Strategic Management - Unit One Material

Key Words that have specific meaning for Strategic Management

Competitive advantage - What a firm does better than its competitors.

Characteristics that allow a firm to outperform its rivals.

Distinctive competence - Special skills and resources that generate strengths that competitors cannot easily match or imitate.

First mover advantage - The competitive advantage held by a firm from being first in a market or first to use a particular strategy.

Late mover advantage - The competitive advantage held by firms that are late in entering a market. Late movers often imitate the technological advances of other firms or reduce risks by waiting until a new market is established.

Sustainable competitive advantage - A competitive advantage that cannot easily be imitated and won’t erode over time.

Group think - A tendency of individuals to adopt the perspective of the group as a whole. It occurs when decision makers don’t question the underlying assumptions.

Competitive strategy - How an enterprise competes within a specific industry or market. Also known as business strategy or enterprise strategy.

Competitor analysis - The competitive nature of an industry. It determines how a rival will likely react in a given situation.

Barriers to entry - Factors that reduce entry into an industry.

Switching costs - The costs incurred when a buyer switches from one supplier to another.

Barriers to exit - Factors that impede exit from an industry.

Contestable markets - Markets where profits are held to a competitive level. Due to the ease of entry into the market.

Strategic groups - Clusters of firms within an industry that share certain critical asset configurations and follow common strategies.

Predatory pricing - Aggressiveness by a firm against its rivals with the intent of driving them out of business.

Concentration - Focus the firm’s efforts and resources in one industry.

Core business - The central or major business of the firm. The core business is formed around the core competency of the firm. Management of the firm’s core business is central to any decision about strategic direction.

Core competency - What a firm does well. The core competency forms the core business of the firm.

Critical success factors - Those few things that must go well if a firm’s is to succeed. Typically 20 percent of the factors determine 80 percent of the performance. The critical success factors represent the 20 percent. Also called key success factors.

Culture - The collection of beliefs, expectations, and values learned and shared by the firm’s members and passed on from one generation to another.

Diversification - The process a firm into new products or enterprises.

Concentric diversification - Diversification into a related industry.

Conglomerate diversification - Diversification into an unrelated industry.

Economics - Cost savings.

Economies of integration - Cost savings generated from joint production,

purchasing, marketing or control.

Economies of size - Fixed costs decline as output increases.

Economies of scope - The products of two or more enterprises produced from shared resources which allows for cost reductions.

Minimum efficient scale - The smallest output for which unit costs are minimized.

Enterprise - The production of a single crop or type of livestock, such as wheat or dairy. A responsibility center.

Primary enterprise - An enterprise that provides the foundation of the firm. The success of the primary enterprise is critical to the success of the firm.

Secondary enterprise - An enterprise that supports a primary enterprise and/or the mission and goals of the firm.

Competitive enterprises - Enterprises for which the output level of one can be increased only by decreasing the output level of the other.

Complementary enterprise - Enterprises for which increasing the output level of one also increased the output level of the other.

Supplementary enterprises - Enterprises for which the level of production of one can be increased without affecting the level of production of the other.

Enterprise strategy - How an enterprise competes within a specific market or industry. Also called business or competitive strategy.

Transfer price - The price at which a good or resource is transferred across

enterprises within a firm. Entrepreneur - An entrepreneur sees change as normal and healthy. He/she is involved in searching for change, responding to it, and exploiting it as an opportunity.

Environmental scanning - To monitor, evaluate and disseminate information from the external environment to key people within the firm.

Environmental analysis - An analysis of the environmental factors that influence a firm’s operations.

Environmental opportunity - An attractive area for a firm to participate in where the firm would enjoy a competitive advantage.

Environmental threat - An unfavourable trend or development in the firm’s

environment that may lead to an erosion of the firm’s competitive position.

Excess capacity - The ability to produce additional units of output without increasing fixed capacity.

Experience curve - Systematic cost reductions that occur over the life of a product. Product costs typically decline by a specific amount each time accumulated output is doubled.

Externalities - A cost or benefit imposed on one party by the actions of another party. Costs are negative externalities and benefits are positive externalities.

Firm vision - The collection of statements listed below indicating the desired strategic future for the firm.

Mission statement - A statement of the reason why a firm exists.

Goals - General statements of where the firm is going and what it wants to achieve.

Objectives - Specific and quantifiable statements of what the firm is to accomplish and when it is to be accomplished.

