Power point presentation on strategy management

 Conceptual framework for strategic
management, the Concept of Strategy and
 the Strategy Formation Process –
Stakeholders in business – Vision, Mission
and Purpose – Business definition, Objectives
and Goals - Corporate Governance and Social
responsibility-case study.

CONCEPT OF STRATEGY
 Strategy is a term that comes from the Greek Strategia meaning :”Generalship”.
 “Strategos” referred to a general in command of an army
 In the military, strategy often refers to manoeuvring troops Into Position Before The Enemy Engaged (: to
move (something or someone) in a careful and usually skillful way. : to do something in an effort to get an advantage, get
out of a difficult situation, etc. : to move (soldiers, ships, etc.)

a group of soldiers. (TROOPS)
 Strategy is far from simple. And understanding a theory of strategy allows us to grasap and work with its complexity by
understanding its logic.


 the managers focused on “today’s decisions for today’s business”.
However the rapid changes experienced by companies have made the
managers to anticipate the future and prepare for it.
 They have prepared systems, procedures and manuals and evolved
budgets and planning and control systems, which included capital
budgeting and management by objectives

 Strategic management deals with decision making and actions which
determine an enterprise’s ability to excel survive or die by making
the best use of a firm’s resources in a dynamic environment.
 The main purpose of study of strategic management is to examine
why some organization succeed while others fail and yet others
completely change.

Consider the following examples:
•Bharat Heavy Electricals Ltd. (BHEL) is now planning to expand its range to 800 MW supercritical power
projects.
•LG Electronics India Ltd. (LGEIL) signed a MOU with Maharashtra government to expand manufacturing
facility at Pune for Rs.900 crores.
•GAIL India has received an offer from China Gas Holdings for participation in a gas based petrochemical project
to be set at Humor in Mangolia.
•The world‟s largest steel conglomerate Mittal Steel Company is to become the second largest stakeholder in a
Chinese Steel firm in Hunan Province.
•Mittal singed three MOUs with Jharkhand Government for setting up 12 million tonne Greenfield project in two
phases.
•Maruthi Udyog slashed the price of Maruti-800 by Rs.16000 in small car segment drastically.
•Lenova, the Chinese computer giant acquired IBM in China.
•Tata Steel entered a joint venture agreement with Iranian Mines and Mining Industries Development and
Renovation Organization.
These examples illustrate how organizations react to environment and adopt suitable course of action
such as divestment, expansion and stability as part of their operations.

 Strategy is the determination of the long-term goals and objectives of an
enterprise and the adoption of the courses of action and the allocation of
resources necessary for carrying out these goals.
 Strategy is management‘s game plan for strengthening the organization‘s
position, pleasing customers, and achieving performance targets.
 Strategy is a framework through which an organisation can assert its vital
continuity whilst managing to adapt to the changing environment to gain
competitive advantage.

 An enterprise’s success mainly depends on three board factors:
(1) The Industry, it belongs to

(1) The Nation, it is located and
(2) Its own resources, capabilities and strategies.
Fig: Determinants of Company Performance
Company Resources,
Industry Context National Context Capabilities and
Strategies
Company Performance

 Industry:
 Some industries are profitable than others due to industry attractiveness.
 A company in attractive industry will achieve success compared to a firm
in a less attractive industry.
 During the last decade software industry is more profitable than
pharmaceutical industry.

 Nation:
 The country also influences the competitiveness of company based within the nation.
 Some countries enjoy competitive advantage with regard to certain industries.
 For example, the world’s most successful automobile and consumer electronics
companies are located in Japan.
 The most successful pharmaceutical companies are located in U.S. and Switzerland.
 Many of the successful financial services companies are located in the United States
and Great Britain.
 The success or failure of individual firms depends on national competitive advantage.

 Company:
 Firm’s resources, capabilities and strategies are the strongest reasons
for the success or failure of the firm.
 Some firms thrive even in less attractive industry whereas some firms
perform poorly in spite of being in profitable industry.
 Often one comes across wide variation in the performance of
companies within the same industry and enjoying same national
competitive advantage.
 There is a grave need to understand the causes of success and failure
in order to develop strategies, which will increase the probability of
success and reduce the probability of failure.

 Academic influences in strategy
 1911 Scientific management (Taylor) – Still in place today (UPS), some consider it micromanaging
 HBS requires a class in Business Policy in 1912
 Adam Smith’s “invisible hand” (the market) gives way to Alfred Sloan (GM CEO from 1923-1946)
concept of the “visible hand”—middle manager
 Chester Bernard influential book “The Executive” argues that managers should pay attention to
“strategic factors”
 Ronald Coase’s 1937 article “why firms exist” (Nobel Prize in economics) and Joseph Schumpter’s
concept of “disruptive technologies” written in 1942 bring in organizational economics
 Max Weber warns against bureaucratic organizations but sees a shift toward this way of organizing

 Recent influences in strategy
 1960s (Strategy and structure; Corporate Strategy)
• 1963 Harvard business conference leads to SWOT analysis
• BCG founded in 1963 “strategy boutique”
• Created the portfolio analysis
• Stars, dogs, cash cows, question marks
 1980s (Porter’s 5 forces)
 1990s (Resource based view of the firm)

 Why is strategic management important?
Gives everyone a role
Makes a difference in performance levels
Provides systematic approach to uncertainties
Coordinates and focuses employees

 Why Strategy?
To change, an organization needs
Burning Platform
Vision
Leadership
Strategic Management
Political Management


NATURE OF STRATEGY
 Provides overall framework
 Strategy provides framework for guiding enterprise thinking and action.
 The purpose of strategy is to determine and communicate a picture of
enterprise through a system of major objectives and policies

 Unified direction
 Strategy is concerned with a unified direction and efficient allocation of an
organization’s resources.
 A well made strategy guides managerial action and thought.
 It provides an integrated approach for the organization and aids in meeting
the challenges posted by environment

 Contradictory Actions
 Due to its dependence on environmental variables, strategy may
involve a contradictory action.
 An organization may take contradictory actions either
simultaneously or gap of time.

 Major course of Action
 Strategy is a major course of action through which an organization
relates itself to its environment particularly the external factors to
facilitate all actions involved in meeting the objectives of the
organization.

 Combinations of action
 Strategy is the combination of actions aimed to meet a particular
condition , to solve certain problems to achieve a desirable end.
 The actions are different for different situations.

 Blend of internal and external factors.
 Strategy is the blend of internal and external factors. To
meet the opportunities and threads provided by the
external factors , internal factors are matched with them.

 Future oriented
 Strategy is future oriented.
 Strategic actions are required for new situations which
have not arisen before in the past.

 Dependent on systems
 Strategy requires some systems and norms for its efficient
adoption in any organization.

