Resource allocation

Sunil Dixit

INTRODUCTION
In strategic planning, resource allocation is a plan for using available resources, for example human resources, Resource allocation deals with the procurement, commitment and distribution of financial, human, information and physical resources to strategic tasks for the achievement of organizational objective.

FACTORS AFFECTING RESOURCE ALLOCATION

Objective of the organization Preference of dominant strategies Internal politics External influences Scarcity of resources Restriction on generating resources Overstatement of needs

COST ANALYSIS

Strategic Cost Management: Basic Concepts

Strategic decision making is choosing among alternative strategies with the goal of selecting a strategy, or strategies, that provides a company with reasonable assurance of long-term growth and survival. The key to achieving this goal is to gain a competitive advantage. Strategic cost management is the use of cost data to develop and identify superior strategies that will produce a sustainable competitive advantage.

Cont
Competitive advantage is the process of creating better customer value for the same or lower cost than that of competitors or creating equivalent value for lower cost than that of competitors. Customer value is the difference between what a customer receives (customer realization) and what the customer gives up (customer sacrifice). The total product is the complete range of tangible and intangible benefits that a customer receives from a purchased product.

General strategies
There are three general strategies that have been identified:  cost leadership  product differentiation  focusing

General Strategies
A cost leadership strategy happens when the same or better value is provided to customers at a lower cost than a company s competitors. Example: A company might redesign a product so that fewer parts are needed, lowering production costs and the costs of maintaining the product after purchase.

General Strategies
A differentiation strategy strives to increase customer value by increasing what the customer receives (customer realization).
Example: A retailer of computers might offer on-site repair service, a feature not offered by other rivals in the local market.

General Strategies
A focusing strategy happens when a firm selects or emphasizes a market or customer segment in which to compete.
Example: Paging Network, Inc., a paging services provider, has targeted particular kinds of customers and is in the process of weeding out the non targeted customers.

PROJECT & PROCEDURAL ISSUES

INTRODUCTION
Procedural Implementation deals with the different aspects of the regulatory framework that Indian companies have to consider. Any organisation which is planning to implement strategies must be aware of the regulatory framework within which the plans, programmes , and projects have to be approved by the government (central and state).

 Following the procedures laid down for implementation constitutes an important component of strategy implementation in the Indian context : 1) Licensing Procedure 2) Foreign Collaboration Procedure 3) MRTP Requirements 4) SEBI of India Requirements 5) Patenting and Trade Marks Requirements 6) Import and Export Requirements

Licensing Procedure
The system of planning rests on three policy documents
Industries (Development & Regulation) Act, 1951

Industrial Policy Resolution, 1956

Industrial Licensing Policy, 1973

Section 30 of the IDR Act, 1951 deals with the Registration & Licensing of industrial undertaking rules. Under this Act, a license is necessary for establishing a new unit, manufacturing a new article, substantial expansion of capacity in existing business, and changing location.

Procedure
The licensing procedure requires the applicant to approach the Secretariat for Industrial Approvals (SIA), which is common for receiving & processing all types of applications related to industrial projects. Composite applications are dealt by the Project Appraisal Board Application considered by a number of govt. agencies & ministries before a Letter of Intent is issued After conditions are fulfilled , the Letter of Intent is converted into an industrial license

Foreign Collaboration Procedure

The govt. policy, in general, allows foreign investment & collaboration on a selective basis in priority areas, export oriented or high technology industries, and permitting existing foreign investment in non-priority areas up to 40% of the equity holding. This limit has been raised to 51% in 34 highpriority industries. All proposals to set up projects with foreign collaboration require prior government approval. The regulatory framework deals with the need for foreign technology, royalty payments, terms & conditions for collaborative agreement & foreign investment.

Procedure
Preliminary evaluation by the promoter, obtaining industrial licence (if necessary), or registration with the Directorate General of Technical Development Obtaining clearance under the MRTP Act Applying for foreign collaboration to Foreign Investment Board Applying for import of capital goods (if required) Finalisation of agreement and clearance from the Reserve Bank of India (RBI).

MRTP Requirements
The Monopolies & Restrictive Trade Practices (MRTP) Act,1969 seeks to prevent monopolistic & restrictive trade practices, & the concentration of economic power. The MRTP Act requires that any substantial expansion which increases the assets or productive capacity or supply for distribution not less than 25%, requires the approval of the central govt.

Contd
The MRTP Act applies to four types of undertakings:
 An undertaking having gross assets of Rs. 100 crore & above  Interconnected Undertakings which together have assets of Rs. 100 crore or above  A dominant undertaking (one which produce, supplies, or controls one-third of any goods in the country) having assets of Rs. 1 crore & above  Interconnected dominant undertakings.

Capital Issue Control Requirements or SEBI Requirements

The issue of capital by companies is regulated through the Capital Issues Control Act, 1956 & the Securities Contracts Regulation Act, 1956 for the purpose of ensuring that investments are made in priority areas, & for the promotion of capital markets & protection of shareholders. Apart from this, these acts also affect mergers & amalgamations as they regulate the capital reorganization plans for mergers.

Contd
The Controller of Capital Issues (CCI) under the Dept. of Economic Affairs, Ministry of Finance, is the nodal agency for the administration of the acts. All proposals for fresh issues of equity or preference capital, issue of right shares, bonus shares, debentures, etc. & capitalization of free reserves have to be scrutinized by the CCI.

Import & Export Requirements

The legal framework for imports & exports in India is provided by the Import & Export (Control) Act, 1947. The Import Trade Control Policy Book (popularly called the Red Book) is an annual govt. publication which outlines the import licensing policy for individual industries & for different categories of importers (established, actual users & registered). Through the Import & Export Control Order, the govt. has delegated the power to issue licenses & to administer the act to the Chief Controller of Imports & Exports.

Contd
For capital goods imports, the Capital goods committee exercises the powers. The Secretariat for industrial approvals handles the procedural formalities. The detailed procedure for import licenses for capital goods and raw materials is provided in Import Trade Control Handbook of Rules & Procedures.

Benefits from Incentives & Facilities

Project Implementation for putting a strategy into action requires a consideration of various incentives, subsidies, & facilities which can benefit an organisation. In providing incentives, etc. the govt. does not play a regulatory or controlling role but a promotional role, which is manifested in various forms.

Contd
In line with the objectives laid out in the Industrial Policy resolution, the govt. attempts to achieve employment generation, correction of regional imbalances, promotion of export-oriented industries & utilization of installed capacity through higher production levels & productivity. The Fiscal, Monetary & Budgetory policies of the govt. are aimed at promotion. The govt. also plays a promotional role in terms of purchasing, pricing, distribution, availability of raw materials & provision of infrastructural facilities.

Conclusion
From above sections, it is to be observed that the role of the govt. is quite comprehensive and affects practically each and every aspect of an organization's management especially activities related to strategic management.

Thank You

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