Innovation - A new way of doing things.

Diffusion curve - The rate over time at which innovations are copied by rivals.

Systematic innovation - The purposeful and organized search for changes, and the systematic analysis of the opportunities these changes might offer for economics and social innovation.

Internal scanning - Looking inside the business and identifying strengths and weaknesses of the firm.

Operations management - Focuses on the performance and efficiency of the production process. It involves the day-to-day decisions of the business.

Portfolio - A group of enterprises within a firm that are managed as individual responsibility centers.

Portfolio analysis - Each product and enterprise is considered as an individual responsibility center for purposes of strategy formulation.

Portfolio management - Management of a firm’s individual enterprises and

resources across these enterprises.

Proactive - Seek out opportunities and take advantage of them. Anticipate threats and neutralize them.

Responsibility center - An enterprise whose performance is evaluated separately and is held responsible for its contribution to the firm’s mission and goals.

Cost center - An enterprise that has a manager who is responsible for cost

performance and controls most of the factors affecting cost.

Investment center - An enterprise that has a manager who is responsible for profit and investment performance and who controls most of the factors affecting revenues, costs, and investments.

Profit center - An enterprise that has a manager who is responsible for profit performance and who controls most of the factors affecting revenues and costs.

Restructuring - Selling off unrelated parts of a business in order to streamline operations and return to a core business.

Stakeholder - Individuals and groups inside and outside the firm who have an interest in the actions and decisions of the firm.

Strategic - Manoeuvring yourself into a favourable position to use your strengths to take advantage of opportunities.

Strategic audit - A checklist of questions that provide an assessment of a firm’s strategic position and performance.

Strategic myopia - Management’s failure to recognize the importance of changing external conditions because they are blinded by their shared, strongly held beliefs.

Strategic thinking - How decisions made today will effect the business years in the future.

Strategic predisposition - A tendency of a firm by virtue of its history, assets, or culture to favour one strategy over competitive possibilities.

Strategic decisions - A series of decisions used to implement a strategy.

Strategic management - The act of identifying markets and assembling the resources needed to compete in these markets. The set of managerial decisions and actions that determine the long-run performance of the firm.

Strategic planning - A comprehensive planning process designed to determine how the firm will achieve its mission, goals, and objectives over the next five or ten years or longer.

business planning - A plan that determines how a strategic plan will be implemented. It specifies how, when, and where a strategic plan will be put into action. Also known as tactical planning.

Strategy - A pattern in a stream of decisions and actions.

Dominant strategy - A strategy that is optimal regardless of the action taken by one’s rival.

Emergent strategy - Unplanned strategy that emerge from within the organization.

Intended strategy - Planned strategy developed through the strategic planning process.

Realized strategy - The real strategy of a firm that is either an intended (planned) strategy of management or an emergent (unplanned) strategy from within the organization.

Strategy formulation - The development of long-range plans for the management of environmental opportunities and threats, in light of the firms strengths and weaknesses.

Strategy implementation - The process by which strategies and policies are put into action through the development of programs, budgets, and procedures.

Strategy control - Compares performance with desired results and provides the feedback for management to evaluate results and take corrective action.

Firm strategy - How a firm will reach its goals and objectives by using firm

strengths to take advantage of environmental opportunities.

Enterprise strategy - How an enterprise competes within its specific market or industry. Also called business or competitive strategies.

Niche strategy - A strategy serving a specialized part of the market.

SWOT analysis - Analysis of the strengths and weaknesses of the firm, and the opportunities and threats of the firm’s environment.

Strategic issues - Trends and forces which occur within the firm or with

environment surrounding the firm.

Strategic factors - Strategic issues expected to have a high probability of occurrence and impact on the firm.

Opportunities and threats - Strategic factors in the firm’s external environment are categorized as opportunities or threats to the firm.

Strengths and weaknesses - Strategic factors within the firm are categorized as strengths or weaknesses of the firm.

Strategic fit - Fit between what the environment wants and what the firm has to offer.

Strategic alternatives - Alternative courses of action that achieve business goals and objectives, by using firm strengths to take advantage of environmental opportunities.

Vertical integration - The process in which either input sources or output buyers of the firm are moved inside the firm.

Backward (upstream) integration - Input sources are the firm.

Forward (downstream) integration - Output buyers are the firm.