ELEMENTS OF STRATEGY
 Goals:
 A strategy invariably indicates the long-term goals toward
which all efforts are directed .
 Such enduring goals help employees give their best in a
unified manner and enable the firm to specify its
competitive position very clearly to its rivals.

Scope
 A Strategy defines the scope of the firm that is, the kind of
products the firm will offer, the marketers it will purse and the
broad areas of activity it will undertake.
 It will at the same time , throw light on the activities that firm will
not undertake.

 Competitive Advantage :
 A Strategy also contains a clear statement of what competitive
advantage the firm will pursue and sustain.
 Competitive advantage arises when a firm is able to perform an
activity that is distinct or different from that of its rivals.

 Logic
 This is the most important element of strategy. It is defined as the tool for distinguish between
true and false. Logic is considered as science as well as the art of reasoning.
 For example , a firm’s strategy is to dominate the market for inexpensive detergents by being
the low-cost, mass-market producer.
 Here the goal is to dominate the detergent market.
 The scope is to produce low-cost detergent powder for the Indian mass market.
 The competitive advantage is the firm’s low cost.
 Yet this example does not explain why this strategy will work.
 Why the firm will get ahead of others by limiting its scope and by being the low cost
producer(competitive advantage) in the detergent industry. The ‘why’ is the logic of the
strategy?

DEFINITIONS OF STRATEGIC MANAGEMENT
 According To William F.Glueck
 “Strategy is a Unified , Comprehensive And Integrated Plan Designed To
Assure That The Basic Objectives Of The Enterprise Are Achieved.
 According To Igor Ansoff
 “ Strategy is The Common Thread Among The Organizations Activities And
Product Markets That Defines The Essential Nature Of Business That The
Organization Was Or Planned To Be In Future”

 ACCORDING TO GEORGE A.STEINER
 “ Strategy means deciding The Basic Mission Of A Company , The Objectives
which It seeks to Achieve and The Policies Governing The Use Of Resources
at The Disposal Of The Firm To Achieve Its Objectives.
 ACCORDING TO ALFRED D.CHANDLER
 “ Strategy is The Determination Of The Basic Long-term Purpose
And Objectives Of An Enterprise And The Adoption Of Courses Of
Action And Allocation Of Resources Necessary For Carrying Out
These Goals

 ACCORDING TO LLOYD L.BYARS
 “ STRATEGIC MANAGEMENT IS CONCERNED WITH MAKING
DECISIONS ABOUT ORGANIZATIONS FUTURE DIRECTION
AND IMPLEMENTING THOSE DECISIONS”.
 ACCORDING TO GLUECK
 STRATEGIC MANAGEMENT IS “A STREAM OF DECISIONS
AND ACTIONS, WHICH LEADS TO THE DEVELOPMENT OF AN
EFFECTIVE STRATEGY TO HELP ACHIEVE CORPORATE
OBJECTIVES”

LEVELS OF STRATEGY
 Three levels of Strategy
 Corporate Level
 Business Level
 Functional Level

CORPORATE STRATEGY
 Strategy at the corporate level is designated as corporate strategy.
 It is the top management’s plan to direct and run the organizations as a
whole
 Corporate strategy sheds light on how one should manage the business one
is in and intends to be in so as to achieve the target levels of corporate
performance
 Corporate level strategy represents the pattern of entrepreneurial actions and
intents underlying the organization’s strategic interests in different business ,
divisions , product lines, technologies, customer groups and customer needs

BUSINESS LEVEL STRATEGIES
 Business strategy or SBU level strategy is the managerial plan for
directing and running a particular business unit, the fundamental
concept in Strategic Business Unit is to identify the discrete
independent product/market segments served by an organization
 For example Reliance Industries Limited operates in textile fabrics,
yarns, fibbers and a variety of Petro chemical products. Such
strategy defines the product-market posture of its individual
business units

FUNCTIONAL LEVEL STRATEGIES
 The functional level of the organizations is the level of the
operating divisions and departments.
 The strategic issues at the functional level strategies in marketing,
finance, operations, human resources, and R&D involve the
development and coordination of resource through which
business unit level strategies can be executed efficient and
effectively.

Basis of Difference Corporate level Business level Functional level
Meaning It often provides basic
direction for strategic
actions.
It is the course of actions
adopted by a firm for
each of its business
separately to serve
identified customer
groups and provide value
to the customer by the
satisfaction of their
needs
It is relatively short-term
activities that each
functional area within a
company will carry out to
implement the broader ,
longer-term corporate
level and business level.
Each functional area has
a number of strategy
choices
Time horizon 10-15 years(long term) Medium term (3 to 5
years)
Short-term(one year)
Specificity Corporate strategy
provides a major
framework for the
strategic decisions.
Business strategies
provide general
directions
It provides more specific
direction to functional
managers

Basis of Difference Corporate level Business level Functional level
Participants Taking corporate
decisions is the
responsibility of the CEO
and Board of Directors.
It is the responsibility of
the head of the business
unit.as business
strategies are approved
through negotiation
between corporate
managers and business
unit managers
It is the responsibility of
the operating managers
of the functional area. It
is approved through
negotiation between
business unit mangers
and operating managers
of functional area.
Example Tata Steel’s mega
takeover of European
steel major company ie
corus for $12.2 billion,
This is the biggest deal
ever for an Indian
company
Moser Bear India-a
Noida Utter Pradesh
based world-class
manufacturing company
CD-R(LOW COST)
Procter & Gamble’s
Research and
development department
which is taking a new
approach to stay
competitive in the slow-
growing consumer
products industry.

STRATEGIC MANAGEMENT MODEL / STRATEGIC PLANNING
PROCESS
 In today's highly competitive business environment, budget-oriented planning
or forecast- based planning methods are insufficient for a large corporation to
survive and prosper.
 The firm must engage in strategic planning that clearly defines objectives and
assesses both the internal and
 External situation to formulate strategy, implement the strategy, evaluate the
progress, and make adjustments as necessary to stay on track.

A SIMPLIFIED VIEW OF THE STRATEGIC PLANNING PROCESS IS
SHOWN BY THE FOLLOWING DIAGRAM:

STRATEGIC INTENT
 Strategic intent takes the form of a number of corporate challenges and
opportunities, specified as short term projects.
 The strategic intent must convey a significant stretch for the company, a
sense of direction, which can be communicated to all employees.
 It should not focus so much on today's problems, but rather on tomorrow's
opportunities. Strategic intent should specify the competitive factors, the
factors critical to success in the future.

 Strategic intent gives a picture about what an organization must get into
immediately in order to use the opportunity.
 Strategic intent helps management to emphasize and concentrate on the
priorities.
 Strategic intent is, nothing but, the influencing of an organization‘s resource
potential and core competencies to achieve what at first may seem to be
unachievable goals in the competitive environment.

