Strategic Management Process

1 Strategic Management Process
Index
Topic Name Introduction Strategy Strategic Planning Strategic Management process Models Of Strategic Management Strategic leadership/role of strategy manager Globalization impact on Strategic Management Strategic Management process of e-business Strategic Management process of Hindustan Unilever ltd Case study Conclusion Bibliography Pg no 2 4 7 14 23 28 33 43 49 60 66 67
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Chapter 1
Introduction Strategic Management - An Introduction Strategic Management is all about identification and description of the strategies that managers can carry so as to achieve better performance and a competitive advantage for their organization. An organization is said to have competitive advantage if its profitability is higher than the average profitability for all companies in its industry. Strategic management can also be defined as a bundle of decisions and acts which a manager undertakes and which decides the result of the firms performance. The manager must have a thorough knowledge and analysis of the general and competitive organizational environment so as to take right decisions. They should conduct a SWOT Analysis (Strengths, Weaknesses, Opportunities, and Threats), i.e., they should make best possible utilization of strengths, minimize the organizational weaknesses, make use of arising opportunities from the business environment and shouldnt ignore the threats. Strategic management is nothing but planning for both predictable as well as unfeasible contingencies. It is applicable to both small as well as large organizations as even the smallest organization face competition and, by formulating and implementing appropriate strategies, they can attain sustainable competitive advantage. Strategic Management is a way in which strategists set the objectives and proceed about attaining them. It deals with making and implementing decisions about future direction of an organization. It helps us to identify the direction in which an organization is moving. Strategic management is a continuous process that evaluates and controls the business and the industries in which an organization is involved; evaluates its competitors and sets goals and strategies to meet all existing and potential competitors; and then reevaluates strategies on a regular basis to determine how it has been implemented and whether it was successful or does it needs replacement. Strategic Management gives a broader perspective to the employees of an organization and they can better understand how their job fits into the entire organizational plan and how it is co-related to other organizational members. It is nothing but the art of managing
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employees in a manner which maximizes the ability of achieving business objectives. The employees become more trustworthy, more committed and more satisfied as they can corelate themselves very well with each organizational task. They can understand the reaction of environmental changes on the organization and the probable response of the organization with the help of strategic management. Thus the employees can judge the impact of such changes on their own job and can effectively face the changes. The managers and employees must do appropriate things in appropriate manner. They need to be both effective as well as efficient. One of the major role of strategic management is to incorporate various functional areas of the organization completely, as well as, to ensure these functional areas harmonize and get together well. Another role of strategic management is to keep a continuous eye on the goals and objectives of the organization.
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Chapter 2
What is strategy? The word strategy is derived from the Greek word stratgos; stratus (meaning army) and ago (meaning leading/moving). Strategy is an action that managers take to attain one or more of the organizations 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 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. Elements of Strategic Management Strategic management, as minimum, includes strategic planning and strategic control. Strategic planning describes the periodic activities undertaken by organizations to cope with changes in their external environments (Lester A. Digman) it involves formulating and evaluating alternative strategies, selecting a strategy, and developing detailed plans for putting the strategy into practice. Strategic planning consists of formulating strategies from which overall plans for implementing the strategy are developed. Strategic control consists of ensuring that the chosen strategy is being implemented properly and that it is producing the desired results.
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Based on Robert Anthony's framework, three types of planning and control are required by organizations: * Strategic Planning and Control - the process of deciding on changes in organizational objectives, in the resources to be used in attaining these objectives, in policies governing the acquisition and use of these resources, and in the means (strategies) of attaining the objectives. Strategic planning and control involve actions that change the character or direction of the organization. * Management Planning and Control - the process of ensuring that resources are obtained and used efficiently in the accomplishment of the organization's objectives. Management planning and control is carried on within the framework established by strategic planning and is analogous to operating control. * Technical Planning and Control - the process of ensuring efficient acquisition and use of resources, with respect to those activities for which the optimum relationship between outputs and resources can be accurately estimated (e.g., financial, accounting, and quality controls). Another important term in the study of strategic management is long-range planning. Longrange planning, planning for events beyond the current year, is not synonymous with strategic management (or strategic planning). Not all long-range planning is strategic. Scope of Strategic Management J. Constable has defined the area addressed by strategic management as "the management processes and decisions which determine the long-term structure and activities of the organization". * Management process. Management process as relate to how strategies are created and changed. * Management decisions. The decisions must relate clearly to a solution of perceived problems * Time scales. The strategic time horizon is long. However, it for company in real trouble can be very short * Structure of the organization. An organization is managed by people within a structure. The decisions which result from the way that managers work together within the structure can result in strategic change
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* Activities of the organization. This is a potentially limitless area of study and we normally shall centre upon all activities which affect the organization. These all five themes are fundamental to a study of the strategic management field and are discussed further in this chapter and other part of this thesis.
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Chapter 3
Strategic planning Strategic planning Strategic planning is a management tool, period. As with any management tool, it is used for one purpose only: to help an organization do a better job - to focus its energy, to ensure that members of the organization are working toward the same goals, to assess and adjust the organization's direction in response to a changing environment. In short, strategic planning is a disciplined effort to produce fundamental decisions and actions that shape and guide what an organization is, what it does, and why it does it, with a focus on the future. A word by word dissection of this definition provides the key elements that underlie the meaning and success of a strategic planning process: The process is strategic because it involves preparing the best way to respond to the circumstances of the organization's environment, whether or not its circumstances are known in advance; nonprofits often must respond to dynamic and even hostile environments. Being strategic, then, means being clear bout the organization's objectives, being aware of the organization's resources, and incorporating both into being consciously responsive to a dynamic environment. The process is about planning because it involves intentionally setting goals (i.e., choosing a desired future) and developing an approach to achieving those goals. The process is disciplined in that it calls for a certain order and pattern to keep it focused and productive. The process raises a sequence of questions that helps planners examine experience, test assumptions, gather and incorporate information about the present, and anticipate the environment in which the organization will be working in the future. Finally, the process is about fundamental decisions and actions because choices must be made in order to answer the sequence of questions mentioned above. The plan is ultimately no more, and no less, than a set of decisions about what to do, why to do it, and how to do it. Because it is impossible to do everything that needs to be done in this world, strategic planning implies that some organizational decisions and actions are more important than others - and that much of the strategy lies in making the tough decisions about what is most important to achieving organizational success.
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The strategic planning can be complex, challenging, and even messy, but it is always defined by the basic ideas outlined above - and you can always return to these basics for insight into your own strategic planning process Swot Analysis and strategic planning SWOT analysis is an examination of an organizations internal strengths and weaknesses, its opportunities for growth and improvement, and the threats the external environment presents to its survival. Originally designed for use in other industries, it is gaining increased use in healthcare. Steps in Swot Analysis The primary aim of strategic planning is to bring an organization into balance with the external environment and to maintain that balance over time. Organizations accomplish this balance by evaluating new programs and services with the intent of maximizing organizational performance. SWOT analysis is a preliminary decision-making tool that sets the stage for this work. Step 1 of SWOT analysis involves the collection and evaluation of key data. Depending on the organization, these data might include population demographics, community health status, sources of healthcare funding, and/or the current status of medical technology. Once the data have been collected and analyzed, the organizations capabilities in these areas are assessed. In Step 2 of SWOT analysis, In step 2 data on the organization are collected and sorted into four categories: strengths, weaknesses, opportunities, and threats. Strengths and weaknesses generally stem from factors within the organization, whereas opportunities and threats usually arise from external factors. Organizational surveys are an effective means of gathering some of this information, such as data on an organizations finances, operations, and processes. Step 3
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It involves the development of a SWOT matrix for each business alternative under consideration. For example, say a hospital is evaluating the development of an ambulatory surgery center (ASC). They are looking at two options; the first is a wholly owned ASC, and the second is a joint venture with local physicians. The hospitals expert panel would complete a separate SWOT matrix for each alternative. Step 4 It involves incorporating the SWOT analysis into the decision-making process to determine which business alternative best meets the organizations overall strategic plan. Strengths Traditional SWOT analysis views strengths as current factors that have prompted outstanding organizational performance. Some examples include the use of state-of-the-art medical Equipment, investments in healthcare informatics, and a focus on community healthcare improvement projects. Other strengths might include highly competent personnel, a clear understanding among employees of the organizations goals, and a focus on quality improvement. Weaknesses Weaknesses are organizational factors that will increase healthcare costs or reduce healthcare quality. Examples include aging healthcare facilities and a lack of continuity in clinical processes, which can lead to duplication of efforts. Weaknesses can be broken down further to identify underlying causes. For example, disruption in the continuity of care often results from poor communication. Weaknesses also breed other weaknesses. Poor communication disrupts the continuity of care, and then this fragmentation leads to inefficiencies in the entire system. Inefficiencies, in turn, deplete financial and other resources. Other common weaknesses include poor use of healthcare informatics, insufficient management training, a lack of financial resources, and an organizational structure that limits collaboration with other healthcare organizations. A payer mix that includes large numbers of uninsured patients or Medicaid patients can also negatively affect an organizations financial performan ce, and a lack of relevant and timely patient data can increase costs and lower the quality of patient care.
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Opportunities Traditional SWOT analysis views opportunities as significant new business initiatives available to a healthcare organization. Examples include collaboration among healthcare organizations through the development of healthcare delivery networks, increased funding for healthcare informatics, community partnering to develop new healthcare programs, and the introduction of clinical protocols to improve quality and efficiency. Integrated healthcare delivery networks have an opportunity to influence healthcare policy at the local, state, and national levels. They also have an opportunity to improve patient satisfaction by increasing public involvement and ensuring patient representation on boards and committees. Organizations that are successful at using data to improve clinical processes have lower costs and higher-quality patient care. For example, healthcare organizations with CMS Hospital Compare quality scores above the 90th national percentile are eligible for CMS pay-for performance incentives. (See Chapter 6 for information on CMS Hospital Compare). The greater the number of organizations achieving such scores, the greater patients access to quality healthcare. Such scores also enhance an organizations Reputation in the Community. Threats Threats are factors that could negatively affect organizational performance. Examples include political or economic instability; increasing demand by patients and physicians for expensive medical technology that is not cost-effective; increasing state and federal budget deficits; a growing uninsured population; and increasing pressure to reduce health cost. Components of Strategy Statements The strategy statement of a firm sets the firms long-term strategic direction and broad policy directions. It gives the firm a clear sense of direction and a blueprint for the firms activities for the upcoming years. The main constituents of a strategic statement are as follows: 1. Strategic Intent An organizations 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
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companys 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 organizations 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 organizations competencies be controlled to maximum value. Strategic intent includes directing organizations 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. 2. Mission Statement Mission statement is the statement of the role by which an organization intends to serve its 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 organizations present (i.e., about where we are). For instance, Microsofts mission is to help people and businesses throughout the world to realize their full potential. Wal-Marts 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 todays dynamic and competitive
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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 behavior of the employees, and a statement of the goals and objectives. Features of a Mission a. Mission must be feasible and attainable. It should be possible to achieve it. b. Mission should be clear enough so that any action can be taken. c. It should be inspiring for the management, staff and society at large. d. It should be precise enough, i.e., it should be neither too broad nor too narrow. e. It should be unique and distinctive to leave an impact in everyones mind. f. It should be analytical, i.e., it should analyze the key components of the strategy. g. It should be credible, i.e., all stakeholders should be able to believe it. 3. 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, Microsofts vision is to empower people through great software, any time, any place, or any device. Wal-Marts 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 its 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 featuresa. It must be unambiguous.
