Subject

STRATEGIC MANAGEMENT

INDEX
Chapter 1 : Strategic Management........................................................................................3 Chapter 2 : The 10-P Model of Global Strategic Management............................................5 Chapter 3 : Porters model of the Five Competitive Forces...............................................10 Chapter 4 : Scenario Planning as a Strategic Management Tool.......................................14 Chapter 5 : Strategic control process..................................................................................16 Strategic Control and Operational Control.....................................................................18 Characteristics of an effective strategic control system.................................................21 Chapter 6 : Strategic Management Functions.....................................................................24 Defining Strategy............................................................................................................24 Developing Strategic Plans.............................................................................................24 Strategy Implementation.................................................................................................24 Monitoring Strategies......................................................................................................25 Difference between Business Vision and Company Mission........................................25 Chapter 7 : Strategic mgmt process meaning, steps & components...............................28 Chapter 8 : Components of Strategic Management Process .............................................30 Strategic Management Process...........................................................................................30

Chapter 1 : Strategic Management

What Is Strategic Management? Strategic management refers to the art of planning your business at the highest possible level. It is the duty of the companys leader (or leaders). Strategic management focuses on building a solid underlying structure to your business that will subsequently be fleshed out through the combined efforts of every individual you employ. Strategic management hinges upon answering three key questions: 1. 2. 3. What are my businesss objectives? What are the best ways to achieve those objectives? What resources are required to make that happen?

Answering the first question requires serious thought about what your ultimate goals are for the business. What are you trying to make happen? What are you attempting to facilitate or enable? What is the best possible outcome your company can aspire to? Drilling down to uncover a companys core objectives can have several phases:

Assessing the landscape within which the company will operate, and

formulating how the company sees its role within that landscape. This is commonly known as a mission statement.

Establishing objectives to answer some of the unmet needs, taking both a long-

and short-term view of what the company can offer. This is commonly known as a vision statement.

Stipulating the goals the company has for itself, both in terms of financial and

strategic objectives. Once these steps have been taken, a strategic plan should begin to emerge effectively setting the stage for answering the second question above, or How best can we reach our goals? Phase two of successful strategic management is formulating a plan by which the company can accomplish what it sets out to do.

Within this phase, a chain of command should be put in place, pairing individuals with the right skills, knowledge, and experience with the businesss needs and objectives. From there, responsibilities for processes and tasks should be distributed across the full chain of command, delegating work to teams and individuals so that they companys goals can be attained through the combined efforts of all employees. This includes communicating responsibilities and deliverables (what needs to be done, and how the results of those tasks will be measured). Finally, strategic management entails allocating the right amount of resources to the different parts of your business so that those assigned to particular goals have what they need to meet their objectives. This ranges from providing your workers with the right supplies to enacting systems by which employees receive the necessary training, all work processes are tested, and all information and data generated is documented. To effectively manage your business strategically, every inch of your company must have its needs met in these ways, so all parts can work together as a seamless, highly functioning whole. A critical but often overlooked aspect of strategic management is the need for it to be both planned and unplanned. Company leaders must take the initiative in setting out how the company should function and operate, but they must also be dynamic in responding to needs and requirements as they arise. Strategic management is not a static process that can be limited to a linear process. Often, unforeseen results ensue (which can be both positive and negative) and strategic managers must be able to respond to occurrences that cannot be predicted. Effective strategic management is lithe and nimble, enabling companies to move quickly in response to new challenges, and replace outmoded ideas and practices with processes that can help meet new needs as they present themselves.

