Strategic Management - An Introduction

Strategic Management is all about identification and description of the strategies that managers can carry
so as to achieve better performance and a competitive advantage for their organization. An organization
is said to have competitive advantage if its profitability is higher than the average profitability for all
companies in its industry.

Strategic management can also be defined as a bundle of decisions and acts which a manager
undertakes and which decides the result of the firm’s performance. The manager must have a thorough
knowledge and analysis of the general and competitive organizational environment so as to take right
decisions. They should conduct a SWOT Analysis(Strengths, Weaknesses, Opportunities, and Threats),
i.e., they should make best possible utilization of strengths, minimize the organizational weaknesses,
make use of arising opportunities from the business environment and shouldn’t ignore the threats.

Strategic management is nothing but planning for both predictable as well as unfeasible contingencies. It
is applicable to both small as well as large organizations as even the smallest organization face
competition and, by formulating and implementing appropriate strategies, they can attain sustainable
competitive advantage.

It is a way in which strategists set the objectives and proceed about attaining them. It deals with making
and implementing decisions about future direction of an organization. It helps us to identify the direction in
which an organization is moving.

Strategic management is a continuous process that evaluates and controls the business and the
industries in which an organization is involved; evaluates its competitors and sets goals and strategies to
meet all existing and potential competitors; and then reevaluates strategies on a regular basis to
determine how it has been implemented and whether it was successful or does it needs replacement.

Strategic Management gives a broader perspective to the employees of an organization and they
can better understand how their job fits into the entire organizational plan and how it is co-related
to other organizational members. It is nothing but the art of managing employees in a manner which
maximizes the ability of achieving business objectives. The employees become more trustworthy, more
committed and more satisfied as they can co-relate themselves very well with each organizational task.
They can understand the reaction of environmental changes on the organization and the probable
response of the organization with the help of strategic management. Thus the employees can judge the
impact of such changes on their own job and can effectively face the changes. The managers and
employees must do appropriate things in appropriate manner. They need to be both effective as well as
efficient.

One of the major role of strategic management is to incorporate various functional areas of the
organization completely, as well as, to ensure these functional areas harmonize and get together well.
Another role of strategic management is to keep a continuous eye on the goals and objectives of the
organization.

Following are the important concepts of Strategic Management:

Strategy - Definition and Features

Components of a Strategy Statement

 Strategic Management Process

Environmental Scanning

Strategy Formulation

Strategy Implementation

Strategy Formulation vs Implementation

Strategy Evaluation

Strategic Decisions

Business Policy

BCG Matrix

SWOT Analysis

Competitor Analysis

Porter’s Five Forces Model

Strategic Leadership

Corporate Governance

Business Ethics

Core Competencies

Strategy - Definition and Features

The word “strategy” is derived from the Greek word “stratçgos”; stratus (meaning army) and “ago”
(meaning leading/moving).

Strategy is an action that managers take to attain one or more of the organization’s goals. Strategy can
also be defined as “A general direction set for the company and its various components to achieve a
desired state in the future. Strategy results from the detailed strategic planning process”.

A strategy is all about integrating organizational activities and utilizing and allocating the scarce resources
within the organizational environment so as to meet the present objectives. While planning a strategy it is
essential to consider that decisions are not taken in a vaccum and that any act taken by a firm is likely to
be met by a reaction from those affected, competitors, customers, employees or suppliers.

Strategy can also be defined as knowledge of the goals, the uncertainty of events and the need to take
into consideration the likely or actual behavior of others. Strategy is the blueprint of decisions in an
organization that shows its objectives and goals, reduces the key policies, and plans for achieving these
goals, and defines the business the company is to carry on, the type of economic and human
organization it wants to be, and the contribution it plans to make to its shareholders, customers and
society at large.

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 of an organization. It defines the overall mission, vision and
direction of an organization. The objective of a strategy is to maximize an organization’s strengths and to
minimize the strengths of the competitors.

Strategy, in short, bridges the gap between “where we are” and “where we want to be”.

components of a Strategy Statement

The strategy statement of a firm sets the firm’s long-term strategic direction and broad policy directions. It
gives the firm a clear sense of direction and a blueprint for the firm’s activities for the upcoming years.
The main constituents of a strategic statement are as follows:

1. Strategic Intent
An organization’s strategic intent is the purpose that it exists and why it will continue to exist,
providing it maintains a competitive advantage. Strategic intent gives a picture about what an
organization must get into immediately in order to achieve the company’s vision. It motivates the
people. It clarifies the vision of the vision of the company.

Strategic intent helps management to emphasize and concentrate on the priorities. Strategic
intent is, nothing but, the influencing of an organization’s resource potential and core
competencies to achieve what at first may seem to be unachievable goals in the competitive
environment. A well expressed strategic intent should guide/steer the development of strategic
intent or the setting of goals and objectives that require that all of organization’s competencies be
controlled to maximum value.

Strategic intent includes directing organization’s attention on the need of winning; inspiring people
by telling them that the targets are valuable; encouraging individual and team participation as well
as contribution; and utilizing intent to direct allocation of resources.
 Strategic intent differs from strategic fit in a way that while strategic fit deals with harmonizing
available resources and potentials to the external environment, strategic intent emphasizes on
building new resources and potentials so as to create and exploit future opportunities.

2. 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.
g. It should be credible, i.e., all stakeholders should be able to believe it.
3. Vision
A vision statement identifies where the organization wants or intends to be in future or where it
should be to best meet the needs of the stakeholders. It describes dreams and aspirations for
future. For instance, 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.

4. Goals and Objectives

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

a. These are precise and measurable.

b. These look after critical and significant issues.
c. These are realistic and challenging.
d. These must be achieved within a specific time frame.
e. These include both financial as well as non-financial components.

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

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

g. Objectives should be both short-term as well as long-term.
h. Objectives must respond and react to changes in environment, i.e., they must
be flexible.
i. These must be feasible, realistic and operational.

Importance of Vision and Mission

Statements
One of the first things that any observer of management thought and practice asks is whether a particular
organization has a vision and mission statement. In addition, one of the first things that one learns in a
business school is the importance of vision and mission statements.

This article is intended to elucidate on the reasons why vision and mission statements are
important and the benefits that such statements provide to the organizations. It has been found in
studies that organizations that have lucid, coherent, and meaningful vision and mission statements return
more than double the numbers in shareholder benefits when compared to the organizations that do not
have vision and mission statements. Indeed, the importance of vision and mission statements is such that
it is the first thing that is discussed in management textbooks on strategy.

Some of the benefits of having a vision and mission statement are discussed below:

 Above everything else, vision and mission statements provide unanimity of purpose to
organizations and imbue the employees with a sense of belonging and identity. Indeed, vision
and mission statements are embodiments of organizational identity and carry the organizations
creed and motto. For this purpose, they are also called as statements of creed.
 Vision and mission statements spell out the context in which the organization operates and
provides the employees with a tone that is to be followed in the organizational climate. Since they
define the reason for existence of the organization, they are indicators of the direction in which
the organization must move to actualize the goals in the vision and mission statements.
 The vision and mission statements serve as focal points for individuals to identify themselves with
the organizational processes and to give them a sense of direction while at the same time
deterring those who do not wish to follow them from participating in the organization’s activities.
 The vision and mission statements help to translate the objectives of the organization into work
structures and to assign tasks to the elements in the organization that are responsible for
actualizing them in practice.
 To specify the core structure on which the organizational edifice stands and to help in the
translation of objectives into actionable cost, performance, and time related measures.
 Finally, vision and mission statements provide a philosophy of existence to the employees, which
is very crucial because as humans, we need meaning from the work to do and the vision and
mission statements provide the necessary meaning for working in a particular organization.

As can be seen from the above, articulate, coherent, and meaningful vision and mission statements go a
long way in setting the base performance and actionable parameters and embody the spirit of the
organization. In other words, vision and mission statements are as important as the various identities that
individuals have in their everyday lives.

It is for this reason that organizations spend a lot of time in defining their vision and mission statements
and ensure that they come up with the statements that provide meaning instead of being mere sentences
that are devoid of any meaning.

Strategic Management Process -

Meaning, Steps and Components
The strategic management process means defining the organization’s strategy. It is also defined as the
process by which managers make a choice of a set of strategies for the organization that will enable it to
achieve better performance.

Strategic management is a continuous process that appraises the business and industries in which the
organization is involved; appraises it’s competitors; and fixes goals to meet all the present and future
competitor’s and then reassesses each strategy.

Strategic management process has following four steps:

 1. Environmental Scanning- Environmental scanning refers to a process of collecting, scrutinizing
and providing information for strategic purposes. It helps in analyzing the internal and external
factors influencing an organization. After executing the environmental analysis process,
management should evaluate it on a continuous basis and strive to improve it.
2. Strategy Formulation- Strategy formulation is the process of deciding best course of action for
accomplishing organizational objectives and hence achieving organizational purpose. After
conducting environment scanning, managers formulate corporate, business and functional
strategies.
3. Strategy Implementation- Strategy implementation implies making the strategy work as intended
or putting the organization’s chosen strategy into action. Strategy implementation includes
designing the organization’s structure, distributing resources, developing decision making
process, and managing human resources.
4. Strategy Evaluation- Strategy evaluation is the final step of strategy management process. The
key strategy evaluation activities are: appraising internal and external factors that are the root of
present strategies, measuring performance, and taking remedial / corrective actions. Evaluation
makes sure that the organizational strategy as well as it’s implementation meets the
organizational objectives.

These components are steps that are carried, in chronological order, when creating a new strategic
management plan. Present businesses that have already created a strategic management plan will revert
to these steps as per the situation’s requirement, so as to make essential changes.

Components of Strategic Management Process

Strategic management is an ongoing process. Therefore, it must be realized that each component interacts
with the other components and that this interaction often happens in chorus.

Environmental Scanning - Internal &

External Analysis of Environment
Organizational environment consists of both external and internal factors. Environment must be scanned
so as to determine development and forecasts of factors that will influence organizational
success.Environmental scanning refers to possession and utilization of information about
occasions, patterns, trends, and relationships within an organization’s internal and external
environment. It helps the managers to decide the future path of the organization. Scanning must identify
the threats and opportunities existing in the environment. While strategy formulation, an organization
must take advantage of the opportunities and minimize the threats. A threat for one organization may be
an opportunity for another.

