions:
Modi Zerox : Focus as a service organisation rather than vendor of
zerox machines. Customer focus: Office Communication with high
priced and low priced equipments, marketing services of
maintenance and per copy price. Customer Function: Availability of
spares, Drums, Toner, good after sales service. Technology:
Collaboration with “Rank Zerox”
Helen Curtice: We are in beauty enriching business. We will pursue
ideas that would generate products enhancing beauty and
youthfulness of men and women.
Intel: We are in the business of computing technology and to
consistently develop the artifice/building blocks of computing
technology for the entire computer industry of the world is our
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Attributes of a good business definition:
• It must be related to human needs which the product seeks
to satisfy and should not be limited to just the product.
• It must be related to basic benefits the product offers.
• It should not be narrow. A wrong and or narrow concept
could reduce the life span of organisation.
• It must be related to the functions performed by the product
and not limited to just the product.
• It must encompass in its fold, as many related function /
benefits as possible.
• It must go beyond the immediate product, beyond the
immediate competitors, beyond the immediate market
• It must be wide enough to embrace new opportunities.
• It must be wide enough to give a vision of latent sources of
competition from say, substitute products.
• Business boundaries keep changing and defining Business
is a dynamic situation and becomes an exacting exercise
and it needs to be re-casted over time again and again.
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Benefits of Business Policy
• Business Policy seeks to integrate the knowledge and experience
gained in various functional areas of Management. Normally
functional areas are aloof of complexities of real life business
situations. Business Policy cuts across the narrow functional
boundaries. Business Policy helps us to create an understanding
of how policies are formulated.
• Managers become more receptive to the ideas and suggestions of
senior Management. Managers feel themselves to be a part of a
• Understanding Business Policy provides a basic framework for
understanding strategic decision making and Improvement in Job
• Study of business policy leads to personal development.
Managers understand the impact of policy shifts on the status of
one’s department and on the positions one occupies.
• Understanding Business Policy enables manger to avail the an
opportunity or avoid a risk to career planning and development
• Understand senior management’s view point.
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Social Responsibility & 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.
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• Scope of Social Responsibility is defined in terms of Social
concern. Business organisation depending on its nature, size,
and breadth of activity, could extend social responsiveness to
the problems of the whole world, nation, local community,
industry and to itself. Business organisations could also
classify Social Responsibilities in terms of relatedness to its
• Like any other strategic functions, for successful
implementation, Organisations need to allocate resources,
create Organisations 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.
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Corporate Governance : Social Responsibility
• Business provides goods & services to Society for which it receives the price.
•Society provides goods and services to Business for which it receives the
•Business rewards to society for its inputs by paying wages/profits/dividends
•Society and Business are interdependent. Their growth & welfare is dependent
on this mutuality. Business owes responsibility towards society. A firm carrying
very positive image in society has very strong probability of lasting growth.
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Corporate Governance : Social Responsibility
• “Sole aim of a business is and should be maximisation of
Shareholders’ value”, as stated by Milton Friedman, does not
hold good anymore.
• All modern large corporate have attained their present size
due to support of society in terms of shareholders, suppliers,
lenders, employees, government, local community and
society at large.
• Every business unit of the country must aim at becoming
good corporate citizen of the country and the world as whole.
World Class Quality of goods and services, reasonable prices
is minimum requirement. With this companies would enjoy
excellent image within area, country and world. Indian
examples are Tatas, Birlas, Reliance, Bajaj, L&T, Hero
Honda, HDFC, Dr. Reddy Laboratories. TCS, etc.
• Industrial Corporate Citizens are trustees and should utilise
their wealth for the welfare of the society / community.
Trusteeship invokes code of discipline, ethical behaviour and
strong principle of accountability. Capital and Labour have to
have mutual, peaceful co-existence.
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Corporate Governance : Social Responsibility
• Common feature they all posses is their image not only as
value creator but more as Top Class Corporate citizen of
India and of the world. They are asset to the share holders,
country and society at large by creating world class products
at competitive prices and price and providing these products
to society at desired time and space. Many of them provide
non-core social activities for benefit of society in quest of
their becoming good Corporate Citizens.
