Business Environment

Chapter III
Strategic Management for Business
Aim
The aim of this chapter is to:

introduce the concept of strategic management

explain the need for strategic management

explain the concept of strategy formulation

Objectives
The objectives of this chapter are to:

enlist limitations of strategic management

explain strategic management process

elucidate the benefits of strategic management

Learning outcome
At the end of this chapter, you will be able to:

define strategic management

understand the benefits and limitations of strategic management

describe environmental scanning

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3.1 Introduction
Strategic management is the process of specifying an organisations objective, developing policies and plans to
achieve these objectives, and allocating resources so as to implement the plans. It is the highest level of managerial
activity, usually performed by the companys Chief Executive Officer (CEO) and executive team. It provides overall
direction to the whole enterprise. An organisations strategy must be appropriate for its resources, circumstances
and objectives. The process involves matching companies strategy advantages to the business environment. One
objective of an overall corporate is to put the organisation into a position to carry out its mission effectively and
efficiently. A good corporate strategy should integrate an organisations goals, policies and action sequences into
a cohesive whole.

3.2 Need for Strategic Management

A companys strategy provides a central purpose and direction to the activities of organisation. Company must
employ strategies to accomplish its basic objectives. These strategies must be clearly communicated to the people
working in the organisation. Need for strategic management is felt for the following reasons.
3.2.1 Due to Change
Organisation exists within external environment. Changes will keep happening in the external environment. Changes
make planning difficult. Strategic management helps the top executives to forecast changes well in advance and to
take advantage of the opportunities and reduce the risk.
3.2.2 Provides Guidelines
Strategic decision is the basis for the formulation of sub strategies. Operational strategies are formulated based on
the strategic decisions. Strategic decision provides a framework within which all supporting decisions should be
formulated.
3.2.3 Better Performance
Better performance is always related to formulation of better strategies and policies. Therefore, it is true that business
which plan strategically have a higher probability of success than those which do not.
3.2.4 Improved Allocation of Resources
Strategic management helps in better resource allocation of an organisation. Strategic management matches activities
with the available resources. Reallocation of resources will take place whenever there is a change in the strategy
due to change in the environment in which the organisation operates.
3.2.5 Competitive Advantage
Strategic management aims at gaining a sustainable competitive edge for the firm. Strategic management includes
the nature and extent of competition and exploits available opportunities. This certainly helps the organisation to
gain competitive edge over the competitors.
3.2.6 Provides Holistic Approach
Strategic management helps managers to understand the organisation completely. This helps managers to have
holistic approach towards business problems.
3.2.7 Improved Integration
Strategic management provides an integrated approach to the decision making process which provides a framework
for decision making. Strategic management formulates decision to cover all functional areas and different activities
intended to accomplish organisational goals.
3.2.8 Systematise Business Decisions
Strategic management exercises systematic and disciplined approach towards policy making. It relates to the
enterprise as a whole. Thus, strategic planning is a forward-looking exercise which determines the future directions
of the enterprise with special reference to its product-market, profitability, size, rate of innovation and external
institutions.
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3.3 Strategic Management Process

Strategic management decision involves four basic elements:

Environmental scanning

Strategy formulation

Strategy implementation

Evaluation and control

3.3.1 Environmental Scanning

Environmental Scanning is the monitoring, evaluating and disseminating of information from the external and internal
environment to the key people within the organisation. Purpose of it is to identify strategic factors. Strategic factors
here refer to those external and internal elements that will determine the future of the organisation. The simplest way
to conduct environmental scanning is through SWOT (Strength, Weakness, Opportunities and Threats) analysis.
Opportunities and threats are the elements of external environment over which organisation does not have any control.
Strength and weaknesse are the variables of the internal environment. These include available resources, culture,
organisational structure, etc. Based on the opportunities, organisation can use its available core competencies to gain
competitive advantage over its competitors. Proper blend of organisational resources certainly help the organisation
to exploit the opportunities and minimise the weaknesses.
3.3.2 Strategy Formulation
Development of long term plans for the effective management of environmental opportunities and threats, in the
light of corporate strengths and weakness is called strategy formulation. Strategy formulation includes defining
corporate mission, specifying objectives, developing strategies and setting policy guidelines.
Mission

An organisations mission is the purpose or reason for the organisations existence.

It tells what the company is providing to society - service or a product.

Mission statement clearly specifies the purpose of the organisation.

Mission statement describes what the organisation is now and what it would like to become.

Therefore, mission of business provides a statement to insiders and outsiders of what the company stands for.

Objectives

Objectives are formulated to accomplish organisation mission.

Objectives can be defined as the long term results that an organisation seeks to achieve in pursuing its basic
mission.

Objectives should not be static, they should be dynamic. That is, changes in the environment or the changes in
the organisational strengths and weakness may call for modification to objectives.

Objectives are operational definitions of the organisations goals.

They provide measurable parameters for evaluating the performance of the organisation.

Importance of objectives

Objectives indicate the purpose and aims and thereby the social justification for the existence of an
organisation.

Objectives provide directions for the functioning of an organisation.

Objectives help an organisation to adjust itself to the existing environment.

Objectives help in attaining employees co-ordination and thereby reduce conflicts.

By making clear what the result should be, objectives provide the basis for control and assessment of organisational
performance.

Objectives help decentralisation by assigning decision making to lower level personnel.

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Features of objectives

Objectives should be understandable Objectives should not be weak and ambiguous. They should be expressed
clearly. Also, this should be made clearly known to the people who work for their accomplishment.

Objectives should be related to the time frame Objectives must specify the time frame within which the stated
objectives must be achieved.

Objectives should be specific Objectives should state what exactly the company is trying to achieve within
a specified time.

Participation To the possible extent, formulation of objectives should involve in the participation of important
people responsible for the accomplishment of the objectives. The sense of participation will provide morale,
motivation and a moral responsibility for the achievement of the objectives.

Objectives must be realistic Objectives should be reasonable and realistic in the sense that they should be
achievable taking the existing environment into consideration.

Consistency Objectives should be mutually consistent throughout the organisation. If objectives are set
concentrating on one area disregarding other areas, it will lead to problems. Therefore, different objectives of
various functional areas should correlate with each other and they must be mutually supportive to accomplish
the overall objectives.

Measurability Objectives should be capable of being measured. To measure the performance of an objective
it should be clearly defined either in quantitative or qualitative terms.

Flexibility Objectives should not be very rigid. It must provide scope for flexibility. Changes in the environment
or changes in organisation strengths and weaknesses may call for modifications to the objectives.

Ranking An organisation with multiple objectives should assign relative priorities and indicate the time frame
within which these objectives must be attained.

Strategic intent
A strategic intent is a companys vision of what it wants to achieve in the long term. It must convey a significant
stretch for a company, a sense of direction, discovery, and opportunity that can be communicated as worthwhile to
all employees. It should not focus so much on todays problems, which are normally dealt with by company visions
and missions, but rather on tomorrows opportunities.
3.3.3 Strategy Implementation
Strategy implementation is the process by which strategy and policies are put into action through the development
programs, budgets and procedures.
Programs
A program is a statement of activities or steps needed to accomplish a single used plan. It takes the action oriented
strategy. It may involve restructuring the organisational change in the internal culture, etc.
Budgets
A budget is a statement of organisations programs in numeric terms. Budgets are expressed in financial terms.
Budget lists the detailed cost of each program. There may be different budgets like capital expenditure budget,
sales budget, cash budget, etc.
Procedures
Procedures are a system of sequential steps that describe in detail how a particular task is to be done. They are
stated in detail to avoid confusion and duplication. Procedures define step by step execution of different activities.
Hence, procedures can be defined as a series of related steps expressed in chronological order to achieve a specific
purpose.

