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 The term Business Policy may be used interchangeably with Strategic
Management, corporate planning etc. Primarily the term Business Policy means a long-
term planning for the total business ± ³as a whole.
Business Corporate/overall functioning
Policy planning/formulation of strategies

Thus Business policy means a long-term planning of any Organization for the
purpose of its ± ³GROWTH, SURVIVAL, EXPANSION, DIVERSIFICATION ETC
The planning of the overall Business is done by the top-level managers who have the
relevant skills experience and knowledge to take a strategic decision for the overall
corporate.
"" ,'+   ,-. ³Business Policy is the study of the functions and
responsibilities of Senior Management, the crucial problems that affect success in the
total enterprise, and the decision that determine the direction of the Organization and
shape its future.´
From the above definition it may be understood that Business Policy attempts to study
what path the Organization is going to take in future.

"" ,'+  
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developed statement of directions and goals. Goals involve definitions of precisely what
the business is or should be and the particular kind of company it should be. Direction
guides the action of the firm to accomplish these goals´.

According to Miller and Earnest ³A policy is a statement or a commonly accepted

understanding of decision making criteria or formulate prepared or evolved to achieve
economy in operations by making decision; relatively routine or frequently occurring
problems and consequently facilitating the delegation of such decisions to lower
managerial levels.´
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It is a study of what the top level Managers do and what guides their activities.
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Business Policy deals with the long term perspective of the Organization. These decision
are taken by the managers at the senior level of management. Therefore, Business Policy
attempts to Study the functions and responsibilities of the senior management which
primarily concerns itself to the crucial problems or decisions of the organization.
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As the Study of Business Policy entails what should be done to take a desired future
course of position it is future-oriented. The senior level managers anticipate and predict
the future and take a policy decision in the present.
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The study of a Business Policy involves evaluating Various courses of action and various
desired future positions and ultimately choosing one of the best suitable future position.

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It also involves an evaluation and choice of a Strategy to reach upto the desired future
position.

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The study of Business Policy is also concerned with the optimum and mobilization of the
available and the required resources in an organisatio9n for the achievement of the :

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´? The learner of business policy have to understand the various concepts involved
like strategy, policies, plans and programmes are encountered in the functional
area courses too.

´? A knowledge of the internal and external environment and how it affects the
functioning of an organization is vital to an understanding of business policy.
 ´? Information about environment helps in the determination of the mission,
objectives, and strategies of a firm.

´? The implementation of strategy is complex issue and through the knowledge

gained business policy enable the learner to visualize how the implementation of
strategic management can take place

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´? Attainment of knowledge should lead to the development of skills. Analysis of

case studies and interpretation and analysis of the business events.

´? The study of BP should enable a student to develop analytical ability and use it to
understand the situation in a given case or incident.

´? The study of business policy should lead to the skills of identifying the factors
relevant in decision making.

´? It increase the mental ability to the learners and enables them to link theory with
practice.

´? Case analysis leads to the development of oral as well as written communication

skills.

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´? The attainment of the knowledge and skill objective should lead to the inculcation
of an appropriate attitude among the learners.

´? It developed a generalist attitude. The generalist attitude enables the learners to

approach and assess a situation fro all possible angles.

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In the Initial days managers used to do with day to day planning methods. The first phase
in mid 1930s was the premise of ad-hoc policy-making mainly due to the nature of the
business of that period. The second phase in 1930s and 1940s was marked by the
increasing environmental changes. Planned Policy formulation replaced ad-hoc policy
 making, which led to the emphasis shift to the integration of functional areas. The third
phase during 1960s was based on strategy paradigm. It was the effect and relationship of
the business with the environment, which guided the process of policy making. In the
early eighties, the patterns changed again companies went global and competition
increased Japanese Companies unleashed a force across the world along with other Asian
companies and posed threats for the U.S. and European Companies.

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The study of Business Policy makes the study of management more meaningful. It
completes the study of management for the students, as it puts together the information of
all the functional areas and gives a complete picture of the organization for determining a
comprehensive future policy of an organization.

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a) Business Policy seeks to integrate the knowledge gained in various functional areas of
management i.e. Finance, Production, Marketing, and Human Relations etc.
b) All the constraints and complexities of the real life business are studied in the subject
of Business Policy.
c) The study & practice of management becomes more meaning with the integration of
all the functional sub-systems.
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d) Business Policy helps to create an understanding of how policies are formulated
e) The study makes the executives more receptive to the developments in the
environment to pick ideas and suggestion for implementation purpose.
f) Business Policy prepares the executives at middle-level of management for the
understanding of strategic decision ± making.
g) It offers a unique perspective to executives to understand the senior management¶s
viewpoint.
The purpose of business policy:
1.? To integrate the knowledge gained in various functional areas of management.
2.? To adopt a generalist approach to problem-solving .
 ? To understand the complex interlink ages operating within an organization
through the use of a systems approach to decision making and relating these to the
changes taking place in the external environment.
 -

The purpose of the business policy course is to integrate the knowledge gained in various
functional areas, to adopt a generalist approach and to comprehend the complex
interaction taking place within the organization. It is a core subject that integrates all the
knowledge & experience gained for future of the organization.

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´? Business policy and strategic management is about decision making and it deals
with actions which determine whether an enterprise excels, survives or dies. This
process is called ³Strategic Management´

´? The job of the strategic managers is to make the best use of firm¶s resources in a
changing environment.

´? We use terms ³Enterprise´. ³organization´, ³Company´, and ³firm´

interchangeably. Some are profit-seeking, others not-for-profit; but all utilize a
strategic management process. Similarly, terms such as ³manager´, ³strategist´,
and Executives´ are substitutes for variety.

Why Change is Essential:

š? Change occurs due to outside pressures such as from Govt. Competitors and
consumers.
 š? Others developed because the employees and management made decisions to
change the nature of business.

Definition of strategic management:

Strategic management is defined -as the dynamic process, Formulation Implementation,

evaluation Control of strategies to realize the organization's strategic intent.

Four Phases in Strategic Management Process

Strategic
Control

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1.? Creating and communicating a vision.
2.? Designing a mission statement.
3.? Defining the business.
4.? Adopting the business model.
5.? Setting objectives.
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1.? Performing environmental appraisal
2.? Doing organizational appraisal
3.? Formulating corporate-level strategies.
4.? Formulating business-level strategies.
5.? Undertaking strategic analysis.
6.? Exercising strategic choice.
 ].? Preparing strategic plan.
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V.? Activating strategies.
9.? Designing the structure, systems and processes.
10.?Managing behavioral implementation.
11.?Managing functional implementation.
12.?Operational strategies.

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13.?Performing strategic evaluation.
14.?Exercising strategic control.
15.?Reformulating strategies.




