Following are the important conce
STRATEGY
The word “strategy” is derived
from the Greek word “stratçgos”; stratus (meaning army) and “ago” (meaning
leading/moving).
Strategy is an action that managers take to attain one or more of
the organization’s goals. Strategy can also be defined as “A general
direction set for the company and its various components to achieve a desired
state in the future. Strategy results from the detailed strategic planning
process”.
A strategy is all about
integrating organizational activities and utilizing and allocating the scarce
resources within the organizational environment so as to meet the present
objectives. While planning a strategy it is essential to consider that decisions
are not taken in a vacuum and that any act taken by a firm is likely to be
met by a reaction from those affected, competitors, customers, employees or
suppliers.
Strategy can also be defined as
knowledge of the goals, the uncertainty of events
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and the need to take into
consideration the likely or actual behavior of others. Strategy is the
blueprint of decisions in an organization that shows its objectives and
goals, reduces the key policies, and plans for achieving these goals, and
defines the business the company is to carry on, the type of economic and
human organization it wants to be, and the contribution it plans to make to
its shareholders, customers and society at large.
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Features
of Strategy
- Strategy is Significant because it is not possible to
foresee the future. Without a perfect foresight, the firms must be ready
to deal with the uncertain events which constitute the business
environment.
- Strategy deals with long term developments rather than
routine operations, i.e. it deals with probability of innovations or new
products, new methods of productions, or new markets to be developed in
future.
- Strategy is created to take into account the probable
behavior of customers and competitors. Strategies dealing with employees
will predict the employee behavior.
Strategy is a well defined roadmap
of an organization. It defines the overall mission,
vision and direction of an organization. The objective of a strategy is to
maximize an organization’s strengths and to minimize the strengths of the
competitors.
Strategy, in short, bridges the gap
between “where we are” and “where we want to be”.
Components of Strategy statement
The strategy statement of a firm
sets the firm’s long-term strategic direction and broad policy directions. It
gives the firm a clear sense of direction and a blueprint for the firm’s
activities for the upcoming years. The main constituents of a strategic
statement are as follows:
- Strategic Intent
An
organization’s strategic intent is the purpose that it exists and why it will
continue to exist, providing it maintains a competitive advantage. Strategic
intent gives a picture about what an organization must get into immediately
in order to achieve the company’s vision. It motivates the people. It
clarifies the vision of the vision of the company. Strategic intent helps
management to emphasize and concentrate on the priorities. Strategic intent
is, nothing but, the influencing of an organization’s resource potential and
core competencies to achieve what at first may seem to be unachievable goals
in the competitive environment. A well expressed strategic intent should
guide/steer the development of strategic intent or the setting of goals and
objectives that require that all of organization’s competencies be controlled
to maximum value.
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Strategic
intent includes directing organization’s attention on the need of winning;
inspiring people by telling them that the targets are valuable; encouraging
individual and team participation as well as contribution; and utilizing intent
to direct allocation of resources. Strategic intent differs from strategic fit
in a way that while strategic fit deals with harmonizing available resources
and potentials to the external environment, strategic intent emphasizes on
building new resources and potentials so as to create and exploit future
opportunities.
- Mission Statement
Mission
statement is the statement of the role by which an organization intends to
serve it’s stakeholders. It describes why an organization is operating and thus
provides a framework within which strategies are formulated. It describes what
the organization does (i.e., present capabilities), who all it serves (i.e.,
stakeholders) and what makes an organization unique (i.e., reason for
existence). A mission statement differentiates an organization from others by
explaining its broad scope of activities, its products, and technologies it
uses to achieve its goals and objectives. It talks about an organization’s
present (i.e., “about where we are”). For instance, Microsoft’s mission
is to help people and businesses throughout the world to realize their full
potential. Wal-Mart’s mission is “To give ordinary folk the chance to
buy the same thing as rich people.” Mission statements always exist at top
level of an organization, but may also be made for various organizational
levels. Chief executive plays a significant role in formulation of mission
statement. Once the mission statement is formulated, it serves the organization
in long run, but it may become ambiguous with organizational growth and innovations.