B) ENVIRONMENTAL SCAN
 The environmental scan includes the following components:
 •Analysis of the firm (Internal environment)
 •Analysis of the firm's industry (micro or task environment)
 •Analysis of the External macro environment (PEST analysis)

 The internal analysis can identify the firm's strengths and weaknesses and the
external analysis reveals opportunities and threats.
 A profile of the strengths, weaknesses, opportunities, and threats is generated
by means of a SWOT analysis
 An industry analysis can be performed using a framework developed by
Michael Porter known as Porter's five forces.
 This framework evaluates entry barriers, suppliers, customers, substitute
products, and industry rivalry.

C) STRATEGY FORMULATION
 Strategy Formulation is the development of long-range plans for the effective
management of environmental opportunities and threats, in light of corporate
strengths & weakness.
 It includes defining the corporate mission, specifying achievable objectives,
developing strategy & setting policy guidelines

i) Mission
 Mission is the purpose or reason for the organization‘s existence.
 It tells what the company is providing to society, either a service like
housekeeping or a product like automobiles.
ii) Objectives
 Objectives are the end results of planned activity.
 They state what is to be accomplished by when and should be
quantified, if possible.
 The achievement of corporate objectives should result in the fulfillment
of a corporation‘s mission.

iii) Strategies
 Strategy is the complex plan for bringing the organization from a
given posture to a desired position in a future period of time.
d) Policies
 A policy is a broad guide line for decision-making that links the
formulation of strategy with its implementation.
 Companies use policies to make sure that employees throughout
the firm make decisions & take actions that support the
corporation‘s mission, objectives & strategy.

D) STRATEGY IMPLEMENTATION
It is the process by which strategy & policies are put into actions
through the development of programs, budgets & procedures.
This process might involve changes within the overall culture,
structure and/or management system of the entire organization.

i) Programs:
 It is a statement of the activities or steps needed to accomplish a
single-use plan.
 It makes the strategy action oriented.
 It may involve restructuring the corporation, changing the
company‘s internal culture or beginning a new research effort.

ii) Budgets:
 A budget is a statement of a corporations program in terms of
dollars.
 Used in planning & control, a budget lists the detailed cost of each
program.
 The budget thus not only serves as a detailed plan of the new
strategy in action, but also specifies through proforma financial
statements the expected impact on the firm‘s financial future.

 iii) Procedures:
 Procedures, sometimes termed Standard Operating Procedures
(SOP) are a system of sequential steps or techniques that
describe in detail how a particular task or job is to be done.
 They typically detail the various activities that must be carried out
in order to complete

E) EVALUATION & CONTROL
 After the strategy is implemented it is vital to continually measure and
evaluate progress so that changes can be made if needed to keep the overall
plan on track.
 This is known as the control phase of the strategic planning process.
 While it may be necessary to develop systems to allow for monitoring
progress, it is well worth the effort.
 This is also where performance standards should be set so that performance
may be measured and leadership can make adjustments as needed to ensure
success.

Evaluation and control consists of the following steps:
 i. Define parameters to be measured
 ii. Define target values for those parameters
 iii. Perform measurements
 iv. Compare measured results to the pre-defined standard
 v. Make necessary changes

STAKEHOLDERS IN BUSINESS
 A corporate stakeholder is a party that can affect or be affected by
the actions of the business as a whole.
 Stakeholder groups vary both in terms of their interest in the
business activities and also their power to influence business
decisions.
 Here is the summary:
 The stake holders of a company are as follows;

Stakeholder Main Interests Power and influence
Shareholders Profit growth, Share price growth, dividends Election of directors
Creditors Interest and principal to be repaid, maintain credit rating Can enforce loan covenants and Can withdraw banking facilities
Directors and managers Salary ,share options, job satisfaction, status Make decisions, have detailed information
Employees Salaries & wages, job security, job satisfaction & motivation Staff turnover, industrial action, service quality
Suppliers Long term contracts, prompt payment, growth of purchasing Pricing, quality, product availability
Customers Reliable quality, value for money, product availability, customer service Revenue / repeat business, Word of mouth recommendation
Community Environment, local jobs, local impact Indirect via local planning and opinion leaders
Government Operate legally, tax receipts, jobs Regulation, subsidies, taxation, planning

Strategy Formulation Strategy Implementation
Strategy Formulation includes planning anddecision-making
involved in developing organization’s strategic goals and plans.
Strategy Implementation involves all those meansrelated to
executing the strategic plans.
In short, Strategy Formulation is placing theForces before the
action.
In short, Strategy Implementation is managingforces during the
action.
Strategy Formulation is an Entrepreneurial Activity based on strategic
decision-making.
Strategic Implementation is mainly
an Administrative Task based on strategic andoperational decisions.
Strategy Formulation emphasizeson effectiveness. Strategy Implementation emphasizeson efficiency.
Strategy Formulation is a rational process. Strategy Implementation is basicallyan operational process.
Strategy Formulation requires co-ordinationamong few
individuals.
Strategy Implementation requires co-ordinationamong many
individuals.
Strategy Formulation requires a great dealof initiative and logical
skills.
Strategy Implementation requires
specific motivational and leadership traits.
Strategic Formulation precedes StrategyImplementation. Strategy Implementation follows StrategyFormulation.

VISION STATEMENT
 Vision statement provides direction and inspiration for organizational goal setting.
 Vision is where you see your self at the end of the horizon OR milestone therein.
 It is a single statement dream OR aspiration.
 Typically a vision has the flavors of 'Being Most admired', 'Among the top league',
'Being known for innovation', 'being largest and greatest' and so on.
 Typically 'most profitable', 'Cheapest' etc. don‘t figure in vision statement.
 Unlike goals, vision is not SMART.
 It does not have mathematics OR timelines attached to it.

 Vision is a symbol, and a cause to which we want to bond
the stakeholders, (mostly employees and sometime share-
holders).
 As they say, the people work best, when they are working
for a cause, than for a goal. Vision provides them that
cause.
 Vision is long-term statement and typically generic &
grand.
 Therefore a vision statement does not change unless the
company is getting into a totally different kind of business.

 Vision should never carry the 'how' part .
 For example ' To be the most admired brand in Aviation
Industry' is a fine vision statement, which can be spoiled
by extending it to' To be the most admired brand in the
Aviation Industry by providing world-class in-flight
services’.
 The reason for not including 'how' is that 'how' may keep
on changing with time.

ACCORDING TO MILLER AND DESS
“vision is the category of intensions that are
broad, all-inclusive , and forward thinking “

ACCORDING TO KOTLER
 “vision is a description of something (an organisation ,
corporate culture, a business, a technology , an activity) in
the future”.

ACCORDING TO EI-NAMAKI
 “Vision is a mental perception of the kind of environment
an individual , or an organization , aspires to create within
a broad time horizon and the underlaying conditions for
the actualisation of this perception.”.