Internal analysis of the environment is the first step of environment scanning. Organizations should
observe the internal organizational environment. This includes employee interaction with other
employees, employee interaction with management, manager interaction with other managers, and
management interaction with shareholders, access to natural resources, brand awareness, organizational
structure, main staff, operational potential, etc. Also, discussions, interviews, and surveys can be used to
assess the internal environment. Analysis of internal environment helps in identifying strengths and
weaknesses of an organization.

As business becomes more competitive, and there are rapid changes in the external environment,
information from external environment adds crucial elements to the effectiveness of long-term plans. As
environment is dynamic, it becomes essential to identify competitors’ moves and actions. Organizations
have also to update the core competencies and internal environment as per external environment.
Environmental factors are infinite, hence, organization should be agile and vigile to accept and adjust to
the environmental changes. For instance - Monitoring might indicate that an original forecast of the prices
of the raw materials that are involved in the product are no more credible, which could imply the
requirement for more focused scanning, forecasting and analysis to create a more trustworthy prediction
about the input costs. In a similar manner, there can be changes in factors such as competitor’s activities,
technology, market tastes and preferences.

While in external analysis, three correlated environment should be studied and analyzed —

 immediate / industry environment

 national environment
 broader socio-economic environment / macro-environment

Examining the industry environment needs an appraisal of the competitive structure of the
organization’s industry, including the competitive position of a particular organization and it’s main rivals.
Also, an assessment of the nature, stage, dynamics and history of the industry is essential. It also implies
evaluating the effect of globalization on competition within the industry. Analyzing the national
environment needs an appraisal of whether the national framework helps in achieving competitive
advantage in the globalized environment. Analysis of macro-environment includes exploring macro-
economic, social, government, legal, technological and international factors that may influence the
environment. The analysis of organization’s external environment reveals opportunities and threats for an
organization.

Strategic managers must not only recognize the present state of the environment and their industry but
also be able to predict its future positions.

Steps in Strategy Formulation Process

Strategy formulation refers to the process of choosing the most appropriate course of action for the
realization of organizational goals and objectives and thereby achieving the organizational vision. The
process of strategy formulation basically involves six main steps. Though these steps do not follow
a rigid chronological order, however they are very rational and can be easily followed in this order.

1. Setting Organizations’ objectives - The key component of any strategy statement is to set the
long-term objectives of the organization. It is known that strategy is generally a medium for
realization of organizational objectives. Objectives stress the state of being there whereas
Strategy stresses upon the process of reaching there. Strategy includes both the fixation of
objectives as well the medium to be used to realize those objectives. Thus, strategy is a wider
term which believes in the manner of deployment of resources so as to achieve the objectives.
 While fixing the organizational objectives, it is essential that the factors which influence the
selection of objectives must be analyzed before the selection of objectives. Once the objectives
and the factors influencing strategic decisions have been determined, it is easy to take strategic
decisions.

2. Evaluating the Organizational Environment - The next step is to evaluate the general
economic and industrial environment in which the organization operates. This includes a review
of the organizations competitive position. It is essential to conduct a qualitative and quantitative
review of an organizations existing product line. The purpose of such a review is to make sure
that the factors important for competitive success in the market can be discovered so that the
management can identify their own strengths and weaknesses as well as their competitors’
strengths and weaknesses.

After identifying its strengths and weaknesses, an organization must keep a track of competitors’
moves and actions so as to discover probable opportunities of threats to its market or supply
sources.

3. Setting Quantitative Targets - In this step, an organization must practically fix the quantitative
target values for some of the organizational objectives. The idea behind this is to compare with
long term customers, so as to evaluate the contribution that might be made by various product
zones or operating departments.
4. Aiming in context with the divisional plans - In this step, the contributions made by each
department or division or product category within the organization is identified and accordingly
strategic planning is done for each sub-unit. This requires a careful analysis of macroeconomic
trends.
5. Performance Analysis - Performance analysis includes discovering and analyzing the gap
between the planned or desired performance. A critical evaluation of the organizations past
performance, present condition and the desired future conditions must be done by the
organization. This critical evaluation identifies the degree of gap that persists between the actual
reality and the long-term aspirations of the organization. An attempt is made by the organization
to estimate its probable future condition if the current trends persist.
6. Choice of Strategy - This is the ultimate step in Strategy Formulation. The best course of action
is actually chosen after considering organizational goals, organizational strengths, potential and
limitations as well as the external opportunities.

1.7. Strategy Implementation -

Meaning and Steps in Implementing
a Strategy
8. Strategy implementation is the translation of chosen strategy into organizational action so
as to achieve strategic goals and objectives. Strategy implementation is also defined as the
manner in which an organization should develop, utilize, and amalgamate organizational
structure, control systems, and culture to follow strategies that lead to competitive advantage and
a better performance. Organizational structure allocates special value developing tasks and roles
to the employees and states how these tasks and roles can be correlated so as maximize
efficiency, quality, and customer satisfaction-the pillars of competitive advantage. But,
organizational structure is not sufficient in itself to motivate the employees.
 9. An organizational control system is also required. This control system equips managers with
motivational incentives for employees as well as feedback on employees and organizational
performance. Organizational culture refers to the specialized collection of values, attitudes, norms
and beliefs shared by organizational members and groups.

10. Following are the main steps in implementing a strategy:

Developing an organization having potential of carrying out strategy successfully.

Disbursement of abundant resources to strategy-essential activities.

Creating strategy-encouraging policies.

Employing best policies and programs for constant improvement.

Linking reward structure to accomplishment of results.

Making use of strategic leadership.

11. Excellently formulated strategies will fail if they are not properly implemented. Also, it is essential
to note that strategy implementation is not possible unless there is stability between strategy and
each organizational dimension such as organizational structure, reward structure, resource-
allocation process, etc.

12. Strategy implementation poses a threat to many managers and employees in an organization.
New power relationships are predicted and achieved. New groups (formal as well as informal) are
formed whose values, attitudes, beliefs and concerns may not be known. With the change in
power and status roles, the managers and employees may employ confrontation behaviour.

2.13. Strategy Formulation vs

Strategy Implementation
3.14. Following are the main differences between Strategy Formulation and Strategy
Implementation-

Strategy Formulation Strategy Implementation

Strategy Formulation includes planning and Strategy Implementation involves all those means
decision-making involved in developing related to executing the strategic plans.
organization’s strategic goals and plans.

In short, Strategy Formulation is placing the In short, Strategy Implementation is managing

Forces before the action. forces during the action.

Strategy Formulation is an Entrepreneurial Strategic Implementation is mainly

Activity based on strategic decision-making. an Administrative Taskbased on strategic and
operational decisions.

Strategy Formulation emphasizes Strategy Implementation emphasizes on efficiency.

on effectiveness.

Strategy Formulation is a rational process. Strategy Implementation is basically an operational

process.

Strategy Formulation requires co-ordination among Strategy Implementation requires co-ordination

few individuals. among many individuals.

Strategy Formulation requires a great deal Strategy Implementation requires

of initiative and logical skills. specific motivational and leadership traits.

Strategic Formulation precedes Strategy STrategy Implementation follows Strategy

Implementation. Formulation.

Strategy Evaluation Process and its

Significance
Strategy Evaluation is as significant as strategy formulation because it throws light on the efficiency and
effectiveness of the comprehensive plans in achieving the desired results. The managers can also assess
the appropriateness of the current strategy in todays dynamic world with socio-economic, political and
technological innovations. Strategic Evaluation is the final phase of strategic management.

The significance of strategy evaluation lies in its capacity to co-ordinate the task performed by
managers, groups, departments etc, through control of performance. Strategic Evaluation is
significant because of various factors such as - developing inputs for new strategic planning, the urge for
feedback, appraisal and reward, development of the strategic management process, judging the validity
of strategic choice etc.

The process of Strategy Evaluation consists of following steps-

1. Fixing benchmark of performance - While fixing the benchmark, strategists encounter

questions such as - what benchmarks to set, how to set them and how to express them. In order
to determine the benchmark performance to be set, it is essential to discover the special
requirements for performing the main task. The performance indicator that best identify and
express the special requirements might then be determined to be used for evaluation. The
organization can use both quantitative and qualitative criteria for comprehensive assessment of
performance. Quantitative criteria includes determination of net profit, ROI, earning per share,
cost of production, rate of employee turnover etc. Among the Qualitative factors are subjective
evaluation of factors such as - skills and competencies, risk taking potential, flexibility etc.
2. Measurement of performance - The standard performance is a bench mark with which the
actual performance is to be compared. The reporting and communication system help in
 measuring the performance. If appropriate means are available for measuring the performance
and if the standards are set in the right manner, strategy evaluation becomes easier. But various
factors such as managers contribution are difficult to measure. Similarly divisional performance is
sometimes difficult to measure as compared to individual performance. Thus, variable objectives
must be created against which measurement of performance can be done. The measurement
must be done at right time else evaluation will not meet its purpose. For measuring the
performance, financial statements like - balance sheet, profit and loss account must be prepared
on an annual basis.
3. Analyzing Variance - While measuring the actual performance and comparing it with standard
performance there may be variances which must be analyzed. The strategists must mention the
degree of tolerance limits between which the variance between actual and standard performance
may be accepted. The positive deviation indicates a better performance but it is quite unusual
exceeding the target always. The negative deviation is an issue of concern because it indicates a
shortfall in performance. Thus in this case the strategists must discover the causes of deviation
and must take corrective action to overcome it.
4. Taking Corrective Action - Once the deviation in performance is identified, it is essential to plan
for a corrective action. If the performance is consistently less than the desired performance, the
strategists must carry a detailed analysis of the factors responsible for such performance. If the
strategists discover that the organizational potential does not match with the performance
requirements, then the standards must be lowered. Another rare and drastic corrective action is
reformulating the strategy which requires going back to the process of strategic management,
reframing of plans according to new resource allocation trend and consequent means going to
the beginning point of strategic management process.

Strategic Decisions - Definition and

Characteristics
Strategic decisions are the decisions that are concerned with whole environment in which the firm
operates, the entire resources and the people who form the company and the interface between the two.

Characteristics/Features of Strategic Decisions

a. Strategic decisions have major resource propositions for an organization. These decisions may
be concerned with possessing new resources, organizing others or reallocating others.
b. Strategic decisions deal with harmonizing organizational resource capabilities with the threats
and opportunities.
c. Strategic decisions deal with the range of organizational activities. It is all about what they want
the organization to be like and to be about.
d. Strategic decisions involve a change of major kind since an organization operates in ever-
changing environment.
e. Strategic decisions are complex in nature.
f. Strategic decisions are at the top most level, are uncertain as they deal with the future, and
involve a lot of risk.
g. Strategic decisions are different from administrative and operational decisions. Administrative
decisions are routine decisions which help or rather facilitate strategic decisions or operational
decisions. Operational decisions are technical decisions which help execution of strategic
decisions. To reduce cost is a strategic decision which is achieved through operational decision
 of reducing the number of employees and how we carry out these reductions will be
administrative decision.

