Unit 2 sem 5

1. STRATEGIC PLANNING
AND MANAGEMENT
UNIT II

2. CONCEPT OF STRATEGIC PLANNING
• Strategic planning means planning regarding future.
• Strategic planning is a process in which an organization's leaders define their vision, mission
for the future and identify their organization's goals and objectives. The process includes
establishing the sequence in which those goals should be realized so that the organization
can reach its stated vision.
• Strategic planning typically represents mid- to long-term goals with a life span of three to
five years, though it can go longer. This is different than business planning, which typically
focuses on short-term, tactical goals, such as how a budget is divided up.
• It involves analysis of various environmental factors with regard to how an organization
relates to its an environment.
• eg. Diversification of business into new lines, introduction of new products, expansion of
market etc.

3. PROCESS OF STRATEGIC PLANNING
1. Determination of Mission and objectives: strategic planning starts with setting of mission
and objectives. Strategic planning is related to long term organization relationship with
external environment.
2. Environmental analysis: external environment is analyzed to identify opportunities and
threats.
3. Self appraisal: internal environment is analyzed to identify the strengths and weaknesses
of the organization. By matching its strength with the environmental opportunities,
enterprise can face competition and achieve growth.
4. Strategic decision making: strategic alternatives are developed and evaluated to make a
strategic choice. The organization must select the alternatives that are best suited to its
capabilities.
5. Strategy implementation and control: once the strategic choice is done it is converted into
meaningful tactical operational plans. control should be done to evaluate performance as
the strategy is put into use.

4. CONTINUE…
• Strategic management is a continuous process that:
1. Evaluates and controls the business and the industries in which an organization is involved;
2. Evaluates its competitors and sets goals and strategies to meet all existing and potential competitors; and then
3. Re-evaluates strategies on a regular basis to determine how it has been implemented and whether it was successful or does it needs replacement

5. NEED OF STRATEGIC PLANNING
AND MANAGEMENT
1. Increasing rate of changes
2. Higher motivation of employees
3. Strategic decision making
4. Optimization of profits

6. IMPORTANCE OF STRATEGIC
MANAGEMENT
• It guides the company to move in a specific direction. It defines organization’s goals and
fixes realistic objectives, which are in alignment with the company’s vision.
• It assists the firm in becoming proactive, rather than reactive, to make it analyse the actions
of the competitors and take necessary steps to compete in the market, instead of becoming
spectators.
• It acts as a foundation for all key decisions of the firm.
• It attempts to prepare the organization for future challenges and play the role of pioneer in
exploring opportunities and also helps in identifying ways to reach those opportunities.
• It ensures the long-term survival of the firm while coping with competition and surviving the
dynamic environment.
• It assists in the development of competitive advantage, that helps in the business survival
and growth.

7. McKINSEY 7’S FRAMEWORK
• Mckinsey model was developed in 1980’s by McKinsey consultants Tom Peters, Robert
Waterman and Julien Philips when organizational effectiveness are at question
• The model is most often used as an organizational analysis tool to assess and monitor
changes in the internal situation of an organization.
• McKinsey 7s model is a tool that analyzes firms organizational design by looking at 7 key
internal element: structure, strategy, systems, skills, style, staff and shared values.
• The model is based on the theory that, for an organization to perform well, these seven
elements need to be aligned and mutually reinforcing. So, the model can be used to help
identify what needs to be realigned to improve performance, or to maintain alignment
(and performance) during other types of change.
• Whatever the type of change – restructuring, new processes, organizational merger, new
systems, change of leadership, and so on – the model can be used to understand how the
organizational elements are interrelated, and so ensure that the wider impact of changes
made in one area is taken into consideration.

8. CONTINUE…..
• Managing strategic alignment across various business operations becomes increasingly
challenging as organizations pivot through ongoing changes.
• One strategic tool used by businesses to manage this complexity and drive consistent
alignment through change periods is the McKinsey 7S Model.
• The goal of this model was to show how 7 elements of the company can be aligned together
to achieve effectiveness in a company.
• The key point of the model is that all the seven areas are interconnected and a change
in one area required change in in the rest of the firm for it to function effectively.
• This model can be applied in many situations and is valuable tool when organization design
is at question. The most common uses of this framework are:
1. To facilitate organizational change
2. To help implement new strategy
3. To facilitate merger of organization

9. McKINSEY MODEL
• Below you can find the McKinsey model which represents the connections between
seven areas and divides them into “Soft Ss” and “hard Ss”
• The shape of the model emphasizes interconnectedness of the elements.