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3.3.4 Evaluation and Control

Performance is the end result of activities. It includes the actual outcomes of strategic management process. The
performance of strategic management is justified in terms of its ability to improve an organisations performance,
typically measured in terms of profits and return on investment (ROI). For evaluation and control to be effective,
managers must obtain clear, prompt and unbiased information from the people below them in organisational hierarchy.
Using this information, managers compare the actual performance with the expected ones.
Evaluation and control is the process in which corporate activities and performance results are monitored with an
intention of comparing actual performance with desired performance. Managers at all levels use the information
collected to take corrective action. The evaluation and control function complete the strategic management model.
Based on performance result, management may need to make adjustments in its strategy formulation, implementation
or both.

3.4 Benefits of Strategic Management

Following are some of the benefits of strategic management.
3.4.1 Proactive Approach
Strategic management helps an organisation to be proactive rather than reactive. Strategic management evaluates
opportunities and threats outside the organisation and prepare the organisation to face the future well in advance.
Strategic management helps in formulating machine and make objectives clear.
3.4.2 Facilitates Better Delegation
Strategic management helps in better delegation and co-ordination.
Executives working at the lower levels can formulate their respective functions and operational strategies within
the board framework of the organisational strategy.
3.4.3 Exploiting Opportunities
Strategic management helps a company to adopt suitable strategies for exploiting opportunities and fight threats.
It will also help the company to drop those businesses which are not successful or which do not meet their
objectives.
3.4.4 Assists in Realistic and Effective Plans
Strategic management will help the company to have constant watch on the environment to identify changes and to
modify the strategy when required. Based on these modifications executives are allowed to formulate their policies
to suit the modified corporate strategy. This leads to formulations of realistic and effective plans.
3.4.5 To Gain Competitive Advantage
Strategic management enables a company to meet competitions more effectively. Careful understanding of changes
in the external environment including completion helps the policy makers to frame policies to explore and exploit
opportunities for the organisational benefit. Quick adaptation to the changing environment helps the company to
gain competitive edge over competitors
3.4.6 Minimises Weaknesses
Every organisation will have both strengths and weaknesses. Prudent strategy maker converts these weaknesses
into strength reinforcing appropriate strategies. Earlier identification of weakness helps an organisation to reduce
it through proper measures.
3.4.7 Promotes Employees Participation
Top level management formulates overall objective and develops corporate strategy based on the objectives to be
accomplished. Operational functional policies are formulated by the executives working at the bottom line. This in
turn helps in employee participation to a greater extent.
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3.4.8 Boost Profits

Number of research studies has suggested that a well designed strategic management can boost profits. Strategic
management helps in identifying, evaluating and adopting best course of action from out of the alternatives available.
This careful selection helps the company to go for improved action which would really improve the profitability
of the organisation.
3.4.9 Systematic Approach for Management Decision
Well designed strategic management adopts system approach to problem solving. It concentrates on all functional
areas of the organisation. It establishes co-ordination and integration between these functional areas. Strategic
management designs appropriate authority and responsibility for each functional area. This leads to systematic
allocation of organisational resources based on priority and urgency.
3.4.10 Empowerment of Employees
Strategic management helps the organisation to achieve commitment from all the members of the organisation.
This commitment helps managers and employees to become more creative and innovative. This process results in
employee empowerment which in turn increases organisational effectiveness.

3.5 Limitations of Strategic Management

Strategic management is not free from limitations. Strategic management has many advantages. Many firms fail despite
adopting strategic management and many firms which do not have strategic management are successful. In short,
strategic management by itself does not ensure success. Following are the limitations of strategic management:

Strategic management decisions are based on certain assumptions. If these assumptions are not valid, the plans
based on them would not be realistic.

Strategic management is a means to achieve organisational mission or objectives. If mission or objectives are
unrealistic, strategy formulated based on these objectives will also turn out to be unrealistic.

Sometimes it argues that strategic management makes an organisation over-ambitious. This over-ambitiousness
leads to organisational failure.

Strategic management uses SWOT analysis as a powerful tool for making suitable strategies. If this SWOT
analysis is not right, strategy formulated to address the opportunities and kill threats is a failure.

Strategic management decisions are based on environmental factors. Company do not have any control over
external environment. Sudden changes call for alteration of strategies formulated earlier. Frequent changes in
strategy reduce confidence of employees.

Success of strategic management is dependent not only on the strategy formulation but also on affective
implementation. If implementation is not effective, even an excellent strategy would not produce excellent
result. Many strategies fall at implementation phase.

It is also argued that strategic management is a costly exercise. An elaborate exercise is needed to identify
opportunities, understand weaknesses and threats. This also calls for analysis and implementation of best course
of alternative.

Strategic planning is a complex and difficult task. It requires people with vision, commitment and expertise.
For the proper implementation, appropriate system must also exist.

As mentioned earlier, strategic management provides for flexibility. It means that strategies will be reviewed
and modified based on the change in the environment. People may resist adopting these changes frequently.

3.6 Strategies and their Role in Strategic Management

Following are the strategies and their role in strategic management:

Strategy is determination of basic long-term goals and objectives of an enterprise and the adoption of courses
of action and the allocation of resources for carrying out these goals.

The success of strategy mainly depends on the skill, experience and analytical observations of the executive
who is supposed to create and implement it.
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Executive in charge of strategy must know the principles of management, effect of business cycles and internal
working condition.

In addition, (s)he must also know government policy and existing competition.

The executive cannot ignore human aspects in organisation.

Corporate strategy can be made successful if all these factors are incorporated in it.

3.7 Role of Strategy in Strategic Management

Following are some roles of strategy in strategic management.
3.7.1 Deliberate Attempt to Counteract Actions of Opponents
Strategies are deliberate attempts made by the management to win over its competitors. Strategies are formulated after
carefully evaluating external environment including competition. External opportunities and threats are effectively
addressed using internal strengths and resources.
3.7.2 Emergence of Tactful Decision
Strategies are determined sufficiently in advance having considered companys policies and objectives so that tactful
decisions and actions can be taken to accomplish them. Strategies help an organisation to prepare them in advance
to face possible future happenings. Strategies help an organisation to prepare them in advance to face possible
future happenings.
3.7.3 Creates System Approach
Strategy is formulated on the basis of system approach. System approach is the overall planning of corporate
enterprise concerned with configuring and directing the resource-conversion process. In this system, the interest and
purpose of the total enterprise is given importance over departmental claims in determining objectives, priorities
and resource allocation.
3.7.4 Helps in Formulating General Policies
Strategy of an organisation is the basis for the formulation of all other policies. In order to translate strategic plans
into action operating plans are formulated. Strategy gives framework within which other plans can be formulated.
3.7.5 Provides Integrated Approach
Corporate strategy takes into consideration all functional areas needed to accomplish basic objectives of the
organisation. Therefore, it provides a mechanism for the interrelated parts to be co-ordinated. It supplies an integrated
framework within which each of the functional plans and divisional are integrated and all are tied together into
overall plans of the organisation.
3.7.6 Minimises Risk
Strategies act as powerful tool in the hands of top management. They reduce business risk and insecurity that are
expected on account of complexity of business operations and other social and political contingencies.
3.7.7 Optimum Use of Organisational Resources
Strategy helps in structuring the companys human resources for maximum potential performance. The plan lists
specific decisions pertaining to structuring of authority and responsibility relationships, workflows, information
flows and flow of other resources.
3.7.8 Continues Review
Strategy formulation is a continuous dynamic process. Strategy is reviewed and modified or reframed to suit the
changed environment. Strategies should be modified and implemented at right time to extract available opportunities
to the maximum.