In today’s dynamic and competitive environment, mission may need to be
redefined. However, care must be taken that the redefined mission statement
should have original fundamentals/components. Mission statement has three main
components-a statement of mission or vision of the company, a statement of the
core values that shape the acts and behaviour of the employees, and a statement
of the goals and objectives.
Features of a Mission
- Mission must be feasible and attainable. It
should be possible to achieve it.
- Mission should be clear enough so that any
action can be taken.
- It should be inspiring for the management,
staff and society at large.
- It should be precise enough, i.e., it should be
neither too broad nor too narrow.
- It should be unique and distinctive to leave an
impact in everyone’s mind.
- It should be analytical,i.e., it should analyze
the key components of the strategy.
- It should be credible, i.e., all stakeholders
should be able to believe it.
- Vision
A vision
statement identifies where the organization wants or intends to be in future or
where it should be to best meet the needs of the stakeholders. It describes
dreams and aspirations for future. For instance, Microsoft’s vision is
“to empower people through great software, any time, any place, or any device.”
Wal-Mart’s vision is to become worldwide leader in retailing. A vision
is the potential to view things ahead of themselves. It answers the question
“where we want to be”. It gives us a reminder about what we attempt to develop.
A vision statement is for the organization and it’s members, unlike the mission
statement which is for the customers/clients. It contributes in effective
decision making as well as effective business planning. It incorporates a
shared understanding about the nature and aim of the organization and utilizes
this understanding to direct and guide the organization towards a better
purpose. It describes that on achieving the mission, how the organizational
future would appear to be.
An
effective vision statement must have following features-
- It must be unambiguous.
- It must be clear.
- It must harmonize with organization’s culture
and values.
- The dreams and aspirations must be rational/realistic.
- Vision statements should be shorter so that
they are easier to memorize.
In order
to realize the vision, it must be deeply instilled in the organization, being
owned and shared by everyone involved in the organization.
- Goals and objectives
A goal is
a desired future state or objective that an organization tries to achieve.
Goals specify in particular what must be done if an organization is to attain
mission or vision. Goals make mission more prominent and concrete. They
co-ordinate and integrate various functional and departmental areas in an
organization. Well made goals have following features-
- These are precise and measurable.
- These look after critical and significant
issues.
- These are realistic and challenging.
- These must be achieved within a specific time
frame.
- These include both financial as well as non-financial
components.
Objectives
are defined as goals that organization wants to achieve over a period of time.
These are the foundation of planning. Policies are developed in an organization
so as to achieve these objectives. Formulation of objectives is the task of top
level management. Effective objectives have following features-
- These are not single for an organization, but multiple.
- Objectives should be both short-term as well as
long-term.
- Objectives must respond and react to changes in
environment, i.e., they must be flexible.
- These must be feasible, realistic and operational.
Strategic
management process
The strategic management process
means defining the organization’s strategy. It is also defined as the process
by which managers make a choice of a set of strategies for the organization
that will enable it to achieve better performance. Strategic management is a
continuous process that appraises the business and industries in which the
organization is involved; appraises it’s competitors; and fixes goals to meet
all the present and future competitor’s and then reassesses each strategy.
Strategic management process has
following four steps:
1.
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Environmental Scanning- Environmental scanning refers to a process of collecting,
scrutinizing and providing information for strategic purposes. It helps in
analyzing the internal and external factors influencing an organization.
After executing the environmental analysis process, management should
evaluate it on a continuous basis and strive to improve it.
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2.
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Strategy Formulation- Strategy formulation is the
process of deciding best course of action for accomplishing organizational
objectives and hence achieving organizational purpose. After conducting
environment scanning, managers formulate corporate, business and functional
strategies.
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3.