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. Strategic decision making: Decision making is the most important function of any
manager. Strategic decision making is the primary task of the senior management. The
difference lies in the levels at which they operates, while decision making pertains to all
managerial functions, strategic decision making largely relates to the responsibilities of
the senior management.

Most people agree that decision making is the process of selecting a course of action
from among many alternatives. The process works somewhat like this:

? Objectives to be achieved are determined.

? Alternative ways of achieving the objectives are identified.

? Each alternative is evaluated in terms of its objective-achieving ability.

? The best alternative is chosen.

The basic thrust of strategic decision making, in the process of strategic management, is
to make a choice regarding the courses of action to adopt.

The fundamental strategic decision relates to the choice of a Mission. In other words, the
answer to such question as:

‡? What is our business?

‡? What will it be?

‡? What should it be?

Process of decision making:

 

Any applied field that combines art and science, you are likely to find two approaches:
‡? Prescriptive: tell you how things ought to be done.
‡? Descriptive: tell you how things are done.
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‡? Oldest decision making theory.
‡? Decision maker is unique actor.
‡? Behavior is intelligent and rational.
‡? The actor makes decision in full awareness of all available feasible
alternatives in order to maximize advantages.
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‡? Opposite of the rational decision maker is intuitive decision maker.
‡? Decision maker prefers habit or experience, gut-feeling, reflective thinking
and instinct using the unconscious mental processes.
‡? Consider a number of alternatives and options simultaneously jumping
from one step in analysis or search to another and back again.

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 ‡? Real decision maker must consider a variety of pressures form other
people affected by their decision.
‡? Organization interacts with a variety of stakeholders in a series of
interdependent exchange relationships.
‡? Unions exchange labour for decent wages and job security. Customers
exchange money for products and services.
‡? Decisions are made when most of the people involved in the process agree
that they have found a solution. They do this by mutual adjustment and
negotiations following the rules of the game.
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´? The human being is a mix of the rational and the emotional.
´? We also know that the environment is a mix of the analyzable and of
chaotic changes and pressures.
´? Strategic management decisions are made in a typically human way- using
the rationally conscious analysis and intuitively unconscious ³Gut´ in the
light of political realities.
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1.? Criteria for decision making.
2.? Rationality in decision making.
 3.? Creativity in decision-making.
4.? Variability in decision making.
5.? Person-related factors in decision-making.
6.? Individual versus Group decision-making.

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:-The promoters of an organization, normally have some aspirations which

guide them in the structuring and functioning of the organization. These aspirations are
expressed in strategic intent means intention. A strategic intent should lead to on end. That
end is the Vision of an organization. It is what the firm or person would ultimately like to
become in the future. A vision is more dreamt of than it is articulated. Many a times it
may not be evident what vision does the top management holds for its organization. A
vision could be as hazy & vague as a dream. Yet it is a powerful motivator to action.
*+: -
³Description of something (an organization, corporate culture, a business, a technology,
an activity) in the future´. - Kotter (1990)

³Mental perception of the kind of environment an individual, or an organization, aspires

to create within a broad time horizon and the underlying conditions for the actualization
of this perception´.
-El- Namaki (1992)
³Category of intentions that are broad , all-inclusive, and forward thinking´.
-Miller and Dess (1996)
Benefits of Having a Vision:
±? Good vision are inspiring and exhilarating.
±? Visions represent a discontinuity.
±? Good visions help in the creation of a common identity and a shared sense of
purpose.
±? Good visions are competitive, original and unique.
 ±? Good visions foster risk-taking and experimentation.
±? Good visions foster long-term thinking.
±? Good vision represents integrity.
Thus good Visions may be inspiring & motivating to the management. It may guide the
working of a dream i. e. a Vision. A vision articulates the position that a firm would like
to attain in the distant future.
+ -. :  ³Indian Oil aims to achieve
international standards of excellence in all aspects of energy an diversified business with
focus on customer delight through quality products and services.´ Thus Vision constitutes
future aspirations that lead to an inspiration to be the best in one¶s field of activity.

 -
The essence of vision is forward-looking view ³what an organization whishes to
become´.
Mission is ³what an organization is and why it exists´.
Peter F. Drucker raised important philosophical questions related to business:
±? What is our business?
±? what will it be?
±? what should it be?
The answers are based on the analysis of the
±? Underlying needs of the society that any organization serves to fulfill.
±? Satisfaction of that need.
±? The business of the organization.

Understanding Mission:
Mission is a statement which defines the role that an organization plays in a society.
It refers to the particular needs of the society, for instance, its information needs.
Defining Mission:

³Essential purpose of the organization, concerning particularly why it is in existence, the

nature of the business (es) it is in, and the customers it seeks to serve and satisfy´.
 -Thompson (199])

Mission is the ³Purpose or reason for the organization existence´.

-Hunger and Wheelen (1999)

How are Mission Statements Formulated?

±? a particular set of tasks they are called upon to perform in the light of their
individual, national or global priorities.

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1.? It should be feasible.

2.? It should be precise.

3.? It should be clear.

4.? It should be motivating.

5.? It should be distinctive.

6.? It should indicate major components of strategy.

].? It should indicate how objectives are to be accomplished.

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8, (- The term basically means the surroundings: external objectives,
variables, events and circumstances under which someone or something exists. In terms
of Business, Environment refers to the culmination of all conditions, events,
circumstances and situations and the various pressures and influences and surround and
directly and indirectly affects the organization.

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;  (0!9- The environment consists of a number of factors and variables directly or
indirectly influencing the operations of any business organization. All the factors and
conditions which form a part of the environment are interrelated and interdependent. One
factor influences or get influenced by another factor. Thus environment is a very complex
phenomenon whose parts may be easily understood in isolation but a total picture may
require sufficient understanding and knowledge.

5; #("- ue to so many forces operating in the environment the nature of
environment is constantly changing and is thus dynamic in nature.
";!. "'-The character of the environment is understood by the person who is
observing it. It has got many angles. It ultimately depends upon the perception of the
observer, what he derives out of the development of the events. For example the de-
licensing of the industries may be considered as an opportunity by some who want to
enter the business. However the same may be considered as a threat by those who were
earlier having a monopoly in a particular business.
'; ,.,"+(0"-he developments and events shaping the environment have a
far reaching influence on the operations of a business. For example any change in the
tastes & linking of customers affect the growth & profitability of a firm. For any business
organization the study of environment is of utmost important to be able to adjust itself to
the latest developments and to be able to reap the benefits of the opportunities arising in
the market. The complexities of any environment may be understood by dividing it into
different categories.