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b. It must be clear. c. It must harmonize with organizations culture and values. d. The dreams and aspirations must be rational/realistic. e. 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. 4. 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 featuresa. These are precise and measurable. b. These look after critical and significant issues. c. These are realistic and challenging. d. These must be achieved within a specific time frame. e. 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 featuresf. These are not single for an organization, but multiple. g. Objectives should be both short-term as well as long-term. h. Objectives must respond and react to changes in environment, i.e., they must be flexible. i. These must be feasible, realistic and operational.
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Chapter 4
Strategic Management Process Strategic management process means defining the organizations 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 its competitors; and fixes goals to meet the entire present and future competitors and then reassesses each strategy. There probably is general acceptance of the idea that strategic management is concerned with the strategic processes that produce desired responses to an organization's changing environment. The strategic management process is concerned with a long-run perspective. The time horizon involved often is at least 3 years and normally may be 5 or 10 years into the future. However, in certain extremely dynamic industries, the strategic management process could be concerned with much shorter time frames. Strategic management is the management of change. This involves the system of corporate values, the corporate culture, and all managerial process of change, such as leadership, planning, control, and human resources management. There are four steps in Strategic Management Process: i. Environmental Scanning Internal and External analysis of Environment)
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 organizations 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
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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. A 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 vigil 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 competitors 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
ii.
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. a) 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
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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. 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. b) 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. c) 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. d) 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. e) 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 degree of gap that persists between the actual reality and the long-term aspirations of the
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organization. An attempt is made by the organization to estimate its probable future condition if the current trends persist. f) 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 iii. Strategy Implementation Strategy implementation is also defined as 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 group. These are the main steps in implementing a strategy: Developing an organization having potential of carrying out strategy successfully. Disbursement of abundant resources to strategy-essential activities. Creating strategy-encouraging policies. Employing best policies and programs for constant improvement. Linking reward structure to accomplishment of results.
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)
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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 behavior Following are the main differences between Strategy Formulation and Strategy Implementation-
Strategy Formulation
Strategy Implementation
Strategy Formulation includes planning and Strategy Implementation involves all those decision-making involved in developing means related to executing the strategic organizations strategic goals and plans. plans. short, Strategy Implementation is
In short, Strategy Formulation is placing the In Forces before the action.
managing forces during the action.
Strategy Formulation is an Entrepreneurial Strategic Implementation is mainly an Activity based on strategic decision-making. Administrative Task based on strategic and operational decisions. Strategy Formulation emphasizes on Strategy Implementation emphasizes on efficiency. Strategy Implementation is basically an operational process. Strategy Formulation requires co-ordination Strategy among few individuals. Implementation requires co-
effectiveness. Strategy Formulation is a rational process.
ordination among many individuals.
Strategy Formulation requires a great deal Strategy Implementation requires specific of initiative and logical skills. iv. Strategy Evaluation motivational and leadership traits.
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
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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. The steps in Strategic Evaluation are as follows 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 include 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
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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 management is an ongoing process Because each one of the five tasks of strategic management requires, constant evaluation and a decision with things as they are or to, make changes - the process of managing strategy is ongoing. Nothing is final as all prior actions are subject to modification as conditions in the surrounding environment change and ways for improvement emerge. Strategic management is a process filled with constant motion. Changes in the organization's situation, either from inside or outside or both, constantly drive strategic adjustments. The task of evaluating performance and initiating corrective adjustments are found in both the end and the beginning of strategic management cycle. The match of external and internal events guarantees revision in the four previous components as this will be imperative sooner or later. It is always incumbent on management to push for better performance to find ways to improve the existing strategy and how it is being executed. Changing external conditions add further impetus to the need for periodic revisions in a companys mission, performance objectives, strategy and approaches to strategy execution. Adjustments usually involve fine turning, but occasions for a major strategic reorientation do arise-sometimes prompted by significant external developments and sometimes by sharply sliding financial performance. Strategy managers must stay close enough to the situation to
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detect when changing conditions require a strategic response and when they do not. It is their job to read the minds of change reorganize significant changes early and capitalize on events as they unfold. Strategic decisions 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 a. Strategic decisions have major resource propositions for an organization. These decisions may be concerned with possessing new resources, organizing others or reallocating others. b. Strategic decisions deal with harmonizing organizational resource capabilities with the threats and opportunities. c. 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. d. Strategic decisions involve a change of major kind since an organization operates in ever-changing environment. Strategic decisions are complex in nature Strategic Management benefits/advantages
There are many benefits of strategic management and they include identification, prioritization, and explorat
of opportunities. For instance, newer products, newer markets, and newer forays into business lines are o
possible if firms indulge in strategic planning. Next, strategic management allows firms to take an objective v of the activities being done by it and do a cost benefit analysis as to whether the firm is profitable. Just to differentiate, by this, we do not mean the financial benefits alone (which would be discussed below)
also the assessment of profitability that has to do with evaluating whether the business is strategically aligned its goals and priorities. The key point to be noted here is that strategic management allows a firm to orient itself to its market consumers and ensure that it is actualizing the right strategy.
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Financial Benefits It has been shown in many studies that firms that engage in strategic management are more profitable and successful than those that do not have the benefit of strategic planning and strategic management. When firms engage in forward looking planning and careful evaluation of their priorities, they have control over the future, which is necessary in the fast changing business landscape of the 21st century. It has been estimated that more than 100,000 businesses fail in the US every year and most of these failures are to do with a lack of strategic focus and strategic direction. Further, high performing firms tend to make more informed decisions because they have considered both the short term and long-term consequences and hence, have oriented their strategies accordingly. In contrast, firms that do not engage themselves in meaningful strategic planning are often bogged down by internal problems and lack of focus that leads to failure. Non-Financial Benefits The section above discussed some of the tangible benefits of strategic management. Apart from these benefits, firms that engage in strategic management are more aware of the external threats, an improved understanding of competitor strengths and weaknesses and increased employee productivity. They also have lesser resistance to change and a clear understanding of the link between performance and rewards. The key aspect of strategic management is that the problem solving and problem preventing capabilities of the firms are enhanced through strategic management. Strategic management is essential as it helps firms to rationalize change and actualize change and communicate the need to change better to its employees. Finally, strategic management helps in bringing order and discipline to the activities of the firm in its both internal processes and external activities. Closing Thoughts In recent years, virtually all firms have realized the importance of strategic management. However, the key difference between those who succeed and those who fail is that the way in which strategic management is done and strategic planning is carried out makes the difference between success and failure..
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Chapter 5
Models Of strategic Management 1. BCG Matrix
Boston Consulting Group (BCG) Matrix is a four celled matrix (a 2 * 2 matrix) developed by BCG, USA. It is the most renowned corporate portfolio analysis tool. It provides a graphic representation for an organization to examine different businesses in it portfolio on the basis of their related market share and industry growth rates. It is a two dimensional analysis on management of SBUs (Strategic Business Units). In other words, it is a comparative analysis of business potential and the evaluation of environment. According to this matrix, business could be classified as high or low according to their industry growth rate and relative market share. Relative Market Share = SBU Sales this year leading competitors sales this year.