ACCORDING TO OREN HARARI
 “vision should describe a set of ideals and priorities , a
picture of the future , a sense of what makes the company
special and unique, a core set of principles that the
company stands for, and a broad set of compelling criteria
that will help to define organizational success.”

 Mental Exercise: Forming a strategic vision is not only merely a
word exercise designed to create a catchy slogan: rather than it is
an exercise in thinking carefully about where a company needs to
head to be successful

 Selects the Target Market: - It involves selecting the
market areas in which to participate putting the company
on a strategic path, and making a commitment to follow
that path

Constitutes organization objectives and focus:
Management’s views and conclusions about what the
organizations long term direction should be , the
technology –product –customer focus . It intends to
pursue and its future business scope constitute a
strategic vision for the company.

 Realistic: A vision must be based in reality to be
meaningful for an organization.
 For example if one is developing a vision for a
computer software company that has carved out a
small niche in the market developing instructional
software and has a 1.5% share of the computer
software market, a vision to overtake Microsoft and
dominate the software market is not realistic.

 Credible: A vision must be believable to be relevant.
 To whom must a vision be credible? Most importantly , to the employees or
members of the organization.
 If the members of the organization do not find the vision credible, it will not be
meaningful or serve a useful purpose.
 One of the purposes of a vision is to inspire those in the organization to
achieve a level of excellence , and to provide purpose and direction for the
work of those employees. A vision which is not credible will accomplish
neither of these ends.

 Attractive : if a vision is going to inspire and motivate those
in the organization , it must be attractive.
 People must want to be part of this future that is
envisioned for the organization.

 Reflects future Plans:- it reflects management’s
aspiration’s for the organization and its business, and
gives specifies about its future business plans

 Dynamic and Flexible : it is dynamic and can be changed
according to change in environment, the appearance of
opportunities or threats is a common reason for change.
 For example in 1999 , LIC of India has changed its vision and
mission statement due to entrance pf private and international
companies in life insurance business in Indian market.

 Comprehensive: Strategic vision is very comprehensive, on the
basis of which mission, objectives, goals and strategies and
determined.

 Time-based : As a rule , strategic vision should have a time
horizon of five years or more unless the industry is very new or
market conditions are so volatile and uncertain that it is difficult to
see that, far down the road with any degree of confidence.

 Future: A vision is not in the present, it is in future.
 In this respect, the image of the leader gazing off into distance to
formulate a vision may not be a bad one.
 A vision is not where company is now; it is where company wants
to be in future

 Simple and Concise: Ideally, executive should present their vision
for the company in language that reaches out and grabs people.
 Creates a vivid image in their heads, and that provokes emotion
and excitement.

 Effective : A crisp, clear, often repeated , inspiring strategic vision
has the power to turn heads in the intended direction and create a
unified organizational march.

 Understand the organization:
 To formulate a vision for an organization , strategic leader first
must understand it.
 Essential questions to be answered include what its mission and
purpose are , what value it provides to the society

 Conduct a Vision Audit :
 This step involves assessing the current direction and momentum
of the organization. Key questions to be answered include:
 Does the organization have a clearly stated vision ?
 What is the organization’s current direction?
 Do the key leaders of the organization know where the
organization’s is headed and agree on the direction?
 Do the organization’s structures , processes , personnel,
incentives and information systems support the current direction?

 Target the Vision:
 This step involves starting to narrow in on a vision. Key questions
 What are the boundaries or constraints to the vision?
 What must be the vision accomplish?
 What critical issues must be addressed in the vision?

 Set the Vision Context:
 this is where strategic leader should look to the future ,
and where the process of formulating a vision gets
difficult.
 Vision is a desirable future for the organization .

 First , the strategic leader should categorise future developments
in the environment which might affect vision.
 Second , he should list expectations for the future in each
category.
 Third , he should determine which, of these expectations is most
likely to occur
 Fourth assign a probability of occurrence to each expectations.

 Develop Future Scenarios:
 This step follows directly from the fourth step. Having determined ,
as best can, those expectations most likely to occur, and those
with the most impact on vision.,
 the leader should combine those expectations into a few brief
scenarios to include the range of possible futures strategic maker
anticipate.

 Generate Alternative Visions:
 Just as there are several alternative futures for the environment ,
there are several directions the organizations might take in to
future.

 Choose the Final Vision:
 Here’s the decision point where strategic leader selects the best
possible Vision for organization.

MISSION STATEMENT
 Mission of an organization is the purpose for which the
organization is.
 Mission is again a single statement, and carries the statement in
verb.
 Mission in one way is the road to achieve the vision.
 For example, for a luxury products company, the vision could be
'To be among most admired luxury brands in the world' and
mission could be 'To add style to the lives'

 Mission statement embodies an organization’s purpose of existence.
 When strategists raise certain fundamental questions related to business such as:
 What is our business?
 Why are we in the business?
 What will it be after 5 years?
 the need for mission statement arises.

 The survival of an organization mainly depends on its ability to
satisfy specific needs of the society.
 Mission statement defines the role that an organization plays in a
society.
 For example, BSNL satisfies the communication needs of the
society.
 Mission statement describes what the company stands for, its
purpose, image and character to different stake holders.
 A survey by Bain and Company indicates that planning and
developing mission and vision statements are the popular
management tools of strategic management.

Thompson defines mission as
 “the essential purpose of the organization, concerning
particularly why it is in existence, the nature of the
business it is in, and the customers it seeks to serve and
satisfy”.
Wheelan and Hunger view that
 “mission is the purpose or reason for the organization’s
existence”.

According to John Pearce
 “mission is an enduring statement of purpose that distinguishes
one firm from other similar firms”.
In Drucker’s opinion
 “mission focuses the organization on action.
 It defines the specific strategies needed to attain goal. It creates a
disciplined organization… The business purpose and business
mission are so rarely given adequate thought, is perhaps the most
important single cause of business failure and business
frustration”.

 A mission statement is full of enthusiasm.
 A mission statement is marked by grandeur.
 It is unique and personal.
 It is not time bound because the future envisioned in a mission
statement cannot be achieved in a day.

 A good mission statement will be:
 Clear and Crisp:
 While there are different views, we strongly recommend that
mission should only provide what, and not 'how and when'. We
would prefer the mission of 'Making People meet their career' to
'making people meet their career through effective career
counseling and education’.
 A mission statement without 'how & when' element leaves a
creative space with the organization to enable them take-up wider
strategic choices.


 Have to have a very visible linkage to the business goals and
strategy: For example you cannot have a mission (for a home
furnishing company) of 'Bringing Style to People‘s lives' while your
strategy asks for mass product and selling.
 Its better that either you start selling high-end products to high
value customers, OR change your mission statement to 'Help
people build homes'.
 Should not be same as the mission of a competing organization.
 It should touch upon how its purpose it unique.