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- The internal environment of a business consists of
various factors existing within an organization which results into building its strengths &
weaknesses.  "!'-. Employees & their skill base. Level of Technology available
Availability of various resources like finance, infrastructure etc. Process Organizational
design and structure Organizational work culture- Procedures ± policies.
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-.The external environment of a business includes
all the factors outside the organization. It is this set of factors which provide an
opportunity or pose threats to the organization. It includes

; ,)
8, (-  (, needs preferences, attitudes, perception,
bargaining & purchasing power, satisfaction etc. , '"- features, functions,
ingredients, image, price, differentiation, availability, substitutes, services etc.
,)+,(',#-Channel, levels, costs, logistics, delivery, service & financial
schemes etc.  (0 , ,!' *" ,-types & number of competitors, entry & exit
of competitors, nature & strategy of competition.

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8, (- Sources of technology cost of technology

acquisition, Technological development, stages of development change & rate of change,
research & development. Impact of technology on human beings and environmental
effort. Communication & infrastructural technology.

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8, (-. Cost, availability & continuity of supply of raw
materials, parts & components. Cost & availability of finance, energy, human resources,
machinery, spare parts & after sales service. Infrastructural support & ease of
availability. Bargaining power of suppliers & existence of substitutes.

8;
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8, (-. Stage of economic development of the country.
Structure of economy- Capitalist/Socialist/Mixed Economic policies- industrial, monetary
& fiscal Economic planning Economic indicates like national income, GNP per capita
income, savings & investment. Balance of payments, value of exports & investment.

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8, (-. Constitutional framework, Directive principles,
fundamental rights, division of powers. Policies related to licensing, monopoly, foreign
investment, financing etc. Policies related to distribution & pricing Policies related to
imports & exports other policies related to the public sector, small scale industries,
environmental pollution, consumer protection etc.

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8, (-The political system and its features, political parties.
The political structure Political processes like party system, elections, economic &
 industrial promotion & regulation. Political philosophy, governments¶ role in business
etc.

8;  " ."!,!
8, (-. Demographic characteristics e.g. Population

and its density, distribution, change, age composition, interstate, migration, rural-urban
mobility & income distribution. Environmental pollution, consumerism, corruption, use
of mass media etc. Family, family values & family structure. Role and position of men,
women, children etc. Educational level, work ethics, role of minority etc.

8; , ! 8, (-. Globalization, global blocks Global HR, Global
information system Global markets & competitiveness Global legal system

; ,!
8, (- A wider perception of the environment includes all the
aspects of the external environment e.g. National/ international Economic Social/
Demographic Technological Political etc. together constitute the general environment.
The general environment affects the business someway or the other and thus all business
houses are concerned about it. The general environment offers a common set of
opportunities and poses a common set of threats to all the players in the industry.
However, the organization may not be influenced by each factor of the general
environment.

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8, (-. Every business organization is concerned with a set of
environment aspects, which have a direct, or an immediate affect on the business. This
part of the general environment which is of an immediate concern to the business is
termed as relevant environment. What constitutes a relevant environment depends upon
the perception & working of the business and the industry a firm is in.

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 Strategic Planning:

±? In simple terms, strategic planning is planning for strategies and implementing

them to achieve organizational goals.

±? It starts by asking oneself simple questions like:

 ‡? What are we doing?

‡? Should we continue to do it or change either our product line or the way of

working?

‡? What is the impact of social, political, technological and other

environmental factors on our operations?

‡? Are we prepared to accept these changes?

‡? What will be the impact of these changes on our operations?

Strategic planning aims at knowing what we are and where we want to go so that
environmental threats and opportunities can be exploited, given the strengths and
weaknesses of an organization.

Features of Strategic Planning:

1.? It is a process of questioning.

2.? Time horizon.

3.? Pervasive process.

4.? Focus of attention.

5.? Continuous process.

Benefits of Strategic Planning:

1.? Financial benefits.

2.? Guide to organizational activities.

3.? Competitive advantage.

4.? Minimizes risk.

 5.? Promotes motivation and innovation.

Limitations of Strategic Planning:

1.? Lack of knowledge.

2.? Problem of co-ordination.

3.? Interdependence of different units.

4.? Managerial perception.

5.? Financial considerations.

Process of Strategic Planning:

1.? Objectives formulation.

2.? Identify the current objectives and strategies.

3.? Analysis the available information.

4.? Analysis the impact of environment.

5.? Analysis the resource position of the firm.

6.? Establishment of alternative strategies.

].? Evaluation of alternative strategies.

V.? Choice of strategy.

9.? Implementation of strategy.

10.?Measurement and control of strategy.

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   - Any Business organization for its survival and growth undertakes a
detailed SWOT analysis. SWOT is the stand for Strength, Weaknesses, and Opportunities
& Threats. In the cut-throat competition faced by the business today a detailed
environmental scanning is a must. The study of Internal & External Environment,
General & Relevant environment makes a business house adopt itself to the ever
changing and ever demanding surroundings in which the business operates.
The strengths & Weaknesses of any organization are inherent and reside in the internal
environment of a business. The Opportunities & Threats are the development or events
which exist in the external environment and are open to all the players in the industry.

;,+-the strength of a business is its capacity or ability to perform or to

possess any resource relevant for the success or otherwise of a firm, which may
not be possessed by a rival player in the industry. For e.g. skilled manpower Level
of technology Economy of Scales or availability of cheap finance Intense
distribution channels Raw materials/ components at least cost. Efficient suppliers
etc. The strengths possessed by a firm gives it a strategic advantage over the other
firms either in the short run or in the long run business can take a risk based on
one of its strengths. This strength, if realized can help strategic planning of a firm.

5; )- A weakness of a business is its shortcoming or inability to do

something or to possess something which a rival firm may have. This weakness
determines the level of strategic advantage gained by a competitive firm over a
business. A weakness could be poor availability or poor retention of skilled
manpower. High cost of capital Outdated or expensive technology High cost of
production Unreliable suppliers. Shallow distribution channels Poor state of
logistics & physical distribution Every organization should try to further
strengthen its abilities and try to overcome or hide or compensate its weaknesses.
These weaknesses or shortcoming are generally made known to the customers by
competitors. The firm should always have a ready strength available to be able to
compensate any or all of its weaknesses in the eyes or the customers. ,
9(0!- Weakness of high cost of production may be justified by unique
features, high quality & durability etc. of the product.