The differences between Strategic, Administrative and Operational decisions can be summarized as
follows-

Strategic Decisions Administrative Decisions Operational Decisions

Strategic decisions are long-term Administrative decisions are Operational decisions are not
decisions. taken daily. frequently taken.

These are considered where The These are short-term based These are medium-period
future planning is concerned. Decisions. based decisions.

Strategic decisions are taken in These are taken according to These are taken in accordance
Accordance with organizational strategic and operational with strategic and administrative
mission and vision. Decisions. decision.

These are related to overall These are related to working of These are related to production.
Counter planning of all employees in an Organization.
Organization.

These deal with organizational These are in welfare of These are related to production
Growth. employees working in an and factory growth.
organization.

Benefits of Strategic Management

There are many benefits of strategic management and they include identification, prioritization,
and exploration of opportunities. For instance, newer products, newer markets, and newer forays into
business lines are only possible if firms indulge in strategic planning. Next, strategic management allows
firms to take an objective view of the activities being done by it and do a cost benefit analysis as to
whether the firm is profitable.

Just to differentiate, by this, we do not mean the financial benefits alone (which would be discussed
below) but also the assessment of profitability that has to do with evaluating whether the business is
strategically aligned to its goals and priorities.

The key point to be noted here is that strategic management allows a firm to orient itself to its market and
consumers and ensure that it is actualizing the right strategy.

Financial Benefits
It has been shown in many studies that firms that engage in strategic management are more profitable
and successful than those that do not have the benefit of strategic planning and strategic management.

When firms engage in forward looking planning and careful evaluation of their priorities, they have control
over the future, which is necessary in the fast changing business landscape of the 21st century.

It has been estimated that more than 100,000 businesses fail in the US every year and most of these
failures are to do with a lack of strategic focus and strategic direction. Further, high performing firms tend
to make more informed decisions because they have considered both the short term and long-term
consequences and hence, have oriented their strategies accordingly. In contrast, firms that do not engage
themselves in meaningful strategic planning are often bogged down by internal problems and lack of
focus that leads to failure.

Non-Financial Benefits
The section above discussed some of the tangible benefits of strategic management. Apart from these
benefits, firms that engage in strategic management are more aware of the external threats, an improved
understanding of competitor strengths and weaknesses and increased employee productivity. They also
have lesser resistance to change and a clear understanding of the link between performance and
rewards.

The key aspect of strategic management is that the problem solving and problem preventing capabilities
of the firms are enhanced through strategic management. Strategic management is essential as it helps
firms to rationalize change and actualize change and communicate the need to change better to its
employees. Finally, strategic management helps in bringing order and discipline to the activities of the
firm in its both internal processes and external activities.

Closing Thoughts
In recent years, virtually all firms have realized the importance of strategic management. However, the
key difference between those who succeed and those who fail is that the way in which strategic
management is done and strategic planning is carried out makes the difference between success and
failure. Of course, there are still firms that do not engage in strategic planning or where the planners do
not receive the support from management. These firms ought to realize the benefits of strategic
management and ensure their longer-term viability and success in the marketplace.

Business Policy - Definition and

Features
Definition of Business Policy
Business Policy defines the scope or spheres within which decisions can be taken by the subordinates in
an organization. It permits the lower level management to deal with the problems and issues without
consulting top level management every time for decisions.

Business policies are the guidelines developed by an organization to govern its actions. They define the
limits within which decisions must be made. Business policy also deals with acquisition of resources with
which organizational goals can be achieved. Business policy is the study of the roles and responsibilities
of top level management, the significant issues affecting organizational success and the decisions
affecting organization in long-run.

Features of Business Policy

An effective business policy must have following features-

1. Specific- Policy should be specific/definite. If it is uncertain, then the implementation will become
difficult.
2. Clear- Policy must be unambiguous. It should avoid use of jargons and connotations. There
should be no misunderstandings in following the policy.
3. Reliable/Uniform- Policy must be uniform enough so that it can be efficiently followed by the
subordinates.
4. Appropriate- Policy should be appropriate to the present organizational goal.
5. Simple- A policy should be simple and easily understood by all in the organization.
6. Inclusive/Comprehensive- In order to have a wide scope, a policy must be comprehensive.
7. Flexible- Policy should be flexible in operation/application. This does not imply that a policy
should be altered always, but it should be wide in scope so as to ensure that the line managers
use them in repetitive/routine scenarios.
8. Stable- Policy should be stable else it will lead to indecisiveness and uncertainty in minds of
those who look into it for guidance.

Difference between Policy and Strategy

The term “policy” should not be considered as synonymous to the term “strategy”. The difference
between policy and strategy can be summarized as follows-

1. Policy is a blueprint of the organizational activities which are repetitive/routine in nature. While
strategy is concerned with those organizational decisions which have not been dealt/faced before
in same form.
2. Policy formulation is responsibility of top level management. While strategy formulation is
basically done by middle level management.
3. Policy deals with routine/daily activities essential for effective and efficient running of an
organization. While strategy deals with strategic decisions.
4. Policy is concerned with both thought and actions. While strategy is concerned mostly with action.
5. A policy is what is, or what is not done. While a strategy is the methodology used to achieve a
target as prescribed by a policy.

BCG Matrix
Boston Consulting Group (BCG) Matrix is a four celled matrix (a 2 * 2 matrix) developed by BCG, USA.
It is the most renowned corporate portfolio analysis tool. It provides a graphic representation for an
organization to examine different businesses in it’s portfolio on the basis of their related market share and
industry growth rates. It is a two dimensional analysis on management of SBU’s (Strategic Business
Units). In other words, it is a comparative analysis of business potential and the evaluation of
environment.

According to this matrix, business could be classified as high or low according to their industry growth
rate and relative market share.
Relative Market Share = SBU Sales this year leading competitors sales this year.

Market Growth Rate = Industry sales this year - Industry Sales last year.

The analysis requires that both measures be calculated for each SBU. The dimension of business
strength, relative market share, will measure comparative advantage indicated by market dominance. The
key theory underlying this is existence of an experience curve and that market share is achieved due to
overall cost leadership.

BCG matrix has four cells, with the horizontal axis representing relative market share and the vertical axis
denoting market growth rate. The mid-point of relative market share is set at 1.0. if all the SBU’s are in
same industry, the average growth rate of the industry is used. While, if all the SBU’s are located in
different industries, then the mid-point is set at the growth rate for the economy.

Resources are allocated to the business units according to their situation on the grid. The four cells of this
matrix have been called as stars, cash cows, question marks and dogs. Each of these cells represents a
particular type of business.

10 x 1x 0.1 x

Figure: BCG Matrix

1. Stars- Stars represent business units having large market share in a fast growing industry. They
may generate cash but because of fast growing market, stars require huge investments to
maintain their lead. Net cash flow is usually modest. SBU’s located in this cell are attractive as
they are located in a robust industry and these business units are highly competitive in the
industry. If successful, a star will become a cash cow when the industry matures.
2. Cash Cows- Cash Cows represents business units having a large market share in a mature,
slow growing industry. Cash cows require little investment and generate cash that can be utilized
for investment in other business units. These SBU’s are the corporation’s key source of cash, and
are specifically the core business. They are the base of an organization. These businesses
usually follow stability strategies. When cash cows loose their appeal and move towards
deterioration, then a retrenchment policy may be pursued.
3. Question Marks- Question marks represent business units having low relative market share and
located in a high growth industry. They require huge amount of cash to maintain or gain market
share. They require attention to determine if the venture can be viable. Question marks are
 generally new goods and services which have a good commercial prospective. There is no
specific strategy which can be adopted. If the firm thinks it has dominant market share, then it can
adopt expansion strategy, else retrenchment strategy can be adopted. Most businesses start as
question marks as the company tries to enter a high growth market in which there is already a
market-share. If ignored, then question marks may become dogs, while if huge investment is
made, then they have potential of becoming stars.
4. Dogs- Dogs represent businesses having weak market shares in low-growth markets. They
neither generate cash nor require huge amount of cash. Due to low market share, these business
units face cost disadvantages. Generally retrenchment strategies are adopted because these
firms can gain market share only at the expense of competitor’s/rival firms. These business firms
have weak market share because of high costs, poor quality, ineffective marketing, etc. Unless a
dog has some other strategic aim, it should be liquidated if there is fewer prospects for it to gain
market share. Number of dogs should be avoided and minimized in an organization.

Limitations of BCG Matrix

The BCG Matrix produces a framework for allocating resources among different business units and
makes it possible to compare many business units at a glance. But BCG Matrix is not free from
limitations, such as-

1. BCG matrix classifies businesses as low and high, but generally businesses can be medium also.
Thus, the true nature of business may not be reflected.
2. Market is not clearly defined in this model.
3. High market share does not always leads to high profits. There are high costs also involved with
high market share.
4. Growth rate and relative market share are not the only indicators of profitability. This model
ignores and overlooks other indicators of profitability.
5. At times, dogs may help other businesses in gaining competitive advantage. They can earn even
more than cash cows sometimes.
6. This four-celled approach is considered as to be too simplistic.

SWOT Analysis - Definition,

Advantages and Limitations
SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats. By definition,
Strengths (S) and Weaknesses (W) are considered to be internal factors over which you have some
measure of control. Also, by definition, Opportunities (O) and Threats (T) are considered to be external
factors over which you have essentially no control.

SWOT Analysis is the most renowned tool for audit and analysis of the overall strategic position of the
business and its environment. Its key purpose is to identify the strategies that will create a firm specific
business model that will best align an organization’s resources and capabilities to the requirements of the
environment in which the firm operates.

In other words, it is the foundation for evaluating the internal potential and limitations and the
probable/likely opportunities and threats from the external environment. It views all positive and negative
factors inside and outside the firm that affect the success. A consistent study of the environment in which
the firm operates helps in forecasting/predicting the changing trends and also helps in including them in
the decision-making process of the organization.

An overview of the four factors (Strengths, Weaknesses, Opportunities and Threats) is given below-

1. Strengths - Strengths are the qualities that enable us to accomplish the organization’s mission.
These are the basis on which continued success can be made and continued/sustained.