Chapter 2 : The 10-P Model of Global Strategic Management

The 10-P Model of Globel Strategic Management The 10-P framework for globalization symbolizes the aspirations and needs of employees and organizations in the new competitive settings. It comes a long way from the initial impetus provided to the subject by Michael Porter in his book Competitive Strategy (1980), and goes beyond his purely industrial organization perspective. The framework operationalizes the 4-Diamonds for a nations competitive advantage of Porter. The 10-P framework integrates theory of strategic management and practice of business policy and provides a structure for the practicing manager to evaluate competitiveness at regular intervals. The 10-P framework explores a fine `fit between the soft and hard strategic choices. It seeks a self-motivated network of stakeholders who are able to self-actualize a high sense of satisfaction, self-worth, liberty and freedom in business organizational settings. True to the vision of a world-class organization, the central fulcrum in the framework is a PEOPLE-ORIENTATION-both inside and outside the corporation. This approach presents a humane perspective to issues at hand and differentiates between a `satisfying approach and an `excellent approach. It realizes and reflects that modern economies and corporations thrive mainly on innovation in all respects of value-augmentation-creative thinking at the design stage, ensuring production at highest efficiency and minimum costs, and satisfying the customer in a most effective manner. The rest of the 9-Ps are levered in a highly interactive mode with People and amongst themselves. A change in any of the Ps affects performance of the other levers and therefore the final outcome for the organization. The 9-Ps are: Purpose, Perspective, Positioning, Plans (and policies), Partnerships, Products, Productivity, Politics, and Performance (and profits). The 10-P framework is appropriate for auditing strategic competitiveness, a monitoring emerging opportunities and threats, devising a value-based action-plan and executing it in the context of globalizing organizations.

PEOPLE Organization is people: An organization is created by the people, it exists for the people, and continuously draws sanction from the people. From this humane perspective, the primary objective of an organization can only be to add value to the society by serving it with value augmented products. The people-focus implies that the primary purpose of an organization can never be to provide employment at the expense of customers or society in general-a drill routinely exercised in Third World countries, and especially in India by many public sector and government organizations during the height of regulated economic regimentation. Similarly, retrenchment of people (hire and fire) cannot be accepted as a no-holds-barred practice for maximizing organizational profits! Retrenchment is a myopic and non-creative response to the problem of cutting costs and improving productivity. The corporate manager in the new paradigm has the unenviable role of maximizing `people orientation as well as `task orientation. In these emerging work values, each employee is empowered to take decisions under certain norms. For instance, under Just-in-Time culture, an ordinary shop-floor worker is empowered to stop the whole machine assembly line if he finds that the product quality has gone out of control. PURPOSE Organizational purpose as used in strategy-making sense is interchangeable with mission, vision, core competence, strategic intent, and basic values. It is important not merely to produce and sell products, but to produce and sell quality products, without fail. Not only from the production side, but also from the distribution side, we must constantly review whether our customers are satisfied with our products and whether customers are satisfied with our service. We must be perfect in satisfying. Organizational purpose must be explicitly stated. An organization must enjoy social sanction by serving socially useful purpose. Purposeless organizations are liable to drift and become marginal in the course of time. A sense of purpose is important for other organizational reasons, including facilitating interpersonal processes and formalization of relationships (the other

characteristic of an organization). Globalization connotes dynamic human will for achieving larger social and human purposes. PERSPECTIVE Strategic management begins with a statement of clear perspective. Top-management perspective is not a bunch of hunches. Organizational perspective must be wellresearched. In facing global competitive challenges, it is important that the firm possesses a global perspective, even though it might be competing and managing locally. Failure to develop an in-depth perspective results in missed opportunities. Polemical debates arise from lack of appreciation of multiple perspectives. Some of the techniques for improving the perspective horizon and thereby quality of decisions are: scenario-building, process consultation, in-house training programmes, job rotation, and cross-functional teams. POSITIONING An important dimension in achieving world-class competitiveness relates to the positioning of the firm. This dimension has high interface with organizational purpose, planning and perspective, resulting in definitional confusion. Positioning of the firm is distinct from positioning of products in marketing. The term has remained mostly confined to abstract strategic management literature despite its obvious criticality to practice. An important dimension in strategy is to understand `where am I, `why am I here, `where do I want to be, and `how do I reach there. In other words, the strategic manager has to ascertain the existing position and future positioning of the firm. Positioning means the place in the industry which the firm would like to occupy in relation to its competitors from the perspective of the consumers. Does the firm compete on lowest-cost, mass-production, high-technology basis? Does it differentiate itself from others on the basis of superior and value-augmented products, or on high-ethic practices, employee policies, etc., which are unique in the industry? Once `positioning choice is made, many process and product related decisions flow.