"; 00 ,- An opportunity is any chance or an event, which can be

utilized and taken advantage of an opportunity, lies in the external environment
 and is open to all the players in the industry serving on the same platform. It
primarily depends upon the perception as well as the resources of the organization
that, whether any occurrence is considered as an opportunity or not. An effective
manager is always receptive to opportunities, which may soon be converted into
strengths.  00 ,# (# 5 -. Some favourable law passed by the
legislature of the country Entry or exit of a competitor a substitute Change of the
consumer behaviour Change in the technology compatible to organisational
resources Availability of a cheap finance Possibility of a joint ventures or takes
over Change in the competitors strategy Change of a political party in power etc.
Thus if any event or an occurrence is in favour of the organization it is perceived
to be an opportunity by it. Opportunities are taken advantage of to create a
competitive edge or a first movers advantage in the industry.
';,-Threats exists in the external environment. It is in accordance of an event or
the potential occurrence of an event which may adversely affect the
organisations functioning or potentiality to lead over the competitors in todays
time or in future. The above mentioned opportunities may well act as a threat to
an organization If it is not suiting its style or working, resources or business
strategy. It is very significant for any business organization to do its SWOT
analysis on a regular interval to make use of its strength & opportunities, to
overcome its weaknesses and to avoid the threats in hampering its business.
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1. Strong market share
2. Growing customer base and customer loyalty.
3. above average market visibility
4. Strongly differentiated products
5. Cost advantages
6. above average profit margins
]. A creative & entrepreneurial alert management
V. above average technological & innovational capability
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 1. Competitive disadvantages
2. Short on financial resources
3. Slipping reputation with customers
4. Lag in new product development
5. High cost of production
6. Weak product quality
]. Losing ground to rival companies
V. Lacking skills & capabilities in key areas
 - A Successful strategist concentrates his efforts on the
understanding of both external as well as the internal analysis. The knowledge of
competitive moves and counter moves and the recognition of the potential
competitive advantages of the organization. Both are equality important to be
realized by a Strategist.

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Ans. Organizational Appraisal:

The appraisal of the external environment of a firm helps it to think of ³what it might
choose to do´. The appraisal of the internal environment, on the other hand, enables a
firm to decide about ³what it can do´.

Dynamics of Internal Environment:

‡? Organizational Resources

‡? Organizational behavior

‡? Strengths and weaknesses

‡? Synergetic Effects

‡? Competencies
 ‡? Organizational Capability

‡? Strategic Advantage

Framework for the development of Strategic Advantage by an Organization:

Strategic Advantage

Organizational Capability

Competencies

Synergistic Effects

Strengths and Weaknesses

Organizational resources + Organizational Behavior

Organizational Capability Factors:

1.? Financial capability: financial capability factors relate to the availability, usage, and
management of funds, and all allied aspects that have a bearing on an organization¶s
capacity and ability to implement its strategies.

Typical strengths that support financial capability:

‡? Assess to financial resources

 ‡? Amicable relationship with financial institutions

‡? High level of creditworthiness

‡? Efficient capital budgeting system.

‡? Low cost of capital as compared to competitors

‡? High level of shareholder's confidence

‡? Effective management control system

‡? Tax benefits due to various Government policies.

2.? Marketing Capability:

Marketing capability factors relate to the pricing, promotion, and distribution of

products or services.

Typical strengths that support Marketing capability:

‡? Wide variety of products

‡? Better quality of products

‡? Low prices as compared to those of similar products in the market

‡? Price protection due to Government policy

‡? Effective sales promotion

‡? High-profile advertising

‡? High quality customer service

‡? Effective distribution system

‡? Effective marketing management information system

3.? Operations Capability:

 Operations capability factors relate to the production of products or services, use
of material resources.

Typical Strengths that support operations Capability:

‡? High level of capacity utilization

‡? Favorable plant location

‡? Reliable sources of supply

‡? Effective control of operational costs

‡? Existence of good inventory control system

‡? Availability of high caliber R & D personnel

Personnel Capability:

Personnel capability factors relate to the existence and use of human resources
and skills.

Typical Strengths that support Personnel Capability:

‡? Genuine concern for human resources management and development

‡? Effective and efficient personnel systems

‡? The organization perceived as a fair and model employer

‡? Excellent training opportunities and facilities

‡? Highly satisfied and motivated workforce

‡? High level of organizational loyalty

‡? Low level of absenteeism

‡? Safe and healthy working conditions

General Management Capability:

general management capability relates to the integration, coordination, and

direction of the functional capabilities towards common goals.

Typical Strengths that support Personnel Capability:

‡? Effective system for corporate planning

‡? Control, reward and incentive system for top managers geared to the
achievement of objectives

‡? Entrepreneurial orientation and high propensity for risk-taking

‡? Good rapport with the government and bureaucracy

‡? Favorable corporate image

‡? Commonly being perceived as a good organization to work for

‡? Development-oriented organizational culture

‡? Effective management of organizational change

Consideration in Organizational Appraisal:

The purpose of organizational appraisal is to determine the organizational

capability in terms of strengths and weaknesses that lie in the different functional
areas.

Factors affecting Organizational Appraisal:

The factors that affect organizational appraisal relate to the strategists, the
organization, and to the internal environment.

±? Characteristics of strategists: ability to judge the opportunities and threats

±? Nature of the organization : Size of the organization

 ±? Internal environment: matching the conditions

Approaches to Organizational Appraisal:

The approaches adopted for preparing organizational appraisal may range from
highly systematic to an Ad hoc one.

Systematic approach is adopted as a proactive measure to appraise the

organization.

Ad hoc approach is generally used as a reactive measure in response to a crisis

and occasional organizational studies may be undertaken to determine capability

Methods and Techniques used for Organizational Appraisal:

±? Identical to those used for the performance evaluation of an organization.

±? There is an important different between performance evaluation and

organizational appraisal.

±? The emphasis in evaluating performance is on assessing the current

behavior of the organization.

±? Organizational appraisal is of a comprehensive and long term nature and

emphasis is not only on current behavior but also on what the organization
needs to do in order to gain the capability.

±? The difference between performance evaluation and organizational

appraisal, the methods and technique used could be classified as broadly
in three parts as below:

Internal Analysis:

1.? VIRO Framework

2.? Value chain analysis

 3.? Quantitative Analysis

I.? Financial analysis

II.? Non-Financial Analysis

4.? Qualitative analysis

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<-The Boston Consulting Group (BCG) a leading management-consulting
firm developed and popularized a growth share matrix. The matrix comprises of four
quadrants each describing the size and position of the strategic business unit owned by an
organization.

On the vertical axis is the Market Growth rate of the market in which the business
operates. A market growth rate above 10 percent is considered to be high. On the
horizontal axis is the Relative Market Share. It refers to the Strategic Business Units
market share as compared to the firm, which is its largest competitor in the segment
under consideration. The relative market share serves a measure of the company¶s
strength in the market segment. The two axis are divided into high & low. The growth
matrix is divided into four cells each indicating a different type of business profile.

c (,)-These are Businesses that operate in high- growth markets but have
low relative market shares. A question mark requires a lot of cash because the company
has to spend money on plant, equipment and personnel to keep up with the fast growing
market and because it wants to overtake the market leader. The company has to think
hard about whether to keep on investing money into this business or put an end.