A MISSION STATEMENT IS FULL OF ENTHUSIASM.
A MISSION STATEMENT IS MARKED BY GRANDEUR.
IT IS UNIQUE AND PERSONAL.
IT IS NOT TIME BOUND BECAUSE THE FUTURE ENVISIONED IN
A MISSION STATEMENT CANNOT BE ACHIEVED IN A DAY.

CHARACTERISTICS OF A MISSION STATEMENT
 A mission statement incorporates the basic business
purpose and the reason for its existence by rendering
some valuable functions for the society.
 An effective mission statement should possess the
following characteristics.

 1) Feasible:
 The mission should be realistic and achievable. For instance, UTI
declared its mission as “to encourage saving and investment
habits among common man”.
 By providing tax relief under Sec 88c, the investment upto 1 lakh in
UTI is exempted from income tax. Hereby common man’s savings
habit is encouraged by UTI.
 2) Precise: A mission statement should not be narrow or too
broad.

3) Clear:
 A mission statement should lead to action.
 BSNL‟s mission of „connecting India‟ leads it to a variety of service with
varied tariff structure so as to cater to the preferences of mobile phone
users.
4) Motivating:
 The mission should be motivating for the employees to be inspired for
action.
 For example, India Post’s mission is to „exceed the expectations of the
customer‟ with dedication, devotion and enthusiasm.

5) Distinctive:
 A mission statement will indicate the major components of the
strategy to be adopted. The mission should be unique.
6) Indicates Major Components of Strategy:
 The mission statement of IOC emphasizes petroleum refining,
marketing and transportation with international standards and
modern technology.
 It indicates that IOC is going to adopt diversification strategy in
future.

HOW MISSION CONTRIBUTES TO STRATEGIC MANAGEMENT?
MISSION CONTRIBUTES TO STRATEGIC MANAGEMENT IN MANY
WAYS:
1. IT PROVIDES DIRECTION TO CORPORATE PLANNING.
2. IT CLARIFIES THE FIRM’S ASPIRATIONS.
3. IT COMMUNICATES TO EMPLOYEES AT VARIOUS LEVELS THE
DIRECTION IN WHICH THEY SHOULD MOVE.
4. IT FOCUSES ON BUSINESS PURPOSE AND LONG-TERM OBJECTIVE
OF THE FIRM.

THE MISSION STATEMENTS OF SOME INDIAN COMPANIES ARE GIVEN
BELOW:
 Infosys: “The primary purpose of corporate leadership is to create
wealth legally and ethically. This translates to bringing a high level
of satisfaction to five constituencies – customers, employees,
investors, vendors and the society at large.
 The Jindal Group: “To become a globally competitive player with a
burning desire to become number one in the steel industry”.

 Unit Trust of India: “To keep the common man in sharper focus; to
encourage saving and investment habits among them”.
 Ranbaxy: “To become a $1 billion research based global
pharmaceutical company”.
 Merck: “To preserve and improve human life”.

 McKinsey: “To help business corporations and governments to be
more successful”.
 Unilever: “To make cleanliness common place, to lessen work for
women, to foster health and to contribute to personal
attractiveness that life may be more enjoyable for the people who
use our products”.
 ONGC: “To be a world class oil and gas company integrated in
energy business with dominant Indian leadership and global
business”.

 Nirma: “Nirma is a customer focused company committed to
consistently offer better quality products and services that
maximize value to the customer”.
 SBI: “With you, all the way”.
 Asian Paints: “Leadership through excellence”.
 Bajaj Auto: “Value for Money, for years”.

TOYOTA
 Vision
 -Toyota aims to achieve long-term, stable growth
economy, the local communities it serves, and its
stakeholders.
 Mission
 -Toyota seeks to create a more prosperous society
through automotive manufacturing

BUSINESS, OBJECTIVES AND GOALS
 A business (also known as enterprise or firm) is an organization
engaged in the trade of goods, services, or both to consumers.
 Businesses are predominant in capitalist economies, in which most of them
are privately owned and administered to earn profit to increase the wealth of
their owners.
 Businesses may also be not-for-profit or state-owned.
 A business owned by multiple individuals may be referred to as a company,
although that term also has a more precise meaning.

 An organization or enterprising entity engaged in commercial,
industrial or professional activities.
 A business can be a for-profit entity, such as a publicly-traded
corporation, or a non-profit organization engaged in business
activities, such as an agricultural cooperative.
 Any commercial, industrial or professional activity undertaken by
an individual or a group.
 A reference to a specific area or type of economic activity.

 'Business' can be defined as:
 1. Businesses include everything from a small owner-operated company such as a
family restaurant, to a multinational conglomerate such as General Electric.
 2. To "do business" with another company, a business must engage in some kind of
transaction or exchange of value with that company.
 3. In this sense, the word "business" can be used to refer to a specific industry or
activity, such as the "real estate business" or the "advertising business".

BASIC FORMS OF OWNERSHIP
ALTHOUGH FORMS OF BUSINESS OWNERSHIP VARY BY
JURISDICTION, THERE ARE SEVERAL COMMON FORMS WHICH ARE
AS FOLLOWS:
 • Sole proprietorship:
 A sole proprietorship is a business owned by one person for-profit. The owner
may operate the business alone or may employ others. The owner of the
business has unlimited liability for the debts incurred by the business.
 •Partnership:
 A partnership is a business owned by two or more people. In most forms of
partnerships, each partner has unlimited liability for the debts incurred by the
business. The three typical classifications of for-profit partnerships are general
partnerships, limited partnerships, and limited liability partnerships.

 • Corporation:
 A corporation is a limited liability business that has a separate
legal personality from its members.
 Corporations can be either government-owned or privately owned,
and corporations can organize either for-profit or not-for-profit.
 A privately owned, for-profit corporation is owned by shareholders
who elect a board of directors to direct the corporation and hire its
managerial staff.
 A privately owned, for-profit corporation can be either privately
held or publicly held.

 Cooperative:
 Often referred to as a "co-op", a cooperative is a limited liability
business that can organize for-profit or not-for-profit.
 A cooperative differs from a for-profit corporation in that it has
members, as opposed to shareholders, who share decision-
making authority.
 Cooperatives are typically classified as either consumer
cooperatives or worker cooperatives.
 Cooperatives are fundamental to the ideology of economic
democracy.

CLASSIFICATION OF BUSINESS
 There are many other divisions and subdivisions of businesses.
 •Agriculture and mining businesses are concerned with the
production of raw material, such as plants or minerals.
 •Financial businesses include banks and other companies that
generate profit through investment and management of capital.

 Information businesses generate profits primarily from the resale
of intellectual property and include movie studios, publishers and
packaged software companies.
 Manufacturers produce products, from raw materials or component
parts, which they then sell at a profit. Companies that make
physical goods, such as cars or pipes, are considered
manufacturers.