Market Growth Rate = Industry sales this year - Industry Sales last year. The analysis requires that both measures be calculated for each SBU. The dimension of business strength, relative market share, will measure comparative advantage indicated by market dominance. The key theory underlying this is existence of an experience curve and that market share is achieved due to overall cost leadership. BCG matrix has four cells, with the horizontal axis representing relative market share and
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the vertical axis denoting market growth rate. The mid-point of relative market share is set at 1.0. If all the SBUs are in same industry, the average growth rate of the industry is used. While, if all the SBUs are located in different industries, then the mid-point is set at the growth rate for the economy. Resources are allocated to the business units according to their situation on the grid. The four cells of this matrix have been called as stars, cash cows, question marks and dogs. Each of these cells represents a particular type of business. 2. Michael Porter Model Michael Porter (Harvard Business School Management Researcher) designed various vital frameworks for developing an organizations strategy. One of the most renowned among managers making strategic decisions is the five competitive forces model that determines industry structure. According to Porter, the nature of competition in any industry is personified in the following five forces Rivalry among current competitors Threat of new potential entrants Threat of substitute product/services Bargaining power of suppliers Bargaining power of buyers
FIGURE: Porters Five Forces model
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The five forces mentioned above are very significant from point of view of strategy formulation. The potential of these forces differs from industry to industry. These forces jointly determine the profitability of industry because they shape the prices which can be charged, the costs which can be borne, and the investment required to compete in the industry. Before making strategic decisions, the managers should use the five forces framework to determine the competitive structure of industry. The five factors of Porters model in detail: Risk of entry by potential competitors: Potential competitors refer to the firms which are not currently competing in the industry but have the potential to do so if given a choice. Entry of new players increases the industry capacity, begins a competition for market share and lowers the current costs. The threat of entry by potential competitors is partially a function of extent of barriers to entry. The various barriers to entry are Economies of scale Brand loyalty Government Regulation Customer Switching Costs Absolute Cost Advantage Ease in distribution Strong Capital base
Rivalry among current competitors: Rivalry refers to the competitive struggle for market share between firms in an industry. Extreme rivalry among established firms poses a strong threat to profitability. The strength of rivalry among established firms within an industry is a function of following factors: Extent of exit barriers Amount of fixed cost Competitive structure of industry Presence of global customers Absence of switching costs Growth Rate of industry
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Demand conditions
Bargaining Power of Buyers: Buyers refer to the customers who finally consume the product or the firms who distribute the industrys product to the final consumers. Bargaining power of buyers refer to the potential of buyers to bargain down the prices charged by the firms in the industry or to increase the firms cost in the industry by demanding better quality and service of product. Strong buyers can extract profits out of an industry by lowering the prices and increasing the costs. They purchase in large quantities. They have full information about the product and the market. They emphasize upon quality products. They pose credible threat of backward integration. In this way, they are regarded as a threat. Bargaining Power of Suppliers: Suppliers refer to the firms that provide inputs to the industry. Bargaining power of the suppliers refer to the potential of the suppliers to increase the prices of inputs( labour, raw materials, services, etc) or the costs of industry in other ways. Strong suppliers can extract profits out of an industry by increasing costs of firms in the industry. Suppliers products have a few substitutes. Strong suppliers products are unique. They have high switching cost. Their product is an important input to buyers product. They pose credible threat of forward integration. Buyers are not significant to strong suppliers. In this way, they are regarded as a threat. Threat of Substitute products: Substitute products refer to the products having ability of satisfying customers needs effectively. Substitutes pose a ceiling (upper limit) on the potential returns of an industry by putting a setting a limit on the price that firms can charge for their product in an industry. Lesser the number of close substitutes a product has, greater is the opportunity for the firms in industry to raise their product prices and earn greater profits (other things being equal). The power of Porters five forces varies from industry to industry. Whatever be the industry, these five forces influence the profitability as they affect the prices, the costs, and the capital investment essential for survival and competition in industry. This five forces model also help in making strategic decisions as it is used by the managers to determine industrys competitive structure. Porter ignored, however, a sixth significant factor- complementary. This term refers to the
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reliance that develops between the companies whose products work is in combination with each other. Strong complementary might have a strong positive effect on the industry. Also, the five forces model overlooks the role of innovation as well as the significance of individual firm differences. It presents a stagnant view of competiti
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Chapter 6
Strategic Leadership/Role of leader and strategy managers Strategic leadership refers to a managers 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 A few main traits / characteristics / features / qualities of effective strategic leaders that do lead to superior performance are as follows: Loyalty- Powerful and effective leaders demonstrate their loyalty to their vision by their words and actions. 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. 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. Have wider perspective/outlook- Strategic leaders just dont have skills in their narrow specialty but they have a little knowledge about a lot of things. 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. Compassion- Strategic leaders must understand the views and feelings of their subordinates, and make decisions after considering them. Self-control- Strategic leaders must have the potential to control distracting/disturbing moods and desires, i.e., they must think before acting. Social skills- Strategic leaders must be friendly and social. Role of Managers/board of directors in Strategy development
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An organization's Chief Executive Officer is the most invisible and important strategy manager. The CEO, as captain of the ship, has full responsibility for leading the tasks of formulating and implementing the strategic plans of the whole organization, even though many other managers have a hand in the process. The CEO functions as chief direction setter, chief objective setter, and chief strategy - maker and chief strategy - implementer for the total enterprise. What the CEO views as important usually moves to the top of every managers priority list and the CEO has the final word on big decisions. Vice President (V.P) for production, marketing, finance etc and other functional departments have strategy making and strategy implementation responsibilities as well. Normally, the production V.P. oversees production strategy; marketing VP heads up the marketing strategy effort and so on. Managerial positions with strategy making and strategy-implementation responsibility are by no means restricted to these few senior executives. Every manager is a strategy-maker and strategy-implementer for the areas. He/she has authority over and supervises. Every part of the company - business unit, division, operating department, plant or district office has a role to carry out (Thompson and Strickland, 1992). The manager in charge of unit, with guidance from superiors, usually ends up doing some or most of the strategy-making for the unit and implement whatever strategic choices are made. However, managers further down in the managerial levels have a narrower, more specific strategy making/strategy-implementing role than managers close to the top. Another reason lower-echelon managers are strategy-makers and strategy-implementers is that more geographically scattered and diversified an organizations operations are, the more impossible it becomes for a few senior executives to handle all the strategic planning that needs to be done. Managers in the corporate office do not know all the situational details in all geographical areas and operating units to be able to prescribe appropriate strategies. Usually, they delegate some of the strategy-making responsibility to lower level managers who head the organizational sub-units where specific strategic results must be achieved. Delegating strategy-making role to those managers who will be deeply involved in carrying out roles in their areas, fixes accountability for strategic success or failure. When the managers who implement the strategy are also its architects, it is hard for them to shift the blame or make excuses if they do not achieved the targeted results. In diversified or large companies where the strategies of several different businesses have to be managed, there are usually four distinct levels of strategy managers: The CEO and other senior corporation-level executives who have primary
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responsibility and personal authority for big strategic decisions affecting the total enterprise and the collection of individual businesses the enterprise has diversified into Managers who have profit-and-loss responsibility for some specific business unit and who are delegated a major leadership role in formulating and implementing the strategy for that unit. Functional area managers within a given business unit have direct authority over a major piece of the business and whose role it is to support units overall strategy with strategic actions in their own areas. Managers of major operating departments and geographic field units who have frontline responsibility for developing the details of strategic efforts in their areas and for implementing and executing the overall strategic plan at grass roots level. Managerial jobs involve strategy formulation and implementation. For example, a multicampus state university has four strategy-managing levels: 1. The Vice Chancellor is a strategy manager with broad direction-setting responsibility and strategic-decision-making authority over all the campuses; 2. Pro Vice Chancellor for each campus customarily has strategy-making/strategy
implementation authority over all academic matters plus budgetary control for that campus, 3. The academic deans have responsibility for charting future direction at the faculty/college level; 4. Departmental heads are strategy-managers with first-line strategy-making/strategy
implementation responsibility and other activities relating to the departments mission objectives and future direction. The job of crafting and implementing strategy touches virtually every managerial job in one way or another at one time or another. Strategic role of the Board of Directors Board Of Directors Since the responsibility of crafting and implementing strategy falls on key managers, the chief, strategic role of an organization's board of directors is to see that the overall task of managing strategy is adequately done. Boards of directors normally review important strategic moves and officially approve the strategic plans that have been submitted by senior
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management a procedure that makes the board ultimately responsible for the strategic actions undertaken However, directors rarely play a direct role in formulating strategy. The immediate task of the directors in ratifying strategy and new direction - setting moves is to ensure that all proposals have been adequately analyzed and considered and that the proposed strategic actions are superior to available alternatives. Flamed proposals are customarily withdrawn for revision by management. The longer range task of directors is to evaluate the caliber of senior executives strategy making and strategy implementing skills. The board must determine whether the current CEO is doing a good job of strategic management, (as a basis for awarding salary increases and bonuses and deciding on retention or removal) and evaluate executives in line to succeed the current CEO Benefits of Strategic Approach to Managing Todays managers have to think strategically about their companys position and about the impact of changing conditions. They have to: Monitor the external situation closely enough to know when to institute strategic change; Know the business well enough to know what kind of strategic change to initiate. The fundamentals of strategic management need Impact of Strategic Management on organization Strategic Management is an intrinsic part of any organization. Strategic management comprises of environmental scanning, strategy formulation, implementation and evaluation and control. Through this process, an organization plans its activities which shall be profitable for the firm. On the other hand, organizational effectiveness is a tool for making best use of available talents, skills and helping employees to achieve their personal goals along with organizational goals and mission. Organizational effectiveness is the degree to which an organization realizes its goals. Effectiveness implicitly takes into consideration a range of variables at both the organizational and departmental levels. The presented study is an attempt to correlate strategic management and organizational effectiveness through a study in banks. The conclusion of the study supports that strategic management has quite an impact on organizational effectiveness in terms of planning, formulation, implementation and evaluation
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in relation to innovation, feedback, roles and communication within an organization. The impact is: Competitive Advantage
Competitive advantage is the set of factors that differentiates an organization from its competitors. In developing, implementing and managing global and national strategies, an organization sets itself apart. In terms of performance, this means that the organization becomes more efficient in its operations, such as manpower planning or manufacturing and in reaching its customers. Strategic management also enables an organization to identify ways of penetrating new markets, globally and nationally.
Culture
Organizational culture significantly influences an organization's performance. Additionally, strategic management helps in creating the organizational culture through developing the mission, vision and values. Proper strategic management facilitates the formation of a culture of integrity, competitive work ethic, embracing technology, value creation for customers and shareholders.