Strengths can be either tangible or intangible. These are what you are well-versed in or what you
have expertise in, the traits and qualities your employees possess (individually and as a team)
and the distinct features that give your organization its consistency.

Strengths are the beneficial aspects of the organization or the capabilities of an organization,
which includes human competencies, process capabilities, financial resources, products and
services, customer goodwill and brand loyalty. Examples of organizational strengths are huge
financial resources, broad product line, no debt, committed employees, etc.

2. Weaknesses - Weaknesses are the qualities that prevent us from accomplishing our mission and
achieving our full potential. These weaknesses deteriorate influences on the organizational
success and growth. Weaknesses are the factors which do not meet the standards we feel they
should meet.

Weaknesses in an organization may be depreciating machinery, insufficient research and

development facilities, narrow product range, poor decision-making, etc. Weaknesses are
controllable. They must be minimized and eliminated. For instance - to overcome obsolete
machinery, new machinery can be purchased. Other examples of organizational weaknesses are
huge debts, high employee turnover, complex decision making process, narrow product range,
large wastage of raw materials, etc.

3. Opportunities - Opportunities are presented by the environment within which our organization
operates. These arise when an organization can take benefit of conditions in its environment to
plan and execute strategies that enable it to become more profitable. Organizations can gain
competitive advantage by making use of opportunities.

Organization should be careful and recognize the opportunities and grasp them whenever they
arise. Selecting the targets that will best serve the clients while getting desired results is a difficult
task. Opportunities may arise from market, competition, industry/government and technology.
Increasing demand for telecommunications accompanied by deregulation is a great opportunity
for new firms to enter telecom sector and compete with existing firms for revenue.

4. Threats - Threats arise when conditions in external environment jeopardize the reliability and
profitability of the organization’s business. They compound the vulnerability when they relate to
the weaknesses. Threats are uncontrollable. When a threat comes, the stability and survival can
be at stake. Examples of threats are - unrest among employees; ever changing technology;
increasing competition leading to excess capacity, price wars and reducing industry profits; etc.

Advantages of SWOT Analysis

SWOT Analysis is instrumental in strategy formulation and selection. It is a strong tool, but it involves a
great subjective element. It is best when used as a guide, and not as a prescription. Successful
businesses build on their strengths, correct their weakness and protect against internal weaknesses and
external threats. They also keep a watch on their overall business environment and recognize and exploit
new opportunities faster than its competitors.

SWOT Analysis helps in strategic planning in following manner-

a. It is a source of information for strategic planning.

b. Builds organization’s strengths.
c. Reverse its weaknesses.
d. Maximize its response to opportunities.
e. Overcome organization’s threats.
f. It helps in identifying core competencies of the firm.
g. It helps in setting of objectives for strategic planning.
h. It helps in knowing past, present and future so that by using past and current data, future plans
can be chalked out.

SWOT Analysis provide information that helps in synchronizing the firm’s resources and capabilities with
the competitive environment in which the firm operates.

SWOT ANALYSIS FRAMEWORK

Limitations of SWOT Analysis

SWOT Analysis is not free from its limitations. It may cause organizations to view circumstances as very
simple because of which the organizations might overlook certain key strategic contact which may occur.
Moreover, categorizing aspects as strengths, weaknesses, opportunities and threats might be very
subjective as there is great degree of uncertainty in market. SWOT Analysis does stress upon the
significance of these four aspects, but it does not tell how an organization can identify these aspects for
itself.

There are certain limitations of SWOT Analysis which are not in control of management. These include-

a. Price increase;
b. Inputs/raw materials;
c. Government legislation;
d. Economic environment;
e. Searching a new market for the product which is not having overseas market due to import
restrictions; etc.
Internal limitations may include-

a. Insufficient research and development facilities;

b. Faulty products due to poor quality control;
c. Poor industrial relations;
d. Lack of skilled and efficient labour; etc

SWOT Analysis of Google

Download PPT for Complete Course on Introduction
SWOT Analysis
Google is probably the world’s best-known company for
pioneering the search engine revolution and providing a
means for the internet users of the world to search and find
information at the click of a mouse. Further, Google is also
known for its work in organizing information in a concise and
precise manner that has been a game changer for the
internet economy and by extension, the global economy
because corporations, individuals, and consumers can
search and access information about anything anywhere and
anytime. Moreover, Google also goes with the motto of “Do
not be Evil” which means that its business practices are
geared towards enhancing information and actualizing best
practices that would help people find and search information.
Though its business practices in China and elsewhere where
Total Slides: 130 the company was accused of being complicit with the
authoritarian regimes in censoring information were
questionable, on balance, the company has done more good
than harm in bringing together information and organizing it.

Strengths

 Market Leader in Search Engines

Perhaps the biggest strength of Google is that it is the undisputed leader in search engines,
which means that it has a domineering and lion’s share of the internet searches worldwide.
Google has more than 65% of the market share for internet searches and the competitors do not
even come close to anywhere that Google does.

 Ability to Generate User Traffic

Google is a household brand in the world, its ability to drive internet user traffic is legendary, and
this has helped it become one of the most powerful brands in the world. Indeed, Google averages
more than 1.2 Billion hits a month in terms of the unique searches that users perform on the site.
This gives it an unrivaled and unparalleled edge over its competitors in the market.

 Revenue from Advertising and Display

Its revenue model wherein it garners humungous profits through partnerships with third party
sites has held the company in good stead as far as its ability to mop up resources and increase
 both its top-line as well as bottom-line is concerned. This is another key strength of the company
that has helped it scale greater heights.

 Introduction of Android and Mobile Technologies

The last of the strengths discussed here relates to its adoption of Android and Mobile
technologies, this has resulted in it becoming a direct competitor of Apple as far as these devices,
and operating systems are concerned.

Weaknesses

 Excessive Reliance on Secrecy

Google does not reveal its algorithm for searches or even its basic formula as far as internet
searches are concerned leading to many experts slamming the company for being opaque and
hiding behind the veneer of secrecy. However, in recent years, Google has taken steps to redress
this by providing a bare bones version of its unique search engine algorithm.

 Falling Ad Rates

In recent years and especially in 2013, the company has been faced with declining revenues from
ads and as a result, the profitability of the company has taken a hit. This is partly due to the
ongoing global economic slowdown and partly because of competitors snapping at its heels in a
more aggressive manner. Indeed, Apple has already taken steps to garner search engine
revenues in its devices and hence, Google must be cognizant of the challenges that lie ahead.

 Overdependence on Advertising

Google’s business model relies heavily on advertising and the numbers reveal that it gets more
than 85% of its revenues from ads alone. This means that any potential dip in revenues would
cost the company dearly (literally as well as metaphorically). The point here is that Google has to
devise a more robust business model that embraces e-commerce and mobile commerce along
with its current business model that is based on ad revenues alone.

 Lack of Compatibility with next generation devices

Another weakness for Google is that it is not compatible with many next generation computing
platforms including mobile and tablet computers and this remains an area of concern for the
company.

Opportunities

 Android Operating System

Perhaps the biggest opportunity for Google lies in its pioneering effort in providing the Android OS
(Operating System) which has resulted in its becoming a direct competitor to Apple and
Samsung.

 Diversification into non-Ad Business Models

 As discussed earlier, the company has to diversify into non-ad revenues if it has to remain
profitable and current indications are that it is adapting itself to this as can be seen from the push
towards commercial transactions using its numerous sites like Google Books, Google Maps etc.

 Google Glasses and Google Play

The introduction of Google Glasses and Google Play promises to be a game changer for Google
and this is a significant opportunity that the company can exploit. Indeed, this very aspect can
make the company take the next evolutionary leap into the emerging world of nano-computing.

 Cloud Computing

Cloud Computing remains a key opportunity for Google as it is already experienced in providing
storage and cloud solutions. Indeed, if not anything, it can move into the enterprise market using
the cloud-computing paradigm.

Threats

 Competition from Facebook

The advent of Social Media has seriously threatened Google’s dominance in the internet world
and the company has to pull an ace to deal with the increasing features available on Facebook
and Twitter.

 Mobile Computing

Another threat to Google is from the emerging area of mobile computing that threatens to pass
the company by as newer companies seize the opportunity to ramp up their mobile computing
presence.

SWOT Analysis of Blackberry

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Total Slides: 130

Introduction
Blackberry, which was the pioneer in mobile-based technologies with its best selling original
Smartphones, has been in the news for all the wrong reasons. First, the company known as Research in
Motion (RIM), which made and marketed the Blackberries, missed the emerging Smartphone revolution
though it was one of the pioneers of mobile computing. Next, the company was unable to read the market
and hence, it lost market share to Apple and Samsung. This resulted in the company nearly going
bankrupt and despite changes in leadership; it could never regain its position. In the past month, the
company has been in the news again because it rejected a buyout offer and rescinded a sale option and
instead, chose to appoint a new CEO along with accepting fresh infusion of capital into the company. This
article discusses the changing strategies of Blackberry through a SWOT Analysis, which would provide
clues into how the company would position itself in the future. The key theme here is that Blackberry
needs to urgently revamp and rejuvenate itself if it has to regain market share and forget about market
leadership, it has to ensure that it stays afloat.

Strengths

 Perhaps the biggest strength of Blackberry is that it enjoys top of the mind recall and has a good
reputation among corporate users of mobiles because of its proprietary technology that scores
over its competitors especially where corporate users are concerned.
 The Blackberry devices can be used with any mobile carriers anywhere in the world and indeed,
this is a key strength for the company as it goes along its business with easy mobility and
portability.
 One of the main strengths of Blackberry is that its devices are more secure than its competitors
and indeed, the security features inherent and embedded in the devices are unmatched by any
other mobile maker including Samsung and Apple. This is the reason why Blackberries are so
popular with corporate users who use it to link it and integrate it with their VPNs or Virtual Private
Networks.
 These strengths have made Blackberry the Smartphone of choice for many governmental
agencies in the United States including the FBI, CIA, The White House, and the State
Department. Given the fact that Blackberries come with an encrypted military grade security
platform makes it the ideal phone of choice for agencies dealing with sensitive information.