PARTNERSHIPS The partnership approach suggests a sense of belief and trust in other persons capabilities and skills. It opens the doors for people to look beyond the usual routine responses, and create an environment where people voluntarily come up with innovative solutions for seemingly intractable problems. Partnership is a perspective as well as a position. Partnership has softer (intangible) and harder (tangible) dimensions. Going beyond the softer side of partnership-approach, development of long-term partners for weak competitors is essential for deriving sustainable advantages. Suppliers, bankers and other investors, employees, government, technology collaborators, transporters, and distributors do have a stake in the firms well-being (and vice versa) and therefore have to be treated as key resources. In this approach, the perspective is that there can be no profits at the expense of any resource. PRODUCTIVITY Global competitiveness is largely an expression of firms relative productive efficiency. A countrys prosperity is indicated by the amount of value-added goods that are produced/made available for consumption. Labor productivity is generally the accepted measure of value addition with the assumption that the same individual would have different capacities in different technological environments and organizational contexts. A key managerial decision that vitally effects the firms overall productivity pertains to capital intensity of the project in terms of investments in land, building and machinery. This decision also affects leverage position of firms. Leverages are of two types: the first, called the degree of operating leverage (DOL), is the firms commitment to fixed overhead expenses irrespective of business done. The second, degree of financial leverage (DFL), is the way the firms funds are distributed, for example, the debt-equity ratio. The degree of combined leverage (DCL) of the firm is the product of its DOL and DFL.

PRODUCT A product is a package of information which the customer interprets in his mind while going through the process of consumption. Therefore, the concept of any product must start with the customer in mind, and end with his total satisfaction. In this definition all products are ultimately services converted into information. Beyond quality, products must offer customers a satisfaction to a level where they become the best salesmen for the company forever. PLANS (AND POLICIES) The thrust of the 10-P framework is to integrate peoples personal growth and development with organizational objectives through excellent all-round quality. The premise is that the tasks are executed with finesse by satisfied and motivated people. To ensure that people remain aligned with the common sense of purpose and do not drift, the organization must have a clear, documented statement of objectives and broad plans. A firms `plan must contain a clear mission statement on the way it proposes to serve the customer.

Chapter 3 : Porters model of the Five Competitive Forces

The model of the Five Competitive Forces was developed by Michael E. Porter 1980. Since that time it has become an important tool for analyzing an organizations industry structure in strategic processes. Porters model is based on the insight that a corporate strategy should meet the opportunities and threats in the organizations external environment. Especially, competitive strategy should base on an understanding of industry structures and the way they change. Porter has identified five competitive forces that shape every industry and every market. These forces determine the intensity of competition and hence the profitability and attractiveness of an industry. The objective of corporate strategy should be to modify these competitive forces in a way that improves the position of the organization. Porters model supports analysis of the driving forces in an industry. Based on the information derived from the Five Forces Analysis, management can decide how to influence or to exploit particular characteristics of their industry.

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The Five Competitive Forces The Five Competitive Forces are typically described as follows:

1. Bargaining Power of Suppliers The term suppliers comprises all sources for inputs that are needed in order to provide goods or services. Supplier bargaining power is likely to be high when:

The market is dominated by a few large suppliers rather than a fragmented source of supply, There are no substitutes for the particular input, The suppliers customers are fragmented, so their bargaining power is low, The switching costs from one supplier to another are high, There is the possibility of the supplier integrating forwards in order to obtain higher prices and margins. This threat is especially high when

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The buying industry has a higher profitability than the supplying industry, Forward integration provides economies of scale for the supplier, The buying industry hinders the supplying industry in their development (e.g. reluctance to accept new releases of products), The buying industry has low barriers to entry.

In such situations, the buying industry often faces a high pressure on margins from their suppliers. The relationship to powerful suppliers can potentially reduce strategic options for the organization. 2. Bargaining Power of Customers Similarly, the bargaining power of customers determines how much customers can impose pressure on margins and volumes. Customers bargaining power is likely to be high when:

They buy large volumes, there is a concentration of buyers, The supplying industry comprises a large number of small operators The supplying industry operates with high fixed costs, The product is undifferentiated and can be replaces by substitutes, Switching to an alternative product is relatively simple and is not related to high costs, Customers have low margins and are price-sensitive, Customers could produce the product themselves, The product is not strategically important for the customer, The customer knows about the production costs of the product There is the possibility for the customer integrating backwards.

3. Threat of New Entrants The threat of new entries will depend on the extent to which there are barriers to entry. These are typically: -

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Economies of scale (minimum size requirements for profitable operations), High initial investments and fixed costs, Cost advantages of existing players due to experience curve effects of operation with fully depreciated assets, Brand loyalty of customers Protected intellectual property like patents, licenses etc, Scarcity of important resources, e.g. qualified expert staff Access to raw materials is controlled by existing players, Distribution channels are controlled by existing players, Existing players have close customer relations, e.g. from long-term service contracts, High switching costs for customers Legislation and government action

4. Threat of Substitutes A threat from substitutes exists if there are alternative products with lower prices of better performance parameters for the same purpose. They could potentially attract a significant proportion of market volume and hence reduce the potential sales volume for existing players. This category also relates to complementary products. The threat of substitutes is determined by factors like:

Brand loyalty of customers, Close customer relationships, Switching costs for customers, The relative price for performance of substitutes, etc.