• They realise their dependence on Society for their needed
inputs like money, men and skills, society as a market for
their outputs and realise that they cannot exist without
unreserved support from Society. The more closely a
company concentrates on solving societal problems, the
better it is able to solve its own problem of growth and
Ulhas D Wadivkar 97
Corporate Governance : Social Responsibility
• Capital and labour should supplement and assist each other.
Capital being trustees should look after welfare of labour not
only material but also moral welfare. Principle of mutually
cherishing each other should be developed. Capital should
look after the workers and workers should look after
productivity and profit of the organisation. Presently, capital
has been replaced by knowledge in newer industries like IT
& Pharma. Knowledge workers (professionals) like Bill
Gates, Narayan Murthy are paving the way towards social
• Social Responsibilities have foundation of Business Ethics,
the moral principles of good & bad, right & wrong or Just &
unjust. Peter Drucker has stated that there are no separate
ethics of business. What is unethical and immoral in society
is also applicable to business. The trick is to put your-self in
shoes of those, against whom a particular action is being
planned / taken, which is known as empathy. Corporate
ethics refers to set of rules, code of conduct acceptable to
society at large without any reservations. The concept of
Business ethics is global phenomenon and is recognised
throughout the world.
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Corporate Governance : Social Responsibility
• Code of Ethics for Indian Business (by PHD
• It is believed that the best way to promote high
standards of business practice is through self regulation.
• Business should be conducted in a manner that earns
the goodwill of all concerned through Quality, efficiency,
transparency & good values with objectives as under:
• a) Be faithful and realistic in stating claims.
b) Be responsive to customer need and concerns.
c) Treat all stakeholders fairly and with respect
d) Protect and promote the Environment and
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• Stakeholders are defined as "those groups without whose
support the organization would cease to exist.
• A corporate stakeholder is a party that affects or can be
affected by the actions of the business as a whole.
• Person, Group, or Organization that has direct or indirect
Stake in an organization because it can affect or be affected
by the Organisation’s actions, Objectives, and Policies.
• Key stakeholders in a Business Organization include
Creditors, Customers, Directors, Employees, Government
(and its Agencies) Owners, Shareholders, Suppliers, Unions,
and the Community from which the business draws its
• Although stake-holding is usually self-legitimizing (those who
Judge themselves to be stakeholders are de facto so), all
stakeholders are not equal and different stakeholders are
entitled to different Considerations.
• For example, a firm's customers are entitled to fair trading
practices but they are not entitled to the same consideration
as the firm's employees.
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External Stakeholder : Definition:
• Entities such as Customers, Suppliers, Lenders, or the
wider society which influence and are influenced by an
Organisation but are not its 'internal part'
• Stakeholder: Any party that has an interest in an
organization. Stakeholders of a company include
stockholders, bondholders, customers, suppliers,
employees, and so forth.
• "The stakeholders in a corporation are the individuals and
constituencies that contribute, either voluntarily or
involuntarily, to its potential wealth-creating capacity and
activities, and that are therefore its beneficiaries and/or risk
Ulhas D Wadivkar 102
• Any individual, group or business with a vested interest (a
stake) in the success of an organization is considered to be
a Stakeholder. A Stakeholder is typically concerned with an
organization delivering intended results and meeting its
financial objectives. In general, a Stakeholder can be one of
two types: internal (from within an organization) or external
(outside of an organization). Examples of a Stakeholder are
an owner, manager, Shareholder, Investor, employee,
customer, partner and/or supplier, among others. A
Stakeholder may contribute directly or indirectly to an
organization’s business activities. Other than traditional
business, a Stakeholder may also be concerned with the
outcome of a specific project, effort or activity, such as a
community development project or the delivery of local
health services. A Stakeholder usually stands to gain or lose
depending on the decisions taken or policies implemented.
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Types of stakeholders
• People who will be affected by an endeavour and can influence it
but who are not directly involved with doing the work. In the Private
Sector,*People who are (or might be) affected by any action taken
by an organization or group. Examples are parents, children,
customers, owners, employees, associates, partners, contractors,
suppliers, people that are related or located near by. Any group or
individual who can affect or who is affected by achievement of a
• An individual or group with an interest in a group's or an
organization's success in delivering intended results and in
maintaining the viability of the group or the organization's product
and/or service. Stakeholders influence programs, products, and
• Any organization, governmental entity, or individual that has a stake
in or may be impacted by a given approach to environmental
regulation, pollution prevention, energy conservation, etc.