Weaknesses

 The key weakness that Blackberry has is that it went on a single-track focus on the corporate
users and enhanced its security features as a USP or a Unique Selling Proposition. While this
aspect held it in good stead as far as the corporate clients are concerned, once Samsung and
Apple came out with Smartphones for the consumers and the everyday usage, Blackberry was
unable to keep up with the competition. Indeed, both Samsung and Apple have cornered the
market share by enhancing the security features in their Smartphones.
 Given the fact that small business owners using Blackberries now had to install expensive
enterprise software, they began to switch to the rivals instead of using Blackberries. Further, the
company lost ground as the proprietary operating system used by Samsung and Apple provided
more benefits to this customer segment leaving Blackberry out of the race.
 As mentioned earlier, Blackberry was essentially a single pony trick with its obsessive focus on
the corporate users. With the large consumer base untouched by it, Samsung and Apple quickly
garnered this segment and by providing an easy to use user interface and apps that were simple
and effective, these companies soon began to take away even the corporate customers of
Blackberry.
Opportunities

 The recent moves by the company are very aggressive as it has rejected a sale offer and a
buyout offer as well as accepted fresh infusion of capital from an Angel Investor. By appointing a
new CEO and revamping its organizational team and structure, Blackberry has signaled that it is
serious and is going all out to reinvent itself.
 The company has a lucrative opportunity as far as leveraging its existing customer base of over
100 Million users is concerned. Given the fact that the company can tap into this customer base
for its future products, there is a significant opportunity waiting for the company.
 By integrating the third party apps and features into its phones, the company can mimic the
strategies followed by Apple and Samsung and the increase in the business partnerships with
third party providers can prove to be a key opportunity for the company as it prepares to take on
Samsung and Apple.

Threats

 Though Blackberries were the original Smartphones, both Apple and Samsung beat it to the race
to build the Smartphone of the future because they provided the flexibility and ease of use that
Blackberries lacked and hence, were able to corner market share and take away its competitors.
 Apart from the threats posed by its competitors, Blackberry has to fight the slack and the gloomy
internal environment, which because of the troubles that the company has been through in recent
years has resulted in lower employee morale and a general lack of direction. Given the fact that
the Smartphone industry thrives on innovation, Blackberry has to rejuvenate itself and reinvent
itself apart from rescuing itself from the sagging momentum and motivation of its employees.

Conclusion
the preceding discussion has highlighted the need for Blackberry and its management to take proactive
steps to pull the company from the quagmire it finds itself in. The recent strategic moves made by the
new leadership are to be seen in the light of the company’s drift away from its profit making and market
leadership model to a situation where it is no longer in the reckoning. In conclusion, Blackberry and its
leadership have their task cut out as they gear themselves to take on the challenges from the
Smartphone companies like Apple and Samsung.

Competitor Analysis - Meaning,

Objectives and Significance
Organizations must operate within a competitive industry environment. They do not exist in vacuum.
Analyzing organization’s competitors helps an organization to discover its weaknesses, to identify
opportunities for and threats to the organization from the industrial environment. While formulating an
organization’s strategy, managers must consider the strategies of organization’s competitors. Competitor
analysis is a driver of an organization’s strategy and effects on how firms act or react in their sectors. The
organization does a competitor analysis to measure / assess its standing amongst the competitors.

Competitor analysis begins with identifying present as well as potential competitors. It portrays an
essential appendage to conduct an industry analysis. An industry analysis gives information regarding
probable sources of competition (including all the possible strategic actions and reactions and effects on
profitability for all the organizations competing in the industry). However, a well-thought competitor
analysis permits an organization to concentrate on those organizations with which it will be in direct
competition, and it is especially important when an organization faces a few potential competitors.

Michael Porter in Porter’s Five Forces Model has assumed that the competitive environment within an
industry depends on five forces- Threat of new potential entrants, Threat of substitute product/services,
bargaining power of suppliers, bargaining power of buyers, Rivalry among current competitors. These five
forces should be used as a conceptual background for identifying an organization’s competitive strengths
and weaknesses and threats to and opportunities for the organization from it’s competitive environment.

The main objectives of doing competitor analysis can be summarized as follows:

To study the market;

To predict and forecast organization’s demand and supply;

To formulate strategy;

To increase the market share;

To study the market trend and pattern;

To develop strategy for organizational growth;

When the organization is planning for the diversification and expansion plan;

To study forthcoming trends in the industry;

Understanding the current strategy strengths and weaknesses of a competitor can suggest
opportunities and threats that will merit a response;

Insight into future competitor strategies may help in predicting upcoming threats and
opportunities.

Competitors should be analyzed along various dimensions such as their size, growth and profitability,
reputation, objectives, culture, cost structure, strengths and weaknesses, business strategies, exit
barriers, etc.

Human, Social, and Intellectual Capital

as a Means of Competitive Advantage
Introduction: Why Should Firms and Nations Invest in Human, Social,
and Intellectual Capital
We often hear economists and management experts exhorting nations and firms to invest in human,
social, and intellectual capital. these calls range from asking governments to set aside substantial
amounts of money to educate and skill the workforce as well as asking the firms and governments to
create a web of social relationships in addition to moving up the value curve by investing in research and
development. Before we launch into a discussion about how these measures would benefit nations and
firms, we should first define what is meant by human, social, and intellectual capital.

In the same manner in which financial capital and physical infrastructure are the factors of production, a
skilled workforce is a vital component and determinant of a firm’s success. This means that firms need
workers who are educated and skilled and are employable and efficient. Economists and management
experts talk about this human capital. In the same manner in which an educated and skilled workforce
raises the productivity of firms, nations also benefit from having a ready pool of workers who are skilled
and capable. Just as firms need to hire these workers, it is upon the nation to provide them the basic
education and skills both through subsidized education and through the provision of skills through
vocational training or teaming up with the private sector in a PPP (Public Private Partnership) model to
impart education to the workers.

Next, social capital is what is the result of the networks of relationship between individuals, communities,
and the ties that bind them in the broader society. You might ask as to why it is important for firms and
nations to have social capital in addition to human capital. The answer is that just as the firms need
educated and skilled workers, the broader society to be healthy and well functioning needs workers and
individuals to be tightly knit into the fabric of society. This social capital leads to less crime, more
productivity, more efficiency, and the formation of communities that are self-sustaining and which are
incubators of physically, mentally, and emotionally healthy and intelligent individuals.

Third, just as human capital and social capital lead to better productivity and a workforce that is efficient,
the next evolutionary step for firms and nations once they have actualized human and social capital is
through moving up the value chain by filing patents, encouraging research, and innovating as well as
leading to the creation of an economy that is characterized by these aspects. Therefore, it is important to
note that in addition to human and social capital, intellectual capital is also needed for firms and nations to
forge ahead in the race to deliver and actualize superior economic value.

As can be seen from the fact that human capital leads to higher productivity and efficiency and social
capital leads to emotionally intelligent workers, intellectual capital leads economies and nations into the
orbit where they can be challenged only by those competitors who have mastered all the three aspects of
evolutionary value creation. Indeed, one of the reasons (as we shall discuss in detail in the next section)
for the relative ascendance of the west over the east and which continue s to this day is that the former
have successfully invested in these forms of capital whereas the latter are playing catch-up and are now
trying to emulate them in their quest for economic growth.

Trajectories of Firms and Nations That Have Invested in These Capital

Aspects
Why do Google and Microsoft in addition to AT&T, 3M, and Apple remain so profitable and competitive?
Why are some firms such as these more successful in generating patents and innovating better than the
rest of the competition? Further, why does Facebook generate such valuations and is considered as one
of the greatest ideas apart from the Smartphones and Search Engines and the invention of the Personal
Computer? The answers to all these questions lies in the fact that these firms were able to first invest in
their workforce or the formation and incubation of human capital, next, they were able to leverage the
college like atmosphere and the free flowing ideas generated by their workforce which is the social capital
and third, these firms were able to move up the curve and indeed, continue moving up the curve to reap
the benefits of intellectual capital that follows from the first two forms of capital.

Similarly, why is the United States such a dominant force in the global economy whereas even China and
India that have large populations of educated workers still are unable to challenge its dominance? The
reason for this is that the United States and largely, Europe have substantially invested in educating and
training apart from skilling their populations over the last century and half and hence, are now reaping the
benefits of such investments. Moreover, by creating a system that encourages creativity and innovation
instead of stifling them, these countries have managed to move up the value curve and stay there. In
addition, whenever they felt that their economic dominance is under threat, these nations have always
found better ideas to become more efficient as can be seen from the Offshoring of manufacturing to
China and back office work to India. In this manner, they have retained their focus on value creation using
the three forms of capital in a way in which the rest of the world is unable to do so even now.

As individuals, we too can ensure that we do our bit to accelerate the formation of these forms of capital
and this is through investing in oneself, forming networks with our peers, coworkers, families, and
communities so that we become more emotionally intelligent, and then by continuously improving and
leaving nothing to chance or becoming complacent thereby being in a creative mode where ideas flow
freely. Further, we can all become wiling partners in the development of these forms of capital by making
conscious choices that lead us to better outcomes for everyone concerned.

Catch-Up and Moving up the Curve

Having considered the successes of firms that invest in these forms of capital, we now turn to how
competitors and countries in the developing world can catch up the dominant firms and countries. The
first step is to provide universal education without discriminating based on class, gender, or race, as well
as through substantially revamping the education system so that instead of rote learning, innovation and
creativity are encouraged. Next, instead of forming clan based and class based relationships alone, there
must be an emphasis on forming networks where class barriers, gender differences, and ethnic and racial
factors are nonexistent meaning that social capital must be incubated that is free from the narrow
constraints imposed by these elements. Third, governments must invest in research and development
and encourage highly skilled scientists and researchers to continue their pioneering work instead of
discouraging and frustrating them, which as often happens, in Asian countries, leads to these individuals
seeking employment and greener pastures in the West.

Though this section sounds like an idealist rant, some of these measures have already been put in place
in China, South East Asia, and to a lesser extent in Latin America. Therefore, it is indeed the case that
the firms and the economies of these nations are emerging as challengers to the Western dominance,
which is not surprising considering the trajectory of value creation. Further, some Indian companies have
also succeeded in actualizing these forms of capital though the overall record leaves much to be desired.
Indeed, it is the case that when India starts building these assets, it can emerge as a potent force to be
reckoned with.

Conclusion
Finally, human, social, and intellectual capital differ from physical and financial capital in the sense that
they can be incubated even by those with less of the latter as hard work, determination, and a culture of
openness can all lead to value creation. Therefore, the clear conclusion is that we do not need Billions of
Dollars in investment and just by making use of the available resources, firms and nations can indeed
prosper in the same manner in which the Western countries and their peoples have enjoyed a higher
standard of living.
Porter’s Five Forces Model of
Competition
Michael Porter (Harvard Business School Management Researcher) designed various vital frameworks
for developing an organization’s strategy. One of the most renowned among managers making strategic
decisions is the five competitive forces model that determines industry structure. According to Porter, the
nature of competition in any industry is personified in the following five forces:

i. Threat of new potential entrants

ii. Threat of substitute product/services
iii. Bargaining power of suppliers
iv. Bargaining power of buyers
v. Rivalry among current competitors

FIGURE: Porter’s Five Forces model

The five forces mentioned above are very significant from point of view of strategy formulation. The
potential of these forces differs from industry to industry. These forces jointly determine the profitability of
industry because they shape the prices which can be charged, the costs which can be borne, and the
investment required to compete in the industry. Before making strategic decisions, the managers should
use the five forces framework to determine the competitive structure of industry.