/ ,- It is a market leader in a high growth market. A star does not necessarily
produce a positive cash flow for the company. The company must spend substantial funds
to keep up with the high market growth an to fight off competitor attacks. A star is a
potential business which has the competitive advantage to be a market leader in an
industry that is growing fast.
  " &- Stars with a falling growth rate that still have the largest relative market
share and produce a lot of cash for the company is called a cash cow. The company does
not have to finance expansion because the markets growth rate has slowed because the
business is the market leader it enjoys economies of scale and higher profit margins. The
company uses its cash cows to pay bills and support other business.

2  + Businesses that have weak market shares in low-growth markets are in the dog
category. The company should consider whether they are expecting a turn around in the
market growth rate or a new chance for market leadership else they should divest this
business. It would be fruitless to spend and money on this matrix business.





<-
A refined version of the BCG Matrix is the one pioneered by General Electric. An
SBUs appropriate objectives cannot be determined solely by its position I the growth
share matrix. If additional factors are considered the growth-share matrix can be seen as a
special case of multifactor portfolio matrix. Each business is rated in terms of two major
dimensions ± market attractiveness and business strength. Companies are successful to
the extent that they enter attractive markets and posses the required business strengths to
succeed in the markets. If one of these fact is missing the business will not produce
outstanding results. Neither a strong company operating in an attractive market will do
very well. To measure the two dimensions, strategic planners must identify the factors
underlying each dimension and find a way to measure them and combine them. Market
attractiveness varies with the markets size, annual market growth rate, historical profit
margins etc. business strength varies with the companys market share, share of growth,
product, quality etc. While the BCG matrix considers only two factors, the GE portfolio
matrix helps the strategic planners to look at more factors in evaluating an actual or
potential business than the BCG model does. As against the BCG matrix the GE matrix is
divided into nine cells, which in turn falls into zones. The three cells in the upper left
corner indicates strong SBUs in which the company should invest or grow. The diagonal
cells stretching from the lower left to the upper right indicate SBUs that are medium in
overall attractiveness. The company should pursue selectively and manage for earnings.
 The three cells in the lower-right corner indicate SBUs that are low in overall
attractiveness. The company should give serious thought to harvesting or divesting these
business units. Apart from the BCG and GE portfolio matrix, three more portfolio matrix
are used to evaluate the strength of business units and facilitate strategic planning.
A) Direction Policy
B) Space Matrix

 - Portfolio models have helped managers to think more strategically, to
understand the economics of their businesses better, improve the quality of their plans,
improve communication between business and corporate management, eliminate weaker
businesses & strengthen their investment in more promising businesses. However, portfolio
models must be used cautiously. They may lead the company to place too much emphasis
on market-share growth and entry into high growth businesses or to neglect its current
businesses because may end up in the same cell position though differ greatly in underlying
ratings & weights.

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-  %
 concept of Strategy is central to understanding Business Policy and
Strategic Management. The term ÄStrategy is derived from the Greek word ÄStrategos
which means generalship. The term Strategy means the art of the managing or adopting a
course of action. A course of action may be:
- To take advantage of opportunities
- To devise ways to counter threats etc.



%

D@4/;³A Strategy is the determination
of the basic 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.´

   
 D@=/; ³A Strategy is a unified,
comprehensive and integrated plan designed to assure that the basic objectives of the
enterprise are achieved.´ By combining the above definitions we understand that a
Strategy is a plan or course of action or a set of decision rules forming a pattern or
creating a common thread related to the organizations activities which are derived from
its policies, objectives and goals.

Apart from the three levels mentioned, many a times a strategy may be designed at higher
levels. Such strategies may be called the Societal Strategies. The strategies may be set at
levels lower than the functional level, which are called Operational Strategies. B
,( * '"  ' "  &" !'    '8! 0( *   **"8
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is the most significant concept in Business policy and Strategic Management. It guides
the functional and operational decisions by defining the broad course of action. For
example, for an old and very well established company, which had been the market
leader for several years, suddenly faces threat from the emergence of competitors has e.g.
Bajaj Scooters faced competition from LML scooters. A course of action may involve
strategies like expansion diversification, focus, turn around, stability or divestment
phases in the Strategic Management. Strategists are individuals or groups who are
primarily involved in the formulation, implementation and evaluation of strategy. For
different levels of managers and sometimes even outside experts are involved.

; ,' *," ,-The Board of Directors are the ultimate legal authority which is
elected by the owners of the organization. The board is responsible for providing
guidance and establishing the directives. There may be difference between the role
played by the Boards of different Organizations. 5 ,'"8"!'-To direct
Discuss matters of technology collaboration New product development Senior
management appointments Reviewing and screening executive decisions Setting and
accomplishing objectives Reviewing and evaluating organisational performance

5; *
9"8 **",-. A CEO may be designated as the Managing Director,
Executive Director, President or General Manager. He is chief Strategist and plays a
major role in decision-making. He is responsible for- Execution of functions of strategic
 importance Setting the mission, objectives & goals of the organization Organizational
leader, Organizer, Implementer, Coordinator and controller.

";
! *
,0,,-An Entrepreneur is the person who starts a new business and
has a high level of ³achievement-motivation´. Since the entrepreneurs are the initiators
and owners they provide a sense of direction to the organization and set objectives and
formulates strategies to achieve them. An entrepreneur usually play all strategic roles
simultaneously.

';  , +(- The Senior Management consists of managers at the highest
level of the managerial hierarchy. Managers at the senior level may serve the Board of
Directors on rotational basis, may be as a part of executive committees formed to deal
with new project. They look after: Modernization Technology up-gradation
Diversification & expansion Plan implementation & communication New product
development Assisting the board & the CEO in the formulation, implementation &
evaluation of strategy.

;  !- There may be Organizations, which do not have corporate planning
department because of small size, infrequent requirements, financial constraints etc. Such
organisations hire external consultants for strategic planning they may be. Individuals
Academicians Consultancy companies etc. They provide professional service by specially
trained & experienced persons to advise and assist managers & administrators to improve
their performance & effectiveness of their Organizations. E.g. A.F.Ferguson, McKinsey
& Co.

 "! -Thus there are various parties involved in the strategy Formulation, Implementation
& evaluation. Strategies give a direction to the company. They coordinate the efforts of all
functions & all levels towards a predetermined common organizational purpose. It facilitates an
optimum resource allocation & helps programming all organizational activities in advance.

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- Corporate level strategies are basically about
choice of direction that a firm adopts in order to achieve its objectives. These strategies guide
decision ± making related to allocating resources among the different businesses of a firm,
transferring resources from one set of business to others and managing & nurturing a portfolio of
businesses in such a way that the overall corporate objectives are achieved. There are different
types of grand strategies.