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3.8 Reasons behind Failure of Strategic Management

Following are the resaons for failure of strategic management:

Strategy is concerned with future course of action and the future being uncertain due to various reasons, definite
strategy cannot be determined. It is likely to be erroneous if adopted. Hence, it leads to failure of strategic
management.

Business cycles, government rules, competitors role, etc, make strategy planners weak and force them to change
strategy very often. Frequent changes indicate poor planning and then the management loses faith in strategy
programme.

Risk involved in the implementation of a strategy is more since strategy involves long-range planning which is
subject to greater degree of uncertainty. As a result of it, strategy is likely to be erroneous.

Success of strategy depends on the joint efforts and co-operation of people in the organisation and in practice,
it is seldom expected and therefore, there are more unforeseen impediments in the successful implementation
of the strategy.

Conflicts between managers goals and the company goals may be an additional impediment. Because of
such conflict, the manager is likely to use his/her own strategy which may defeat the overall strategy of the
company.

Management is generally reluctant either to drop or modify the predetermined strategy for achieving the benefits
of market opportunities. Management, therefore, depends on short-term benefits, which could have been a
change in the established strategy.

To communicate, a strategy requires as much trouble and time as to conceive it.

Under changing circumstances, strategy becomes obsolete unless it is suitably modified.

Process of Strategic Management
Analysing
Current
Situation
Situation
Analysis

Feedback
Deciding on
Strategies
Strategy
Formulation

Strategy
Implementation

Strategic
Intent

External/ Internal
Analysis
Corporate
strategic
intent

Putting Strategies
in Action

Management
Issues

Evaluating
Changing
Strategies
Evaluation
and Control

Organisation
Issues

Business

Competitive
Strategy

Functional
Issues

Fig. 3.1 Process of strategic management

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Summary

Strategic management is the process of specifying an organisations objective, developing policies and plans to
achieve these objectives, and allocating resources so as to implement the plans.

Strategic management helps the top executives to forecast changes well in advance and to take advantage of
the opportunities and reduce the risk.

Strategy formulation includes defining corporate mission, specifying objectives, developing strategies and
setting policy guidelines.

A strategic intent is a companys vision of what it wants to achieve in the long term.

A budget is a statement of organisations programs in numeric terms. Budgets are expressed in financial
terms.

The performance of strategic management is justified in terms of its ability to improve an organisations
performance, typically measured in terms of profits and return on investment (ROI).

Top level management formulates overall objective and develops corporate strategy based on the objectives to
be accomplished.

Success of strategic management is dependent not only on the strategy formulation but also on affective
implementation.

Executive in charge of strategy must know the principles of management, effect of business cycles and internal
working condition.

Risk involved in the implementation of a strategy is more since strategy involves long-range planning which is
subject to greater degree of uncertainty.

Success of strategy depends on the joint efforts and co-operation of people in the organisation and in practice,
it is seldom expected and therefore, there are more unforeseen impediments in the successful implementation
of the strategy.

References

Harrison, J. S., 2009. Foundation in Strategic Management. 5th ed., South-Western College Pub.

Hunger, J. D., 2006 Essentials of Strategic Management. 4th ed., Prentice Hall.

THE STRATEGIC MANAGEMENT PROCESS, [Pdf] Available at: <http://www.romans-group.com/pdfs/crafting.

pdf>[Accessed 14 May 2013].

The Strategic Management Process, [Pdf] Available at: <http://sbaer.uca.edu/publications/strategic_management/

pdf/04.pdf>[Accessed 14 May 2013].

2012, Introduction to Strategic Management [Video online]Available at: <http://www.youtube.com/

watch?v=rJ2tmqRkiCM> [Accessed 14 May 2013].

2008. Strategic Management, 2012. [Video online]Available at: <http://www.youtube.com/

watch?v=5b6QacnMFsw> [Accessed 14 May 2013].

Recommended Reading

Hoskisson, R. E., 2006. Strategic Management Concepts. 7th ed.,South-Western College Pub.

Greer, C. R., 2000. Strategic Human Resource Management: A General Managerial Approach. 2nd ed., Prentice
Hall.

Thompson, J. L., 1997. Strategic Management: Awareness and Change. 2nd ed., International Thompson
Business Press, London.

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Self Assessment
1. Which of the following statements is false?
a. A companys strategy provides a central purpose and direction to the activities of organisation.
b. Strategic management including the nature and extent of competition and exploits available opportunities.
c. Strategic management exercises systematic and disciplined approach towards policy making.
d. Strategic formulation exercises systematic and disciplined approach towards policy making.
2. What are expresses in financial terms?
a. Budgets
b. Profits
c. Loses
d. Strategies
3. Strategic management helps the _________ to forecast changes well in advance and to take advantage of the
opportunities and reduce the risk.
a. middle level management
b. first line management
c. top executives
d. CEO
4. Which of the following statements is false?
a. The simplest way to conduct environmental scanning is through SWOT analysis.
b. Opportunities and threats are the elements of external environment over which organisation does not have
any control.
c. Strength and weaknesses are the variables of the external environment.
d. Strength and weaknesses are the variables of the internal environment.
5. _______ statement clearly specifies the purpose of the organisation.
a. Strategic
b. Mission
c. Vision
d. Management
6. ________ are operational definitions of the organisations goals.
a. Strategic statement
b. Strategic intent
c. Objectives
d. Mission statement

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7. Which of the following statements is true?

a. Strategic statement should not focus so much on todays problems, which are normally dealt with by company
visions and missions, but rather on tomorrows opportunities.
b. Strategic panning should not focus so much on todays problems, which are normally dealt with by company
visions and missions, but rather on tomorrows opportunities.
c. Strategic intent should focus so much on todays problems, which are normally dealt with by company
visions and missions, but rather on tomorrows opportunities.
d. Strategic intent should not focus so much on todays problems, which are normally dealt with by company
visions and missions, but rather on tomorrows opportunities.
8. What involve restructuring the organisation change in the internal culture?
a. Programs
b. Procedures
c. Budgets
d. Profits
9. _________ helps a company to adopt suitable strategies for exploiting opportunities and fight threats.
a. Strategic formulation
b. Strategic planning
c. Strategic management
d. Strategic intent
10. _________ is a continuous dynamic process.
a. Strategic planning
b. Strategy formulation
c. Strategic management
d. Strategic intent

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Chapter IV
Corporate Strategy
Aim
The aim of this chapter is to:

introduce the concept of corporate strategy

explain corporate planning

elucidate the essentials of corporate planning

Objectives
The objectives of this chapter are to:

explain various corporate strategies

explicate the concept of corporate policy and its features

explain the steps in formulation of policy

Learning outcome
At the end of this chapter, you will be able to:

identify factors leading to the need for corporate management

describe various types of corporate policy

understand corporate strategy

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4.1 Introduction
Corporate management is a broad phenomenon and covers a wide spectrum of activities. It is the direction an
organisation takes with the objective of achieving business success in the long term. Recent approaches have focused
on the need for companies to adapt to and anticipate changes in the business environment, i.e., a flexible strategy.
The development of a corporate strategy involves establishing the purpose and scope of the organisations activities
and the nature of the business it is in, taking the environment in which it operates, its position in the marketplace,
and the competition it faces into consideration; mostly analysed through a SWOT analysis.