Let’s discuss the five factors of Porter’s model in detail:

1. Risk of entry by potential competitors: Potential competitors refer to the firms which are not
currently competing in the industry but have the potential to do so if given a choice. Entry of new
players increases the industry capacity, begins a competition for market share and lowers the
current costs. The threat of entry by potential competitors is partially a function of extent of
barriers to entry. The various barriers to entry are-
 Economies of scale
 Brand loyalty
  Government Regulation
 Customer Switching Costs
 Absolute Cost Advantage
 Ease in distribution
 Strong Capital base
2. Rivalry among current competitors: Rivalry refers to the competitive struggle for market share
between firms in an industry. Extreme rivalry among established firms poses a strong threat to
profitability. The strength of rivalry among established firms within an industry is a function of
following factors:
 Extent of exit barriers
 Amount of fixed cost
 Competitive structure of industry
 Presence of global customers
 Absence of switching costs
 Growth Rate of industry
 Demand conditions
3. Bargaining Power of Buyers: Buyers refer to the customers who finally consume the product or
the firms who distribute the industry’s product to the final consumers. Bargaining power of buyers
refer to the potential of buyers to bargain down the prices charged by the firms in the industry or
to increase the firms cost in the industry by demanding better quality and service of product.
Strong buyers can extract profits out of an industry by lowering the prices and increasing the
costs. They purchase in large quantities. They have full information about the product and the
market. They emphasize upon quality products. They pose credible threat of backward
integration. In this way, they are regarded as a threat.
4. Bargaining Power of Suppliers: Suppliers refer to the firms that provide inputs to the industry.
Bargaining power of the suppliers refer to the potential of the suppliers to increase the prices of
inputs( labour, raw materials, services, etc) or the costs of industry in other ways. Strong
suppliers can extract profits out of an industry by increasing costs of firms in the industry.
Suppliers products have a few substitutes. Strong suppliers’ products are unique. They have high
switching cost. Their product is an important input to buyer’s product. They pose credible threat of
forward integration. Buyers are not significant to strong suppliers. In this way, they are regarded
as a threat.
5. Threat of Substitute products: Substitute products refer to the products having ability of
satisfying customers needs effectively. Substitutes pose a ceiling (upper limit) on the potential
returns of an industry by putting a setting a limit on the price that firms can charge for their
product in an industry. Lesser the number of close substitutes a product has, greater is the
opportunity for the firms in industry to raise their product prices and earn greater profits (other
things being equal).

The power of Porter’s five forces varies from industry to industry. Whatever be the industry, these five
forces influence the profitability as they affect the prices, the costs, and the capital investment essential
for survival and competition in industry. This five forces model also help in making strategic decisions as it
is used by the managers to determine industry’s competitive structure.

Porter ignored, however, a sixth significant factor- complementaries. This term refers to the reliance that
develops between the companies whose products work is in combination with each other. Strong
complementors might have a strong positive effect on the industry. Also, the five forces model overlooks
the role of innovation as well as the significance of individual firm differences. It presents a stagnant view
of competition.
Overfished Ocean Strategy: How to
Drive Growth and Attain Profitability
To say that we are facing a resource crunch seems obvious to anyone who is remotely tuned into the
present day global economy. However, instead of beating one’s hearts and lamenting the looming
resource crunch does not solve any of our problems. Instead, the solution lies in innovating, moving
beyond vertical integration and into non-linear as well as horizontal integration, and focusing on delivering
an experience instead of a product alone so that wastage of resources and redundancies in the value
chain can be eliminated are some of the aspects of the strategies to deal with resource crunches.

This is the overfished ocean strategy wherein managers have to contend with the oceans that
have run dry of fishes to catch and irrespective of whether there is a new ocean (blue ocean),
improvising in existing and saturated markets (red oceans), the bottom line remains that the entire
ocean is being overfished and hence, a radically new approach which combines the elements described
in the previous paragraph have to be actualized.

Introduction: Welcome to the Age of Decline

Ever since the Industrial Revolution began and led to the cascading changes that ultimately resulted in
the birth and creation of the modern corporations and modern businesses, resources were plenty and
hence, these companies could base their models on an ever increasing supply of everything ranging from
oil and minerals to metals and food items. This abundant supply of cheap resources powered modern
civilization for most of the 19th and 20th centuries. However, as businesses enter the new millennium and
midway through the second decade of the new century, the tides seem to be turning against them as far
as availability of cheap and plentiful resources are concerned.

This dawning of the age of decline or the era of diminishing resources means that businesses and
managers in them need to wake up to the new realities of resource crunches and declines as well as face
the prospect of ever increasing prices of raw materials coupled with declining supplies and ever scarce
situations. When compared to the previous century, the prices of resources and raw materials followed a
downward trend in terms of real prices, which meant that businesses and managers did not have to worry
about sourcing, and finding raw materials or establishing supply chains that are also global in nature as
resources were mined at ease and with success.

However, since the beginning of the last decade of the new century, the real prices of the resources have
shown an upward trend meaning that for the first time in history, businesses are faced with the prospect
of having to contend with ever-increasing prices of raw materials. Of course, resource crunch has always
been a characteristic of human history. What is different this time is that while we have always relied on
finding new sources of resources every time we ran up against the wall of scarcity, for the first time, we
are increasingly facing the real prospect of having no new sources.

Akin to an ocean where the waters have been fished so much that there are no more fish left, the present
times resemble a situation of overfished oceans or the situation where businesses and managers have to
do with the threat of having no resources or costly resources. Therefore, businesses have to learn to
make do with declines and this is the overfished strategy that this report examines in detail.

The Overfished Ocean Strategy

Some businesses have responded to the overfished oceans or the saturated red oceans by turning to
blue oceans or sources of raw materials that are unexploited. However, when one considers the fact that
even these sources of raw materials are sought after soon after they are discovered means that the
whole concept of the ocean itself running dry of fish has to be dealt with. If we consider the fact that in the
last decade, prices of commodities in real terms have risen by 147 percent means that managers can no
longer tweak and adjust their sources of competitive advantage but instead, have to radically alter the
way they do business.

This is the Overfished ocean strategy where managers have to not only proclaim the end of the linear
economy or the modes of production and consumption where products once consumed are discarded.
Instead, the linear modes of production and consumption have become circular meaning that the
production and consumption cycle turns full circle with the discarded materials coming back to the
beginning of the subsequent cycles of production.

This is one aspect of the overfished ocean strategy. The other aspect of the overfished ocean strategy
lies in the way synergies are actualized throughout the production and consumption cycle by turning
resource scarcity into a competitive advantage. How many times have you carpooled or teamed up with
your colleagues so that you can economize on fuel, parking costs, and other expenses? As this habit of
consuming lesser resources by synergizing is being accepted in the West, the managers there are also
turning to how Eastern and traditional forms of production and consumption practiced in countries like
China and India can show the way forward in a world of declining resources.

When one adds innovation and inventiveness to the mix of strategies to deal with overfished oceans, then
the result is that as many traditional cultures make do with less and lesser, the world would soon have to
turn the clock back and unlearn some things and learn new things. There are already many companies in
the West who have actualized the overfished ocean strategies for sustainable competitive advantage. We
shall discuss some of these companies in the next section.

Examples of Companies Pioneering Overfished Ocean Strategy

For instance, the German global automobile giant, BMW has already put in place a strategy wherein it
does not sell cars only but instead, sells mobility. In other words, it has moved beyond selling products
and instead markets a service. The core idea of mobility has allowed its managers to offer the concept of
a rented car sharing service with the motto of “pick up anywhere, drop anywhere” wherein commuters in
densely populated cities can economize on fuel, parking costs, as well as share the per minute billing with
other riders and can save on the investment needed to buy a car for themselves.

Further, there are some startups in Europe that let manufacturing companies having idle capacity to sell
their spare capacity to others who can then economize on the need for capital investment of their own.
The overcapacity can be anything such as land that is unused, skills that are transferable, and
underutilized machines that can be used by smaller companies.

Apart from this, the global shoemaker company, Puma, is pioneering a way to reduce the wasteful
consumption that is inherent in making and packaging shoes by removing the traditional boxes in which
shoes are packed and instead providing consumers with a reusable and recyclable bag that is also less
material intensive for its manufacture.

Of course, these companies are just some examples of the overfished ocean strategy and there are
countless others who are transforming their value chains, moving from vertical integration to horizontal
integration, and managing to grow and go from growth to growth despite being faced with the resource
crunch.
Conclusion: The Future Belongs to Resource Crunch Innovators
Faced with oscillating prices and volatile commodity markets coupled with geopolitical instability and a
world that is becoming more complex with each day, managers have to make do with less and ensure
that they get more from less. The lessons for managers from the overfished ocean strategies are that
they need to focus on all aspects of the value chain so that at each step they can cut down on waste and
eliminate redundancies. The bottom line for the overfished ocean strategy is that one must produce more
with less and the fact that the linear throw away and disposable economy is coming to an end should be
clear to the modern day managers. As with the companies discussed above, managers everywhere have
to embrace frugality and think out of the box if they have to actualize success in the emerging overfished
ocean economy of the future. In conclusion, the reality is that no matter where one is globally, the
depletion of resources affects all managers and whereas some can take it easy for a few more years and
others have to face it now, sooner or later all the lines meet and all managers everywhere have to
embrace the overfished ocean strategy.

Porter’s Five Forces Analysis of the

Airlines Industry in the United States
Five Forces Analysis
Porter’s Five Forces analysis is a useful methodology and a tool to analyze the external environment in
which any industry operates. The key aspect about using Porter’s Five Forces for the airline industry
in the United States is that the airline industry has been buffeted by strong headwinds from a host
of external factors that include declining passenger traffic, increasing operating expenses, high
fuel prices, and greater landing and maintenance costs, apart from intense competition from low
cost carriers that has led to a cutthroat price war which has led the industry severely affected.
Indeed, it can be said that the airline industry globally is in a “death spiral” and more so in the United
States where several prominent carriers were either forced into bankruptcy or had to merge with other
airlines just to stay afloat.