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Strategy Implementation- Strategy implementation implies
making the strategy work as intended or putting the organization’s chosen
strategy into action. Strategy implementation includes designing the
organization’s structure, distributing resources, developing decision making
process, and managing human resources.
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4.
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Strategy Evaluation- Strategy evaluation is the final
step of strategy management process. The key strategy evaluation activities
are: appraising internal and external factors that are the root of present
strategies, measuring performance, and taking remedial / corrective actions.
Evaluation makes sure that the organizational strategy as well as it’s
implementation meets the organizational objectives.
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These components are steps that are
carried, in chronological order, when creating a new strategic management plan.
Present businesses that have already created a strategic management plan will
revert to these steps as per the situation’s requirement, so as to make
essential changes.
Components of Strategic Management Process
Strategic management is an ongoing process. Therefore,
it must be realized that each component interacts with the other components and
that this interaction often happens in chorus.
Environmental
scanning
Organizational environment
consists of both external and internal factors. Environment must be scanned
so as to determine development and forecasts of factors that will influence
organizational success. Environmental scanning refers to possession and
utilization of information about occasions, patterns, trends, and
relationships within an organization’s internal and external environment.
It helps the managers to decide the future path of the organization. Scanning
must identify the threats and opportunities existing in the environment.
While strategy formulation, an organization must take advantage of the
opportunities and minimize the threats. A threat for one organization may be
an opportunity for another.
Internal analysis of the
environment is the first step of environment
scanning. Organizations should observe the internal organizational environment.
This includes employee interaction with other employees, employee interaction
with management, manager interaction with other managers, and management
interaction with shareholders, access to natural resources, brand awareness,
organizational structure, main staff, operational potential, etc.
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Also, discussions, interviews, and
surveys can be used to assess the internal environment. Analysis of internal
environment helps in identifying strengths and weaknesses of an organization.
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As business becomes more
competitive, and there are rapid changes in the external environment,
information from external environment adds crucial elements to the
effectiveness of long-term plans. As environment is dynamic, it becomes
essential to identify competitors’ moves and actions. Organizations have also
to update the core competencies and internal environment as per external
environment. Environmental factors are infinite, hence, organization should be
agile and vigile to accept and adjust to the environmental changes. For
instance - Monitoring might indicate that an original forecast of the prices of
the raw materials that are involved in the product are no more credible, which
could imply the requirement for more focused scanning, forecasting and analysis
to create a more trustworthy prediction about the input costs. In a similar
manner, there can be changes in factors such as competitor’s activities,
technology, market tastes and preferences.
While in external analysis,
three correlated environment should be studied and analyzed —
- immediate / industry environment
- national environment
- broader socio-economic environment / macro-environment
Examining the industry
environment needs an appraisal of the competitive structure of the
organization’s industry, including the competitive position of a particular
organization and it’s main rivals. Also, an assessment of the nature, stage,
dynamics and history of the industry is essential. It also implies evaluating
the effect of globalization on competition within the industry. Analyzing the national
environment needs an appraisal of whether the national framework helps in
achieving competitive advantage in the globalized environment. Analysis of macro-environment
includes exploring macro-economic, social, government, legal, technological and
international factors that may influence the environment. The analysis of
organization’s external environment reveals opportunities and threats for an
organization.
Strategic managers must not only
recognize the present state of the environment and their industry but also be
able to predict its future positions
Strategy Formulation
Strategy formulation refers to the
process of choosing the most appropriate course of action for the realization
of organizational goals and objectives and thereby achieving the
organizational vision. The process of strategy formulation basically
involves six main steps. Though these steps do not follow a rigid
chronological order, however they are very rational and can be easily
followed in this order.
- Setting Organizations’
objectives - The key component of any
strategy statement is to set the long-term objectives of the
organization. It is known that strategy is generally a medium for
realization of organizational objectives. Objectives stress the state of
being there whereas Strategy stresses upon the process of reaching
there. Strategy includes both the fixation of objectives as well the
medium to be used to realize those objectives. Thus, strategy is a wider
term which believes in the manner of deployment of resources so as to
achieve the objectives.