It is a strategy, which aims at an incremental improvement of its functional performance. It may
aim at marginally changing any one aspect of the business:- Customer segment Alternative
Technology Product mix etc. A stability strategy is adopted because It is less risky Environment
faced is relatively unstable. Expansion may not be suitable. There may be three types of stability
strategies.
;?  ."+,+#-
It involves a conclusions decision to do nothing new and to continue with the present
business.
5;, *,+#-
There may be a situation when the firm tries to sustain its profitability by reducing
investments, cutting costs, raising prices, increasing productivity etc.
5;? ,+#-
It is a strategy to give a pause to the blasting expansion strategy in the past or toe move
cautiously before moving into a new business aspect.
:
 


- Acts as a testing ground, before entering into a new venture
- Gives a period of rest if the company had been pursuing aggressive expansion.
- Suitable when any expansion may be threatening



<



This strategy aims at high growth by substantially broadening the scope of one or more of its
businesses. It aims at the improvement of its overall performance in business. 
 ;?
90 , +" ", -
It is also called as intensification, focus or specialization strategy. It involves
concentration of resources on one or more of a firm business so that it leads to expansion
5;?
90 , ++, -
Integration means combining activities related to present activity of a firm. It is an
expansion strategy which involves integrating to any business activity in the value chain
ahead or backwards existing business of an organization.

";?
90 , +'8,*" -

Diversification involves a substantial change in the business of the organization.
 ",8,*" :- When the new activity is related to existing business activity.

';?
90 , + 0, -.

it is a strategy which works on the possibility of mutual cooperation with competitors;
with the competition also going at the same time.
,+,-.
It is a strategy of two or more organisation in which one acquires the assets and
liabilities of the other in exchange of share or cash.

) 8,-.

It is a strategy where an attempt is made by one firm to acquire ownership or control over
another firm against the wishes of the latters management.

' 8,-.

It is a strategy where two or more companies combine to form a new company in order
to make use of the strengths of the partners to gain access to a new business. Eg. Maruti-
Suzuki.

,+"!!"-.

Two or more firms unite to pursue a set of agreed upon goals but remain independent
subsequent to the formation of the alliance.

;
90 , +, !6 -.

  are the types of expansion strategies that require firms to market their products
beyond the national market.





%
 

 Retrenchment strategy is followed when organisation aims
at a contraction of the scope of business. It may involve a total or partial withdrawal from an
existing business. A firm may adopt this strategy when faced with adverse external environment
eg. Shrinking market share, diminishing profitability, falling sales, emergence of substitute
products, adverse government policies, tougher competition, changing customer need &
preferences etc. It involves strategies like.

;? ,, ',+-

It means devising a strategy to reversing the trend, negatively affecting the organisation. The
strategy implemented internally focus on the ways and means of reversing the process of
decline.
5;? 8(-
It is a strategy which cuts-off the loss- making units or divisions, a product list or any of its
decline causing function etc. it involves a sale of a portion of business. It is adopted in case a
turn-around strategy is not successful.

";? F' -

It is a strategy adopted to abandon all its activities completely. It involves closing down a
firm and setting its assets. It is considered to be the last resort for any strategist as it involves
both loss to employees as well as to the organisation.
'8+ *
,"(,+#
-To move out of loss-making business.
-To meet threatening environment (Government/ competitor/ Substitutes/ Economy/
Customers needs & preferences).
-Supports profitable businesses by reallocation of resources.
-Saves managements efforts by cutting off unprofitable business.
'8+ *
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-May be used a short ±cut to putting hard work

- May divest a potentially profitable business.
 -May be the decline is temporary.





It is strategy adopted by an organization as a mixture of Stability, Expansion & Retrenchment
either at the same time in its different businesses or at different times in the same business with
the aim of improving its performance. In practice it is very difficult to find any organization that
has run its business on a single strategy.

Big organization facing complex environment cannot run a single strategy. An organization has
different business. Each business lies in different industry requiring a different response.

 -. Thus, the above discussion shows that there exists various strategic
alternatives before a strategist. Depending on the
- Type and nature of business
- Growth & future of business
- Nature and number of competitors
- External environmental variables
- Overall philosophy of the top-management
- Internal strengths & weaknesses etc; a given strategy or a combination is adopted

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=? The number of firms in the industry

=? The level and pattern of Promotional expenditure.
=? The rate and nature of technological competition.
=? The relative size of firm.
=? Consumer preferences for the product and for related products.
 =? The rate of demand growth. The extent of demand growth.
=? The price behavior of the leading firm.

;? , *
,# i) The economies of scale ii) Brand identification iii) Govt.
Limitations (License requirement)
;? ; &,*!#,-.When buyer can force down prices.
;? ; &,*!00!,-When Suppliers can force buyers to pay higher prices
8;? 8; 5 , '"-. By placing a ceiling on the price it can change to
substitute products or services and limit the potential of an industry.
8;? :;' ")#+* ,  -.The strongest forces which influence the profitability of
a firm become the determining factors in strategy formulation. *! *
',#!#-.
',#,"8
 (08  
The minimum efficient scale of production. Buyers switching costs.

',# ,"8-. a) Growth potential b) Profitability of the industry c) Relative

abilities of players.  (08   -. Where does the firm stand in comparison to others
ina particular Industry.  


1. " ,-.Size of Industry Product offering Volume

2. ',#
8, (-. Fragmented Industry Emerging Industry Nature of Industry

Declining Industry Global Industry

3. ',# ,",- Market Size Number of players Shares of players Nature of

competitions.

4. ',#,"8-.Profit Potential Growth Prospects. Barriers in industry entry

5. ',#0,* ,("-.Production Sales Profitability

6. ',# ,""-. Product Policy Pricing Strategies Promotion Policy Distribution Policy
etc.
]. ,", -.Change in consumer Preferences Product innovations Entry or exit of firms
in a market. Rate of growth etc.

For any strategist to plan for a policy for future requires a complete internal as well as external
analysis. In the external environmental analysis special effort is put on Industry Analysis. The
analysis of the Industry includes the overall variables of the industry includes the overall
variables of the industry incorporating its size, nature, performance, attractiveness, relative
market share etc. by analysing the industry, a Strategist can very well evaluate whether it should
enter into a given business with investments or refrain from going ahead.

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Ans. Definition:- Competitive Advantage ± a situation in which there is a match between the
distinctive competencies of a firm and the factors critical for success within its industry that
permits the firm to out per form competitors. Competitive Advantage profiles a statement
showing competitive position of an organization in the market place. It is also known as Strategic
Advantage. Dynamics of National Competitive Advantage:- National Competitive Advantage:-
Competitive advantage to a country in relation to other countries. Like each organization, each
country is known in terms of its competitive advantage. For ex.:- USA of computers, credit
cards, Japan for electronic & automobiles, Germany for printing Presses, Switzer land for
pharmaceuticals and India for software professionals. The question is what factors have
contributed to generate advantage to these countries in specific areas? The answer of this
question is important for the purpose of generating competitive advantage at the global level.
According to M.Parter have categories various national attributes in four groups.