• A participant in a community mobilization effort, representing a
particular segment of society. School board members,
environmental organizations, elected officials, chamber of
commerce representatives, neighbourhood advisory council
members, and religious leaders are all examples of local
Ulhas D Wadivkar 104
Examples of a company stakeholders
Stakeholder Examples of interests
Owners private/shareholders Profit, Performance, Direction
Government Taxation, VAT, Legislation, Low unemployment
Senior Management staff Performance, Targets, Growth
Non-Managerial staff Rates of pay, Job Security
Working conditions, Minimum Wages, Legal
Customers Value, Quality, Customer Care, Ethical products
Creditors Credit score, New contracts, Liquidity
Local Community Jobs, Involvement, Environmental issues, Shares
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Competitive Strategy According to
• In a 1996 Harvard Business Review article and in an
earlier book, Porter argues that competitive strategy is
"about being different." He adds, "It means
deliberately choosing a different set of activities to deliver
a unique mix of value“.
• In short, Porter argues that strategy is about competitive
position, about differentiating yourself in the eyes of the
customer, about adding value through a mix of activities
different from those used by competitors.
• In his earlier book, Porter defines competitive strategy as
"a combination of the ends (goals) for which the firm
is striving and the means (policies) by which it is
seeking to get there." Thus, Porter seems to embrace
strategy as both plan and position. (It should be noted
that Porter writes about competitive strategy, not about
strategy in general.)
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Identification and Assessment of firm’s
Competitive Edge & Core Competencies
• A Competence is something an Organisation is good at
doing. It results out of accumulated learning and built-up
proficiencies. Examples are Proficiency in
Merchandising, Working with Customers, Proficiency in
specific technology, Proven capabilities.
• A Core Competence is a proficiently performed activity
that is central to the Organisation Strategy. These are
important activities in which Company is better than
other internal activities. Examples are : Good after sale
service, Skills in Manufacturing, High quality product at
• A Core Competence is knowledge & skill based residing
in people, and in Company’s intellectual capital. (Does
not appear in Balance Sheet)
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• A Distinctive Competence is a competitively valuable
activity that Company performs better than its rivals. It is
Competitive superiority in performing Core activity
generating competitively superior resource strength.
• A strength that is superior / distinctive to competition is
• Competitive advantage is a back-up for strategy without
which strategy will not work.
• Competitive advantage finally results in either cost
advantage or differentiation advantage.
• Creating entry barrier is also a way to built up competitive
• Building Competitive advantage is a conscious and long
• Preparing Competitive Advantage Profile for the
organisation is based on internal appraisal and industry-
Ulhas D Wadivkar 109
An enduring competency that cannot be easily duplicated
by imitation is Core Competency. Core Competency lies at
the root of products.
Techniques used are : SWOT Analysis
• : Bench marking
• : Value chain analysis
• : Value to customers – Competitive
• : Competitive strength assessment.
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Internal Appraisal of the firm:
1. To know one’s organisational capabilities, Strengths
2. To select the most suitable Opportunities as per already
3. To assess the “Capability GAP” for the opportunity in
hand and also for the Objectives and Goals.
4. To take steps to elevate the capability to achieve
Objectives and Goals.
5. To select the Product / business in which organisation
can grow as per potentials appraised.
Factors considered for Internal Appraisal:
• Assessment of the Strengths-Weaknesses in different
• Identification and assessment of firm’s Competitive
Edge and Core Competencies.
• Appraisal of the individual business, product lines of the
firm and firm’s know-how status.
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Assessing strengths and weaknesses:
– How well is the company’s present Strategy working?
1. Evaluate company’s competitive approach. Compare
cost effectiveness of the Company products with its
rivals. Are we low cost? Or does our product have
distinctive features? What value for money is offered to
the customers? What is the perception of Customers
about our Product and the Company.