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While
fixing the organizational objectives, it is essential that the factors which
influence the selection of objectives must be analyzed before the selection of
objectives. Once the objectives and the factors influencing strategic decisions
have been determined, it is easy to take strategic decisions.
- Evaluating the Organizational Environment - The next step is to evaluate the general economic and
industrial environment in which the organization operates. This includes a
review of the organizations competitive position. It is essential to
conduct a qualitative and quantitative review of an organizations existing
product line. The purpose of such a review is to make sure that the
factors important for competitive success in the market can be discovered
so that the management can identify their own strengths and weaknesses as
well as their competitors’ strengths and weaknesses.
After
identifying its strengths and weaknesses, an organization must keep a track of
competitors’ moves and actions so as to discover probable opportunities of
threats to its market or supply sources.
- Setting Quantitative Targets - In this step, an organization must practically fix the
quantitative target values for some of the organizational objectives. The
idea behind this is to compare with long term customers, so as to evaluate
the contribution that might be made by various product zones or operating
departments.
- Aiming in context with the divisional plans - In this step, the contributions made by each
department or division or product category within the organization is
identified and accordingly strategic planning is done for each sub-unit.
This requires a careful analysis of macroeconomic trends.
- Performance Analysis - Performance analysis includes discovering and
analyzing the gap between the planned or desired performance. A critical
evaluation of the organizations past performance, present condition and
the desired future conditions must be done by the organization. This
critical evaluation identifies the degree of gap that persists between the
actual reality and the long-term aspirations of the organization. An
attempt is made by the organization to estimate its probable future
condition if the current trends persist.
- Choice of Strategy -
This is the ultimate step in Strategy Formulation. The best course of
action is actually chosen after considering organizational goals,
organizational strengths, potential and limitations as well as the
external opportunities.
Strategy Implementation
Strategy implementation is the
translation of chosen strategy into organizational action so as to achieve
strategic goals and objectives.
Strategy implementation is also defined as the manner in which an
organization should develop, utilize, and amalgamate organizational
structure, control systems, and culture to follow strategies that lead to
competitive advantage and a better performance. Organizational structure
allocates special value developing tasks and roles to the employees and
states how these tasks and roles can be correlated so as maximize efficiency,
quality, and customer satisfaction-the pillars of competitive advantage. But,
organizational structure is not sufficient in itself to motivate the
employees.
An organizational control system
is also required. This control system equips managers with motivational
incentives for employees as well as feedback on employees and organizational
performance. Organizational culture refers to the specialized collection of
values, attitudes, norms and beliefs shared by organizational members and
groups.
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Follwoing are the main steps in
implementing a strategy:
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Developing an organization having
potential of carrying out strategy successfully.
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Disbursement of abundant resources
to strategy-essential activities.
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Creating strategy-encouraging
policies.
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Employing best policies and
programs for constant improvement.
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Linking reward structure to
accomplishment of results.
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Making use of strategic
leadership.
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Excellently formulated strategies
will fail if they are not properly implemented. Also, it is essential to note
that strategy implementation is not possible unless there is stability between
strategy and each organizational dimension such as organizational structure,
reward structure, resource-allocation process, etc.
Strategy implementation poses a
threat to many managers and employees in an organization. New power
relationships are predicted and achieved. New groups (formal as well as
informal) are formed whose values, attitudes, beliefs and concerns may not be
known. With the change in power and status roles, the managers and employees
may employ confrontation behaviour.
Following are the main differences
between Strategy Formulation and Strategy Implementation-
Strategy
Formulation
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Strategy
Implementation
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Strategy Formulation includes
planning and decision-making involved in developing organization’s strategic
goals and plans.
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Strategy Implementation involves
all those means related to executing the strategic plans.
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In short, Strategy Formulation is placing
the Forces before the action.
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In short, Strategy Implementation
is managing forces during the action.