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Chapter 7
Globalization impact on strategic Management The globalization of business has become so rapid that a new field called "Global Strategic Management" has now emerged. This new field is a blend of strategic management and international business that develops worldwide strategies for global corporations. Whereas most studies in this field focus on ordinary business conditions, the revolutionary events of the past few years make it clear that the present is not ordinary. Such epoch-shattering events as the collapse of communism, the unification of Europe, the information revolution, the arrival of an environmental ethic, and other remarkable new developments signal that a new era is emerging in global affairs. This article describes a broader approach to global strategic management that encompasses these revolutionary changes. The viewpoint presented here was developed in a project sponsored by the World Future Society called "WORLD 2000." WORLD 2000 focuses on conducting a global strategic management process among business, government, education, and other sectors of society to define the emerging global system and help institutions adapt to changes. It represents a fresh examination of the forces that are integrating the earth into a coherent global order as well as those that are creating the disorder that tends to characterize our time: the unification of markets and communications, as well as the vast differences in cultures, local problems, and values erupting around the globe. By gaining new insights into the emerging world system, social institutions may better understand how they can adapt to these changes. This seems to be an opportune time for such an examination. The transition to a new global system is likely to be made during the next decade; the year 2000 offers a highly symbolic turning point at which the emerging global order can be shaped and molded. Following is a global strategic plan, developed by synthesizing the literature and then reviewing the plan with groups of executives. It follows the logic of a typical strategic plan but carried to a global level. First, we summarize nine super trends that describe a long-term trajectory toward an advanced stage of "global maturity." Second, we note five principal obstacles that must be overcome to clear the way ahead. Third, we argue that these issues can
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be resolved by a newly emerging perspective that recognizes the essential unity of a global community. The Trajectory To Global Maturity The following trends represent the principal driving forces that are now moving the world in new directions. They could be called "super trends." Little attempt is made to offer justifications, and many other trends that capture finer details are not covered. This summarizes the major features that characterize the emerging shape of the globe as it moves along a long-term trajectory toward a new stage of global maturity. Trend 1: A Stable Population of 10-14 Billion The earth, which already is teeming with 5.5 billion people, is expected to double its population to reach a stable level somewhere between 10-14 billion humans by the mid-21st century. About 95 percent of this growth will occur in the less developed countries (LDCs). Trend 2: Industrial Output Will Increase by a Factor of 5-10 The aggregate level of material consumption, or industrial output, should increase by a factor of 5-10 over the next few decades as most remaining parts of the world industrialize to reach the equivalent standard of living enjoyed by Americans, Europeans, and Japanese. Industrial throughout, however, is likely to grow less as more efficient means are found to insure a sustainable form of development. Trend 3: The Wiring of the Globe Information technology (IT) is a revolutionary force that will continue to overthrow governments, restructure corporations, and unify the world. This revolution will wire the earth into a single communication network, a central nervous system for a planetary society. However, the gap between information haves and have-nots is apt to persist. Trend 4: The High-Tech Revolution The IT revolution is accelerating technical advances to create breakthroughs in all fields: the mapping of DNA, genetic therapy, robotics, materials research, sustainable "green
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technology," automated transportation, and even a "technology of consciousness." Trend 5: Global Integration The globe is becoming integrated into a single community connected by a common communication system, a global economy, and a shared international culture. In time, this process may unify today's growing economic blocs and political federations into a universal system of open trade, a global banking system and common currency, and some form of world governance. Trend 6: Diversity and Complexity It is a great paradox that global integration will be accompanied by disintegration into a highly diverse system. Ethnic enclaves, such as those in the former republics of the USSR, will continue to seek autonomy; various groups within nations will form pockets of selfgoverning subcultures; and modern societies generally will splinter into a far more complex, differentiated social order. rend 7: A Universal Standard of Freedom Freedom and the recognition of human rights should continue spreading around the globe, though this movement may ebb and flow at times. A majority of nations now have political democracy and free market systems, and the number should grow to the extent that freedom becomes the accepted norm, with authoritarian systems being the exception. Trend 8: Continued Crime, Terrorism, and War Traumatic upheaval is likely to produce disgruntled individuals, groups, and nations resorting to a variety of crimes, terrorism, and limited wars. However, global wars and the old fear of nuclear holocaust now seem unlikely. Trend 9: Transcendent Values As this transformation unfolds, most people in advanced nations should strive for quality of life, community, self-fulfillment, art, spirituality, and other higher-order values that transcend material needs. Many are cynical about such claims, but as the philosopher Andre Malraux
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predicted, the twenty-first century will be the century of religion.
CRITICAL ISSUES BLOCKING THE PASSAGE AHEAD Although this evolutionary trajectory is likely to stabilize into a mature, coherent global order in the mid-twenty-first century, business and government must resolve the following five issues, which pose barriers to this forward movement. Once again, this represents a quick survey--not a detailed summary--to highlight key issues that now present major obstacles to progress. Issue 1: Making the Leap to a Global Order Most of the problems the world struggles with result from the fragmented economic and political systems that continue unchanged from the industrial past. Trade barriers, fluctuating currency exchange rates, and difficulties in communicating are "old" problems that should not exist in a "new" global order managed as a coherent system; they do not exist in the United States, Germany, China, or other societies governed as coherent systems. The transition to some type of world order is monumental because it requires sophisticated global systems that integrate the world into a single whole, permitting a quantum leap to a global level of governance heretofore unknown. Issue 2: Reconciling Economic Interests Communism may have yielded to markets, but markets do not exist only in capitalism. The strength of Japan, for instance, hinges on a market system that is based on collaborative working relations: a "Human Enterprise System" (Ozaki 1991). In contrast, the capitalism practiced in Western nations, such as the United States, is in trouble because it exacerbates conflicts between labor and management, rich and poor, business and government, domestic and foreign trade, private and public sectors, and other basic incompatibilities. A sound global economy for the future, therefore, awaits the creation of a new economic paradigm based on some form of free enterprise that can reconcile these diverse interests into a productive and harmonious community.
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Issue 3: Achieving Sustainable Development The present conflict between economic growth and environmental protection will be resolved either rationally or through some form of decline. The anticipated five- or ten-fold increase in industrial output is incompatible with any reasonable forecast under existing conditions. Many solutions are being proposed to achieve sustainable development, but the task of implementation remains formidable. Ecological systems are suffering unsustainable stress even under today's far more modest load. Developed countries (DCs) show little inclination to alter their profligate lifestyles, and LDCs seem to be striving for Western affluence. Issue 4: Managing Complexity One of the most striking trends of the emerging future is the explosion of complexity that is almost impossible to contain within today's cumbersome institutions. Much of what passes for unsolvable disorder reflects an inability to respond effectively to the diversity of individual and community challenges. This problem, which toppled communism, is becoming severe in the West. Top-down corporations are struggling to diversify so they can serve myriad market niches; governments have not yet begun to grapple with the intricacies of education, poverty, crime, and other chronic social problems. Dramatically different institutions are needed to manage this complex new world, which may require an upheaval similar to the one now plaguing the former communist bloc. Issue 5: Alleviating the North-South Gap The enormous disparity between the wealth of LDCs in the South and the DCs of the North shows little sign of improvement, fanning an explosive antagonism between these two halves of the globe. Average income in the South is now about six percent of that in the North; little progress is being made in alleviating the misery of these people, who make up three-quarters of all humanity. Unless serious efforts are made to close this gap by bringing LDCs into the modem world, the Southern hemisphere will seethe with the same potential for violent confrontation that was released in the Los Angeles riots of 1992. These five dilemmas are exacerbated by one of the most pervasive problems of our time: a collapse of faith in the familiar old ideology that guided humans through the past epoch with good success. It could be thought of as a "meta-issue." With the USSR now defunct and the
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United States in crisis, the lack of superpower leadership has left a vacuum of power. Ideas and moral guidelines at a time when the world is facing Herculean new challenges. The result is political gridlock, economic stagnation, destructive personal stress, social disorders, and many other symptoms of breakdown. From all this apparent chaos, a new paradigm, model, or belief system must somehow be formed that allows people to make sense of today's different global realities. A strategy based on global perspective An enormous variety of policies and remedial programs are being proposed to resolve all these problems, but their sheer number and diversity scatter attention into confusing, uncoordinated, and ineffectual directions. This section synthesizes these proposals into a "master strategy" based on a different perspective now gaining increasing attention, one that recognizes the essential unity of the emerging global system. The key to understanding the emerging world view is to see that unprecedented new imperatives have arisen--especially the revolutionary force of IT--that are unleashing powerful new forces to integrate the globe. As communication systems encircle the earth to form a central nervous system for the planet, the fragmented parts of today's failing global order are being joined together into an interconnected, coherent system. The most recent report of the Club of Rome (King and Schneider 1991) notes that current dramatic changes represent the first global revolution because the entire earth is experiencing these events together at the same time. This perspective then leads to the following elements of a master strategy required to overcome the issues defined before: Strategy 1: Disseminate Advanced Technology to Unify the Globe Although many people fear its effects, the relentless advance of modern technology-especially information technology--is the primary force driving the globe through its present transition. It was the ubiquitous presence of television, radio, facsimile, and video, for instance, that armed citizens of the former USSR and the Eastern Bloc with the knowledge required to overthrow their governments. Information technologies should be diffused, therefore, by corporations selling sophisticated products abroad, governments fostering joint research and development projects, individuals
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sharing technical knowledge, and any other reasonable methods. There is a particular need to find ways of introducing these technologies into LDCs to advance their modernization and unite them with the world. All technology can be misused, so care is needed to ensure that it is applied appropriately. The emerging global order is being constructed on a technological foundation; the sooner that foundation is in place, the sooner this system can behave as a coherent global community. Strategy 2: Integrate Economics and Society The conflict between economic life and social life is being reconciled, as evidenced by breakthroughs that would have been unthinkable a few years ago. Japan has shown the world that a union of economic and social interests is more productive, spurring others to emulate this "human-centered" form of enterprise. Even General Motors, long regarded as the antithesis of this idea, has formed GM-Saturn as a prototype of socially responsive business, managed by a coalition of workers, customers, suppliers, distributors, and local citizens. Saturn production lines cannot keep up with demand because Saturn cars are now the best in their class, proving that social goals are compatible with economic goals. Intense global competition should, in time, drive most economies in this direction because it is efficient. Decisions ranging from the shop floor to national macroeconomic policy may then be made collectively by all affected parties, including workers, labor, consumer advocates, governments, and citizens. If this can be done, the leaders of business and other social institutions may then act as stewards rather than managers, creating the badly needed trust, quality, mutual service, and collaborative economic relationships that can instill the essential sense of community that vitalizes society. Strategy 3: Create a Symbiotic Society-Environment Interface A harmonious economic-societal relationship will mean little if it is not supported by a viable ecosystem. Civilization must be carefully redesigned to form a symbiotic society-environment interface. Business firms are now competing to prove their environmental consciousness because of public pressure. Stephen Schmidheiny, Chairman of the Business Council for Sustainable Development, described the advantages (1992): "Progress toward sustainable development makes good business sense because it can create competitive advantage and new
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opportunities." A wide range of difficult adjustments are under way to integrate ecological realities into economic and social life. Sustainable technologies and practices are being developed to increase economic efficiency, advance more modest but wholesome lifestyles, develop renewable energy, reforest denuded lands, convert to organic agriculture, recycle waste, and improve pollution controls. To evaluate this complex situation realistically, social indicators must be incorporated into such financial measures as GNP; social costs, such as pollution, should be internalized in the form of taxes and credits to guide balanced economic choices. Strategy 4: Decentralize Institutions to Empower Individuals Almost all analysts agree that social institutions need to be restructured for a knowledgebased global order, but confusion reigns over what is needed. The most useful guide can be found in a dominant imperative now sweeping through modern nations: institutions are being decentralized into networks of small, autonomous units to master complexity. This imperative is the entrepreneurial half of the new role emerging for institutions; the move toward collaborative, democratic policymaking described in Strategy 3 constitutes the other half that unifies this diversity into a harmonious whole. For instance, large corporations are being disaggregated into small "internal enterprises" that form the equivalent of market economies inside organizations--"internal markets" (Halal et al. 1993). Under the pressure of limited budgets and public demands, governments are also allowing the public to choose among competing agencies. A good example is the way U.S. education is introducing market competition among schools, which are also governed democratically by teachers, parents, local citizens, and administrators. The result of all these changes is to restructure authority relationships. Markets and democracies share the common feature of placing control in the hands of ordinary people to harness the growing diversity of thought and values into creative forces of change, with institutions providing the overarching systems that support and guide change. The decentralization of authority, then, empowers a person to care for themselves more effectively, which provides a self-organizing system for managing a complex world.
