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.