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Strategy Formulation is an Entrepreneurial
Activity based on strategic decision-making.
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Strategic Implementation is mainly
an Administrative Task based on strategic and operational decisions.
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Strategy Formulation emphasizes on
effectiveness.
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Strategy Implementation emphasizes
on efficiency.
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Strategy Formulation is a rational
process.
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Strategy Implementation is
basically an operational process.
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Strategy Formulation requires
co-ordination among few individuals.
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Strategy Implementation requires
co-ordination among many individuals.
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Strategy Formulation requires a
great deal of initiative and logical skills.
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Strategy Implementation requires
specific motivational and leadership traits.
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Strategic Formulation precedes
Strategy Implementation.
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STrategy Implementation follows
Strategy Formulation.
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Strategy Evaluation
Strategy Evaluation is as
significant as strategy formulation because it throws light on the efficiency
and effectiveness of the comprehensive plans in achieving the desired
results. The managers can also assess the appropriateness of the current
strategy in todays dynamic world with socio-economic, political and
technological innovations. Strategic Evaluation is the final phase of strategic management.
The significance of strategy
evaluation lies in its capacity to co-ordinate the task performed by
managers, groups, departments etc, through control of performance. Strategic Evaluation is significant because of various
factors such as - developing inputs for new strategic planning, the urge for
feedback, appraisal and reward, development of the strategic management process,
judging the validity of strategic choice etc.
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The process of Strategy Evaluation
consists of following steps-
- Fixing benchmark of performance - While fixing the benchmark, strategists encounter
questions such as - what benchmarks to set, how to set them and how to
express them. In order to determine the benchmark performance to be set,
it is essential to discover the special requirements for performing the
main task. The performance indicator that best identify and express the
special requirements might then be determined to be used for evaluation.
The organization can use both quantitative and qualitative criteria for
comprehensive assessment of performance. Quantitative criteria includes
determination of net profit, ROI, earning per share, cost of production,
rate of employee turnover etc. Among the Qualitative factors are
subjective evaluation of factors such as - skills and competencies, risk
taking potential, flexibility etc.
- Measurement of performance - The standard performance is a bench mark with which
the actual performance is to be compared. The reporting and communication
system help in measuring the performance. If appropriate means are
available for measuring the performance and if the standards are set in
the right manner, strategy evaluation becomes easier. But various factors
such as managers contribution are difficult to measure. Similarly
divisional performance is sometimes difficult to measure as compared to
individual performance. Thus, variable objectives must be created against
which measurement of performance can be done. The measurement must be done
at right time else evaluation will not meet its purpose. For measuring the
performance, financial statements like - balance sheet, profit and loss
account must be prepared on an annual basis.
- Analyzing Variance -
While measuring the actual performance and comparing it with standard
performance there may be variances which must be analyzed. The strategists
must mention the degree of tolerance limits between which the variance
between actual and standard performance may be accepted. The positive
deviation indicates a better performance but it is quite unusual exceeding
the target always. The negative deviation is an issue of concern because
it indicates a shortfall in performance. Thus in this case the strategists
must discover the causes of deviation and must take corrective action to
overcome it.
- Taking Corrective Action - Once the deviation in performance is identified, it is
essential to plan for a corrective action. If the performance is
consistently less than the desired performance, the strategists must carry
a detailed analysis of the factors responsible for such performance. If
the strategists discover that the organizational potential does not match
with the performance requirements, then the standards must be lowered.
Another rare and drastic corrective action is reformulating the strategy
which requires going back to the process of strategic management,
reframing of plans according to new resource allocation trend and consequent
means going to the beginning point of strategic management process.
Strategic Decision
Strategic decisions are the
decisions that are concerned with whole environment in which the firm
operates the entire resources and the people who form the company and the
interface between the two.
Characteristics/Features
of Strategic Decisions
- Strategic decisions have
major resource propositions for an organization. These decisions may be
concerned with possessing new resources, organizing others or
reallocating others.