5. Competitive Rivalry between Existing Players This force describes the intensity of competition between existing players (companies) in an industry. Strong competition pressurizes on prices, margins, and hence, on profitability for every single company in the industry. Competition between existing players is likely to be high when:

There are many players of about the same size, Players have similar strategies There is not much differentiation between players and their products, etc.

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Chapter 4 : Scenario Planning as a Strategic Management Tool

Scenarios are tools for ordering ones perception about alternative future environment in which todays decision might be framed. In practice, scenarios resemble a set of stories, written or spoken, built around carefully constructed plots. These stories can express multiple perspectives on complex events, scenarios give meaning to these events. Scenarios are powerful planning tools precisely because the future is unpredictable. Unlike traditional forecasting or market research, scenarios present alternative images instead of extrapolating current trends from the present. Scenarios also embrace qualitative perspectives and the potential for sharp discontinuities that econometric models exclude. Consequently, creating scenarios requires decisionmakers to question their broadest assumptions about the way the world works so that they can foresee decisions that might be missed or denied. Without an organization, scenarios provide a common vocabulary and an effective basis for communicating complex sometimes paradoxical conditions and options. Good scenarios are plausible and surprising, they have the power to break old stereotypes, and their creators assume ownership and put them to work. Using scenarios is rehearsing the future. By recognizing the warning signals, the threats and opportunities that is unfolding, one can avoid surprises, adapt and act effectively. Decisions which have been pre-tested against a range of what may offer are more likely to stand the test of time, produce robust and resilient strategies, and create distinct competitive advantage. Ultimately, the result of scenario planning is not a more accurate picture of tomorrow but better thinking and an ongoing strategic conversation about the future. Implementation of scenario planning A company wide involvement in scenario planning leads to bette results in a firm. A cross-functional team is instituted for the identification and monitoring of issues. Employees are encouraged to participate by an incentive based process.

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Steps involved; 1) Identification of issues : understand the effects of external factors on business technology driven, political, economic, competitive positioning 2) Classification of issues : support the issue identified with reports/propositions, determine the uncertainty and kind of impact of the issue 3) Analyzing and problem solving

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Chapter 5 : Strategic control process

Regardless of the type or levels of control systems an organization needs, control may be depicted as a six-step feedback model: 1. Determine What to Control: The first step in the control process is determining the major areas to control. Managers usually base their major controls on the organizational mission, goals and objectives developed during the planning process. Managers must make choices because it is expensive and virtually impossible to control every aspect of the organizations 2. Set Control Standards: The second step in the control process is establishing standards. A control standard is a target against which subsequent performance will be compared. Standards are the criteria that enable managers to evaluate future, current, or past actions. They are measured in a variety of ways, including physical, quantitative, and qualitative terms. Five aspects of the performance can be managed and controlled: quantity, quality, time cost, and behavior Standards reflect specific activities or behaviors that are necessary to achieve organizational goals. Goals are translated into performance standards by making them measurable. An organizational goal to increase market share, for example, may be translated into a top-management performance standard to increase market share by 10 percent within a twelve-month period. Helpful measures of strategic performance include: sales (total, and by division, product category, and region), sales growth, net profits, return on sales, assets, equity, and investment cost of sales, cash flow, market share, product quality, valued added, and employees productivity. Quantification of the objective standard is sometimes difficult. For example, consider the goal of product leadership. An organization compares its product with those of competitors and determines the extent to which it pioneers in the introduction of basis product and product improvements. Such standards may exist even though they are not formally and explicitly stated.