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Strategy 5: Foster Collaborative International Alliances A knowledge-based society fosters pockets of collaborative problem solving in which all partners benefit, while competition drives collaborating parties together. This is why business managers and politicians are creating a flurry of strategic alliances with their competitors. Cooperation has now become the most powerful force in world affairs. This new ethic of strategic collaboration is also being extended to forge productive alliances between business and government, economists and ecologists, and competing nations, knitting together a global community of diverse groups. Note that an ethic of cooperation implies not altruism but a reciprocity of interests that benefits all partners. It is enlightened self-interest. The conflict between North and South, for example, could yield cooperative ventures, such as the North American Free Trade Agreement, between DCs and LDCs based on mutual advantages for both parties. LDCs gaining capital, jobs, and know-how, while DCs gain access to markets and less costly labor. Obviously there is no assurance that the world will pursue a path of this type. And it is certainly true that difficult choices at dangerous junctures could deflect the trajectory toward maturity into other directions. However, historic breakthroughs have occurred in the past few years--the collapse of communism, a greatly reduced threat of nuclear holocaust, and worldwide concern over the environmental crisis--largely through the natural evolution of the global order. Barring unforeseen disasters, it seems reasonable to expect that the other remaining obstacles noted above could also be resolved from this same natural process, though we cannot now anticipate how or when. This does not mean that individuals and institutions are passive observers of an immutable process of natural development: change is the sum of countless small human actions that collectively produce social transformation. A coherent new world order will emerge only if global corporations, national governments, and educational institutions are able to adopt major strategies such as those outlined above. Developing and disseminating advanced technologies, especially information technology, will be essential in forming the foundation for a mature global society. A collective model of enterprise must be defined that reconciles
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the interests of capital with mounting social concerns, particularly environmental sustainability. Large firms must be decentralized to empower individuals if we hope to manage a complex and diverse world. Strategic alliances must be encouraged on a global scale to avoid the conflicts that now divide the world. Accomplishing these ambitious tasks will test us all because our individual perspectives will have to yield to a broader perspective. In our work conducting the WORLD 2000 global strategic management process for corporations, government agencies, and other management groups, we find a common theme running through all these changes: the emerging global order can be integrated into a workable whole only by accepting the legitimacy of other views, even those we feel are antithetical to our own. The primary skill required to survive this critical transformation, therefore, is an attentive ability to reconcile the conflicting, endlessly changing, overwhelming complexity posed by today's diverse world. A crucial paradox lies at the heart of this challenge. What is involved, fundamentally, is cultivating a more transcendent mode of thought that can permit all of us to regain command over our affairs by relinquishing the illusion of self-control in favor of shared control. Impact of Internet on Strategic Mangement Few innovation in history provide as many benefits to the strategic management of a corporation as does electronic commerce via the internet.The global nature of technology low cost opportunity to reach millions of people interactive nature and variety of possibilities result in many benefits to strategic management .Ecommerce provides certain benefits to the strategic management of corporations. Expands the market place to national and international markets .All any one now needs is a computer to connect buyers and sellers. Decrease the cost of creating, processing, distributing storing and retrieving information. The cost of electronic is quite reasonable. Enables people to create highly specialized business ventures. Very narrow market can now be reached via internet and internet search engines. Allow small inventories, just in time manufacturing, and less overhead expenses by facilating pull type supply chain management.
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Enables the communication of products and services to better suit customer needs. Customers are encouraged to select alternative and styles from the auto of their choice on the BMW Web site.
Increase flexibility, compress cycle, and delivery time, and provides easy access t information on customers and suppliers
Chapter 8
Strategic management process of e-business The e-business strategic management process illustrated is based on the traditional model of strategic management. It is a systematic process consisting of four interrelated steps: (1) Analyze the external and internal environments, (2) Select the e-business strategy, (3) Implement the e-business strategy, and (4) Evaluate the success of the e-business strategy. Step 1: Analyze The Companys External And Internal Environments In the traditional strategic planning model, managers identify their companys strengths and weaknesses, as well as the obstacles and opportunities in their business environment. They are then ready to make strategic decisions that seek to balance their companys competencies with the business opportunities around them. This step is equally crucial for e-business planning. The main barriers to e-business adoption A wait-and-see attitude and skepticism on the part of clients and partners can put up barriers that discourage e-business solutions. In other cases, the nature of the companys product can make it more difficult to introduce e-business. Consider the example of Moules Industrials, a Sherbrook, Que., firm that manufactures rubber and plastic moulds-a customized product that is generally unsuitable for Web-based sales because transactions cannot occur without prior personal contact. Moules Industrials can, however, use the Web to foster initial client contact, and when an agreement is reached with a client, the Internet can make further contact easier during the prototype development phase.
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For SMEs located outside major urban centers, it is sometimes hard to find simple, economic solutions for distributing the products they sell on-line. La Ferme Martinette, a maple-product business in Quebecs Eastern Townships that markets its merchandise on-line, must rely on Canada Post to deliver goods to its customers. La Fermee Martinette operates at a disadvantage because merchandise pickup is not an option for many customers, and because it does not have personal contact with customers at the time of sale or product receipt. The Web makes it possible for SMEs like La Ferme Martinette to increase their customer base, but it cannot solve all the logistical difficulties related to the sale. However, our study found that by far the most important obstacle to e-business adoption among small- and medium-sized enterprises was lack of financial resources. The size of the investment and the long and sometimes uncertain payback period frequently cause SMEs to postpone investing in e-business. For example, 20 per cent of Polar Plastics customers wanted the Montreal-based plastic-ware manufacturer to adopt an electronic data interchange (EDI) system, which was too costly, given the companys small client base. Polar Plastic knew that it would be very difficult to pay off the $30,000 cost of the system over the short term. Instead, the company opted for EDI Gateway, a technological solution offered by an external supplier that processes customer orders and lets Polar Plastic transmit information to its clients EDI systems. Through this intermediary company, Polar could receive and transmit information by fax to clients like McDonalds Restaurants. Until recently, the cost of contracting this particular EDI solution through an intermediary was a few hundred dollars per month. What conditions enable e-business adoption? When developing their e-business strategic plan, managers must take into account the number and nature of external factors that are compatible with the adoption of e-business. Depending on the industry, government financing may be an incentive for adopting ebusiness. Other proven incentives are the time spent with SMEs to understand their needs and the investments in technological infrastructure made by the leaders of sector-based associations like the QICG (Quebec Institute of Graphic Communications) and the funding and technological expertise of partners such as government agencies and large corporations. Many companies know how to identify and take advantage of such arrangements. In our
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study, the triggering factor was usually the initiative of managers who realized the potential advantages of e-business. For example, the vision and technological know-how of managers at Auberge de La Fontaine, a small hotel in Montreal, and Colibri Tours, a travel agency, led these companies to develop a Web site. After many years of negative growth, Revue Gestion, a magazine for business practitioners and academics, also sought to boost readership by going on-line. Step 2: Select An E-Business Strategy The selection of an e-business strategy requires solid knowledge of how e-business can create economic value for the firm. Successful SMEs know how to identify the scope of their activities and determine which products, clients and geographic markets they should target. They also know how to set clear and measurable goals. How can e-business create economic value? The ultimate goal of any strategic decision is to create value. Amit and Zotto identified four opportunities to create value with the help of e-business: efficiency, complementarities, novelty and lock-in. Efficiency is mainly derived from lower costs due to faster transactions, increased automation of the companys operations, and the ease with which clients can research relevant information. Novelty refers to the design and adoption of new operational methods in a given sector that link up new or existing participants, or introduces new products and services. By locking in to a particular, reliable technological solution, a company gains approval and trust among its client base. Complementarities are mainly concerned with the bundling of resources and technological capabilities, as well as the bundling of products and services, of various partners in one electronic network. In our study, the principal value driver was efficiency for the firm and the customer. Using e-business allowed SMEs to reduce costs and find new clients, as was the case with Montreals Auberge de La Fontaine, whose Web presence boosted the inns revenues by 30 per cent. The inn was also able to save on advertising costs by reducing the number of promotional flyers it printed. Its trilingual site (French, English and Spanish) allows customers to view available rooms and obtain information on Montreals tourist and cultural offerings, adding value for its patrons and streamlining the booking process.