Contractual integration - Separate firms in the various stages of production link the stages through contractual arrangements.

Full integration - Where one firm has full ownership and control over all the stages in the production of a product

Quasi-integration - A firm gets most of its requirements from an outside supplier that is under its partial control.

Tapered integration - A firm produces part of its own requirements and buys the rest from outside suppliers.

Vertical coordination - The stages in the production of a product are linked by more than open markets but less than ownership and control by one firm.

Vertical merger - Firms in different stages of the production and distribution chain are linked together.

 Introduction

The study of strategic management

Strategic management is the set of managerial decision and actions that determines the long-run performance of a corporation and provide more than average performance of Industry. It includes environmental scanning (both external and internal), strategy formulation (strategic or long range planning), strategy implementation, and evaluation and control. The study of strategic management therefore emphasizes the monitoring and evaluating of external opportunities and threats in lights of a corporation’s strengths and weaknesses.

Evolution of strategic management or why strategic planning

Strategic planning is needed if (1) the corporation becomes large, (2) the layers of management increase, or (3) the environment changes in its complexity (4). Globalization

Phase 1 – During 1980’s Basic financial planning was given utmost importance: operational control by trying meeting budgets based on financial data.

Phase 2 – Early 1990’s saw this trend and there is need for ensuring sustainability of organizations. Many organizations in Forbes list were lost disappeared after a decade due to lack of future orientation. This lead to Fore-cast based planning: Trying more effective planning for growth by trying to predict the future for two to three years.

Phase 3. Externally oriented planning: Seeking increasing responsiveness to markets and competition by trying to think strategically. The focus is on what is happening in the external environment and building those key factors in to the planning.

Phase 4. Strategic management: Seeking a competitive advantage and a successful future by managing all resources. Phase 4 in the evolution of the strategic management includes a consideration of strategy implementation and evaluation and control, in addition to the emphasis on the strategic planning in Phase 3. General Electric led by Jack Welsh one of the pioneers of the strategic planning, he created the concept of Boundary less organizations and other concepts that ensured higher shareholder return ; Similarly in India Mittal of Airtel used strategic planning by outsourcing key activities to BPOs and marketing was retained.

 This lead to creation o largest telecom organization in the world from mere investment of 60,000 rupees to 26 billion dollar business.The word “strategy” is derived from the Greek word “stratçgos”; stratus (meaning army) and “ago” (meaning leading/moving).

Strategy is an action that managers take to attain one or more of the organization’s goals. Strategy can also be defined as “A general direction set for the company and its various components to achieve a desired state in the future. Strategy results from the detailed strategic planning process”. An equivalent definition given in the class is selection of actions that will make an organization to have superior performance compared to industry.

Actions means allocating resources. It captures the essence of strategy. 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.

Features of Strategy

1. Strategy is Significant because it is not possible to foresee the future. Without a perfect foresight, the firms must be ready to deal with the uncertain events which constitute the business environment.

2. Strategy deals with long term developments rather than routine operations, i.e. it deals with probability of innovations or new products, new methods of productions, or new markets to be developed in future.

3. Strategy is created to take into account the probable behavior of customers and competitors. Strategies dealing with employees will predict the employee behavior.

Strategy is a well defined roadmap or a goal post to be achieved of an

organization. It defines the overall mission, vision and direction of an organization. The objective of a strategy is to maximize an organization’s strengths and to minimize the strengths of the competitors. Strategy, in short, bridges the gap between “where we are” and “where we want to

be”.

Strategic Management

Strategic management has now evolved to the point that it is primary value is to help the organization operate successfully in dynamic, complex global environment.

Corporations have to become less bureaucratic and more flexible. In stable environments such as those that have existed in the past, a competitive strategy simply involved defining a competitive position and then defending it. Because it takes less and less time for one product or technology to replace another, companies are finding that there are no such thing as enduring competitive advantage and there is need to develop such advantage is more than necessary.

Mission Statement

Mission statement is the statement of the role by which an organization intends to serve it’s stakeholders. It describes why an organization is operating and thus provides a framework within which strategies are formulated. It describes what the organization does (i.e., present capabilities), who all it serves (i.e., stakeholders) and what makes an organization unique (i.e., reason for existence). A mission statement differentiates an organization from others by explaining its broad scope of activities, its products, and technologies it uses to achieve its goals and objectives.