 Real estate businesses generate profit from the selling, renting,
and development of properties comprising land, residential homes,
and other kinds of buildings.
 Retailers and distributors act as middle-men in getting goods
produced by manufacturers to the intended consumer, generating
a profit as a result of providing sales or distribution services. Most
consumer-oriented stores and catalog companies are distributors
or retailers.

 Service businesses offer intangible goods or services and
typically generate a profit by charging for labor or other services
provided to government, other businesses, or consumers.
 Organizations ranging from house decorators to consulting firms,
restaurants, and even entertainers are types of service
businesses.

 Transportation businesses deliver goods and individuals from
location to location, generating a profit on the transportation costs.
 Utilities produce public services such as electricity or sewage
treatment, usually under a government charter.

OBJECTIVES
 Objectives give the business a clearly defined
target.
 Plans can then be made to achieve these targets.
 This can motivate the employees.
 It also enables the business to measure the
progress towards to its stated aims.

 Objectives and goals are used interchangeably in management
literature but the recent strategic management literature shows a
subtle distinction between these two terms.
 Objective is the end, which the organization tries to achieve
through its operations. „
 Goal‟ is an open-ended statement, which does not quantify what
needs to be achieved, and time frame for completion.
 So „growth‟ is a goal whereas an objective is to „increase growth
by 10% in terms of market share and sales over last year‟.
 Usually the long-term goals and short-term objectives are derived
from mission.

SIGNIFICANCE OF OBJECTIVES
 Objectives are formulated from mission statements.
 Objectives form the basis for all other functional decisions such as
finance, manufacturing, marketing and human resource.
 Objectives are split into business wise objectives and functional
targets and performance targets.
 While setting objectives, the organization encounters the
environment and determines the locus it will devise to attain in the
environment such as a dominant player, a meek player or one
among the herd.

 Objectives and strategy put together, explain the firm’s concept of
business.
 Objectives indicate the organizational performance to be realized
and expected over a period of time.

ORGANIZATIONS FOLLOW MULTIPLE OBJECTIVES SUCH AS:
• GROWTH
• PROFITABILITY
• MARKET SHARE
• PRODUCTIVITY
• TECHNOLOGY
• R&D AND INNOVATION
• CORPORATE SOCIAL RESPONSIBILITY
• IMAGE
• EMPLOYEE SATISFACTION

 Growth:
 Growth in sales, in profits and assets are indicators of a firm’s
financial soundness and long-term welfare.
 Reliance Industries is a typical example, for growth objectives.
 Growth of a firm is ensured if growth in sales, profits and assets
are ensured.

 Profitability:
 Profitability has several dimensions and it is measured in terms of return on
investment, net worth, assets, revenue and earnings per share. With profitability
objective, the firm examines the profit potential of present portfolio and reallocates
accordingly. Some of the specific issues are:
 (a) How are the present investments of the firm behaving?
 (b) What is the rate of return?
 (c) How is the spread of the investment?
 The example of ITC is worth studying. ITC has made investments in five main
businesses namely tobacco, agro products, financial services, paper and packaging,
hotel and tourism.

 Market Share:
 Market share is a crucial indicator of the firm’s growth and around
market share objective, business level strategies are formulated.
 For many Japanese firms, building market share is synonymous with
long run profits and brand building.
 Tata, Colgate BPL and P&G are companies that focus on market share
as the key corporate objective.
 Colgate firmly believes that it should have always 50% market share.
 The policy of P&G is „Profit via market share and it is prepared to
accept short-term loss to win over the established leader
 HLL and be a market leader ultimately.

 Technology:
 Corporate objectives are set in technology for companies like Du
Pont and Intel.
 For Du Pont, leadership in chemical technology and continuous
new product development are their major objectives.
 Product innovation is the key objective of Intel.
 Ranbaxy and 3M maintain that R&D and new product
development constitute a major objective for them.

 Human Resource:
 The software giant Infosys, set objective in human resource.
 Development of a cadre of software professional is set as a major
corporate objective. „
 Human Capital is shown in the balance sheet of Infosys as
additional information.

 Corporate Image:
 Tata Group has set the objective of being viewed as a respectable
business group.
 They maintain transparency with regard to donations to political
parties for their election campaigns and created an electoral fund.
 They project as a role model in the matter of corporate
governance.

 Social Responsibility:
 Social responsibility includes setting objectives in community
welfare, public welfare and environmental protection.
 Tata Group has objectives relating to society.
 They are involved in rehabilitation of handicapped children.

 Characteristics of Objectives
 Objective setting is complex process.
 Well-formulated objectives possess certain characteristics.
 a) Specific
 b) Time bound
 c) Measurable
 d) Challenging
 e) Objectives form a hierarchy
 f) Constraints
 g) Verifiable h) Timeframe

 Formulation of Objectives
 Formulation of objectives and goals is a complex process.
 The strategists should consider the four factors while
evolving objectives.

 1) The forces in the environment:
 The government regulations, powerful consumer groups, trade
unions and influential suppliers exert enormous pressure on
organization.
 The stakeholders, their priorities and views influence objective
setting.

 2) Realities of firm’s resources and power relationship:
 Material and human resource are always scarce and powerful
dominant groups try to take upper hand and exercise power over
other group in framing objectives of their choice and allocate
scarce resources in their favour.
 Internal power relationship influences objective setting.

 3) The values of top management:
 Values of enduring beliefs, about what is good or bad, desirable or
undesirable.
 The top management may have entrepreneurial value and a
philanthropic value or social responsibility value which in turn will
influence their goal setting.

 4) Past Strategies:
 Strategies and objectives followed in the recent past are likely to
have deep impact and radical deviation from them will not be
possible.
 The changes from current objectives will be marginal and
incremental in nature.

OBJECTIVES AND STRATEGIC MANAGEMENT
 Objectives are important for strategic management for the following reasons:
 1. Objectives help to relate the organization in the environmental context.
 It helps to attract people with identical frame of mind.
 2. Objectives help to coordinate decisions.
 All employees are aware of the objectives and stated objectives proved to be a
means of coordination.
 3. Objectives serve as standards of appraising organizational performance.
 They serve as a basis for evaluating success or failure of organization.

The Difference between goals and objectives
 Goals are broad; objectives are narrow.
 Goals are general intentions; objectives are precise.
 Goals are intangible; objectives are tangible.
 Goals are abstract; objectives are concrete.
 Goals can't be validated as is; objectives can be validated.