Supplier Power
The power of suppliers in the airline industry is immense because of the fact that the three inputs that
airlines have in terms of fuel, aircraft, and labor are all affected by the external environment. For instance,
the price of aviation fuel is subject to the fluctuations in the global market for oil, which can gyrate wildly
because of geopolitical and other factors. Similarly, labor is subject to the power of the unions who often
bargain and get unreasonable and costly concessions from the airlines. Third, the airline industry needs
aircraft either on outright sale or wet lease basis which means that the airlines have to depend on the two
biggies, Airbus, and Boeing for their aircraft needs. This is the reason the power of the suppliers in terms
of the three inputs needed for them is categorized as high according to the Porter’s Five Forces
framework.

Buyer Power
With the proliferation of online ticketing and distribution systems, fliers no longer have to be at
the mercy of the agents and the intermediaries as well the airlines themselves for their ticketing
needs. Apart from, the entry of low cost carriers and the resultant price wars has greatly benefited the
fliers. Moreover, the tight regulation on the demand side of the airline industry meaning that passengers
and fliers have been protected by the regulators means that the balance of power is tipped in their favor.
All these factors make the airline industry cede power to the consumers and hence, the power of buyers
is moderate to high as per Porter’s Five Forces methodology. Apart from this, the buyers can engage in
“price discovery” meaning that price fluctuations do not deter them as they have multiple channels
through which they can book their tickets.

Entry and Exit Barriers

The airline industry needs huge capital investment to enter and even when airlines have to exit the
sector, they need to write down and absorb many losses. This means that the entry and exit barriers
are high for the airline industry. As entry into the airline industry needs a high infusion of capital, not
everybody can enter the industry, which in addition, needs sophisticated knowledge and expertise on part
of the players, which is a deterrent. The exit barriers are also subject to regulation as regulators in the
United States do not let airlines exit the industry unless they are satisfied that there is a genuine business
reason for the same. Moreover, the airline industry leverages the efficiencies and the synergies from the
economies of scale and hence, the entry barriers are high. Therefore, applying Porter’s Five Forces
framework, we find that the airlines pose significant entry and exit barriers, which means that the impact
of this dimension is quite high.

Threat of Substitutes and Complementarities

The airline industry in the United States is not at threat from substitutes and complementarities as unlike
in the developing world, consumers do not necessarily take the train or the bus for journeys. What this
means is that flying is a natural phenomenon for the consumers and hence, the substitutes in terms of the
train and bus is minimal in its impact. Of course, many Americans motor down (use their cars for longer
travel as well) which means that there is the threat of this substitute. As for complementarities, the
provision of services like free Wi-Fi, a la carte meals, and passenger amenities offered by the full service
airlines does not really translate into more passengers as in the recent past; fliers have been induced
more by lower fares than these aspects.

Intensity of Competitive Rivalry

As mentioned in the introduction, the airline industry in the United States is extremely competitive
because of a number of reasons which include entry of low cost carriers, the tight regulation of the
industry wherein safety become paramount leading to high operating expenses, and the fact that the
airlines operate according to a business model that is a bit outdated especially in times of rapid turnover
and churn in the industry. Apart from anything else, the airline industry is regulated on the supply side
more than the demand side, which means that instead of the airlines being free to choose which markets
to operate and which segments to target, it is the fliers who get to be pampered by the regulators. This is
the reason why low cost carriers have literally grounded the full service airlines and when combined with
the intense competition that was always the case in the United States, the result is that the sector is one
of the most competitive in the country.

Porter’s Five Forces Analysis of

Samsung
Introduction
Porter’s Five Forces methodology is used in this article to analyze the business strategies of white goods
makers like Samsung. This tool is a handy method to assess how each of the market drivers impact the
companies like Samsung and then based on the analysis, suitable business strategies can be devised.
Further, companies like Samsung are known to study the markets they want to approach thoroughly and
deeply before they make a move and it is in this perspective that this analysis is undertaken.

Industry Rivalry
This element is especially significant for Samsung as the other White Goods multinationals like LG,
Nokia, and Motorola not to mention Apple are engaged in fierce competitive rivalry. Indeed, Samsung
cannot take its position in the market for granted as all these and other domestic white goods players
operate in a market where margins are tight and the competition is intense. Apart from this, Samsung
faces the equivalent of the “Cola Wars” (the legendary fight for dominance between Coke and Pepsi) in
emerging markets like India where Samsung has to contend and compete with a multitude of players
domestic and global. This has made the impact of this dimension especially strong for Samsung.

Barriers to Entry and Exit

The White Goods industry is characterized by high barriers to entry and low barriers to exit especially
where global conglomerates like Samsung are concerned. Indeed, it is often very difficult to enter
emerging markets because a host of factors have to be taken into consideration such as setting up the
distribution network and the supply chain. However, global conglomerates can exit the emerging markets
easily as all it takes is to handover and sell the business to a domestic or a foreign player in the case of
declining or falling sales. This means that Samsung has entered many emerging markets through a step-
by-step approach and has also exited the markets that have been found to be unprofitable. This is the
reason why white goods multinationals like Samsung often do their due diligence before entering
emerging markets.

Power of Buyers
The power of buyers for white goods makers like Samsung is somewhat of a mixed bag where though the
buyers have a multitude of options to choose from and at the same time have to stick with the product
since they cannot just dump the product, as it is a high value item. Further, the buyers would have to
necessarily approach the companies for after sales service and for spare parts. Of course, this does not
mean that the buyers are at the mercy of the companies. Far from that, they do have power over the
companies, as most emerging market consumers are known to be finicky when deciding on the product to
buy and explore all the options before reaching a decision. This means that both the buyers and the
companies need each other just like the suppliers and the companies, as we shall discuss next.

Power of Suppliers
In many markets in which Samsung operates, there are many suppliers who are willing to offer their
services at a discount since the ancillary sectors are very deep. However, this does not mean that the
companies can exert undue force over the suppliers as once the supply chain is established; it takes a lot
to undo it and build a new supply chain afresh. This is the reason why white goods makers like Samsung
invariably study the markets before setting up shop and also take the help of consultancies in arriving at
their decision.

Threat of Substitutes
This element is indeed high as the markets for white goods are flooded with many substitutes and given
the fact that consumer durables are often longer term purchases, companies like Samsung have to be
careful in deciding on the appropriate marketing strategy. This is also the reason why many multinationals
like Samsung often adopt differential pricing so as to attract consumers from across the income pyramid
to wean them away from cheaper substitutes. Further, this element also means that many emerging
market consumers are yet to deepen their dependence on white goods and instead, prefer to the
traditional forms of housework wherein they rely less on gadgets and appliances. However, this is rapidly
changing as more women enter the workforce in these markets making it necessary for them to use
gadgets and appliances.

Stakeholders
This is an added element for analysis as the increasing concern over social and environmentally
conscious business practices means that companies like Samsung have to be careful in how they do
business as well as project themselves to the consumers. For instance, white goods makers are known to
decide after due deliberation on everything from choosing their brand ambassadors to publicizing their
CSR (Corporate Social Responsibility) initiatives.

Conclusion
As the diagram above indicates the relative strengths and the weaknesses of each element, we can now
conclude this analysis with the theme that as the global economy integrates and more emerging markets
open up, companies like Samsung are at an advantage because they have already established
themselves in many markets. However, it must also be noted that each market is unique and hence,
Samsung must not adopt a one size fits all strategy and instead, must approach each market differently.
In conclusion, Samsung can take pride from the fact that being an Asian conglomerate, it has managed to
break into and hold its own against many western multinationals that have been in this business for
decades.

Strategic Leadership - Definition and

Qualities of a Strategic Leader
Strategic leadership refers to a manager’s potential to express a strategic vision for the
organization, or a part of the organization, and to motivate and persuade others to acquire that
vision. Strategic leadership can also be defined as utilizing strategy in the management of employees. It
is the potential to influence organizational members and to execute organizational change. Strategic
leaders create organizational structure, allocate resources and express strategic vision. Strategic leaders
work in an ambiguous environment on very difficult issues that influence and are influenced by occasions
and organizations external to their own.

The main objective of strategic leadership is strategic productivity. Another aim of strategic leadership is
to develop an environment in which employees forecast the organization’s needs in context of their own
job. Strategic leaders encourage the employees in an organization to follow their own ideas. Strategic
leaders make greater use of reward and incentive system for encouraging productive and quality
employees to show much better performance for their organization. Functional strategic leadership is
about inventiveness, perception, and planning to assist an individual in realizing his objectives and goals.
Strategic leadership requires the potential to foresee and comprehend the work environment. It requires
objectivity and potential to look at the broader picture.

A few main traits / characteristics / features / qualities of effective strategic leaders that do lead to
superior performance are as follows:

Loyalty- Powerful and effective leaders demonstrate their loyalty to their vision by their words and
actions.

Keeping them updated- Efficient and effective leaders keep themselves updated about what is
happening within their organization. They have various formal and informal sources of information in
the organization.

Judicious use of power- Strategic leaders makes a very wise use of their power. They must play the
power game skillfully and try to develop consent for their ideas rather than forcing their ideas upon
others. They must push their ideas gradually.

Have wider perspective/outlook- Strategic leaders just don’t have skills in their narrow specialty but
they have a little knowledge about a lot of things.

Motivation- Strategic leaders must have a zeal for work that goes beyond money and power and also
they should have an inclination to achieve goals with energy and determination.

Compassion- Strategic leaders must understand the views and feelings of their subordinates, and
make decisions after considering them.

Self-control- Strategic leaders must have the potential to control distracting/disturbing moods and
desires, i.e., they must think before acting.

Social skills- Strategic leaders must be friendly and social.

Self-awareness- Strategic leaders must have the potential to understand their own moods and
emotions, as well as their impact on others.

Readiness to delegate and authorize- Effective leaders are proficient at delegation. They are well
aware of the fact that delegation will avoid overloading of responsibilities on the leaders. They also
recognize the fact that authorizing the subordinates to make decisions will motivate them a lot.

Articulacy- Strong leaders are articulate enough to communicate the vision(vision of where the
organization should head) to the organizational members in terms that boost those members.

Constancy/ Reliability- Strategic leaders constantly convey their vision until it becomes a component
of organizational culture.