10. HARD S AND SOFT S
• The seven areas of the organization are divided into the soft and hard areas.
• Strategy, structure and systems are hard elements that are easy to manage as
compared to soft elements.
• Style, staff, skills and shared values are soft elements which are harder to manage.
• The 7S Model is a strategic tool that helps you analyze organizational gaps,
inconsistencies, and alignment issues.
• Pros: The 7S Model helps you understand the broader impact of change initiatives
on the entire organization.
• Cons: It doesn’t analyze external elements and their impact on organizations.

11. HARD S
• Strategy: it is a plan developed by a firm to achieve sustained competitive
advantage. But it is hard to tell if such strategy is well aligned with other elements.
So the key in 7s model is not only to find a greater strategy but also to see whether
it is perfectly aligned with other elements.
• Structure: represents the way business divisions and units are organized and who is
accountable to whom. It is the organizational chart of the firm. It is very easy to
change as per needed.
• Systems: these are the processes and procedures of the company, which reveal
business daily activities and how decisions are made. Systems are the area of the
firm that determines how business is done.

12. SOFT S
• Skills: Skills refer to the abilities of employees to perform well and to complete tasks.
A study suggests that 45% of respondents reported that a skill gap caused a loss in
productivity. Skills gaps overburden experienced employees who have to pick up the slack
for their coworkers’ inexperience. It’s essential to identify the skill gaps and create
relevant employee training programs to bridge these gaps
• Staff: This element represents the talent pool required, the size of the existing workforce,
and their motivations. It also considers how they are trained and rewarded within the
organization.
• Style: it is the management style of companies leader. It deals with how the managers
interact, what actions they take.
• Shared values: are the core of McKinsey 7s model. They are the norms and the standards that
guide employee behavior and company actions. Thus it is the foundation of every
organization. While implementing a change, organizations expect a behavioral modification
from their employees.

13. STEPS FOR USING MCKINSEY TOOL
1. Identify the areas that are not effectively aligned.
2. Determine the optimal organization design
3. Decide where and what changes should be made
4. Make the necessary changes
5. Continuously review the 7s

14. PEST Analysis
• PEST analysis (political, economic, social, and technological) is a management
method whereby an organization can assess major external factors that influence its
operation in order to become more competitive in the market.
• PEST analysis is a measurement tool to assess markets for a particular product or a
business at a given time frame. Once these factors are analyzed organizations can
take better decisions.
• Your business is just one small cog in the wider economy. For your business to be
successful, it is important to understand and adapt to what’s around you.
• Researching trends and possibilities that may affect your business allows you to
plan and act strategically. This is for business owners and executives who want
to understand the external opportunities and threats facing their business.

15. CONTINUE….
• P stands for political environment. It includes government regulations or any defined rules
for that particular industry or business (legislation such as minimum wage, or codes and
practices). It also involves tax policy (employment laws (industrial disputes, maternity benefit
act, women compensation act), environmental laws). It also includes type of government
(democratic, dictatorship or communist etc).
• E stand for economic environment. It includes interest rates, exchange rates, economic
growth, inflation, deflation rate, overseas economic trends, market distribution trends,
national and international trade and monetary issues. These factors helps in assessing
demand, costing of the product, expansion and the growth.
• S stands for social factors. It includes study of demographics, lifestyle trends, consumer
attitudes and opinions, consumer buying patterns, fashion and role models, ethical issues,
advertising and publicity, brand and company image.

16. CONTINUE…
• T stands for technological factors. It involves technological advancement,
replacement of obsolete technology, technology access, licensing, patents,
automation, innovation etc.