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Value can also be created through complementarities and lock-in. Caractra-Neomdia, a Quebec-based printing and new-media company, retains clients by providing them with comprehensive content-management services and alternative publishing methods. How can the SME position itself in the industry? To create value, companies seek to improve their positioning vis--vis their competitors. The SMEs in this study were seeking primarily to improve their client offerings by making their products or services more attractive. Revue Gestion, for instance, established an on-line database for individual and corporate clients. The search engine on its Web site allows readers to conduct speedy, targeted searches through its collection of 1,000 articles published within the past 28 years. By offering an electronic database of articles as well as a print version, Revue Gestion is adding value in ways that will strengthen its customer base. Colibri Tours chose to develop a Web site in order to reach clients directly rather than through intermediaries. The travel agency was able to improve the speed and quality of its services, reduce its promotional costs and lock in customers. RECF, a French-Canadian group of editors, inexpensively expanded its product range, enhanced its exposure and increased sales by making its plays and poetry publications available on-line. Some of the less profitable cultural products that RECF was unable to include in a printed catalogue are now offered online at lower cost. Thanks to e-business, SMEs are consolidating and expanding their geographic market. For example, GLP Hi-Tech, a plastics processor in St. Jean-sur-Richelieu, Que., created a Web site to attract international clients to its GLP Power division. The company now sells its products in over 20 countries to clients who would have been expensive to reach without the Internet. La Ferme Martinette draws customers from the Montreal area by advertising its sugar-shack activities on-line, and is also hoping to reach a more international market for its maple-sugar products. Auberge de La Fontaine focuses on the North American market, but is also attempting to attract international clients through its Web site. Step 3: Implement The E-Business Strategy After defining the targeted client base and geographic markets for new or traditional products, SME managers should plan the implementation of their e-business and decide what type of
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technological solution and supply chain to adopt. What are the most suitable technological solutions? Companies have a wide range of technological options from which to choose (see Table 1). Our study shows that SMEs usually develop Web sites and e-shops that complement their products and services, and fulfill their need for identity and independence. SMEs in plastics and printing often are reluctant to embrace technological solutions that impose standardization on the entire industry. In fact, portal solutions, virtual communities and e-malls are usually not attractive to SMEs because they do not support the SMEs need for identity and independence. Thanks to its Web site, Maison Laprise, a manufacturer of factory-built homes, is able to provide customers with a complete catalogue of its products, along with the relevant technical specifications for each home. The sites search engine allows clients to input the features they want in a home and quickly access an appropriate model. About 60 per cent of buyers said they visited the Web site before heading to the companys showroom. The companys on -line presence has bolstered its sales volume. Some businesses prefer to involve other retailers or partners in their technological solutions, and to devise a technical format that is tailored to the specific operations of their association or sector. RECF, for example, runs an e-mall where editor partners can advertise their products. Step 4: Evaluate the success of the e-business strategy After acquiring a sound understanding of how to create economic value with e-business and determining the firms desired positioning, managers must finalize objectives relating to sales growth, cost reduction and profitability. They must also select the indicators that will enable them to assess the success of the e-business solution-scorecards showing financial, client, internal process and learning and growth indicators can be vital tools. Indicators for evaluating e-business success Overall, the businesses in this study used a small number of unsophisticated indicators. They placed importance on the profitability of transactions, and measured performance by
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analyzing additional sales volume and the savings realized by using e-business. In our study, only Revue Gestion established a set of indicators to assess the performance of its e-business project prior to implementing e-business. Many of these indicators are automatically captured on Revue Gestions Web site Revue Gestions on-line presence has increased the companys revenues by over 25 per cent. This improvement is largely due to the introduction of corporate on-line subscriptions for businesses and associations, which increased subscription rates from 2,500 to more than 30,000 in one year. At the same time, handling, marketing and printing costs declined, saving the journal an estimated $194,000. Auberge de la Fontaines Web site expanded the companys client base by 15 per cent. In 2003, 24 per cent of the companys clients discovered the hotel through the Internet-49 per cent were American, 42 per cent Canadian, and 3 per cent French. Moreover, 52 per cent of the hotels clients entered the site directly through its e-mail address, aubergedelafontaine.com; nine per cent through the bonjourquebec.com reservation portal; and the remainder through approximately 50 out of the 300 sites on which the hotel is registered. The Auberge was able to recover its investment in e-business within six to eight months. Impression Paragraph, a printing company in Ville St-Laurent, Que., introduced Intraprint software that enabled customers to order their business cards online. This decreased turnaround on orders from 12 days to less than 48 hours, and reduced the number of errors. Previously, clients had faxed their handwritten orders, and these were not always easy to read. This article illustrates the strategic management process involved in adopting e-business, based on the experiences of 11 Canadian small- and medium-sized enterprises. Although the SMEs in this study had limited financial and human resources, they were still able to develop technological solutions that allowed them to reduce operating costs, increase capacity, diversify product and service offerings, increase exposure with clients and expand their market share
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Chapter 09
Strategic management of HUL Introduction: Soon after followed Lifebuoy in 1895 and other famous brands like Pears, Lux and Vim. Vanaspati was launched in 1918 and the famous Dalda brand came to the market in 1937. In 1931, Unilever set up its first Indian subsidiary, Hindustan Vanaspatii Manufacturing Company, followed by Lever Brothers India Limited (1933) and United Traders Limited (1935). These three companies merged to form HUL in November 1956; HUL offered 10% of its equity to the Indian public, being the first among the foreign subsidiaries to do so. Unilever now holds 67.25% equity in the company. The rest of the shareholding is distributed among about three lakh individual shareholders and financial institutions. The erstwhile Brooke Bond's presence in India dates back to 1900. By 1903, the company had launched Red Label tea in the country. In 1912, Brooke Bond & Co. India Limited was formed. Brooke Bond joined the Unilever fold in 1984 through an international acquisition. The erstwhile Lipton's links with India were forged in 1898. Unilever acquired Lipton in 1972 and in 1977 Lipton Tea (India) Limited was incorporated. Pond's (India) Limited had been present in India since 1947. It joined the Unilever fold
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through an international acquisition of Chesebrough Pond's USA in 1986. Since the very early years, HUL has vigorously responded to the stimulus of economic growth. The growth process has been accompanied by judicious diversification, always in line with Indian opinions and aspirations. The liberalization of the Indian economy, started in 1991, clearly marked an inflexion in HUL's and the Group's growth curve. Removal of the regulatory framework allowed the company to explore every single product and opportunity segment, without any constraints on production capacity. Simultaneously, deregulation permitted alliances, acquisitions and mergers. In one of the most visible and talked about events of India's corporate history, the erstwhile Tata Oil Mills Company (TOMCO) merged with HUL, effective from April 1, 1993. In 1996, HUL and yet another Tata company, Lakme Limited, formed a 50:50 joint venture, Lakme Unilever Limited, to market Lakme's market-leading cosmetics and other appropriate products of both the companies. Subsequently in 1998, Lakme Limited sold its brands to HUL and divested its 50% stake in the joint venture to the company. HUL formed a 50:50 joint venture with the US-based Kimberly Clark Corporation in 1994, Kimberly-Clark Lever Ltd, which markets Huggies Diapers and Kotex Sanitary Pads. HUL has also set up a subsidiary in Nepal, Unilever Nepal Limited (UNL), and its factory represents the largest manufacturing investment in the Himalayan kingdom. The UNL factory manufactures HUL's products like Soaps, Detergents and Personal Products both for the domestic market and exports to India. The 1990s also witnessed a string of crucial mergers, acquisitions and alliances on the Foods and Beverages front. In 1992, the erstwhile Brooke Bond acquired Kothari General Foods, with significant interests in Instant Coffee. In 1993, it acquired the Kissan business from the UB Group and the Dollops Ice cream business from Cadbury India. As a measure of backward integration, Tea Estates and Doom Dooma, two plantation companies of Unilever, were merged with Brooke Bond. Then in 1994, Brooke Bond India and Lipton India merged to form Brooke Bond Lipton India Limited (BBLIL), enabling greater focus and ensuring synergy in the traditional Beverages business. 1994 witnessed
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BBLIL launching the Wall's range of Frozen Desserts. By the end of the year, the company entered into a strategic alliance with the Kwality Ice-cream Group families and in 1995 the Milk food 100% Ice-cream marketing and distribution rights too were acquired. Finally, BBLIL merged with HUL, with effect from January 1, 1996. The internal restructuring culminated in the merger of Pond's (India) Limited (PIL) with HUL in 1998. The two companies had significant overlaps in Personal Products, Specialty Chemicals and Exports businesses, besides a common distribution system since 1993 for Personal Products. The two also had a common management pool and a technology base. The amalgamation was done to ensure for the Group, benefits from scale economies both in domestic and export markets and enable it to fund investments required for aggressively building new categories. In January 2000, in a historic step, the government decided to award 74 per cent equity in Modern Foods to HUL, thereby beginning the divestment of government equity in public sector undertakings (PSU) to private sector partners. HUL's entry into Bread is a strategic extension of the company's wheat business. In 2002, HUL acquired the government's remaining stake in Modern Foods. In 2003, HUL acquired the Cooked Shrimp and Pasteurized Crabmeat business of the Amalgam Group of Companies, a leader in value added Marine Products exports. HUL launched a slew of new business initiatives in the early part of 2000s. Project Shakti was started in 2001. It is a rural initiative that targets small villages populated by less than 5000 individuals. It is a unique win-win initiative that catalyses rural affluence even as it benefits business. Currently, there are over 45,000 Shakti entrepreneurs covering over 100,000 villages across 15 states and reaching to over 3 million homes. In 2002, HUL made its foray into Ayurvedic health & beauty centre category with the Ayush product range and Ayush Therapy Centres. Hindustan Unilever Network, Direct to home business was launched in 2003 and this was followed by the launch of Pureit water purifier in 2004. In 2007, the Company name was formally changed to Hindustan Unilever Limited after receiving the approval of share holders during the 74th AGM on 18 May 2007. Brooke Bond and Surf Excel breached the Rs 1,000 crore sales mark the same year followed by Wheel
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which crossed the Rs.2000 crore sales milestone in 2008.On 17th October 2008 HUL completed 75 years of corporate existence in India. In January 2010, the HUL head office shifted from the landmark Lever House, at Back bay Reclamation, Mumbai to the new campus in Andheri (E), Mumbai. On 15th November, 2010, the Unilever Sustainable Living Plan was officially launched in India at New Delhi. In March, 2012 HULs state of the art Learning Centre was inaugurated at the Hindustan Unilever campus at Andheri, Mumbai. In April, 2012, the Customer Insight & Innovation Centre (CiiC) was inaugurated at the Hindustan Unilever campus at Andheri; Mumbai HUL completes 80 years of corporate existence in India on October 17th, 2013. Strategic thinking of HUL Vision Of Hul HUL's vision is to continuously innovate technologies to further reduce water consumption and further increase conservation in its operations. Simultaneously, HUL sites will progressively help communities, wherever required, to develop watersheds.