4.2 Corporate Strategy

Corporate strategy is related mostly to external environment. Corporate strategy is formulated at the higher level of
management. At operational level, operational strategies are also formulated. It requires systems and norms for its
efficient adoption in any organisation. Corporate strategy is concerned with a unified direction and efficient allocation
of organisational resources and encompasses the entire management process. It is also concerned with the choice
of alternatives, determination of future course of action, mobilisation of resources and deployment of resources for
attainment of goals. It is both short term and long term. It is related to all levels of management. Strategic issues,
however, are related to top management. Corporate strategy is concerned with coping uncertain future with active
intervention. It is based on various types of plan namely, strategic plan, functional plan, operating plan, organisational
plan, etc. It is all pervasive and integrated.
4.2.1 Scope of Corporate Management
The term corporate management is an extension of the term corporate planning and also includes implementation
and control aspects. More specifically, the scope of corporate management is spread over different areas. They are
as follows:

Role of top management in corporate governance.

Code of conduct including audit committee, governance committee, etc.

Competitive scenario for dynamic and global markets.

Market structures and network externalities.

Strategic enablers like IT, R&D, knowledge and innovations, etc.

Corporate social responsibility including ethics, values and social audit.

Philanthropy as a strategic choice.

4.3 Corporate Planning

Corporate planning is a comprehensive planning process which involves continued formulation of objectives and
the guidance of affairs towards their attainment. It is undertaken by top management for the company as a whole
on a continuous basis. According to Hussey Corporate long range planning is not a technique, it is a complete way
of running a business. Corporate planning is a way of keeping the companys eye open. The object of corporate
planning is to identify new areas of investments and marketing. The purpose of corporate planning process is to
formulate the organisations mission. Objectives, goals, policies, programme strategies and major action plans to
achieve its objectives.
4.3.1 Essentials of Corporate Planning
Following are the essentials of corporate planning:

Corporate planning deals with the future of current decisions.

The process of corporate planning integrates strategic planning with short range operational plans.

A few authorities use comprehensive corporate planning, strategic planning, long range planning, formal planning,
corporate planning, etc, as synonymous to each other.

Corporate planning is viewed as an organisational process resulting in developing strategic intent and action
plans to achieve the objectives.

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4.3.2 Steps of Corporate Planning Process

Following are the steps of corporate planning process:

Formulation of strategic intent

Environmental appraisal

General of strategic alternatives

Evaluation of alternatives

Decisions in terms of strategy, policies and programmes

4.3.3 Benefits of Corporate Planning

Following are the benefits of corporate planning:

Corporate planning ensures a rational allocation of resources and improves co-ordination between various units
or divisions.

With corporate planning, significant improvement in performance is reflected.

A formal planning system can help the management in responding to a dynamic environment and in managing
a strategically complex organisation with limited resources.

With corporate planning, a sense of making a systematic and critical review of business is developed.

This develops a visionary approach. A habit of forward thinking is encouraged in forward planning.

4.3.4 Reasons Attributed to the Failure of Corporate Planning

Following are the reasons attributed to the failure of corporate planning:

Failure to keep the corporate planning system simple.

Failure to develop awareness about corporate planning process in the organisation.

A low status is given to a planner by the Chief Executive.

Failure to modify the corporate planning system with the charging conditions in the company.

Planner has only a part time interest in planning.

Insufficient time is provided in the corporate planning process.

4.3.5 Prerequisites for Success in Corporate Planning

Following are the prerequisites for success in corporate planning:

The chief executive must be totally committed and involved in the corporate planning process.

Participation of those executives who would be responsible for implementation must be ensured.

The process of corporate planning should be introduced on continuous basis to cope with ever changing
environmental factors.

The executives must understand that the real purpose of corporate planning is to provide direction to the
organisation.

4.4 Need for Corporate Management

Following points enlist the need of corporate management:

Scarcity of resources

Fast technological changes

Changing human values

Multiplicity of stake holders

Growing competition

Liberalisation, privatisation and globalisation

Growing scale of business operations

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Faster and quicker modes of transportation and communication

Professionalism in management

4.5 Components of Corporate Strategy

The major components of corporate strategy are purpose and objectives, vector, competitive advantage, synergy,
personal values and aspirations and social obligations.
4.5.1 Objectives
Corporate objectives should be stated in such a way that they may provide a clear idea about the scope the enterprises
business. Objectives give direction for which action plan is formulated. Objectives are open-ended attributes denoting
a future state. Objectives translate the purpose into goals. An objective should be:

with a timeframe

attainable

challenging

understandable

measurable and controllable

For having clarity in objectives, the business domain is defined specifically in terms of a product class, technology,
customer group, market need or some other combination.
4.5.2 Vector
Vector gives directions within an industry and across industry boundaries which the firm proposes to pursue. If an
organisation has the objective to maximum sales, the series of decisions will be to enhance salesmans commission,
release nationwide advertisement, introduce total quality management and introduce new product range. Vector
signifies that a series of decisions are taken in the same direction to accomplish the objectives.
4.5.3 Competitive Advantage
Corporate strategy is relative in nature. In the formulation of corporate strategy, the management should isolate
unique features of the organisation. The steps to be taken must be competitively superior. While making plans,
competitors may be ignored. However when we formulate corporate strategies, we cannot ignore competitors. If
an organisation does not look at competitive advantage, it cannot survive in a dynamic environment. This aspect
builds internal strength of the organisation and enhances the quality of corporate strategy.
4.5.4 Synergy
Synergy means measurement of the firms capability to take advantage of a new product market move. If decisions
are made in the same directions to accomplish the objectives there will be synergic impacts. The corporate strategy
will give the synergy benefit.

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4.6 Functions of Corporate Strategy

Following are the functions of corporate strategy:

It provides a dual approach to problem solving. Firstly, it exploits the most effective means to overcome
difficulties and face competition. Secondly, it assists in the deployment of scarce resources among critical
activities.

It focuses attention upon changes in the organisational set up, administration of organisational process affecting
behaviour and the development of effective leadership.

It offers a technique to manage changes. The management is totally prepared to anticipate, respond and influenced
to look at changes. It also offers a different way of thinking.

It furnishes the management with a perspective whereby, the latter gives equal importance to present and future
opportunities.