Basis of Difference Goals objectives
Nature Goals are more generalised
statements like maintaining
market leadership , striving
continuously for technological
superiority, etc
An objective may imply a resource
commitment requiring the
organization to use those
resources in order to achieve the
desired outcomes
Time frame Goals are timeless, enduring and
unending because goals relate to
the ongoing activities of an
organization
Objectives are temporal, time-
phased and intended to be
superseded by subsequent
objectives
Specificity Goals are stated in broad general
terms
Objectives are much more specific
Measurement Generally quantitative goals are
set in relative terms
Quantitative objectives are set in
absolute terms

CORPORATE GOVERNANCE
 Corporate governance is the set of processes, customs, policies,
laws and institutions affecting the way a corporation (or company) is
directed , administered or controlled.
 Corporate governance is also concerned with the ethics , values
and morals of a company and its directors
 Corporate governance generally refers to the set of mechanisms
that influence the decisions made by managers when there is a
separation of ownership and control.

 The term „corporate governance‟ means the relationship among
the three groups i.e. Board of Directors, Shareholders and Top
management, in determining the direction and performance of the
organization.
 Governance Concept in ‘Ramayana’ To provide “the maximum
happiness for the maximum number of people for the maximum
period, based on the principles of Dharma – righteousness and
moral values.” - Ayodhya Kand

DEFINITION
According to Cadbury Committee:
 “Corporate governance is defined as the system by which companies
are directed and controlled.”
According to Rafael La Porta
 “Corporate governance to a larger extent is a set of mechanisms
through which outside investors protect themselves against
expropriation by the insiders “
According to Sternberg
 “Corporate governance describes ways of ensuring that corporate
actions, assets, and agents are directed at achieving the corporate
objectives established by the corporation’s shareholders

CHARACTERISTICS OF CORPORATE GOVERNANCE
Board of Ethics:
 Corporate Governance is based on ethics, moral principles and
values. So the Board of Directors must avoid unfair practices,
cheating, exploitation
Universal Application:
 Corporate Governance has universal application. That is it is used
by companies all over the world. It is given a legal recognition in
many countries. All companies must use corporate governance
voluntarily

 Systematic: Corporate governance is very systematic. It is based
on Laws, procedures, practices, rules, etc
All these laws are made to increase the wealth of the
shareholders and to protect the rights of all the stakeholders of the
company.
Represents Business Decision Framework: It represents the value
framework , the ethical framework and the moral framework under
which business decisions are taken

Key Part of the Contract:
 Good governance goes beyond common sense. It is a key part of
the contract that underpins economic growth in a market economy
and public faith in that system.
Assurance to well-Functioning of Markets:-
 The role of good governance and corporate responsibility in
helping to assure the well-functioning markets needed for
economic growth and development cannot be taken for granted.

FUNDAMENTAL PRINCIPLES OF CORPORATE GOVERNANCE.

Transparency and Disclosure :
 Transparency implies explaining a company’s policies, decisions
and actions to those to whom it has responsibilities
 Transparency means openness in company’s relationship with its
employees
Fairness :
 organizations should respect the rights of shareholders and enable
shareholders to exercise their rights by effectively communicating
information that is relevant, timely, understandable and easily
accessible.

Responsibility and Accountability:
 Corporate is expected to be responsible citizen and serve not only
the interest of the stakeholders but also in the best interest of the
society .
 Corporate governance reflects the larger ethics prevailing in
society.
 Accountability towards stakeholders would lead to achieve
corporate wealth maximisation, investor’s confidence , corporate
image building and enhanced market capitalisation.

Trusteeship :
 Inherent in the concept of trusteeship is the responsibility to ensure equity,
namely , that the rights of all shareholders , large of small, are protected.
Empowerment :
 Empowerment refers to increasing the spiritual, political , social, educational,
gender or economic strength of individuals and communities.
Controls :
 Control should prevent misuse of power, facilitate timely management
response to change, and ensure that business risks are pre-emptively and
effectively managed.

Ethical Corporate Citizenship:
 Corporations have a responsibility to set exemplary standards of
ethical behaviour, both internally within the organization as well as
in their external relationships.

Share holders
 A shareholder or stockholder is an individual or institution (including a corporation)
that legally owns one or more shares of stock in a public or private corporation.
Shareholders own the stock, but not the corporation itself.
 Stockholders are granted special privileges depending on the class of stock. These
rights may include:
 The right to sell their shares,
 The right to vote on the directors nominated by the board,
 The right to nominate directors (although this is very difficult in practice because of
minority protections) and propose shareholder resolutions,
 The right to dividends if they are declared,
 The right to purchase new shares issued by the company, and

Board of Directors
 Elected by the shareholders, the board of directors is made up of two
types of representatives.
 The first type involves individuals chosen from within the company.
 This can be a CEO, CFO, manager or any other person who works for
the company on a daily basis.
 The other type of representative is chosen externally and is considered
to be independent from the company.
 The role of the board is to monitor the managers of a corporation,
acting as an advocate for stockholders.
 In essence, the board of directors tries to make sure that shareholders'
interests are well served.

Chairman –
 Technically the leader of the corporation, the chairman of the
board is responsible for running the board smoothly and
effectively.
 His or her duties typically include maintaining strong
communication with the chief executive officer and high-level
executives, formulating the company's business strategy,
representing management and the board to the general public and
shareholders, and maintaining corporate integrity.
 A chairman is elected from the board of directors.

 Inside Directors –
 These directors are responsible for approving high-level budgets
prepared by upper management, implementing and monitoring
business strategy, and approving core corporate initiatives and
projects.
 Inside directors are either shareholders or high-level management
from within the company.
 Inside directors help provide internal perspectives for other board
members.
 These individuals are also referred to as executive directors if they
are part of company's management team.

Outside Directors –
While having the same responsibilities as the inside directors in
determining strategic direction and corporate policy,
outside directors are different in that they are not directly part of the
management team.
The purpose of having outside directors is to provide unbiased and
impartial perspectives on issues brought to the board.

MANAGEMENT TEAM
AS THE OTHER TIER OF THE COMPANY, THE MANAGEMENT
TEAM IS DIRECTLY RESPONSIBLE FOR THE DAY-TO-DAY
OPERATIONS (AND PROFITABILITY) OF THE COMPANY.
Chief Executive Officer (CEO) –
 As the top manager, the CEO is typically responsible for the entire operations
of the corporation and reports directly to the chairman and board of directors.
 It is the CEO's responsibility to implement board decisions and initiatives and
to maintain the smooth operation of the firm, with the assistance of senior
management.
 Often, the CEO will also be designated as the company's president and
therefore also be one of the inside directors on the board (if not the
chairman).

Chief Operations Officer (COO) –
 Responsible for the corporation's operations, the COO looks after
issues related to marketing, sales, production and personnel.
 More hands-on than the CEO, the COO looks after day-to-day
activities while providing feedback to the CEO.
 The COO is often referred to as a senior vice president.

Chief Finance Officer (CFO) –
 Also reporting directly to the CEO,
 the CFO is responsible for analyzing and reviewing financial data,
reporting financial performance, preparing budgets and monitoring
expenditures and costs.
 The CFO is required to present this information to the board of
directors at regular intervals and provide this information to
shareholders and regulatory bodies such as the Securities and
Exchange Commission (SEC).
 Also usually referred to as a senior vice president, the CFO
routinely checks the corporation's financial health and integrity.