25. ETOP
• ETOP stands for Environmental Threat and Opportunity Profile.
• ETOP analysis is the process by which organizations monitor their relevant
environment to identify opportunities and threats affecting their business for the
purpose of taking strategic decisions

26. WHY ETOP IS NEEDED
• Helps the organization to identify opportunities and threats.
• Provides strategists of which sectors have a favorable, unfavorable and neutral
impact on the organization.
• Helps the organization where it stands with respect to its environment
• Helps in formulating appropriate strategy
• Helps in formulating SWOT analysis

27. HOW TO PREPARE AN ETOP/STEPS
1. Identify major environmental factors which have direct impact on the
organization, such as economical, market, social, international, legal,
technological, political, ecological etc.
2. Environmental factors are then divided and sub divided into subsectors of each
factor.
3. These factors are then analyzed to determine major opportunities and threats in
each of the subsectors.
4. Impact of each sub sector on organization in form of statement is assessed as
being favorable, unfavorable or neutral.

28. ENVIRONMENTAL FACTORS

29. EXAMPLE OF
HYPOTHETICAL
COMPANY
Environmental Sectors Impact of each sector
Social (↑) Customer preference for motorbike,
which are fashionable, easy to ride
and durable.
Political (→) No significant factor.
Economic (↑) Growing affluence among urban
consumers; Exports potential high.
Regulatory (↑) Two Wheeler industry a thrust area
for exports.
Market (↑) Industry growth rate is 10 to 12
percent per year, For motorbike
growth rate is 40 percent, largely
Unsaturated demand.
Supplier (↑) Mostly ancillaries and associated
companies supply parts and
components, REP licenses for
imported raw materials available.
Technological (↑) Technological up gradation of
industry in progress. Import of
machinery under OGL list possible.
A summary ETOP may only show the major
factors for the sake of simplicity. The table
provides an example of an ETOP prepared
for an established company, which is in the
Two Wheeler industry.
The main business of the company is in
Motor Bike manufacturing for the domestic
and exports markets. This example relates
to a hypothetical company but the
illustration is realistic based n the current
Indian business environment.
Environmental Threat and Opportunity Profile (ETOP) for a Motor Bike company:

30. CONCLUSION DERIVED
• As shown in the table motorbike manufacturing is an attractive proposition due to
the many opportunities operating in the environment. The company can take
advantage of the various government policies and concessions. It can also take
advantage of the high exports potential that already exists.
• Since the company is an established manufacturer of motorbike, it has a favorable
supplier as well as technological environment. The company is able to ensure the
supply of raw materials and components, and have access to the latest technology
and have the facilities to use it

31. • The strategic managers should keep focus on the following dimensions,
1. Issue Selection: Focus on issues, which have been selected, should not be missed since there is
a likelihood of arriving at incorrect priorities. Some of the important issues may be those
related to market share, competitive pricing, customer preferences, technological changes,
economic policies, competitive trends, etc.
2. Accuracy of Data: Data should be collected from good sources otherwise the entire process of
environmental scanning may go waste.
3. Impact Studies: Impact studies should be conducted focusing on the various opportunities and
threats and the critical issues selected. It may include study of probable effects on the
company’s strengths and weaknesses, accomplishment of mission and vision etc.
4. Flexibility in Operations: There are number of uncertainties exist in a business situation and so
a company can be greatly benefited buy devising proactive and flexible strategies in their plans,
structures, strategy etc. The optimum level of flexibility should be maintained.

32. SAP

33. SAP(STRUCTURAL ADJUSTMENT
PROGRAMME)
• Structural adjustment programs (SAPs) are economic reform programs that are
often implemented by countries in response to financial crises or as a condition of
receiving aid or debt relief from international financial institutions such as the
International Monetary Fund (IMF) or the World Bank.
• To bring long term price stability, equilibrium in balance of payments and to ensure
higher rate of economic growth, Dr. Manmohan Singh, the Finance Minister of newly
elected Congress Government adopted New Economic policy (NEP) in 1991 on the
advice of IMF and World bank.
• The most important element of New Economic Policy was the adoption of SAP
which sought to change the nature of Indian Economic system by ultimately
establishing a free market economy.
• Under this Structural adjustment Programme, public sector were diluted and private
sector enhanced and expanded.