It talks about an organization’s present (i.e., “about where we are”).For instance, Microsoft’s mission is to help people and businesses throughout the world to realize their full potential. Wal-Mart’s mission is “To give ordinary folk the chance to buy the same thing as rich people.” Mission statements always exist at top level of an organization, but may also be made for various organizational levels. Chief executive plays a significant role in formulation of mission statement. Once the mission statement is formulated, it serves the organization in long run, but it may become ambiguous with organizational growth and innovations.

In today’s dynamic and competitive environment, mission may need to be redefined. However, care must be taken that the redefined mission statement should have original fundamentals/components. Mission statement has three main components-a statement of mission or vision of the company, a statement of the core values that shape the acts and behaviour of the employees, and a statement of the goals and objectives.

Features of a Mission

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 everyone’s mind.

f. It should be analytical, i.e., it should analyze the key components of the strategy.

Vision

A vision statement identifies where the organization wants or intends to be in future or where it should be to best meet the needs of the stakeholders. It describes dreams and aspirations for future. For instance, Microsoft’s vision is “to empower people through great software, any time, any place, or any device.” Wal-Mart’s vision is to become worldwide leader in retailing. A vision is the potential to view things ahead of themselves. It answers the question “where we want to be”. It gives us a reminder about what we attempt to develop.

A vision statement is for the organization and it’s members, unlike the mission statement which is for the customers/clients. It contributes in effective decision making as well as effective business planning. It incorporates a shared understanding about the nature and aim of the organization and utilizes this understanding to direct and guide the organization towards a better purpose.

 It describes that on achieving the mission, how the organizational future would appear to be.

An effective vision statement must have following features

a. It must be unambiguous.

b. It must be clear.

c. It must harmonize with organization’s 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.

Goals and objectives

A goal is a desired future state or objective that an organization tries to achieve. Goals specify in particular what must be done if an organization is to attain mission or vision. Goals make mission more prominent and concrete. They co-ordinate and integrate various functional and departmental areas in an organization.

Well made goals have following features-

1. These are precise and measurable.

2. These look after critical and significant issues.

3. These are realistic and challenging.

4. These must be achieved within a specific time frame.

5. These include both financial as well as non-financial components.

Objectives

Objectives are defined as goals that organization wants to achieve over a period of time. These are the foundation of planning. Policies are developed in an organization so as to achieve these objectives. Formulation of objectives is the task of top level management.

Effective objectives have following features-

1. These are not single for an organization, but multiple.

2. Objectives should be both short-term as well as long-term.

3. Objectives must respond and react to changes in environment, i.e., they must be flexible.

4. These must be feasible, realistic and operational.

Tactics

Tactics are concerned with the short to medium term co-ordination of activities and the deployment of resources needed to reach a particular strategic goal. Some typical questions one might ask at this level are: "What do we need to do to reach our growth / size / profitability goals?" "What are our competitors doing?" "What machines should we use?" The decisions are taken more at the lower levels to implement the strategies based on ground realities.

How strategy is initiated?

A triggering event is something that stimulates a change in strategy .Some of the possible triggering events is:

New CEO: By asking a series of embarrassing questions, the new CEO cuts through the veil of complacency and forces people to question the very reason for the corporation’s existence.

Intervention by an external institution: The firm’s bank suddenly refuses to agree to a new loan or suddenly calls for payment in full on an old one.

Threat of a change in ownership: Another firm may initiate a takeover by buying the company’s common stock.

Management’s recognition of a performance gap: A performance gap exists when performance does not meet expectations. Sales and profits either are no longer increasing or may even be falling.

Innovation of a new product that threatens the existence of the present status quo.

Basic model of strategic management

Strategic management consists of four basic elements

1. Environmental scanning

2. Strategy Formulation

3. Strategy Implementation and

4. Evaluation and control

Management scans both the external environment for opportunities and threats and the internal environmental for strengths and weakness. The following factors that are most important to the corporation’s future are called strategic factors: strengths, weakness, opportunities and threats (SWOT)

Strategy Formulation

Strategy formulation is the development of long-range plans for they effective

management of environmental opportunities and threats, taking into consideration corporate strengths and weakness. It includes defining the corporate mission, specifying achievable objectives, developing strategies and setting policy guidelines.