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Setting the timing associated with the standards is also a problem for many organizations. It is not unusual for short-term objectives to be met at the expense of long-term objectives. Management must develop standards in all performance areas touched on by established organizational goals. The various forms standards are depend on what is being measured and on the managerial level responsible for taking corrective action. 3. Measure Performance: Once standards are determined, the next step is measuring performance. The actual performance must be compared to the standards. Many types of measurements taken for control purposes are based on some form of historical standard. These standards can be based on data derived from the PIMS (profit impact of market strategy) program, published information that is publicly available, ratings of product / service quality, innovation rates, and relative market shares standings. Strategic control standards are based on the practice of competitive benchmarking - the process of measuring a firms performance against that of the top performance in its industry. The proliferation of computers tied into networks has made it possible for managers to obtain up-to-minute status reports on a variety of quantitative performance measures. Managers should be careful to observe and measure in accurately before taking corrective action. 4. Compare Performance to Standards: The comparing step determines the degree of variation between actual performance and standard. If the first two phases have been done well, the third phase of the controlling process comparing performance with standards should be straightforward. However, sometimes it is difficult to make the required comparisons (e.g., behavioral standards). Some deviations from the standard may be justified because of changes in environmental conditions, or other reasons. 5. Determine the Reasons for the Deviations: The fifth step of the control process involves finding out: why performance has deviated from the standards? Causes of deviation can range from selected achieve organizational objectives. Particularly, the organization needs to ask if the deviations are due to internal shortcomings or external

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changes beyond the control of the organization. A general checklist such as following can be helpful:

Are the standards appropriate for the stated objective and strategies? Are the objectives and corresponding still appropriate in light of the current environmental situation? Are the strategies for achieving the objectives still appropriate in light of the current environmental situation? Are the firms organizational structure, systems (e.g., information), and resource support adequate for successfully implementing the strategies and therefore achieving the objectives?

Are the activities being executed appropriate for achieving standard?

6. Take Corrective Action: The final step in the control process is determining the need for corrective action. Managers can choose among three courses of action: (1) they can do nothing (2) they can correct the actual performance (3) they can revise the standard. When standards are not met, managers must carefully assess the reasons why and take corrective action. Moreover, the need to check standards periodically to ensure that the standards and the associated performance measures are still relevant for the future. The final phase of controlling process occurs when managers must decide action to take to correct performance when deviations occur. Corrective action depends on the discovery of deviations and the ability to take necessary action. Often the real cause of deviation must be found before corrective action can be taken. Causes of deviations can range from unrealistic objectives to the wrong strategy being selected achieve organizational objectives. Each cause requires a different corrective action. Not all deviations from external environmental threats or opportunities have progressed to the point a particular outcome is likely, corrective action may be necessary.

Strategic Control and Operational Control

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Strategic control focuses on the dual questions of whether: (1) the strategy is being implemented as planned; and (2) the results produced by the strategy are those intended. Strategic control is the critical evaluation of plans, activities, and results, thereby providing information for the future action. There are four types of strategic control: premise control, implementation control, strategic surveillance and special alert control Premise Control: Planning premises/assumptions are established early on in the strategic planning process and act as a basis for formulating strategies. Premise control has been designed to check systematically and continuously whether or not the premises set during the planning and implementation processes are still valid. It involves the checking of environmental conditions. Premises are primarily concerned with two types of factors:

Environmental factors (for example, inflation, technology, interest rates, regulation, and demographic/social changes). Industry factors (for example, competitors, suppliers, substitutes, and barriers to entry).

All premises may not require the same amount of control. Therefore, managers must select those premises and variables that (a) are likely to change and (b) would a major impact on the company and its strategy if the did. Implementation Control: Strategic implantation control provides an additional source of feed forward information. Implementation control is designed to assess whether the overall strategy should be changed in light of unfolding events and results associated with incremental steps and actions that implement the overall strategy. The two basis types of implementation control are: 1. Monitoring strategic thrusts (new or key strategic programs). Two approaches are useful in enacting implementation controls focused on monitoring strategic thrusts: (1) one way is to agree early in the planning process on which thrusts are critical factors in the success of the strategy or of that thrust; (2) the second approach is to use stop/go assessments linked to a series of meaningful thresholds 19

(time, costs, research and development, success, etc.) associated with particular thrusts. 2. Milestone Reviews. Milestones are significant points in the development of a programme, such as points where large commitments of resources must be made. A milestone review usually involves a full-scale reassessment of the strategy and the advisability of continuing or refocusing the direction of the company. In order to control the current strategy, must be provided in strategic plans. Strategic Surveillance: is designed to monitor a broad range of events inside and outside the company that are likely to threaten the course of the firms strategy. The basic idea behind strategic surveillance is that some form of general monitoring of multiple information sources should be encouraged, with the specific intent being the opportunity to uncover important yet unanticipated information. Strategic surveillance appears to be similar in some way to environmental scanning. The rationale, however, is different. Environmental, scanning usually is seen as part of the chronological planning cycle devoted to generating information for the new plan. By way of contrast, strategic surveillance is designed to safeguard the established strategy on a continuous basis. Special Alert Control: Special alert controls are the need to thoroughly, and often rapidly, reconsider the firms basis strategy based on a sudden, unexpected event. (i.e., natural disasters, chemical spills, plane crashes, product defects, hostile takeovers etc.). Special alert controls should be conducted throughout the entire strategic management process.