34. HISTORY OF SAP
• “Structural Adjustment” is the name given to a set of “free Market” economic policy reforms imposed on
developing countries by the Bretton Woods Institutions (the World Bank and International Monetary Fund
(IMFs) as a condition for receipt of loans.
• The two Bretton Woods institutions require borrowing countries to implement certain policies in order to
obtain new loans (or to lower interest rates on existing ones). These policies are typically centered around
increased privatization, liberalizing trade and foreign investment, and balancing government deficit
• Structural Adjustment Loans (SALs) aim to achieve three main objectives: boosting economic growth,
addressing balance of payments deficits, and reducing poverty.
• It was developed in early 1980s
• Initiated in turkey
• It was gaining stronger influence over the economies of debt strapped governments
• 187 SAPs negotiated for 64 developing countries.
• India supported SAPs and has been the largest recipient of SAP loans since 1991. the largest of these have
been to banking sector ($2 trillion) and for swachh Bharat Mission ($1.5 billion). Such loans cannot be spent
on health, development or education programs.

35. CONTINUE..
• Structural adjustment programs have demanded that borrowing countries introduce broadly free-
market systems coupled with occasionally outright austerity. (In economic policy, austerity is a
set of political-economic policies that aim to reduce government budget deficits through
spending cuts, tax increases, or a combination of both). Countries have been required to perform
some combination of the following:
1. Devaluing their currencies to reduce balance of payments deficits. (devaluation helps in boosting
exports because the goods become relatively cheaper for foreign consumers as the value of domestic currency goes down when compared to foreign
currency. Devaluation helps in reducing the trade deficit.)
2. Cutting public sector employment, subsidies, and other spending to reduce budget deficits
(negative balance between a government's spending and revenues.)
3. Privatizing state-owned enterprises and deregulating state-controlled industries.
4. Easing regulations in order to attract investment by foreign businesses.
5. Closing tax loopholes and improving tax collection domestically.

36. NEW REFORMS OF SAP (INDIA)
1. De- reservation of industries of the public sector:
• New industrial policy 1991 has been adopted under SAP reforms which lifted excess
direct controls and regulations on industries and ensure a free market economy.
• New policy indicates government invites a greater degree of participation by the
private sector in important areas of the economy.
• Industries which were earlier reserved under public sector were Iron and Steel,
Electricity, Air transport, ship building, telecommunications, chemical plants, heavy
machinery industries etc.
• Now only six industries are reserved for the public sector which are in areas where
security and strategic considerations are predominant

37. CONTINUE..
2. Liberalization: Abolition of Industrial Licensing system
• Until 1991 Indian industrial sector had functioned under a system of tight controls
and regulations by industrial licensing system (scare resources were allotted for
building of industrial base)
• New policy abolished all industrial licensing except 15 industries for which license
was still required (security purpose and for protection of environment)
• However licensing for these 15 industries has been greatly simplified
• For granting license only certain locational guidelines are to be fulfilled so that
polluting industries should not cluster around major urban centers.

38. CONTINUE..
3. Privatization of Public sector enterprises
• An important aspect of NEP was that government will no longer operate in
commercial enterprises. Government decided to disinvest the public enterprises.
• Government can sell completely or a part of its equity capital to private sector.
• Through disinvestment or privatization the government can mop a good amount of
resources which can be used for various purposes.
• These resources were used to pay back public debt and to finance budget deficits.
• Many public enterprises were already running inefficiently and were incurring huge
losses.

39. CONTINUE..
4. Welcoming Foreign technology and Private Foreign Investment:
• Till 1991, foreign investment and import of foreign technology was regulated tightly in India.
• Indian firms required to obtain prior approval from the government for import of foreign
technology for each project.
• It leads to delays and hampered business decision making for Indian firms.
• After NEP some of the selected list of high technology and priority industries will receive
automatic approval within certain guidelines.
• Further government has liberalized its policy regarding foreign investment.
• To attract private foreign investment , it has been decided to grant automatic permission to
private foreign investors to hold equity upto 50% of total equity shares in the Indian
industries

40. CONTINUE..
5. Trade Liberalization
Import licensing for import of goods have been removed, further to promote competitiveness,
efficiency and globalization of Indian economy import duties have been reduced to the
maximum of 50% in case of consumer goods and 30% in case of industrial or capital goods.
The new thinking was that by cheapening of imported goods, the Indian firms will try to
compete their products with foreign products and they can expand their exports.
6. Currency Convertibility and Floating of Indian Rupees
• Indian rupee are now fully convertible since March 1993.
• This implies that for the purpose of foreign trade and travel you can convert rupees into
foreign currency and vice versa through foreign exchange market at determined exchange
rate.