- Strategic decisions deal with
harmonizing organizational resource capabilities with the threats and
opportunities.
- Strategic decisions deal with
the range of organizational activities. It is all about what they want
the organization to be like and to be about.
- Strategic decisions involve a
change of major kind since an organization operates in ever-changing
environment.
- Strategic decisions are
complex in nature.
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- Strategic decisions are at the top most level, are
uncertain as they deal with the future, and involve a lot of risk.
- Strategic decisions are different from administrative
and operational decisions. Administrative decisions are routine decisions
which help or rather facilitate strategic decisions or operational
decisions. Operational decisions are technical decisions which help
execution of strategic decisions. To reduce cost is a strategic decision
which is achieved through operational decision of reducing the number of
employees and how we carry out these reductions will be administrative decision.
The differences between Strategic,
Administrative and Operational decisions can be summarized as follows-
Strategic Decisions
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Administrative Decisions
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Operational Decisions
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Strategic decisions are long-term
decisions.
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Administrative decisions are taken
daily.
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Operational decisions are not
frequently taken.
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These are considered where The
future planning is concerned.
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These are short-term based
Decisions.
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These are medium-period based
decisions.
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Strategic decisions are taken in
Accordance with organizational mission and vision.
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These are taken according to
strategic and operational Decisions.
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These are taken in accordance with
strategic and administrative decision.
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These are related to overall
Counter planning of all Organization.
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These are related to working of
employees in an Organization.
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These are related to production.
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These deal with organizational
Growth.
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These are in welfare of employees
working in an organization.
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These are related to production
and factory growth.
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SWOT ANALYSIS
SWOT is an acronym for Strengths,
Weaknesses, Opportunities and Threats.
By definition, Strengths (S) and Weaknesses (W) are considered to be internal
factors over which you have some measure of control. Also, by definition,
Opportunities (O) and Threats (T) are considered to be external factors over
which you have essentially no control.
SWOT Analysis is the most renowned tool for audit and analysis of the
overall strategic position of the business and its environment. Its key
purpose is to identify the strategies that will create a firm specific
business model that will best align an organization’s resources and
capabilities to the requirements of the environment in which the firm
operates. In other words, it is the foundation for evaluating the internal
potential and limitations and the probable/likely opportunities and threats
from the external environment. It views all positive and negative factors
inside and outside the firm that affect the success. A consistent study of
the environment in which the firm operates helps in forecasting/predicting
the changing trends and also helps in including them in the decision-making
process of the organization.
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An overview of the four factors
(Strengths, Weaknesses, Opportunities and Threats) is given below-
- Strengths-
Strengths are the qualities that enable us to accomplish the
organization’s mission. These are the basis on which continued success can
be made and continued/sustained. Strengths can be either tangible or
intangible. These are what you are well-versed in or what you have
expertise in, the traits and qualities your employees possess
(individually and as a team) and the distinct features that give your
organization its consistency. Strengths are the beneficial aspects of the
organization or the capabilities of an organization, which includes human
competencies, process capabilities, financial resources, products and
services, customer goodwill and brand loyalty. Examples of organizational
strengths are huge financial resources, broad product line, no debt,
committed employees, etc.
- Weaknesses-
Weaknesses are the qualities that prevent us from accomplishing our
mission and achieving our full potential. These weaknesses deteriorate
influences on the organizational success and growth. Weaknesses are the
factors which do not meet the standards we feel they should meet.
Weaknesses in an organization may be depreciating machinery, insufficient
research and development facilities, narrow product range, poor
decision-making, etc. Weaknesses are controllable. They must be minimized
and eliminated. For instance - to overcome obsolete machinery, new
machinery can be purchased. Other examples of organizational weaknesses
are huge debts, high employee turnover, complex decision making process,
narrow product range, large wastage of raw materials, etc.