1. Factor Condition: Factor that provide base for undertaking various business activities.
These resources can be dividing into five broad categories-human resources, knowledge
resource, physic resource, capital resource & infrastructure.

2.? Demand Condition: The nature of demand conditions for an organization¶s or industry¶s
product services in the country is important because it determines the rate of and nature
 of improvement & innovation by the organizations. These factors either train
organizations for world-class competitive or fail to adequately prepare them to competent
in the global market place

3.? Related & supporting Industries: Apart from the main industry in which context
competitive advantage is talked about, the conditions of related & supporting industries
also determine industry¶s competitive advantage. However the Long run , the relationship
between main industry & related & supporting industries becomes reciprocal. For ex.:- If
the main Industry is developed, the relate industries will also develop with a time lag. In
the same way, the related industries will provide support to the further development of
the main industry.

4. Firm strategy, structure & Rivalry: Differences in strategy, structure & rivalry create
advantages or disadvantages to firms. Competing in different types of industries in a
nation. The aggregate of these determines national competitive advantage. The way
different firms shape their strategy- ranging from a broad outlook and long-term
profitability to narrow range and short term profitability-determine how the nation will be
competitive. For ex.:- US companies rank return on investment, share price increase, &
market share in that order.

Approaches for Competitive Advantage:

These approaches are as follows:-
1. Generic competitive strategy
2. STRATEGIC intent
3. Bench Marketing
4. Synergistic approach
5. Critical success factors approach.
1.? Generic competitive strategy:- A basic strategy based on the principle that the
achievement of competitive advantage is at the case of superior market strategy.

a) Overall coat leadership:- an organizations position as the Industrys least cost

producer in broadly defined markets or a wide mix of products.
(b) Cost Focus:- a situation in which an organisation focus on a narrow market
segment & offers product at the lower price than its competitors based on cost
advantage.
(c) Differentiation:- is the act of designing a set of meaning full differences of
distinguish the organisations offerings from competitors offerings
(d) Focused Differentiation:- differentiation of activities to generate competitive
advantage in a narrowly defined market/ coustmor segment.
II. Strategic Intent:- ambitions and obsession for winning which are used a means for
generating competitive advantage. According to Hamel & Prahalad:-
(a) Building layers of advantage
(b) Searching for loose bricks
(c) Changing the rules for engagement
(d) Collaborating

III. Bench marking: - It is another tool which can be used to generate competitive
advantage. It is a process of identifying, understanding, and adapting outstanding
practices from within the same organization or from other business to help improve
performance. Types of Benchmarking:-
1. Product Benchmarking
2. Competitive bench marking
3. Process bench marking
4. Strategic benchmarking
5. Global benchmarking.
 IV. Synergic Approach:- can be used as a means do generating competitive advantage
to an organization if the managers are sufficiently aware about how synergistic effect is
developed. Synergy is the process of putting two or more elements together to achieve a
sum total greater than the sum total of individual elements separately. This effect is
described as 2+2=5 effect. Areas of synergistic effect:-
- Production synergy
- Marketing synergy
- Research development synergy
- Financial synergy
- General management synergy

V. Critical Success factors Approach:- characteristics, conditions or variables which

when sustained can have significant impact on the success of an organization
competing in a particular industry.
Organizational Critical success factors:-
Mckinsey ]s framework: - Strategy, Structure, systems, staffs, skills, style, shared
values
Types of competitive Advantage:-
1. Volume: - volume of competitive advantage exists when organization has very few
advantages but these are quite large in volume.
For ex.:- In luxury car segment, product differentiation in terms of style, comfort,
design etc. is used for generating competitive advantage and cost becomes secondary.
2. Specialized:- specialized competitive advantage exists when an organization has the
opportunity to adopt many approaches together to generate competitive advantage.

For ex.:- Organizations manufacturing specialized machinery for selected market-

segment can combine both approaches-low cost & product different ion- to be
competitive.
 3. Stalemated: - Competitive advantage exists when an organization operates in an
industry in which meaningful product, differentiation is not possible & industry¶s cost
structure is quite rigid.
For ex.:- sugar industry, product differentiation does not exist.
4. Fragmented: - competitive advantage exists an organization has many opportunities but
each opportunity has limited payoff.
5. for ex. Restaurants.


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 Stakeholders and Strategic Management:

Stakeholders are the individuals and groups who can affect and are affected by, the
strategic outcomes achieved and who have enforceable claims on a firm¶s performance.

±? Stakeholders can support the effective strategic management of an organization.

±? They could also withhold participation essential for effective strategic

management of an organization

Stakeholders¶ Relationship Management

The Organization-Stakeholder Relationship

Stakeholder Analysis:

±? All stakeholders are not equally important to an organization in terms of their

power to influence strategy formulation, their interest in the affairs of the
organization and the legitimacy they hold to affect the organization.

Stakeholder analysis follows the step below:

±? Identify the stakeholders

±? Identify the stakeholders¶ expectations, interests and concerns

±? Identify the claims stakeholders are likely to make on the organization

±? Identify the stakeholders who are most important from the organization¶s
perspective

±? Identify the strategic challenges involved in managing the stakeholder

relationship.

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Functional plans and policies:

 ±? For effective implementation, strategists have to provide direction to functional
managers regarding to plans and policies to adopted.

±? In fact, the effectiveness of strategic management depends critically on the

manner in which strategies are implemented.

Nature of functional plans and policies:

‡? In term of the levels of strategy formulation, functional strategies operate below the SBU
or Business level strategies. Within functional strategies there might be several sub-
functional areas.

‡? within the textile division, there might be functional areas such as marketing, production,
research and development, etc.

‡? Functional mangers need guidance from the business strategy in order to make decisions.

Need for Functional Plans and Policies:

‡? The strategic decisions are implemented by all parts of an organization.

‡? There is a basis available for controlling activities in the different functional areas of
business.

‡? The time spent by functional managers in decision-making is reduced as plans lay down
what is to be done and policies provide the discretionary framework within which decisions
need to be taken.

‡? Similar situations occurring in different functional areas are handled in a consistent

manner by the functional managers.

‡? Coordination across the different functions takes place where necessary.

Development of functional Plans and Policies:

Financial plans and Policies:

 The financial plans and policies of an organization are related to the availability, usage
and management of funds. Strategists need to formulate plans and policies in these areas
so that strategies are implemented.

Source of Funds:

±? Plans and policies related to the sources of funds deal with financing or capital mix
decisions.

±? The major factors regarding which plans and policies have to be made are: Capital
structure, procurement of capital and working capital borrowing, reserve and surplus
as sources of funds, and relationship with lenders, banks and financing institutions.

Usage of Funds:

±? Plans and policies for the usage of funds deal with investment or asset-mix
decisions.

±? The important factors regarding which plans and policies are to be made are:
dividend decisions and relationship with stakeholders.