To conclude, Strategic leaders can create vision, express vision, passionately possess vision and
persistently drive it to accomplishment.
Some Pitfalls to be Avoided in
Strategic Management
It needs to be remembered that strategic management and strategic planning are intricate and complex
processes that take the organization into unchartered territories. Hence, they do not provide a readymade
prescription for success nor do they promise instant solutions to all problems that the organization is
facing. Instead, strategic management and strategic planning are processes that take the organization
through a journey that involves providing a framework for solving problems and addressing questions.

Some of the pitfalls to be avoided in strategic management and strategic planning are listed
below:

 The first and foremost pitfall relates to using strategic management and strategic planning only to
satisfy accreditation and regulatory requirements instead of adding value to the firm’s processes.
 Getting into solution mode without thinking through the complex problems that 21st century
organizations face. It needs to be remembered that many problems that businesses face need
“slow fixes” rather than quick and easy solutions that are attractive at first glance but fail over the
longer term.
 When the top managers do not support the strategic management process because of
intraorganizational politics, any strategy however good would fail because of the lack of buy-in
from key interests in the organization.
 When the planning is delegated to a “planner” instead of all the managers getting involved, there
are issues to do with lack of information and lack of execution, which results in the strategy going
haywire.
 When firms are bogged down by too many internal problems that sap the energies of the
managers, strategic planning and strategic management become futile, as the managers are
engrossed in firefighting and solving the internal problems rather than focusing on the external
aspects.
 One of the pitfalls of strategic planning happens when organizations become so formal and
structured in their approach that they neglect the creative and flexible aspects. The point to be
noted here is that out of the box thinking and non-linearity are important for firms to succeed in
today’s business landscape.
 On the other hand, too much reliance on intuition can cost firms dear as after all strategy is a
series of steps that need to be actualized and hence, there is a need for a well thought out and
detailed plan.

While these are the some of the pitfalls of strategic planning, there are other aspects like not working to a
plan and being too much bureaucratic. Since the organizations of the future need to be agile and flexible
with the ability to be malleable according to the changing market conditions and yet at the same time,
have a core structure that is consistent with core competencies, a mix of formal and informal planning is
needed for effective strategic management.

Closing Thoughts
Strategy is formal and emergent at the same time meaning that there needs to be formal planning as well
as elbowroom for spontaneous evolution of the strategic planning process. This is the overriding
imperative that organizations must follow if they are to actualize strategies that make them market
leaders.
Corporate Governance - Definition,
Scope and Benefits
What is Corporate Governance?
Corporate Governance refers to the way a corporation is governed. It is the technique by which
companies are directed and managed. It means carrying the business as per the stakeholders’ desires. It
is actually conducted by the board of Directors and the concerned committees for the company’s
stakeholder’s benefit. It is all about balancing individual and societal goals, as well as, economic and
social goals.

Corporate Governance is the interaction between various participants (shareholders, board of directors,
and company’s management) in shaping corporation’s performance and the way it is proceeding towards.
The relationship between the owners and the managers in an organization must be healthy and there
should be no conflict between the two. The owners must see that individual’s actual performance is
according to the standard performance. These dimensions of corporate governance should not be
overlooked.

Corporate Governance deals with the manner the providers of finance guarantee themselves of getting a
fair return on their investment. Corporate Governance clearly distinguishes between the owners and the
managers. The managers are the deciding authority. In modern corporations, the functions/ tasks of
owners and managers should be clearly defined, rather, harmonizing.

Corporate Governance deals with determining ways to take effective strategic decisions. It gives ultimate
authority and complete responsibility to the Board of Directors. In today’s market- oriented economy, the
need for corporate governance arises. Also, efficiency as well as globalization are significant factors
urging corporate governance. Corporate Governance is essential to develop added value to the
stakeholders.

Corporate Governance ensures transparency which ensures strong and balanced economic
development. This also ensures that the interests of all shareholders (majority as well as minority
shareholders) are safeguarded. It ensures that all shareholders fully exercise their rights and that the
organization fully recognizes their rights.

Corporate Governance has a broad scope. It includes both social and institutional aspects. Corporate
Governance encourages a trustworthy, moral, as well as ethical environment.

Benefits of Corporate Governance

1. Good corporate governance ensures corporate success and economic growth.

2. Strong corporate governance maintains investors’ confidence, as a result of which, company can
raise capital efficiently and effectively.
3. It lowers the capital cost.
4. There is a positive impact on the share price.
5. It provides proper inducement to the owners as well as managers to achieve objectives that are in
interests of the shareholders and the organization.
6. Good corporate governance also minimizes wastages, corruption, risks and mismanagement.
7. It helps in brand formation and development.
 8. It ensures organization in managed in a manner that fits the best interests of all.

Business Ethics - A Successful way of

conducting business
Definition of Business Ethics

Business Ethics refers to carrying business as per self-acknowledged moral standards. It is actually a
structure of moral principles and code of conduct applicable to a business. Business ethics are applicable
not only to the manner the business relates to a customer but also to the society at large. It is the worth of
right and wrong things from business point of view.

Business ethics not only talk about the code of conduct at workplace but also with the clients and
associates. Companies which present factual information, respect everyone and thoroughly adhere to the
rules and regulations are renowned for high ethical standards. Business ethics implies conducting
business in a manner beneficial to the societal as well as business interests.

Every strategic decision has a moral consequence. The main aim of business ethics is to provide people
with the means for dealing with the moral complications. Ethical decisions in a business have implications
such as satisfied work force, high sales, low regulation cost, more customers and high goodwill.

Some of ethical issues for business are relation of employees and employers, interaction between
organization and customers, interaction between organization and shareholders, work environment,
environmental issues, bribes, employees rights protection, product safety etc.

Below is a list of some significant ethical principles to be followed for a successful business-

1. Protect the basic rights of the employees/workers.

2. Follow health, safety and environmental standards.
3. Continuously improvise the products, operations and production facilities to optimize the resource
consumption
4. Do not replicate the packaging style so as to mislead the consumers.
5. Indulge in truthful and reliable advertising.
6. Strictly adhere to the product safety standards.
7. Accept new ideas. Encourage feedback from both employees as well as customers.
8. Present factual information. Maintain accurate and true business records.
9. Treat everyone (employees, partners and customers) with respect and integrity.
10. The mission and vision of the company should be very clear to it.
11. Do not get engaged in business relationships that lead to conflicts of interest. Discourage black
marketing, corruption and hoarding.
12. Meet all the commitments and obligations timely.
13. Encourage free and open competition. Do not ruin competitors’ image by fraudulent practices.
14. The policies and procedures of the Company should be updated regularly.
15. Maintain confidentiality of personal data and proprietary records held by the company.
16. Do not accept child labour, forced labour or any other human right abuses.

Social Responsibilities of Managers

Social responsibility is defined as the obligation and commitment of managers to take steps for
protecting and improving society’s welfare along with protecting their own interest. The managers must
have social responsibility because of the following reasons:

1. Organizational Resources - An organization has a diverse pool of resources in form of men,

money, competencies and functional expertise. When an organization has these resources in hand,
it is in better position to work for societal goals.

2. Precautionary measure - if an organization lingers on dealing with the social issues now, it would
land up putting out social fires so that no time is left for realizing its goal of producing goods and
services. Practically, it is more cost-efficient to deal with the social issues before they turn into
disaster consuming a large part if managements time.

3. Moral Obligation - The acceptance of managers’ social responsibility has been identified as a
morally appropriate position. It is the moral responsibility of the organization to assist solving or
removing the social problems

4. Efficient and Effective Employees - Recruiting employees becomes easier for socially responsible
organization. Employees are attracted to contribute for more socially responsible organizations. For
instance - Tobacco companies have difficulty recruiting employees with best skills and competencies.

5. Better Organizational Environment - The organization that is most responsive to the betterment of
social quality of life will consequently have a better society in which it can perform its business
operations. Employee hiring would be easier and employee would of a superior quality. There would
be low rate of employee turnover and absenteeism. Because of all the social improvements, there will
be low crime rate consequently less money would be spent in form of taxes and for protection of land.
Thus, an improved society will create a better business environment.
But, manager’s social responsibility is not free from some criticisms, such as -

1. High Social Overhead Cost - The cost on social responsibility is a social cost which will not
instantly benefit the organization. The cost of social responsibility can lower the organizational
efficiency and effect to compete in the corporate world.
2. Cost to Society - The costs of social responsibility are transferred on to the society and the
society must bear with them.
3. Lack of Social Skills and Competencies - The managers are best at managing business
matters but they may not have required skills for solving social issues.
4. Profit Maximization - The main objective of many organizations is profit maximization. In such a
scenario the managers decisions are controlled by their desire to maximize profits for the
organizations shareholders while reasonably following the law and social custom.

Social responsibility can promote the development of groups and expand supporting industries.

Core Competencies - An essential for

Organizational Success
What is Core Competency?
Core competency is a unique skill or technology that creates distinct customer value. For instance, core
competency of Federal express (Fed Ex) is logistics management. The organizational unique capabilities
are mainly personified in the collective knowledge of people as well as the organizational system that
influences the way the employees interact. As an organization grows, develops and adjusts to the new
environment, so do its core competencies also adjust and change. Thus, core competencies are flexible
and developing with time. They do not remain rigid and fixed. The organization can make maximum
utilization of the given resources and relate them to new opportunities thrown by the environment.

Resources and capabilities are the building blocks upon which an organization create and execute
value-adding strategy so that an organization can earn reasonable returns and achieve strategic
competitiveness.

Figure: Core Competence Decision

Resources are inputs to a firm in the production process. These can be human, financial, technological,
physical or organizational. The more unique, valuable and firm specialized the resources are, the more
possibly the firm will have core competency. Resources should be used to build on the strengths and
remove the firm’s weaknesses. Capabilities refer to organizational skills at integrating it’s team of
resources so that they can be used more efficiently and effectively.

Organizational capabilities are generally a result of organizational system, processes and control
mechanisms. These are intangible in nature. It might be that a firm has unique and valuable resources,
but if it lacks the capability to utilize those resources productively and effectively, then the firm cannot
create core competency. The organizational strategies may develop new resources and capabilities or it
might make stronger the existing resources and capabilities, hence building the core competencies of the
organization.

Core competencies help an organization to distinguish its products from it’s rivals as well as to reduce its
costs than its competitors and thereby attain a competitive advantage. It helps in creating customer value.
Also, core competencies help in creating and developing new goods and services. Core competencies
decide the future of the organization. These decide the features and structure of global competitive
organization. Core competencies give way to innovations. Using core competencies, new technologies
can be developed. They ensure delivery of quality products and services to the clients.