Mission Statement Unilever's mission is to add Vitality to life. We meet everyday needs for nutrition, hygiene, and personal care with brands that help people feel good, look good and get more out of life. Corporate purpose Unilever's mission is to add Vitality to life. We meet everyday needs for nutrition; hygiene and personal care with brands that help people feel good, look good and get more out of life. Our deep roots in local cultures and markets around the world give us our strong relationship w i t h c o n s u m e r s a n d a r e t h e f o u n d a t i o n f o r o u r f u t u r e g r o w t h . W e w i l l b r i n g o u r w e a l t h o f k n o w l e d g e and international expertise to the service of local consumers - a truly multi-local multinational. Our long-term success requires a total commitment to exceptional standards of performance and productivity, to working together effectively, and to a willingness to embrace new ideas and learn continuously. To succeed also requires, we believe, the highest standards of c orporate behavior
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toward severe one we work with, the communities we touch, and the environment on which we have an impact. This is our road to sustainable, profitable growth, creating long-term value for our shareholders, our people, and our business partners. Values at Hul- Unilever has earned a reputation for conducting its business with integrity and with respect for the interests of those our activities can affect. This reputation is an asset, just as real as our people and brands .Our first priority is to be a successful business and that means investing for growth and balancing short term and long term interests. It also means caring about our consumers, employees and shareholders, our business partners and the world in which we live. To succeed requires the highest standards of behavior from all of us. The general principles contained in this Code set out those standards. More detailed guidance tailored to the needs of different countries and companies will build on these principles as appropriate, but will not include any standards less rigorous than those contained in this Code. We want this Code to be more than a collection of high sounding statements. It must have practical value in our day to day business and each one of us must follow these principles in the spirit as well as the letter. Standard of Conduct We conduct our operations with honesty, integrity and openness, and with respect for the human rights and interests of our employees. We shall similarly respect the legitimate interests of those with whom we have relationships. Obeying the Law Unilever companies and our employees are required to comply with the laws and regulations of the countries in which we operate. Employees Unilever is committed to diversity in a working environment where there is mutual trust and respect and where everyone feels responsible for the performance and reputation of our Company. We will recruit, employ and promote employees on the sole basis of the qualifications and abilities needed for the work to be performed. We are committed to safe and healthy working conditions for all employees. We will not use any form of forced, compulsory or child labor .We are committed to working with employees to develop and
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enhance each individual's skills and capabilities. We respect the dignity of the individual and the right of employees to freedom of association. We will maintain good communications with employees through company based information and consultation procedures. Community Involvement Unilever strives to be a trusted corporate citizen and, as an integral part of society, to fulfill our responsibilities to the societies and communities in which we operate Company. We will recruit, employ and promote employees on the sole basis of the qualifications and abilities needed for the work to be performed We are committed to safe and healthy working conditions for all employees. We will not use any form of forced, compulsory or child labor .We are committed to working with employees to develop and enhance each individual's skills and capabilities. We respect the dignity of the individual and the right of employees to freedom of association. We will maintain good communications with employees through company based information and consultation procedure Consumers Unilever is committed to providing branded products and services which consistently offer value in terms of price and quality, and which are safe for their intended use. Products and services will be accurately and properly labeled, advertised and communicated. Shareholders Unilever will conduct its operations in accordance with internationally accepted principles of good corporate governance. We will provide timely, regular and reliable information on our activities, structure, financial situation and performance to all shareholders. Business Partners Unilever is committed to establishing mutually beneficial relations with our suppliers, customers and business partners .In our business dealings we expect our business partners to adhere to business principles consistent with our own Public Activities Unilever companies are encouraged to promote and defend their legitimate business interests.Unilever will co-operate with governments and other organizations, both directly and
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through bodies such as trade associations, in the development of proposed legislation and other regulations which may affect legitimate business interests. Unilever neither supports political parties nor contributes to the funds of groups whose activities are calculated to promote party interests. The Environment Unilever is committed to making continuous improvements in the management of our environmental impact and to the longer-term goal of developing a sustainable business. Unilever will work in partnership with others to promote environmental care, increase understanding of environmental issues and disseminate good practice. Innovation In our scientific innovation to meet consumer needs we will respect the concerns of our consumers and of society. We will work on the basis of sound science applying rigorous Standards of product safety. Competition Unilever believes in vigorous yet fair competition and supports the development of appropriate competition laws. Unilever companies and employees will conduct their operations In accordance with the principles of fair competition and all applicable regulations. Conflicts of Interests All Unilever employees are expected to avoid personal activities and financial interests which could conflict with their responsibilities to the company. Unilever employees must not seek gain for themselves or others through misuse of their positions. Compliance Monitoring Reporting Compliance with these principles is an essential element in our business success. The Unilever Board is responsible for ensuring these principles are applied throughout Unilever. The Group Chief Executive is responsible for implementing these principles and is supported in this by the Corporate Code Committee comprising the General Counsel, the Joint Secretaries, the Chief Auditor, the SVP HR, the SVP Communications and the Corporate Code Officer, who presents quarterly reports to the Unilever Executive. Day to day
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responsibility is delegated to all senior management of the regions, categories, functions and operating companies. They are responsible for implementing these principles, if necessary through more detailed guidance tailored to local needs, and are supported in this by Regional Code Committees comprising the Regional General Counsel together with representatives from all relevant functions and categories .Assurance of compliance is given and monitored each year. Compliance with the Code is subject to review by the Board supported by the Corporate Responsibility and Reputation Committee and for financial and accounting issues the Audit Committee. Any breaches of the Code must be reported in accordance with the procedures specified by the General Counsel. The Board of Unilever will not criticise management for any loss of business resulting from adherence to these principles and other mandatory policies and instructions .The Board of Unilever expects employees to bring to their attention, or to that of senior management, any breach or suspected breach of these principles. Provision has been made for employees to be able to report in confidence and no employee will suffer as a consequence of doing so. Strategic Planning by HUL Strategy adopted by HUL HUL (Hindustan Uni Lever Ltd) formerly HLL and see how the complex task of brand management is actually handled. This company is taken for this article as HUL is considered as one of the most successful in Brand Management.HLL has a large brand portfolio consisting of nearly 110 bands. In every product line, it has built a number of brands over a period of time. Quite a few brands have come to its fold from the parent company. It has also acquired several ongoing brands from the market. HLL also vigorously pursues brand extension strategy. And concurrently, HLL undertakes line pruning and brand restructuring and consolidation, based on marketing compulsions. HLL is also playing there juvenation and re-launch game. With great benefit the corporate-level endeavors at business expansion and diversification are also throwing new challenges on the brand strategy front. HLL lends itself for a proper understanding of the complexity of the brand management task. We shall examine how HLL handles the complex demands in brand management. Such an array of brands is the outcome of a conscious corporate strategy by HLL. As corporate, HLL wants to be a leader in every one of its businesses and the strategy is to fight on the strength of the competitive advantage arising from the possession of strong brands. It is this strategy that is getting reflected in the development of a multitude of strong brands. If we take the
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business of bathing soaps, as an example, HLL has the objective of being a national player (not a niche or a regional marketer) and the leader therein. HLL also wants about 30 per cent of the corporate income to come from this line. So, HLL opted for the strategy of developing quite a few strong brands in this line, and among them they cover different market segments and price points. Dove, Lux, Liril, Rexona, Pears and Lifebuoy are the outcome of such a well planned brand strategy Action plan by HUL: The Chairman of Hindustan Lever Limited (HLL), Mr. M.S. Banga, addressing the companys Annual General Meeting, presented an action-plan for a Food Revolution to sustainably accelerate agricultural growth which, in turn, will regenerate and sustain demand across the economy. With over 70% of the population being dependent on it, agricultural growth has a multiplier effect driving demand across all sectors of the economy and overall GDP growth. He announced that HLLs modeling had shown that a 3% incremental growth in agriculture will lead to a 2.6% growth in the manufacturing sector, taking overall GDP growth closer to the 8% mark. Food Revolution: Mr. Banga outlined a strategy which will lead to a significant reduction in prices of food, making food more affordable and thereby increasing consumption. The growth in food consumption in turn will increase farmers incomes, the slowdown of which is a key reason for downturn in Indian industry. We as a country have responded to crises through concerted action born out of national consensus. The success of the Green Revolution and the White Revolution are proof of this. Now, we need a Food Revolution to foster a virtuous cycle of regenerative, broad-based growth, he said. Calling it the paradox of Indian agriculture, Mr. Banga pointed out that while godowns were overflowing, about 42% of the rural population and 49% of the urban population received less than the accepted daily calorie intake norm. This is because these consumers cannot afford food at the current prices. Since food consumption has hit a plateau, farmers incomes have stagnated, despite rising procurement prices.Mr. Banga said that the policy framework has so far sought to increase agricultural income by increasing minimum support prices or subsidies. But with food going out of the reach of large sections even at current prices, the only way to increase farmers income is to increase consumption of food. HLLs modeling has demonstrated that if,
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for example, the price of wheat can be reduced by Rs.2 per kg, and consumption will increase by 25% (about 41 million tons) among the lower income groups. Challenge Cost: To reduce costs, Mr. Banga said that agricultural pricing could be guided byHLLs philosophy of Challenge Cost, instead of the prevalent cost-plus model. The company first determines what the consumer is willing to pay for the benefits a product offers. It then determines an appropriate margin. The target consumer price less the target margin gives the Challenge Cost that HLL achieves through its expertise in R&D, manufacturing and supply chain. Mr. Banga proposed a three-pronged strategy encompassing a) Precision Farming to improve farm productivity within the current land-holding pattern; b) creating a structure to facilitate growth of a vibrant food processing industry and c) identifying various enablers for the model to work. Precision Farming: Under Precision Farming, a farmer adjusts farm practices to match the variation of soil and terrain across time and the area of his plot rather than following the current practice of a one size fits all approach which manages crops at the lowest common denominator. Farmer Service Centre: A close linkage between agriculture and industry should be forged through the establishment of Farmer Service Ceners. These would be partnership webs between the farmer and agri-input companies, banks, insurance companies, grain handling and storage companies, and food processors. To be run as a private enterprise, Farmer Service Centers would have an appropriate radius of operation. Enablers for the model: The model can be implemented with reorientation of Government policies towards promoting efficiencies and value addition; amendments in the legal framework; rationalization of fiscal levies; and progressively making packaging of
food products mandatory. Common Indian Market: Movement and storage of food grains must be freed, creating a Common Indian Market. A Futures Market should be created for more demand-driven crop planning. The role of agencies like the FCI should be changed to administer the Futures Market and the Common Indian Market, and coordinate exports For free movement of agriculture produce and to enable the food processor to directly purchase the farmers output, the Market Committee legislation of various States need to be dropped. Forward contracts, backed by assured
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enforceability, should be permitted so that the processor can enter into a contract even before sowing. Harmonized laws, single Ministry: Equally essential would be harmonizing the various food laws, which often have contradictory requirements, and housing them under a single Ministry. Indias food laws, which restrict innovation, should be brought in line with the widely followed international Codex. It would encourage innovation, without diluting consumer protection in anyway, Mr. Banga said. Rationalization of fiscal levies: The various taxes and levies imposed on commodities at various stages have a cascading effect on prices, and also hinder free flow of output from the farm to the factory. Mr. Banga suggested that they be replaced with a uniform additional excise duty. Summing up, Mr. Banga said, The model I have outlined would increase agricultural productivity, which would in turn increase farm incomes and make food more affordable. Increased farm incomes would drive demand for the rest of the industry and services sectors, leading to a sustainable growth cycle. The creation of a vibrant food processing industry would add further value, generating employment and prosperity.