2. Core competencies, distinctive competencies are
building blocks of Strategy. They give the strength.
Similarly resource weaknesses make company
vulnerable and need to be corrected. Strength allows
Company to take advantage of opportunities and guard
3. Check Value Chain analysis. Do we competitively
manage value additions in Value chain? Are we
competitively stronger or weaker than our key rivals?
Ulhas D Wadivkar 112
• Check what strategic issues need managerial attention.
Find out gaps and take remedial actions. Conduct
Industry analysis and competitive situation analysis and
prepare a “worry list”. Good company situation analysis,
good industry & competitive analysis are valuable pre-
condition for good strategy making.
• Marketing: Market growth, market share of the firm and
its competitors, Production capacity and GAP between
market potential, brand equity, Product’s life cycle and
estimating safe period. Customer’s perception for the
product and level of satisfaction there of. Synergy of the
product-mix, Prices, margins, new product capability,
Advertising, Sales promotion,
Ulhas D Wadivkar 113
• Marketing audit: Market share analysis, Price-volume
relationship, Cost analysis, Product line wise profits,
Consumer satisfaction index, Brand monitoring surveys.
• Finance: Level of financial performance – profitability and
productivity, analysis of Assets & Costs, DSCR (debt
service coverage ratio), analysis & efficiency of Cash flow,
liquidity, Appreciation of long term financial plans as per
Cost of capital, adequacy of Capital Expenditures, Tax
administration, dynamism in Tax planning, payback, IRR &
BE analysis, earning ratios like EPS, etc.
• Manufacturing/Operations: Appropriateness of
manufacturing processes, skills, facilities for future
requirements of product trend. Management in planning
and manufacturing controls. Operating efficiency w.r.t
industry standards, Industrial Engineering capability for
improving product and methods. Value engineering to
simplify the product. Analysis of capacity utilisation,
maintenance, breakdowns, inventory analysis, cost of
Ulhas D Wadivkar 114
• R & D: Commitment to R&D, nature & depth of R & D
outfit, Allocation of resources, Speed of R & D, New
product development-its records and adequacy, R & D
and market needs, Analysis of patents generated, new
product commercialisation, R & D expenses v/s new
• Allocation of resources and Corporate Functions:
chief characteristics of Top Management – Image as
dynamic? Confident? Aggressive? Timid? Reticent?
Change-stability oriented? Future oriented? Coping up
with future challenges? Creative? Realistic? Innovation
• Organisation Culture & Structure – Traditional? Modern?
Rigid? Centralised? Flexible? Flat? Use of information
• Quality of strategic planning?
• Executive turnover?
• Directors – Dummy? Active? Effective Policy makers?
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Signs of Strength in Company’s Competitive Position
• Important Core Competencies.
• Strong or leading market Share.
• A pacesetting or distinctive strategy.
• Growing customer base & Customer Loyalty.
• Above average market visibility.
• In a favourably situated strategic group.
• Concentrating on fastest growing Market Segments.
• Strong Differentiated product.
• Cost advantages & above average Profit margins.
• Above average technological and innovative Capability.
• A creative, entrepreneurially alert management.
• In position to capitalise on available opportunities.
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Signs of Weaknesses in Company’s Competitive Position
• Confronted with competitive dis-advantages.
• Losing ground to rival firms.
• Below average growth in revenues.
• Short on financial resources.
• A slipping reputation with customers.
• Trailing in product development.
• In a strategic group destined to lose ground.
• Weak in areas where there is most market potential.
• A higher cost producer.
• Too small to be a major market force or in marketplace.
• Not in good position to deal with emerging threats.
• Weak product quality.
• Lacking skills and capabilities in key areas.
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Organizational Capability Profile &
Strategic Advantage Profile:
• OR includes tangible,
Plant & Equipments,
• Four Types of Resources
e.g. “Valuable”, “Rare”,
“Costly to Imitate” and
eventually, lead to
• OB is manifestation of
forces and influence of
Internal Environment. (like,
Quality of Leadership,
Shared value, Culture,
Quality of Work, Work
Politics, use of Power)
• OB affects ability of
organisation to use its
• OR is Hardware & OB is