41. CSF
• Critical success Factors are the critical factors or activities required for ensuring the success
for your business. The term was initially used in the world of data analysis and business
analysis. CSF are the factors that determine project success or failure
• Identifying CSFs is important as it allows firms to focus their efforts on building their
capabilities to meet the CSFs or even allow firms to decide if they have the capability to
build the requirements necessary to meet Critical Success Factors.
• CSF is an element of organizational activity which is central to its future success. CSF may
change over time and may include items such as product quality, employee attitudes,
manufacturing flexibility and brand awareness
• CSF are determined by the planning of IT infrastructure in a business enterprises.
• There are two broad approaches to systematic identification i.e. structured and unstructured
approaches. The structured approach has gained popularity due to fact that it is more
focused and comprehensive.

42. STRUCTURED APPROACH TO IT
INFRASTRUCTURE
• Structured approach to planning IT infrastructure provides a framework of the
detailed steps that need to be taken for the purpose of planning
• It is well tested and proven approach
• As it is structured it is easy to identify the steps that are involved in the process of
planning and the associated cost and budget.
• A number of planning methods have been suggested but most popular method
which is followed by many IT infrastructure designers are
• IBMs( (International Business Machines Corporation) – Business System Planning (BSP)
• MITs - Critical Success Factor (CSF)

43. CONTINUE…
a) Business System Planning method
1. Using BSP a rigorous analysis of the operations in the business is undertaken by the
managers and a detailed mapping of the business operations is done.
2. It is done by using value chain analysis (Value chain analysis is a means of evaluating each
of the activities in a company's value chain to understand where opportunities for
improvement lie) which enables the management to analyze the role information play in
the industry. Such analysis identifies the information needed in the enterprises.
3. Value chain analysis helps to gather information from both internal and external
organization and from this stage detailed development is made.
b) CSF : developed by John. F. Rochart at CISR (Centre of Information System Research) at
MITs Sloan School of management.
• It suggest KPI (Key Performance Indicator) for each manager for achieving the objectives of
the organization

44. CONTINUE…
• The data regarding KPI must be gathered from the objectives laid down for each
manager and means of analyzing such data must be provided by information
system.
• For eg. Educational institutions identified more than 20 different goals but it was
summarized and only following 3 CSF are important.
i. Relevance: courses which are developed must be relevant to the society
ii. Excellence: courses must be developed and taught in the best possible way.
iii. Contribution: teachers must be contribute to the literature.
• CSF is always hierarchical in nature. It should ensure that the conflict in CSFs are
avoided at all levels in the hierarchy.

45. CONTINUE..
2. Unstructured approach to IT infrastructure planning: the proponents of
unstructured approach argue that structured approach is time consuming process.
Some times it takes so much time that initial opportunities and enthusiasm is lost.
• Many of the MNCs are in the process of following minimum IT infrastructure for all
the distributors in the metropolitan cities.
• However such situation is not common and many enterprise have enough freedom
for planning their IT infrastructure.

46. CORPORATE GOVERNANCE
• Boards of directors are responsible for the governance of their companies. The
shareholders' role in governance is to appoint the directors and the auditors and to
satisfy themselves that an appropriate governance structure is in place.
• Corporate governance refers to the accountability of the Board of Directors to all
stakeholders of the company i.e. shareholders, employees, suppliers, customers and
society in general; towards giving the corporation a fair, efficient and transparent
administration.
• Corporate governance is the system by which companies are directed and
controlled.

47. PRINCIPLES OF CORPORATE
GOVERNANCE
1. Accountability: it is the responsibility of chairman, BOD and chief executive to be
answerable to the shareholders. This principle gives confidence to the
shareholders than in case of any unfavorable situation the person is responsible
will held in charge.
2. Transparency: it provides clear information about company policies and practices
that affects the rights of shareholders. It helps in building trust and
togetherness between top management and the stakeholders. Transparency is
the foundation of corporate governance.
3. Independence: means the ability to make decisions without being influenced by
others. Decisions must be taken by board of directors or top management without
having any personal interest in the company.