Mission

An organization’s mission is its purpose, or the reason for its existence. It states what it is providing to society .A well conceived mission statement defines the fundamental , unique purpose that sets a company apart from other firms of its types and identifies the scope of the company ‘s operation in terms of products offered and markets served

Objectives

Objectives are the end results of planned activity; they state what is to be accomplished by when and should be quantified if possible. The achievement of corporate objectives should result in fulfillment of the corporation’s mission.

Strategies

A strategy of a corporation is a comprehensive master plan stating how corporation will achieve its mission and its objectives. It maximizes competitive advantage and minimizes competitive disadvantage. The typical business firm usually considers three types of strategy: corporate, business and functional.

Policies

A policy is a broad guideline for decision making that links the formulation of strategy with its implementation. Companies use policies to make sure that the employees throughout the firm make decisions and take actions that support the corporation’s mission, its objectives and its strategies.

Strategic decision making

Strategic deals with the long-run future of the entire organization and have

three characteristic

1. Rare- Strategic decisions are unusual and typically have no precedent to follow.

2. Consequential-Strategic decisions commit substantial resources and demand a great deal of commitment

3. Directive- strategic decisions set precedents for lesser decisions and future actions throughout the organization.

Mintzberg’s mode s of strategic decision making

According to Henry Mintzberg, the most typical approaches or modes of strategic decision making are entrepreneurial, adaptive and planning.

Making better strategic decisions

He gives seven steps for strategic decisions

1. Evaluate current performance results

2. Review corporate governance

3. Scan the external environment

4. Analyze strategic factors (SWOT)

5. Generate, evaluate and select the best alternative strategy

6. Implement selected strategies

7. Evaluate implemented strategies

SBU or Strategic Business Unit

An autonomous division or organizational unit, small enough to be flexible and large enough to exercise control over most of thefactors6 affecting its longterm performance. Because strategic business units are more agile. they allow the owning conglomerate to respond quickly to changing economic or market situations.

Corporate Governance

Corporate governance is a mechanism established to allow different parties to contribute capital, expertise and labour for their mutual benefit the investor or shareholder participates in the profits of the enterprise without taking responsibility for the operations. Management runs the company without being personally responsible for providing the funds. So as representatives of the shareholders, directors have both the authority and the responsibility to establish basic corporate policies and to ensure they arte followed. The board of directors has, therefore, an obligation to approve all decisions that might affect the long run performance of the corporation. The term corporate governance refers to the relationship among these three groups (board of directors, management and shareholders) in determining the direction and performance of the corporation

Responsibilities of the board

Specific requirements of board members of board members vary, depending

on the state in which the corporate charter is issued. The following five

responsibilities of board of directors listed in order of importance

1. Setting corporate strategy ,overall direction, mission and vision

2. Succession: hiring and firing the CEO and top management

3. Controlling , monitoring or supervising top management

4. Reviewing and approving the use of resources

5. Caring for stockholders interests

Role of board in strategic management

The role of board of directors is to carry out three basic tasks

1. Monitor

2. Evaluate and influence

3. Initiate and determine

CORPORATE SOCIAL RESPONSIBILITY

Corporate Social Responsibility (CSR) is an important activity to for businesses. As globalization accelerates and large corporations serve as global providers, these corporations have progressively recognized the benefits of providing CSR programs in their various locations. CSR activities are now being undertaken throughout the globe.

What is corporate social responsibility?

The term is often used interchangeably for other terms such as Corporate Citizenship and is also linked to the concept of Triple Bottom Line Reporting (TBL) that is people, planet and profits., which is used as a framework for measuring an organization’s performance against economic, social and environmental parameters. It is about building sustainable businesses, which need healthy economies, markets and communities.

The key drivers for CSR are

Enlightened self-interest - creating a synergy of ethics, a cohesive society and a sustainable global economy where markets, labour and communities are able to function well together. Sustainability You need to understand sustainability. It is being used mostly in organizational forums and a basic understanding is needed for you. The discussion on sustainability is only for your understanding.

Sustainability means "meeting present needs without compromising the ability of future generations to meet their needs’. These well-established definitions set an ideal premise, but do not clarify specific human and environmental parameters for modelling and measuring sustainable developments. The following definitions are more specific:

1. "Sustainable means using methods, systems and materials that won't deplete resources or harm natural cycles".

2. Sustainability "identifies a concept and attitude in development that looks at a site's natural land, water, and energy resources as integral aspects of the

development".