It provides the management with a mechanism to cope with highly complex environment characterised by
diversity of cultural, social, political and competitive forces.

4.7 Kinds of Corporate Strategy

There are four grand strategic alternatives. They are stability, expansion, retrenchment and any combination of these
three. These strategic alternatives are also called grand strategies.
4.7.1 Stability Strategy
It is adopted by an organisation when it attempts to improve functional performance. They are further classified as
follows:

No change strategy

Profit strategy

Pause/Proceed with caution strategy

4.7.2 Expansion Strategy

It is followed when an organisation aims at high growth. They operate through:

Concentration

Integration

Diversification

Co-operation

Internationalisation

4.7.3 Retrenchment Strategy

It is followed when an organisation aims at a contraction of its activities. It is done through turnaround, divestment
and liquidation in either of the following modes:

Compulsory winding up

Voluntary winding up

Winding up under supervision of the court

4.7.4 Combination Strategies

They are followed when an organisation adopts a combination of stability, expansion and retrenchment either at the
same time in different businesses or at different times in the same business.

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4.8 Significance of Corporate Strategy

Following points illustrates the significance of Corporate Strategy:

Corporate strategy rationalises allocation of scarce resources.

Corporate strategy motivates employees examples to shape their work in the context of shared corporate
goals.

Strategy assists management to meet unanticipated future changes.

Organisational effectiveness is ensured through implementing and evaluating the strategy.

Corporate strategy is a powerful tool for the management to deal with the future which is uncertain and hazy
in all respects.

Corporate strategy improves the capability of management in coping with the volatile external environmental
forces.

Corporate strategy encourages the management to choose the best course of action to realise the objectives.

Strategy planning system provides an objective basis for measuring performance.

4.9 Limitations of Corporate Strategy

Following are the limitations of Corporate Strategy:

The process of strategy formulation is not an easy task. The process of forming corporate strategy is complex,
cumbersome and complicated.

Corporate strategies are useful for long range problems. They are not effective to overcome current
exigencies.

The corporate strategy formulation process calls for considerable time, money and effort. Developing appropriate
corporate strategy is not a simple and economical proposition. For financially weak companies, cost becomes
a great hindrance.

As future is uncertain and cannot be predicted accurately, the strategic planning system based on hazy and
uncertain estimates is not exact.

Implementation of corporate strategy is influenced by organisational factors, behavioural factors and motivational
factors. The gap between formulation and implementation of corporate strategy does not give desired results
to the organisation.

4.10 Concept and Meaning of Corporate Policy

Corporate policy is the guide post to decision making. It helps in the managerial thinking process and thus leads to
the efficient and effective attainment of the objectives of any organisation. Corporate policy clarifies the intention of
management in dealing with various problems faced. It gives managers a transparent guideline to make appropriate
decisions. Corporate policy helps the manager to identify the solution to the problems. It provides the framework
in which the decisions are to be taken.
Following are the distinct views regarding policies categorised in three board groups:

The first category holds the opinion that policy and strategy are synonymous.

The second group of experts view that corporate policy is the process of implementing strategy.

The third view considers corporate policy to be decisions regarding the future of an organisation.

4.11 Features of Corporate Policy

Following are the features of corporate policy:

General statement of principles Policies are general statement of principles followed by corporate for the
attainment of organisational objectives. These principles provide a guide to action for the executives at different
levels.

Long term perspective Corporate policies have a long life and are formulated with a long term perspective.
They provide stability to the organisation.

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Achievement of objectives Corporate policy is aimed at the fulfilment of organisational objectives. They
provide a framework for action and thus help the executives to work towards the set goals.

Qualitative, conditional and general statement Corporate policy statements are qualitative in nature. They are
conditional and defined in general manner. These statements use words as to maintain, to follow, to provide,
etc. They can be specific at times but most of the times, a corporate policy tends to be general.

Guide for repetitive operations Corporate policies are formulated to act as a guide for repetitive day to day
operations. They are best as a guide for the activities that occur frequently or repeatedly.

Hierarchy Corporate policies have a hierarchy, i.e. for each set of objectives at each level of management
there is a set of policies. The top management determines the basic overall policy, then the divisional and / or
departmental policies are determined by the middle level management and lower level policies are more specific
and have a shorter time horizon than policies at higher levels.

Decision making process Corporate policy is a decision making process. In formulating corporate policy one
has to make choices and the choice is influenced by the interests and attitudes of managers engaged in making
the policies.

Mutual application Corporate policies are meant for mutual application by subordinates. They are made for
some specific situation and have to be applied by the members of the organisation.

Unified structure Corporate policies tend to provide predetermined issues and thus avoid repeated analysis.
They provide a unified structure to other types of plans and help managers in delegating authority and having
control over the activities.

Positive declaration Corporate policy is a positive declaration and a command to its followers. It acts as a
motivator for the people following it and thus they work towards the attainment of the objectives effectively.
The corporate policy lays down the values which dominate organisations actions.

4.12 Scope of Corporate Policy

Corporate policies are statements of guidelines for corporate thinking and action. They lay down the approach before
the management to deal with the challenges in the environment. They cover the following broad areas that affect
the decisions of the organisation.

Corporate policy consists of a variety of subject that affects various interest groups in the organisation and
outside it.

Corporate policy is concerned with the various functional areas like production, human resources, marketing
and finance.

We can understand corporate policy areas in two broad categories namely, major and minor policies.

The overall objectives, procedures and control are covered in major policies. These policies are concerned with
each and every aspect of the organisation, its structure, its financial status, its production stature, its human
resources and all those issues which require attention like mergers, research, expansion, etc. Basically, the top
management is involved in the framing of such major policies. Further, the operations and activities are also
carried out by executives so that the organisational objectives are met.

The minor policies are concerned with each segment of the organisation with emphasis on details and procedures.
These policies are part of the major policies. The operational control can be made possible only if the minor
policies are implemented efficiently. The minor policies are concerned with the day to day operations and are
decided at the departmental levels. The minor policies may cover relations with dealers, discount rates, terms
of credit, etc. Thus, corporate policies cover wide range subjects ranging from operational level policies to the
top level policies.

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4.13 Classification of Corporate Policies

Below given is the classification of corporate policies.
4.13.1 Classification on the Basis of Scope
On the basis of scope of an organisation, policies are classified as follows:

Basic policies These are framed by the top management and spell out the basic approach of a company to its
activities and its environment.

General policies These are framed by the middle management level and are more specific. They apply to large
segments of the organisation.

Specific policies These are framed by the foremen and supervisors and are very specific in nature. They are
applicable to routine activities.

4.13.2 Classification on the Basis of Expression

On the basis of expression, corporate policies can either be expressed or implied.

Expressed policies: The policies which are expressed in clear words either orally or in writing are the expressed
policies. These are most suitable for small organisations.

Implied policies: The policies which are understood by the employees, code of conduct or behaviour and are
not expressed orally or through written statements are known as implied policies. They flow from philosophy,
values and traditions of the organisation.

4.13.3 Classification on the Basis of Level

Different policies are formed at different levels of management. They are as follows:

Top management policies: These are framed by the top management and it is only responsible for them. The
policies are derived from top management planning and top management planning and top management sees
that they are put into effect and judge the results.