NEED & SIGNIFICANCE
 1. Changing ownership Structure:
 The profile of corporate ownership has changed significantly.
 Public financial institutions are the single largest shareholder is the
most of the large corporations in the private sector.
 Institutional inventors and mutual funds have now become singly
or jointly direct challenges to management of companies.

2. Social Responsibility:
 A company is a legal entity without physical existence.
 Therefore, it is managed by board of directors which is
accountable and responsible to share holders who provide the
funds.
 Directors are also required to act in the interests of customers,
lenders, suppliers and the local community for enhancing
shareholders value.

3. Scams
 In recent years several corporate frauds have shaken the public
confidence.
 A large number of companies have been transferred to Z group by the
Bombay stock exchange.
4. Corporate Oligarchy:
 Shareholder activism and share holder democracy continue to remain
myths in India.
 Postal ballot system is still absent.
 Proxies are not allowed to speak at the meetings. Shareholders‘
association, inventor‘s education and awareness have not emerged as a
countervailing force.
5. Globalization
 As Indian companies went to overseas markets for capital, corporate
governance become a buzz world.

IMPORTANCE OF CORPORATE GOVERNANCE
 Creating and Enhancing Corporation’s Competitive Advantage
 Enabling Corporation to Perform Efficiently by preventing Fraud
and Malpractices.
 Providing Protection to shareholders Interest
 Enhancing the valuation of an Enterprise
 Ensuring Compliance of Laws and Regulations

ISSUES OF CORPORATE GOVERNANCE
 Distinguishing the Roles of Board and Management
 Composition of the Board and Related issues
 Separation of the Roles of the CEO and Chairperson.
 Should the Board have committees.
 Appointment to the Board and Directors and Re-Election
 Directors and Executives Remuneration
 Disclosure and Audit
 Protection of shareholder Rights and their Expectations.
 Dialogue with institutional shareholders Issue

SOCIAL RESPONSIBILITY
 Social responsibility of a firm is the obligation of decision makers in the
corporation to take actions which project and improve the welfare of the
society as a whole along with their own interest.
 Corporate social responsibility is the interaction between business and the social
environment in which it exists.
 Bowen argued that corporate social responsibility rests on two premises: social
contract, which is an implied set of rights and obligations that are inherent to social
policy and assumed by business, and moral agent, which suggests that businesses
have an obligation to act honorably and to reflect and enforce values that are
consistent with those of society.

 Meaning:
 Social Responsibility of business refers to all such duties and obligations of
business directed towards the welfare of society.
 The obligation of any business to protect and serve public interest is known
as social responsibility of business.
Why should business be socially responsible?
 •Public image
 •Government Regulation
 •Survival and growth
 •Employee satisfaction
 •Consumer Awareness

DEFINITION
According to Cannon:
 “Corporate social responsibility means devising corporate strategies and building a business
with the society’s needs in mind”
According to Koontz and O’ Donnel
 “Social responsibility is the personal obligation of every one as he acts for his own interests to
assure that the rights and legitimate interests of all others are not impinged.
According to Lord Holme and Richard Watts:
 “Corporate social responsibility is the continuing commitment by business to behave ethically
and contribute to economic development while improving the quality of life of the workforce
and their families as well as the local community and society at large”

SOCIAL RESPONSIBILITY TOWARDS DIFFERENT INTEREST
GROUPS:
1. Responsibility towards owners:
 Owners are the persons who own the business. They contribute capital
and bear the business.
 •Run the business efficiently
 •Proper utilization of capital and other resources.
 •Regular and fair return on capital invested.

 2. Responsibility towards Investors:
 •Investors are those who provide finance by way of
investment in shares, bonds, etc. Banks, financial
institutions and investing public are all included in this
category.
 •Ensuring safety of their investment
 • Regular payment of interest.

3. Responsibility towards employees:
 Business needs employees or workers to work for it.
 If the employees are satisfied and efficient, then the business can be
successful.
 •Timely and regular payment of wages and salaries.
 •Opportunity for better career prospects.
 •Proper working conditions
 •Timely training and development
 •Better living conditions like housing, transport, canteen and crèches.

4. Responsibility towards customers:
 No business can survive without the support of customers.
 •Products and services must be able to take care of the needs of the
customers.
 •There must be regularity in supply of goods and services.
 •Price of the goods and services should be reasonable and affordable
 •There must be proper after sales-service
 •Grievances of the consumers if any must be settled quickly.

 Responsibility towards competitors:
 Competitors are the other businessmen or organization
involved in a similar type of business.
 •Not to offer to customers heavy/discounts and or free
products in every sale.
 •Not to defame competitors through false
advertisements.

6. Responsibility towards suppliers:
 Suppliers are businessmen who supply raw materials
and other items required by manufacturers and traders.
 •Giving regular orders for purchase of goods
 •Availing reasonable credit period
 •Timely payment of dues.

7. Responsibility towards Government:
 Business activities are governed by the rules and regulations
framed by the government.
 •Payment of fees, duties and taxes regularly as well as honestly
 •Conforming to pollution control norms set up by government
 •Not to indulge in restrictive trade practices.

8. Responsibility towards society:
 A society consists of individuals, groups, organizations, families etc.
They all are the members of the society.
 •To help the weaker and backward sections of the society.
 •To generate employment.
 •To protect the environment
 •To provide assistance in the field of research on education, medical
science, technology etc.

Theories
 In the field of ethics three types of ethics have been developed.
 1) The Utilitarian Theory
 2) The Theory based on Rights
 3) The Theory of Justice

 The Utilitarian Theory suggests that plans and actions
should be evaluated by their consequences.
 It means that plans and actions should produce the
greatest goods for greatest number of people.
 When the Utilitarian Theory is extended to an enterprise, it
should optimize satisfaction to all stakeholders.

 The Theory based on Rights holds that all people have
basic rights and it should be respected in all decisions.
 Rights of all individuals should be respected and those
decisions, which interfere with other individuals‟ freedom,
should be avoided.

 However, business managers are aware that ethical
standards differ from nation to nation.
 For example, business houses in India make contributions
to political parties.
 In some countries government officials are influenced with
money to handle business transactions favorably.
 Corruption in many countries is rampant and is looked
upon as normal.
 Managers have to make crucial choices when ethical
standards differ from one country to another.

NEED FOR SOCIAL RESPONSIBILITY
 To provide Sense of Responsibility
 To Fulfil Long-Run Self –Interest
 To improve Public Images
 To avoid Government Regulation or Control
 To avoid Misuse of National Resources and Economic Power
 To Avoid Class Conflicts.
 To Convert Resistances into Resources
 To Minimize Environmental Damage

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