3. "Sustainability integrates natural systems with human patterns and celebrates continuity, uniqueness and place making".

Combining all these definitions; Sustainable developments are those which fulfil present and future needs while using and not harming renewable resources and unique human-environmental systems of a site:[air, water, land, energy, and human ecology and/or those of other [off-site] sustainable systems (Rosenbaum 1993 and Vieria 1993).

Social investment - contributing to physical infrastructure and social capital is increasingly seen as a necessary part of doing business.

Transparency and trust - business has low ratings of trust in public perception. There is increasing expectation that companies will be more open, more accountable and be prepared to report publicly on their performance in social and environmental arenas. Increased public expectations of business - globally companies are expected to do more than merely provide jobs and contribute to the economy through taxes and employment.

Corporate social responsibility is represented by the contributions undertaken by companies to society through its core business activities, its social investment and philanthropy programmes and its engagement in public policy.

In recent years CSR has become a fundamental business practice and has gained much attention from chief executives, chairmen, boards of directors and executive management teams of larger international companies. They understand that a strong CSR program is an essential element in achieving good business practices and effective leadership. Companies have determined that their impact on the economic, social and environmental landscape directly affects their relationships with stakeholders, in particular investors, employees, customers, business partners, governments and communities.

According to the results of a global survey in 2002 by Ernst & Young, 94 per cent of companies believe the development of a Corporate Social Responsibility (CSR) strategy can deliver real business benefits, however only 11 per cent have made significant progress in implementing the strategy in their organisation. Senior executives from 147 companies in a range of industry sectors across Europe, North America and Australasia were interviewed for the survey. The survey concluded that CEOs are failing to recognize the benefits of implementing Corporate Social Responsibility strategies, despite increased pressure to include ethical, social and environmental issues into their decision-making processes. Research found that company CSR programs influence 70 per cent of all consumer purchasing decisions, with many investors and employees also being swayed in their choice of companies. "While companies recognize the value of an integrated CSR strategy, the majority are failing to maximize the associated business opportunities," said Andrew Grant, Ernst & Young Environment and Sustainability Services Principal.

"Corporate Social Responsibility is now a determining factor in consumer and client choice which companies cannot afford to ignore. Companies who fail to maximize their adoption of a CSR strategy will be left behind." The World Economic Forum has recognized the importance of corporate social responsibility by establishing the Global Corporate Citizenship Initiative.

The Initiative hopes to increase businesses' engagement in and support for corporate social responsibility as a business strategy with long-term benefits both for the companies themselves as well as society in general.

Strategic planning for small business

Many entrepreneurial ventures and small businesses believe that strategic planning is only for large businesses However, it is very much relevant to learn the gamelans - and strategic planning is a major part of any successful business. Small business needs more careful thought about business. Strategic planning involves setting up a strategy that your business is going to follow over a defined time period. It can be for a specific part of the business, like planning a marketing strategy, or for the business as a whole. Usually a board of directors sets the overall strategy for the business and each area of the company plans their strategy in alignment with the overall strategy.

Differing businesses use various time periods for their strategic planning. The time period is usually dependent on how fast the industry is moving. In a fast-changing environment like the internet, 5-year plans don't make sense. In big industries longer range planning is possible and desirable. Small businesses start with Writing a business plan which is different from strategic planning.

One writes a business plan when one is starting something new - a business or a product/service line within a business. Strategy looks to growth while business planning looks to beginnings. Part

of the strategy of a business may be to introduce a new product line. That product line would then have its own business plan for its development and introduction. Without a strategy any business small or big business has no direction. Strategy tells where you want to go.

Strategic Planning in Public and Non-Profit Sector Organizations

Strategic Planning is a means to an end, a method used to position an organization, through prioritizing its use of resources according to identified goals, in an effort to guide its direction and development over a period of time.

Strategic planning in recent years has been primarily focused on private sector organizations and much of the theory assumes that those in executive control of an organization have the freedom to determine its direction.

Current theories also appear to assume, that a profit motive will be the driving force behind the planning requirement. In public sector organizations or in non profit organizations, however, those in executive positions often have their powers constrained by statute and regulation which predetermine, to various degrees, not only the very purpose of the organization but also their levels of freedom to diversify or to reduce, for example, a loss-making service for example we cannot close Air India even it is making losses; however, it cannot be totally profit oriented only as it has a social purpose.