48. CONTINUE….
4. Fairness: each shareholders must be given an equal opportunity to voice their
grievances and issues relating to their rights. As per this principle all the
shareholders are treated equally without any personal favoritism.
5. Social responsibility: companies should be aware of social issues and take action
to address them. In this way company creates a positive image in the industry.

49. SEBI CODE OF CONDUCT FOR
CORPORATE GOVERNANCE
• For promoting good corporate governance, Securities Exchange Board of India has constituted a committee under the chairmanship
of Kumar Mangalam Birla. On the basis of recommendations of this committee SEBI issued certain guidelines which are as follows:
1. BOD: BOD of the company shall have combination of executive and non executive directors.
• The number of directors would depend on whether chairman is executive or non executive
• Non executive chairman – 1/3 of board will be directors
• Executive chairman- ½ of board will comprise of directors
2. Audit committee:
i. Company should have independent audit committee which comprise of:
a) It shall have minimum 3 members as non executive directors
b) Chairman will be independent director
c) The chairman will present at annual general meeting
ii. Audit committee shall have powers like
a) To seek information from employees
b) To obtain legal advice
c) Can investigate any activity
iii. Role of audit committee must include:
a) Reviewing the companies financial and risk policies
b) Recommendation of removal and appointment of auditors

50. CONTINUE…
3. Remuneration of directors: following disclosures have to be made in annual report for corporate governance
a) Details of performance linked incentives
b) Details of salary, bonus, pension etc
4. Management: management analysis report should form a part of annual report for the shareholders
a) Opportunities and threats
b) Risk and concern
c) Segment or product wise performance
5. Shareholders: if new director is appointed following information related to director is provided to shareholders:
a) A brief summary of director
b) Area of his expertise
c) No. of co. in which he holds directorship
6. Report on corporate governance: a separate section in annual report for corporate governance should be maintained
7. Compliance: the company should receive a certificate from the auditors regarding compliance of corporate governance.
This certificate along with directors report is send to shareholders

51. NEED FOR CORPORATE
GOVERNANCE
1. Wide spread of shareholder: to protect interest of each shareholders
2. Corporate scams scandals: corporate scams have shaken public confidence. In order to gain
confidence in the corporate sector, the need of C.G. is required.
3. Greater expectations of society: todays society have lots of expectations from corporate sector
like better quality, pollution control, reasonable price etc. to meet all this expectations there
must be code of conduct of corporate governance.
4. Globalization: desire of more and more Indian companies to be listed on international stock
exchange focuses on need of corporate governance. International company also recognizes
only those companies which have good conduct of corporate governance.
5. Ill practices of monetary compensation: it’s a practice that, top level executives are getting
huge monetary payments both in developed and developing economies. There is no
justification for the payment of ranking managers which necessitates the need of corporate
governance.
6. Hostile take overs: hostile take overs put a question mark on the efficiency of take over
companies so there is proper need of proper code of conduct.

52. INTERNAL ENVIRONMENTAL
SCANNING
• Organization environment consist of both external and internal factors. Environment
must be scanned so that the factors that influence organization success must be
known.
• External analysis helps the organization to identify the threats and opportunities.
With the help of strategy formulation, Organization must take the advantage of
opportunities and minimize the threats.
• Internal analysis is the first step in the environment scanning
• Analysis of internal environment helps in identifying strength and weakness of an
organization.
• Discussions, interviews and surveys can be used to assess the internal environment.

53. APPROACHES OF ENVIRONMENT
SCANNING
1. Processed form approach: secondary sources of data is used for gathering
information for environment scanning. Organization uses information or data
supplied by government agencies or private institutions.
2. Ad hoc approach: primary sources of data is used for gathering information for
environment scanning. Organization conduct special surveys, questionnaires and
studies to deal with specific environment issues from time to time.
3. Systematic approach: it includes systematic collection of information for
environment scanning. These are required to be closely monitored regularly as
they have direct impact on the organization.