Middle level management policies: These are laid down by the middle level managers and deal with the
organisational activities like selection of executives, employee training, deciding processes, methods, techniques,
etc.

Lower level management: Those people who have direct control over the working force comprise the lower
level management. These people set up policies with respect to the accomplishment of tasks of sub divisions
of the organisations.

4.13.4 Classification on the Basis of Origin

On the basis of origin, policies are classified as follows:

Original policies: These policies are formed from the company objectives. These are formed by the top
management and the top management is responsible for guiding and directing them and the subordinates are
responsible in the attainment of organisation objectives.

Appealed policies: These are also called suggested policies because they are made by taking into account the
suggestions of subordinates or people who implement these policies.

Imposed policies: External forces sometimes force the company to accept certain policies forcibly. These policies
are called imposed policies. The external forces could include government rules and suggestions, arguments
with trade unions etc.

Derivative policies: These policies are operational in nature and are derived from companys major policies.
They are made as guidelines to perform day to day operations.

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4.13.5 Classification on the Basis of Functional Areas

In an organisation, various functional areas are seen. The policies are classified according to functional areas, i.e.
production policies, marketing and sales policies, financial policies and personnel policies.

Production policies: These policies are concerned with production of a product, type of technology, equipment,
selection of plant layout, location and size, manufacturing cost, inventory control, quality control, etc.

Marketing & sales policies: The policies which relate to policies in market analysis, business law, salesmanship
and advertising are concerned with total process of marketing mix and product mix. These include decisions
with respect to customers, channels of distribution, dealers, sales control, promotion, etc.

Financial policies: The success of business depends upon these policies. These consist of policies with respect
to capital structure, methods of raising funds, the utilisation of funds, credit policy, dividend decisions, profit
policy, costing and accounting policy, etc.

Personnel policies: Employees are very important for the organisation and the personnel policies are concerned
with issues like recruitment, selection, training and development, promotion and transfer, wages and incentives,
etc.

4.13.6 Classification of Policies on the Basis of Nature of Management

The main functions of an organisation consist of planning, organising, actuating and controlling. The policies may
therefore be classified as planning policies, organising policy, actuating policy and controlling policy.

Planning policies: These policies are concerned with the determination of ways to attain the objectives of the
organisation. Such policies decide corporate objectives, alternative courses of action, comparison of alternatives,
establishment of budgets, schedules, procedures, etc.

Organising policies: These policies are concerned with allocation of activities to members of the group so that
through their collective efforts, objectives could be achieved. These are those policies which provide issues like
organisation structures, authority, responsibility, delegation, centralisation and various relationships.

Actuating policies: The actuating policies include providing leadership, integrating tasks and communication and
organisation environment. These policies are concerned with organising the employees of the organisation.

Controlling policies: Controlling is the process by which the performance is compared with the set objectives.
These policies provide for establishment of standards, pointing out deviations, ascertaining causes for deviation
and taking corrective actions.

4.14 Importance of Corporate Policy

Following points illustrates the importance of corporate policy:

Policies are needed to carry out the business activities in a smooth manner.

They provide clear cut courses for attainment of business objectives.

If a proper explicit policy has been formulated, many of the details could be conveniently handled by the
subordinates and management would not unnecessarily waste its time and energy in doing them.

Policies provide a guide and framework for decision making.

Policies encourage delegation of the power of decision making.

Good policies provide a direction in which all management activities are focused.

Policies provide stability to the action of the members of the firm.

Policies deter the subordinates to rethink on the day to day issues and thus avoid repetitive analysis of issues.

Policies facilitate evaluation of performance by acting as a standard.

They enhance employees enthusiasm and loyalty for the organisation.

They help solving the problems for optimum utilisation of scarce recourses.

The sound policies help building good public image of the business.

Policies provide the firm with clear objectives with which the managers can decide the future course of
action.

They act as tool for co-ordination and control.

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Summary

Corporate management is a broad phenomenon and covers a wide spectrum of activities.

Corporate strategy is formulated at the higher level of management. At operational level, operational strategies
are also formulated.

Corporate planning is a comprehensive planning process which involves continued formulation of objectives
and the guidance of affairs towards their attainment.

The process of corporate planning integrates strategic planning with short range operational plans.

A formal planning system can help the management in responding to a dynamic environment and in managing
a strategically complex organisation with limited resources.

The chief executive must be totally committed and involved in the corporate planning process.

The process of corporate planning should be introduced on continuous basis to cope with ever changing
environmental factors.

Corporate strategy improves the capability of management in coping with the volatile external environmental
forces.

The corporate strategy formulation process calls for considerable time, money and effort.

Corporate policy helps the manager to identify the solution to the problems.

Corporate policy consists of a variety of subject that affects various interest groups in the organisation and
outside it.

Corporate policy areas have two broad categories namely, major and minor policies.

Good policies provide a direction in which all management activities are focused.

References

Corporate Strategy, [Pdf] Available at: <http://educ.jmu.edu/~gallagsr/WDFPD-Corporate.pdf> [Accessed 14

May 2013].

Concept of Corporate Strategy, [Pdf] Available at: <http://alumni.pondiuni.edu.in/dde/downloads/mbaii_sm.pdf>

[Accessed 14 May 2013].

Dransfield, R., 2001. Corporate Strategy, Heinemann.

Colley, J., 2002. Corporate Strategy, Tata McGraw-Hill Education.

2008. What is Good Corporate Strategy? [Video online] Available at: <http://www.youtube.com/
watch?v=43kZDnyDXOc> [Accessed 15 May 2013].

2008. Corporate Strategy [Video online] Available at: <http://www.youtube.com/watch?v=gkxMy-HiZU8>

[Accessed 15 May 2013].

Recommended Reading

Thompson, J. L., 2001. Understanding corporate strategy,Cengage Learning EMEA.

Leontiades, J., 1987. Multinational corporate strategy, Lexington Books.

Sutton, C. J., 1980. Economics and Corporate Strategy, CUP Archive.

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Self Assessment
1. Which of the following statements is false?
a. Corporate strategy is related mostly to external environment.
b. Corporate strategy is formulated at the higher level of management.
c. Corporate management is a broad phenomenon and covers a wide spectrum of activities.
d. Corporate planning is a broad phenomenon and covers a wide spectrum of activities.
2. Which is a comprehensive planning process which involves continued formulation of objectives and the guidance
of affairs towards their attainment?
a. Corporate planning
b. Corporate policy
c. Corporate strategy
d. Strategy planning
3. The _________ must be totally committed and involved in the corporate planning process.
a. managers
b. middle level managers
c. chief executive
d. first line managers
4. _________ signifies that a series of decisions are taken in the same direction to accomplish the objectives.
a. Synergy
b. Vector
c. Policy
d. Strategy
5. What means measurement of the firms capability to take advantage of a new product market move?
a. Synergy
b. Policy
c. Vector
d. Objective
6. Which of the following statements is false?
a. Corporate strategy motivates employees examples to shape their work in the context of shared corporate
goals.
b. Strategy assists management to meet unanticipated future changes.
c. Organisational effectiveness is ensured through implementing and evaluating the strategy.
d. Corporate objective motivates employees examples to shape their work in the context of shared corporate
goals.