The primary financial driver in these organizations is not profit, but to maximize output within a given budget (some organizations_ currently having to try to do both) and, while elements of competition do exist, it is much more common to think of comparators rather than competitors. Much of the planning literature, currently being published, addresses the necessity of planning in the profit and non-profit sectors. Strategic thought and action have become increasingly important and have been adopted by public and non-profit planners to enable them to successfully adapt to the future.

It has been established in literature that strategic planning, can help public and nonprofit organizations anticipate and respond effectively to their dramatically changing environments. In their efforts to provide increased value for money and to genuinely improve their outputs, public and non-profit sector organizations have been increasingly turning to strategic planning systems and models. For example Indian posts adopted a strategy to face competition from courier service by having SPEED POST. It is a thought from the state organization that is not working for profit. Similarly many of the NGOs such as Hand in Hand in Kancheepuram provide funds to people who can pay back and plans all its activities effectively.

Strategic Change

Strategic Change means changing the organizational Vision, Mission, Objectives and of course the adopted strategy to achieve those objectives. Strategic change is defined as " changes in the content of a firm's strategy as defined by its scope, resource deployments, competitive advantages, and synergy"(Hofer and Schendel 1978) Strategic change is defined as a difference in the form, quality, or state over time in organization's alignment with its external environment (Rajgopal & Spreitzer, 1997 Van de Ven & Pool, 1995).

Considering the definition of strategic change, strategic change could be affected by the states in which s firms exists and their external environments. Because the performance of firms might dependent on the fit between firms and their external environments, the appearances of novel opportunities and threats in the external environments, in other words, the change of external environments, require firms to adapt to the external environments again; as a result, firms would change their strategy in response to the environmental changes.

The states of firms will also affect the occurrence of strategic change. For example, firms tend to adopt new strategies in the face of financial distress for the purpose of breaking the critical situations. Based on the argument of Rajagopalan and Spreitzer (1997), the factors which affect decision maker's cognition of external environment would affect strategic change in the organization rather than the actual change that happens in an organization.

Environmental scanning and industry analysis

Environmental scanning

Environmental scanning is the monitoring, evaluating and disseminating of

information from the external and internal environments to keep people within the corporation. It is a tool that a corporation uses to avoid strategic surprise and to ensure long-term health.

Scanning of external environmental variables The social environment includes general forces that do not directly touch on the short-run activities of the organization but those can, and often do, influence its longrun decisions. These forces are

• Economic forces

• Technological forces

• Political-legal forces

• Sociocultural forces

Scanning of social environment

The social environment contains many possible strategic factors. The number of factors becomes enormous when one realize that each country in the world can be represented by its own unique set of societal forces, some of which are very similar to neighboring countries and some of which are very different.

Monitoring of social trends

Large corporations categorized the social environment in any one geographic

region into four areas and focus their scanning in each area on trends with corporatewide relevance. Trends in any area may be very important to the firms in other industries.

Trends in economic part of societal environment can have an obvious impact

on business activity. Changes in the technological part of the societal environment have a significant impact on business firms. Demographic trends are part of socio cultural aspects of the societal environment.

International society consideration

For each countries or group of countries in which a company operates, management must face a whole new societal environment having different economic, technological, political-legal, and Socio cultural variables. This is especially an issue for a multinational corporation, a company having significant manufacturing and marketing operations in multiple countries. International society environments vary so widely that a corporation’s internal environment and strategic management process must be very flexible. Differences in social environments strongly affect the ways in which a multinational company.

Scanning of the task environment

A corporation’s scanning of the environment should include analysis of all the relevant elements in the task environment. These analyses take the form of individual reports written by various people in different parts of the firms. These and other reports are then summarized and transmitted up the corporate hierarchy for top management to use in strategic decision making. If a new development reported regarding a particular product category, top management may then sent memos to people throughout the organization to watch for and reports on development in related product areas. The many reports resulting from these scanning efforts when boiled down to their essential, act as a detailed list of external strategic factors.

Identification of external strategic factors:

One way to identify and analyze developments in the external environment is to use the issues priority matrix as follows. 1. Identify a number of likely trends emerging in the societal and task environment. These are strategic environmental issues: Those important trends that, if they happen, will determine what various industries will look like. 2. Assess the probability of these trends actually occurring. 3. Attempt to ascertain the likely impact of each of these trends of these corporations.