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Chapter 10
Case Study on Strategic Management Case 1 DD is the Indias premier public service broadcaster with more than 1,000 transmitters covering 90% of the countrys population across on estimated 70 million homes. It has more than 20,000 employees managing its metro and regional channels. Recent years have seen growing competition from many private channels numbering more than 65, and the cable and satellite operators (C & S). The C & S network reaches nearly 30million homes and is growing at a very fast rate. DDs business model is based on selling half hour slots of commercial time to the programme producers and Charging them a minimum guarantee. For instance, the present tariff for the first 20 episodes of a programmeRs.30 lakh plus the cost of production of the programme. In exchange the procedures get 780 seconds of commercial time that he can sell to advertisers and can generate revenue. Break-even point for procedures, at The present rates, thus is Rs.75, 000 for a 10 second advertising spot. Beyond 20 episodes, the minimum guarantee is Rs.65 lakh for which the procedures has to charge Rs.1, 15,000 for a 10 second spot in order to
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Break-even. It is at this point the advertisers face a problem the competitive rates for a 10 second spot isRs.50,000. Procedures are possessive about buying commercial time on DD. As a result the DDs projected growth of revenue is only commercial time on DD. As a result the DDs projected growth of revenue is only 610% as against 50-60% for the private sector channels. Software suppliers, advertisers and audiences are deserting DD owing to its unrealistic pricing policy. DD has options before it. First, it should privates, second it Should remain purely public service broadcaster and third, a middle path. The challenge seems to be exploiting DDs immense potential and emerge as a formidable player in the mass media. What is the best option, in your view, for DD? . Analyze the SWOT factors the DD has? Why do you think that the proposed alternative is the best?
Answers 1) For several years Doordarshan was the only broadcaster of television programmes in India. After the opening of the sector to the private entrepreneur (cable and satellite channels), the market has witnessed major changes. The number of channels has increased and also the quality of programmes, backed by technology, has improved. In terms of quality of programmers, opportunity to advertise, outreach activities, the broadcasting has become a popular business. Broadcasters too have realized the great business potential in the market. But for this, policies need to be rationalized and be opened to the scope of innovativeness not only in term of quality of programmes. This would not come by simply going to more areas or by allowing bureaucratic set up to continue in the organization. Strategically the DD needs to undergo a policy overhaul. DD, out of three options, namely privatization, public service broadcaster or a middle path, can choose the third one, i.e. a combination of both. The whole privatization is not possible under the diversified political scenario. Nor it would be desirable to hand over the broadcasting emotively in the private hand as it proves to be a great means of communication many socially oriented public programmers. The government could also think in term of creating corporation (as it did by creating Prasar Bharti) and provide reasonable autonomy to DD. So far as its advertisement tariff is concerned that can be made fairly competitive. However, at the same time cost of advertising is to be compared with the reach
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enjoyed by the doordarshan. The number of viewers may be far more to justify higher tariffs. of advertising is to be compared with the reach enjoyed by the doordarshan. The number of viewers may be far more to justify higher tariffs. 2) The SWOT analyses involve study of strengths, weaknesses, opportunities and threats of an organization. SWOT factors that are evidently available to the Door Darshan are as follows: S Strength More than 1000 transmitters. Covering 90% of population across 70 million homes against only 30 million home by C & S. More than 20,000 employees. W Weakness Rigid pricing strategy. Low credibility with certain sections of society. Quality of programs is not as good as compared to C & S network O-Opportunities Infrastructure can be leased out to cable and satellite channel. Digital terrestrial transmission. Regional focused channels . T Threats Desertion of advertisers and producers may result in loss of revenues. Due to quality of program the reach of C & S network is continuously expanding. As the C& S network need the trained staff, some employees of DD may switchover and take new jobs 3) It is suggested that the DD should adopt a middle path. It should have a mix of both the options. It should Economized on its operational aspects and ensure more productivity in term of revenue generation and
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Optimization of use of its infrastructure. Wherever, the capacities are underutilized, these may be leased out to the private operations. At the same time quality and viewership of programmes should be improved. Bureaucracy may reduce new strategic initiatives or make the organization less transparent. Complete privatization can fetch a good sum and may solve many of the managerial and operational problems. However, complete public monopoly is not advisable because that denies the government to fully exploit the avenue for social and public use. The government will also lose out as it will not be able to take advantage of rising Potential of the market. Case study 2 In 2006-07 PTC Food division decided to enter the fast growing (20-30% annually) snacks segment, an Altogether new to it. It had only one national competitor-Trepsico's Trito. After a year its wafer snack brand-Ringo, fetched 20% market share across the country. Ringo's introduction was coincided with the cricket world cup. The wafer snacks market is estimated to be around Rs. 250 crores. The company could take the advantage of its existing distribution network and also source potatoes from farmers easily. Before the PTC could enter the market a cross-functional team made a customer survey through a marketing research group in 14 cities of the country to know about the snacks of eating habits of people. The result showed that the customers within the age-group of 15-24 years were the most promising for the product as they were quite enthusiastic about experimenting new snack taste. The company reported to its chefs and the chefs came out with 16 flavors with varying tastes suiting to the targeted age-group. The company decided to target the youngsters as primary target on the assumption that once they are lured in, it was easier to reach the whole family. Advertising in this category was extremely crowded. Every week two-three local products in new names were launched, sometimes with similar names. To break through this clutter the company decided to bank upon hum our appeal. The Industry sources reveal that PTC spent about Rs. 50crores on advertisement and used all possible media print and electronic, both including the creation of its own website, Ringoringoyoungo.com with offers of online games, contests etc. Mobile phone tone downloading was also planned which proved very effective among teenagers. The site was advertised on all dotcom networks. , Shine TV, Bee
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TV and other important channels were also used for its advertisement along with FM radio channels in about 60 cities with large hoardings at strategic places. Analysts believes that Ringo's success story owes a lot to PTC's widespread distribution channels and Aggressive advertisements. Humour appeal was a big success. The `Ringo' was made visible by painting the Railway bogies passing across the States. It has also been successful to induce Lovely Brothers' Future Group to replace Trito in their Big-Bazaar and chain of food Bazaars. PTC is paying 4% higher margin than Trepsico to Future group and other retailers. Ringo to giving Trepsico a run for its money. Trito's share has already been reduced considerably. Retail tie-ups, regional flavors, regional humour appeals have helped PTC. But PTC still wants a bigger share in the market and in foreign markets also, if possible. Answer the following questions: i. ii. iii. What is SWOT Analysis? What are the weaknesses PTC for entering into the branded snacks market? What kind of marketing strategy was formulated and implemented for Ringo? What else need to be done by Ringo so as to enlarge its market? Answers 1) SWOT Analysis is at used by organization for revolving strategic options. For the future. The term Swot refers to the analysis of strength, weaknesses, opportunities and that facing a company. Strength and weaknesses are identifying in the internal environment, whereas opportunities and threats are located in the external environment. Strength: Strength is an inherent capability of the organization which it can used to gain strategic advantage over its competitor. Weakness: A weakness is an inherent limitation or constraint of the organization which creates strategic disadvantage to it. Opportunity: An opportunity is a favorable condition in the external environment which enables to the organization its position. Threat: An favorable condition in external environment which cases a risk for, or damage to the organization position. 2) Weaknesses are inherent limiting factors of an organization. They are internal by nature to the working of the organization. The case study does not clearly mention the points that can conclusively be weaknesses of the company. However, a deeper analysis will bring out that the company is totally new to the snacks business and is highly aggressive in its approach.
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The experience in the food business may not result in the required competencies in the business of chips. Seemingly, the company has also gone overboard in its advertisement expenditure. It may be that the margins justify expenditure of 20% in value of the total market size of Rs.250 Crores. Otherwise, the company may who are trying to get attention of existing and new customers. The business is already cluttered with regional and national players and is highly competitive. Further, the company is overly relying on young segment of the population. This segment can be highly receptive to the new products and the company may lose them easily to the competitors 3) Formulation and implementation of marketing strategy was as under. The Product: To launch its snack product, an easy to remember brand name RINGO was decided upon. To understand the snacking habits of Indian customer a large survey was undertaken. Chefs on the basis of the market survey came out with sixteen flavors. The target group was identified as youngsters of 15-24 years. The Promotion: The Company spent about Rs.50crore on marketing communication. Different Media Including print, electronic and outdoor advertising were put to use. Appeal used was that of humour. A huge visibility through point-of-sale was also arranged. Promotion policy was very aggressive considering that 50crores were spent in a market of 250crores. The Place: Getting Trito replaced by Ringo in Big-Bazaar and food bazaar chain of stores was a great success for PTC. To motivate a higher margin than the Trepsico was provided for. PTC even otherwise has extensive distribution network. A perfect blend of marketing mix has made it possible to go so far and so early. Since the marketing strategy has remained successful, they need to carry it forward. However, they also need to keep a restrain on promotion as spending huge amount of money on marketing for a share in the market being too high. Such an expensive campaign is only suitable if the company is able to increase the market size itself and not merely its own in the existing market share. To achieve this it requires competencies. Otherwise, it might be difficult to sustain high expenditure over a very long period of time
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Chapter 11
Conclusion Business history shows that high performing enterprises often initiate and lead, not just react and defend. They launch strategic offensive to secure sustainable competitive advantage and then use their market edge to achieve superior financial performance. Aggressive pursuit of a creative, opportunistic strategy can propel a firm into a leadership position, paving the way for its goods and services to become the industry standard. In a dynamic and uncertain environment, strategic management is important because it can provide managers with a systematic and comprehensive means for analyzing the environment assessing their organization's strengths and weakness and identifying opportunities for which they could develop and exploit a competitive advantage. The strategic management process includes eight steps identifying the organization's current mission, objectives and strategies, analyzing the environment, identifying opportunities and threats in the environment, analyzing the organization resources, identifying the organization's strengths and weaknesses, formulating strategies, implementing strategies and evaluating
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Bibliography:
http://www.managementstudyguide.com/strategic-management-process.htm http://www.ache.org/pdf/secure/gifts/Harrison_Chapter5.pdf http://jupapadoc.startlogic.com/compresearch/papers/JCR07-2.pdf Andrews K.R. 1987. The Concept of Corporate Strategy. Richard D. Irwin. Gluck F.W. 1985 A Fresh Look at Strategic Management. Journal of Business 21http://srinivasatimes.com/Strategic%20management%20case%20studies.pdf http://my.safaribooksonline.com/book/management/9788131759844/case-study-on-tata-skystrategic-advantage-through-technology/c11-sec1005#X2ludGVybmFsX0h0bWxWaWV3P3htbGlkPTk3ODgxMzE3NTk4NDQlMkZjMTEtc2 VjMS0wMDQmcXVlcnk9 http://www.hul.co.in/aboutus/ourhistory/
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immediate / industry environment national environment broader socio-economic environment

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In short, Strategy Formulation is placing the In Forces before the action.

managing forces during the action.

effectiveness. Strategy Formulation is a rational process.

ordination among many individuals.

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FIGURE: Porters Five Forces model

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predicted, the twenty-first century will be the century of religion.

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