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7. Which of the following statements is true?

a. Implementation of corporate planning is influenced by organisational factors, behavioural factors and
motivational factors. The gap between formulation and implementation of corporate strategy does not give
desired results to the organisation.
b. Implementation of corporate policy is influenced by organisational factors, behavioural factors and
motivational factors. The gap between formulation and implementation of corporate strategy does not give
desired results to the organisation.
c. Implementation of corporate strategy is influenced by organisational factors, behavioural factors and
motivational factors. The gap between formulation and implementation of corporate strategy does not give
desired results to the organisation.
d. Implementation of corporate objective is influenced by organisational factors, behavioural factors and
motivational factors. The gap between formulation and implementation of corporate strategy does not give
desired results to the organisation.
8. _________ is concerned with the various functional areas like production, human resources, marketing and
finance.
a. Corporate objective
b. Corporate policy
c. Corporate strategy
d. Strategic planning
9. Which policies are framed by the top management and spell out the basic approach of a company to its activities
and its environment?
a. General policies
b. Basic policies
c. Specific policies
d. Expressed policies
10. The policies which are understood by the employees, code of conduct or behaviour and are not expressed orally
or through written statements are known as _________.
a. expressed policies
b. general policies
c. implied policies
d. basic policies

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Chapter V
Top Management
Aim
The aim of this chapter is to:

explain various management levels

elucidate the duties of borad of directors

explicate the chief responsibilities and skills of top management

Objectives
The objectives of this chapter are to:

introduce the ranks of management

explain the responsibilities of different management levels

expose them to skills and responsibilities of an CEO

Learning outcome
At the end of this chapter, you will be able to:

understand various levels/ranks of management

identify the roles and responsibilites of top level managers

describe top management roles

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5.1 Introduction
Highest ranking executives with titles such as chairman, chief executive officer, managing director, president,
executive directors, executive vice-presidents, etc, are responsible for the growth of the entire enterprise. Top
management translates the policy formulated by the board of directors into goals, objectives and strategies and
projects a shared vision of the future. It makes decisions that affect everyone in the organisation, and is held entirely
responsible for the success or failure of the enterprise.

5.2 Management Levels

Managers are organisational members who are responsible for the work performance of other organisational members.
Managers have formal authority to use organisational resources and to make decisions. In organisations, there are
typically three levels of management, namely, top level, middle level, and first level. These three main levels of
managers form a hierarchy, in which they are ranked in order of importance. In most organisations, the number of
managers at each level is such that the hierarchy resembles a pyramid; with many more first level managers, fewer
middle level managers and the fewest managers at the top level. There are a number of changes that are occurring
in many organisations that are changing the management hierarchies in them, such as the increasing use of terms,
the prevalence of outsourcing and the flattening of organisational structures.
5.2.1 Top Level Managers
Following are the functions of top level managers.

Top level managers or top managers are also senior management or executives.

These individuals are at the top one or two levels in an organisation and hold titles such as Chief Executive
Officers (CEO), Chief Financial Officer (CFO), Chief Operation Officer (COO), Chief Information Officer
(CIO), Chairperson of the Board, President, Vice President, Corporate head.

Often, a set of these managers will constitute the top management team, which is composed of the CEO, the
COO and other department heads.

Top level managers make decisions affecting the entirety of the firm.

Top managers do not direct the day-to-day activities of the firm; rather, they set goals for the organisation and
direct the company to achieve them.

Top managers are ultimately responsible for the performance of the organisation, in terms of the growth of the
organisation.

Top managers in most organisations have a great deal of managerial experience and have moved up through
the ranks of management within the company or in another firm.

An exception to this is a top manager who is also an entrepreneur; such an individual may start a small company
and manage it until it grows enough to support several levels of management.

5.2.2 Middle Level Managers

Following are the functions of middle level managers:

Middle level managers are those in the levels below top level managers. Middle managers job titles include
General Manager, Plant Manager, Regional Manager and Divisional Manager.

Middle level managers are responsible for carrying out the goals set by top management. They do so by setting
goals for their departments and other business units.

Middle level managers can motivate and assist first line managers to achieve objectives.

Middle managers may also communicate upward, by offering suggestions and feedback to top managers.

Because middle managers are more involved in the day-to-day workings of a company, they may provide
valuable information to top managers to help improve the organisations bottom line.

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5.2.3 First Level Managers

Following are the functions of first level managers:

First level managers are also called first-line managers or supervisors.

These managers have job titles such as: Office Manager, Shift Supervisor, Department Manager, Foreperson,
Crew Leader, Store Manager.

First line managers are responsible for the daily management of line workers, the employees who actually
produce the product or offer the service.

There are first-line managers in every work unit the organisation.

Although first-level managers typically do not set goals for the organisation, they have a very strong influence
on the company.

These are the managers that most employees interact with on a daily basis, and if the managers perform poorly,
employees may also perform poorly, may lack motivation, or may leave the company.

5.3 Board of Directors

A board of directors is a body of elected or appointed members who jointly oversee the activities of a company or
organisation. The body sometimes has a different name, such as board of trustees, board of governors, board of
managers, or executive board. It is often simply referred to as the board. A boards activities are determined by
the powers, duties and responsibilities delegated to it conferred on it by an authority outside itself. These matters
are typically detailed in the organisations bylaws. The bylaws commonly also specify the number of members of
the board, how they are to be chosen, and when they are to meet. In an organisation with voting members, the board
acts on behalf of, and is subordinate to, the organisations full assembly, which usually chooses the members of the
board. In a stock corporation, the board is elected by the stockholders and is the highest authority in the management
of the corporation. In a non-stock corporation with no general voting membership, e.g. a university, the board is the
supreme governing body of the institution.
5.3.1 Duties of Board of Directors
Following are the duties of board of directors:

Governing the organisation by establishing broad policies and objectives.

Selecting, appointing, supporting and reviewing the performance of the chief executive.

Ensuring the availability of adequate financial resources.

Approving annual budgets.

Accounting to the stakeholders for the organisations performance.

Setting their salaries and compensation.

5.4 Sub Committee

A subcommittee is a subordinate committee cocsists of members who belong to a larger committee. Subcommittees
are a critical part of committee organisation, as they allow committees to focus on several issues without needing
to involve all of the members, and they create more flexibility within the committee structure. There are two main
types subcommittees: standing and working.

A standing subcommittee is one which is always in existence, covering specific issues which pertain to the
committee in general. One special type of standing subcommittee, the executive subcommittee, can make
executive decisions on behalf of the larger group.

A working committee is tasked with dealing with a specific and often temporary issue.

Members of a subcommittee are usually chosen or elected by other members of the committee, and they are
selected on the basis of experience, qualification and willingness to serve.

The subcommittee usually agrees to meet together at set intervals, taking care not to overlap with regular
committee meetings and the members may be tasked with making periodic reports to the general committee on
their progress and concerns.
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Subcommittee meetings may also be closed to the public for privacy reasons, particularly when open committee
meetings cannot be held in closed sessions for legal reasons and committee members want a chance to meet
officially without public oversight.