- Opportunities-
Opportunities are presented by the environment within which our
organization operates. These arise when an organization can take benefit
of conditions in its environment to plan and execute strategies that
enable it to become more profitable. Organizations can gain competitive
advantage by making use of opportunities. Organization should be careful
and recognize the opportunities and grasp them whenever they arise.
Selecting the targets that will best serve the clients while getting
desired results is a difficult task. Opportunities may arise from market,
competition, industry/government and technology. Increasing demand for
telecommunications accompanied by deregulation is a great opportunity for
new firms to enter telecom sector and compete with existing firms for
revenue.
- Threats-
Threats arise when conditions in external environment jeopardize the
reliability and profitability of the organization’s business. They
compound the vulnerability when they relate to the weaknesses. Threats are
uncontrollable. When a threat comes, the stability and survival can be at
stake. Examples of threats are - unrest among employees; ever changing
technology; increasing competition leading to excess capacity, price wars
and reducing industry profits; etc.
Advantages
of SWOT Analysis
SWOT Analysis is instrumental in
strategy formulation and selection. It is a strong tool, but it involves a
great subjective element. It is best when used as a guide, and not as a
prescription. Successful businesses build on their strengths, correct their
weakness and protect against internal weaknesses and external threats. They
also keep a watch on their overall business environment and recognize and
exploit new opportunities faster than its competitors.
SWOT Analysis helps in strategic
planning in following manner-
- It is a source of information for strategic planning.
- Builds organization’s strengths.
- Reverse its weaknesses.
- Maximize its response to opportunities.
- Overcome organization’s threats.
- It helps in identifying core competencies of the firm.
- It helps in setting of objectives for strategic
planning.
- It helps in knowing past, present and future so that by
using past and current data, future plans can be chalked out.
SWOT Analysis provide information that
helps in synchronizing the firm’s resources and capabilities with the
competitive environment in which the firm operates.
SWOT
ANALYSIS FRAMEWORK
Limitations
of SWOT Analysis
SWOT Analysis is not free from its
limitations. It may cause organizations to view circumstances as very simple
because of which the organizations might overlook certain key strategic
contact which may occur. Moreover, categorizing aspects as strengths,
weaknesses, opportunities and threats might be very subjective as there is great
degree of uncertainty in market. SWOT Analysis does stress upon the
significance of these four aspects, but it does not tell how an organization
can identify these aspects for itself.
There are certain limitations of
SWOT Analysis which are not in control of management. These include-
- Price increase;
- Inputs/raw materials;
- Government legislation;
- Economic environment;
- Searching a new market for
the product which is not having overseas market due to import
restrictions; etc.
Internal limitations may include-
- Insufficient research and
development facilities;
- Faulty products due to poor
quality control;
- Poor industrial relations;
- Lack of skilled and efficient
labour; etc
Strategic
leadership
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Strategic leadership refers to a
manger’s potential to express a strategic vision for the organization, or a
part of the organization, and to motivate and persuade others to acquire that
vision. Strategic leadership can also be
defined as utilizing strategy in the management of employees. It is the
potential to influence organizational members and to execute organizational
change. Strategic leaders create organizational structure, allocate resources
and express strategic vision. Strategic leaders work in an ambiguous
environment on very difficult issues that influence and are influenced by
occasions and organizations external to their own.
The main objective of strategic
leadership is strategic productivity. Another aim of strategic leadership is
to develop an environment in which employees forecast the organization’s
needs in context of their own job. Strategic leaders encourage the employees
in an organization to follow their own ideas. Strategic leaders make greater
use of reward and incentive system for encouraging productive and quality
employees to show much better performance for their organization. Functional
strategic leadership is about inventiveness, perception, and planning to
assist an individual in realizing his objectives and goals.
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Strategic leadership requires the
potential to foresee and comprehend the work environment. It requires
objectivity and potential to look at the broader picture.
A few main traits /
characteristics / features / qualities of effective strategic leaders that
do lead to superior performance are as follows:
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Loyalty- Powerful and effective leaders demonstrate their loyalty
to their vision by their words and actions.