Management of Funds:

±? It basically deals with decisions related to the systemic aspects of financial

management. The major factors regarding which plans and policies related to the
management of funds have to be made are: systems of finance, accounting, and
budgeting, management control system, cash credit and risk management cost
control and reduction and tax planning and advantages.

Marketing plans and policies:

‡? Product:

‡? Pricing:

‡? Place:

‡? Promotion:
Operations plans and policies:

‡? Production system:

‡? Operations planning and Control:

‡? Research and Development:

Personnel plans and Policies:

Personnel System:

±? Plans and policies related to the personnel system deal with factors like
manpower planning, selection, development, compensation,
communication, and appraisal.

±? The importance of such plans and policies lies in the role that personnel
system play in providing and maintaining human resources.

Organizational and employee characteristics:

±? Organizational and employee characteristics include factors such as the

corporate image, quality of managers, staff and workers, perception about
and image of the organization as an employer, availability of development
opportunities for employees, working conditions, etc.

Industrial Relations:

±? Union-management relationship, collective bargaining, safety, welfare and

security, employee satisfaction and morale etc.

±? Industrial relations assume a special significance in an environment where

there are several factors such as a pro-labour attitude of government, rules
and regulations related to unions Integration of Functional plans and
policies:

±? Functional tasks are derived from the key activities that have to be
performed for the implementation of a strategy. The functional areas in
 any organization are, therefore, based on the segregation of the key
activities.

±? Consideration in Integration:

±? Need for internal consistency.

±? Relevance to development of organizational capability.

±? Making trade-off decisions

±? Determination of intensity of linkages.

±? Timing of implementation of plans and policies.

±? and workers,

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. An Overview of Strategic Evaluation and Control:

‡? Strategic evaluation and control constitutes the final phase of strategic management.

‡? Strategic evaluation operates at two levels: strategic and operations.

±? At the strategic level, we are concerned more with the consistency of strategy
with the environment.

±? At the operational level, the effort is directed at assessing how well the
organization is pursuing a given strategy.

Nature of Strategic Evaluation and Control:

The purpose of strategic evaluation is to evaluate the effectiveness of a strategy in

achieving organizational objectives.
 ³ strategic evaluation and control could be defined as the process of determining the
effectiveness of a given strategy in achieving the organizational objective and taking corrective
action wherever required.´

Importance of Strategic Evaluation:

±? Need for feedback, appraisal and Reward.

±? Check on the validity of strategic choice.

±? Congruence between decisions and intended strategy.

±? Successful culmination of the strategic management process. Creating inputs for

new strategic planning.

Participants in strategic management:

M? the board of directors

M? chief executives

M? financial controller.

M? audit and executive committees.

M? middle ±level managers.

Barriers in Evaluation:

š? Limits of Control.

š? Difficulties in management.

š? Resistance to Evaluation.

š? Short-termism.

š? Relying on Efficiency Versus Effectiveness.

Requirement for Effective Evaluation:

 1.? Control should involve only the minimum amount of information.

2.? Control should monitor only managerial activities and results .

3.? Controls should be timely.

4.? Long-term and short-term controls should be used.

5.? Controls should aim at pinpointing exceptions.

6.? Reward of meeting or exceeding standards should be emphasized.

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 Strategic Control: Strategic controls take into account the changing assumptions that
determine a strategy, continually evaluate the strategy as it is being implemented and take
the necessary steps to adjust the strategy to the new requirements.

The four basic types of strategic controls are:

1.? Premise control

2.? Implementation control.

3.? Strategic surveillance

4.? Special alert control.

Premise control:

Premise control is necessary to identify the key assumptions and keep track of any
change in them so as to assess their impact on strategy and its implementation.

For example, a company may base its strategy on important assumptions related
to environment factors (Favorable government policies), industrial factors
(changing nature of competition) and organizational factors (expected
breakthrough in R&D).
 ´? Premise control serves the purpose of continually testing the assumptions to find
out whether they are still valid or not.

´? This enables the strategists to take corrective action at the right time rather than
continuing with a strategy based on erroneous assumptions.

Implementation Control:

´? Implementation control is aimed at evaluating whether the plans, programmes and

projects are actually guiding the organization towards its predetermined objectives or
not. if, at any time,

´? it is felt that the commitment of resources to a plan, programme or project would not
benefit the organization as envisaged, they have to revised.

Strategic surveillance:

´? The premise and implementation types of strategic controls are specific in nature.

´? Strategic surveillance, on the other hand, is aimed at a more generalized and

overarching control µdesigned to monitor a broad range of events inside and outside
the company that are likely to threaten the course of a firm¶s strategy.

Special alert control:

‡? The last of the strategic control systems is the special alert control, which is based on
a trigger mechanism for rapid response and immediate reassessment of strategy in the
light of sudden and unexpected events.

‡? Special alert control can be exercised through the formulation of contingency

strategies and assigning the responsibility of handling unforeseen events to crisis
management teams.

Operational Control:

Operational control is aimed at allocation and use of organizational resources

through evaluation of the performance of organizational units such as divisions,
 SBUs, etc, to assess their contribution to the achievement of organizational
objectives.

Process of evaluation:

±? Setting standards of performance.

±? Measurement of performance.

±? Analyzing variances.

±? Taking corrective action.

±? The evaluation process for operational control



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. An Overview of Strategic Evaluation and Control:

‡? Strategic evaluation and control constitutes the final phase of strategic management.

‡? Strategic evaluation operates at two levels: strategic and operations.

±? At the strategic level, we are concerned more with the consistency of strategy
with the environment.

±? At the operational level, the effort is directed at assessing how well the
organization is pursuing a given strategy.

Nature of Strategic Evaluation and Control:

The purpose of strategic evaluation is to evaluate the effectiveness of a strategy in

achieving organizational objectives.

³ strategic evaluation and control could be defined as the process of determining the
effectiveness of a given strategy in achieving the organizational objective and taking corrective
action wherever required.´

Importance of Strategic Evaluation:

±? Need for feedback, appraisal and Reward.

±? Check on the validity of strategic choice.

 ±? Congruence between decisions and intended strategy.

±? Successful culmination of the strategic management process. Creating inputs for

new strategic planning.

Participants in strategic management:

M? the board of directors

M? chief executives

M? financial controller.

M? audit and executive committees.

M? middle ±level managers.

Barriers in Evaluation:

š? Limits of Control.

š? Difficulties in management.

š? Resistance to Evaluation.

š? Short-termism.

š? Relying on Efficiency Versus Effectiveness.

Requirement for Effective Evaluation:

].? Control should involve only the minimum amount of information.

V.? Control should monitor only managerial activities and results .

9.? Controls should be timely.

10.?Long-term and short-term controls should be used.

11.?Controls should aim at pinpointing exceptions.

12.?Reward of meeting or exceeding standards should be emphasized.