Serving on a subcommittee can require some diplomatic skills. Members of a subcommittee must keep the spirit
of the larger group in mind, and since they may end up speaking on behalf of other members of the committee,
they have to be careful to ensure that their statements and positions are worded appropriately.

In the case of an executive standing subcommittee, members must also consider issues like budgeting, which
can become critical when making executive decisions.

5.5 Chief Responsibilities and Skills of Top Management

Chief responsibilities and skills of top management are discussed below.
5.5.1 Planning

Objectives are the goals that management wants to achieve and planning is the process to accomplish these
objectives.

It is a road map of improvement.

Planning should be realistic based and framework within which a new strategy will be implemented.

But it is evident that mostly top management considers planning as the starting point only not as the integral
part of managing necessary tasks.

Top management assigns the planning process to planning department yet it plays a vital role in recognising the
hidden opportunities and clear understanding of goals, market and completion.

5.5.2 Organising

Organising is the act of arranging certain elements following some rules.

The entire role of organising is to achieve the overall completion of organisations objectives.

It is obligatory to organise all kind of resources including men, material, money and machine to make the optimum
use in achieving certain specialisation. This specialisation can be achieved through employing different tasks
to specify people who are specialists in that area.

Top managements ability to organise all resources well helps in expanding business.

5.5.3 Controlling

Controlling is one of the foremost managerial functions like planning and organising but it is continuous, and
can be entrenched at any of hierarchy.

It is very important for the top management to check the errors, and then take the corrective action so that deviation
from standards should be visualised clearly and declared purposes will be attained in a preferred mode.

5.6 Chief Executive Officer (CEO)

A chief executive officer is also known as a managing director or chief executive. The executive officer is the highest
ranking corporate officer or administrator in charge of total management of an organisation. An individual appointed
as a CEO of a corporation, company, organisation, or agency reports to the board of directors.
5.6.1 Responsibilities
Following are the responsibilites of CEO:

The responsibility of the chief executive officer is to align the company, internally and externally, with strategic
vision.

The core duty of a CEO is to facilitate business outside the company while guiding employees and other executive
officers towards a central objective.

The size and sector of the company will dictate the secondary responsibilities.

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A CEO must have a balance of internal and external initiative to build a sustainable company.

For corporations, the chief executive officer primarily coordinates external initiatives at a high level. As there
are many other c-level executives (e.g. marketing, information, technical, financial, etc) seldom do corporate
CEOs have low-level functions.

For emerging entrepreneurs, their acting position as a CEO is much different than that on the corporate level.
As often other c-level executives are not incorporated in small operations, it is the duty of the CEO to assume
those positions.
Chairman

Chief Executive
Officer

President

Chief Financial
Officer

Board of
Directors

Fig. 5.1 Board of directors

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Summary

Highest ranking executives with titles such as chairman, chief executive officer, managing director, president,
executive directors, executive vice-presidents, etc, are responsible for the growth of the entire enterprise.

Managers are organisational members who are responsible for the work performance of other organisational
members.

In organisations, there are typically three levels of management, namely, top level, middle level, and first
level.

Top level managers or top managers are also senior management or executives.

Middle level managers are those in the levels below top level managers. Middle managers job titles include
General Manager, Plant Manager, Regional Manager and Divisional Manager.

First level managers are also called first-line managers or supervisors.

First line managers are responsible for the daily management of line workers, the employees who actually
produce the product or offer the service.

A board of directors is a body of elected or appointed members who jointly oversee the activities of a company
or organisation.

A subcommittee is a subordinate committee consists of members who belong to a larger committee. Subcommittees
are a critical part of committee organisation, as they allow committees to focus on several issues without needing
to involve all of the members, and they create more flexibility within the committee structure.

Planning should be realistic based and framework within which a new strategy will be implemented.

Organising is the act of arranging certain elements following some rules.

Controlling is one of the foremost managerial functions like planning and organising but it is continuous, and
can be entrenched at any of hierarchy.

The executive officer is the highest ranking corporate officer or administrator in charge of total management
of an organisation.

References

Levels of Management, [Pdf] Available at: <http://www.managementstudyguide.com/management_levels.htm>

[Accessed 14 May 2013].

Top Level Management, [Online] Available at: <www.boundless.com/management/introduction-to-management/

management-levels-and-types/top-level-management/> [Accessed 16 May 2013].

Koontz, H. & Weihrich, H., 2007. Essentials Of Management, 7th ed., Tata McGraw-Hill Education.

Dubrin, A. J., 2008. Essentials of management, 8th ed., Cengage Learning.

2009. Organizational Management, [Video online] Available at: <http://www.youtube.com/watch?v=pB7c2bKixg> [Accessed 17 May 2013].

2011. Business Environment and Corporate Environment, [Video online] Available at: <http://www.youtube.
com/watch?v=duKOsvvSxf8> [Accessed 17 May 2013].

Recommended Reading

Shaikh, S., 2010. Business Envrionment, 2nd ed., Pearson Education India.

Prasad, V., 2010. Business Environment, Gyan Publishing House.

Reddy, J., 2010. Business Environment, APH Publishing.

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Self Assessment
1. Which of the following statements is false?
a. Managers are organisational members who are responsible for the work performance of other organisational
members.
b. Board of directors has formal authority to use organisational resources and to make decisions.
c. In most organisations, the number of managers at each level is such that the hierarchy resembles a
pyramid.
d. Managers have formal authority to use organisational resources and to make decisions.
2. ___________ make decisions affecting the entirety of the firm.
a. Top level managers
b. Middle level managers
c. First line managers
d. Executive officers
3. Which of the following statements is true?
a. First line managers do not direct the day-to-day activities of the firm; rather, they set goals for the organisation
and direct the company to achieve them.
b. Middle level managers do not direct the day-to-day activities of the firm; rather, they set goals for the
organisation and direct the company to achieve them.
c. Top managers do not direct the day-to-day activities of the firm; rather, they set goals for the organisation
and direct the company to achieve them.
d. Managers do not direct the day-to-day activities of the firm; rather, they set goals for the organisation and
direct the company to achieve them.
4. Who is responsible for carrying out the goals set by top management?
a. Executives
b. First line managers
c. Officers
d. Middle level managers
5. Who are also called first-line managers or supervisors?
a. First level managers
b. Middle level managers
c. Top level managers
d. Managers
6. There are ___________ in every work unit the organisation.
a. managers
b. middle level managers
c. first level managers
d. top level managers

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7. A __________ is a body of elected or appointed members who jointly oversee the activities of a company or
organisation.
a. sub committee
b. working committee
c. standing committee
d. board of directors
8. In a non-stock corporation with no general voting membership, e.g. a university, who is the supreme governing
body of the institution?
a. The committee
b. The sub committee
c. The board
d. The standing committee
9. A ___________ is a subordinate committee consists of members who belong to a larger committee.
a. committee
b. sub committee
c. board
d. standing committee
10. Which of the following statements is false?
a. A working committee is tasked with dealing with a specific and often temporary issue.
b. A working subcommittee is one which is always in existence, covering specific issues which pertain to the
committee in general.
c. Members of a subcommittee are usually chosen or elected by other members of the committee, and they are
selected on the basis of experience, qualification and willingness to serve.
d. A standing subcommittee is one which is always in existence, covering specific issues which pertain to the
committee in general.

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