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Keeping them updated- Efficient and effective leaders keep themselves updated
about what is happening within their organization. They have various formal
and informal sources of information in the organization.
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Judicious use of power- Strategic leaders makes a very wise use of their power.
They must play the power game skillfully and try to develop consent for their
ideas rather than forcing their ideas upon others. They must push their ideas
gradually.
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Have wider perspective/outlook- Strategic leaders just don’t have skills in their narrow
specialty but they have a little knowledge about a lot of things.
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Motivation- Strategic leaders must have a zeal for work that goes
beyond money and power and also they should have an inclination to achieve
goals with energy and determination.
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Compassion- Strategic leaders must understand the views and feelings
of their subordinates, and make decisions after considering them.
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Self-control- Strategic leaders must have the potential to control
distracting/disturbing moods and desires, i.e., they must think before
acting.
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Social skills- Strategic leaders must be friendly and social.
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Self-awareness- Strategic leaders must have the potential to understand
their own moods and emotions, as well as their impact on others.
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Readiness to delegate and
authorize- Effective leaders are proficient
at delegation. They are well aware of the fact that delegation will avoid
overloading of responsibilities on the leaders. They also recognize the fact
that authorizing the subordinates to make decisions will motivate them a lot.
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Articulacy- Strong leaders are articulate enough to communicate the
vision(vision of where the organization should head) to the organizational
members in terms that boost those members.
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Constancy/ Reliability- Strategic leaders constantly convey their vision until it
becomes a component of organizational culture.
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To conclude, Strategic leaders can
create vision, express vision, passionately possess vision and persistently
drive it to accomplishment.
What
is Corporate Governance?
Corporate Governance refers to the
way a corporation is governed. It is the technique by which companies are
directed and managed. It means carrying the business as per the stakeholders’
desires. It is actually conducted by the board of Directors and the concerned
committees for the company’s stakeholder’s benefit. It is all about balancing
individual and societal goals, as well as, economic and social goals.
Corporate Governance is the
interaction between various participants (shareholders, board of directors,
and company’s management) in shaping corporation’s performance and the way it
is proceeding towards. The relationship between the owners and the managers
in an organization must be healthy and there should be no conflict between
the two. The owners must see that individual’s actual performance is
according to the standard performance. These dimensions of corporate governance
should not be overlooked.
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Corporate Governance deals with the
manner the providers of finance guarantee themselves of getting a fair return
on their investment. Corporate Governance clearly distinguishes between the
owners and the managers. The managers are the deciding authority. In modern
corporations, the functions/ tasks of owners and managers should be clearly
defined, rather, harmonizing.
Corporate Governance deals with
determining ways to take effective strategic decisions. It gives ultimate
authority and complete responsibility to the Board of Directors. In today’s
market- oriented economy, the need for corporate governance arises. Also,
efficiency as well as globalization are significant factors urging corporate
governance. Corporate Governance is essential to develop added value to the
stakeholders.
Corporate Governance ensures
transparency which ensures strong and balanced economic development. This also
ensures that the interests of all shareholders (majority as well as minority
shareholders) are safeguarded. It ensures that all shareholders fully exercise
their rights and that the organization fully recognizes their rights.
Corporate Governance has a broad
scope. It includes both social and institutional aspects. Corporate Governance
encourages a trustworthy, moral, as well as ethical environment.
Benefits
of Corporate Governance
- Good corporate governance ensures corporate success and
economic growth.
- Strong corporate governance maintains investors’
confidence, as a result of which, company can raise capital efficiently
and effectively.
- It lowers the capital cost.
- There is a positive impact on the share price.
- It provides proper inducement to the owners as well as
managers to achieve objectives that are in interests of the shareholders and
the organization.
- Good corporate governance also minimizes wastages,
corruption, risks and mismanagement.
- It helps in brand formation and development.
- It ensures organization in managed in a manner that
fits the best interests of all.