Operational Control Operational control systems are designed to ensure that day-to-day actions are consistent with established plans and objectives. It focuses on events in a recent period. Operational control systems are derived from the requirements of the management control system.

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Corrective action is taken where performance does not meet standards. This action may involve training, motivation, leadership, discipline, or termination. Evaluation Techniques for Operational Control:

Value chain analysis: Firms employ value chain analysis to identify and evaluate the competitive potential of resources and capabilities. By studying their skills relative to those associated with primary and support activities, firms are able to understand their cost structure, and identify their activities through which they can create value.

Quantitative performance measurements: Most firms prepare formal reports of quantitative performance measurements (such as sales growth, profit growth, economic value added, ration analysis etc.) that managers review at regular intervals. These measurements are generally linked to the standards set in the first step of the control process. For example if sales growth is a target, the firm should have a means of gathering and exporting sales data. If the firm has identified appropriate measurements, regular review of these reports helps managers stay aware of whether the firm is doing what it should do. In addition to there, certain qualitative bases based on intuition, judgment, opinions, or surveys could be used to judge whether the firms performance is on the right track or not.

Benchmarking: It is a process of learning how other firms do exceptionally highquality things. Some approaches to bench marking are simple and straightforward. For example Xerox Corporation routinely buys copiers made by other firms and takes them apart to see how they work. This helps the firms to stay abreast of its competitors improvements and changes.

Key Factor Rating: It is based on a close examination of key factors affecting performance (financial, marketing, operations and human resource capabilities) and assessing overall organisational capability based on the collected information.

Characteristics of an effective strategic control system

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Effective strategic control systems tend to have certain qualities in common. These characteristics/qualities can be stated thus: Suitable: The control system must be suitable to the needs of an organisation. It must conform to the nature and needs of the job and the area to be controlled. For example, the control system used in production department will be different from that used in sales department. Simple: The control system should be easy to understand and operate. A complicated control system will cause unnecessary mistakes, confusion and frustration among employees. When the control system is understood properly, employees can interpret the same in a right way and ensure its implementation. Selective: To be useful, the control system must focus attention on key, strategic and important factors which are critical to performance. Insignificant deviations need not be looked into. By concentrating attention on important aspects, managers can save their time and meet problems head-on in an effective manner. Sound and economical: The system of control should be economical and easy to maintain. Any system of control has to justify the benefits that it gives in relation to the costs it incurs. To minimize costs, management should try to impose the least amount of control that is necessary to produce the desired results. Flexible: Competitive, technological and other environmental changes force

organizations to change their plans. As a result, control should be necessarily flexible. It must be flexible enough to adjust to adverse changes or to take advantage of new opportunities. Forward-looking: An effective control system should be forward-looking. It must provide timely information on deviations. Any departure from the standard should be caught as soon as possible. This helps managers to take remedial steps immediately before things go out of gear.

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Reasonable: According to Robbins, controls must be reasonable. They must be attainable. If they are too high or unreasonable, they no longer motivate employees. On the other hand, when controls are set at low levels, they do not pose any challenge to employees. They do not stretch their talents. Therefore, control standards should be reasonable-they should challenge and stretch people to reach higher performance without being demotivating Objective: A control system would be effective only when it is objective and impersonal. It should not be subjective and arbitrary. When standards are set in clear terms, it is easy to evaluate performance. Vague standards are not easily understood and hence, not achieved in a right way. Controls should be accurate and unbiased. If they are unreliable and subjective, people will resent them. Responsibility for failures: An effective control system must indicate responsibility for failures. Detecting deviations would be meaningless unless one knows where in the organisation they are occurring and who is responsible for them. The control system should also point out what corrective actions are needed to keep actual performance in line with planned performance. Acceptable: Controls will not work unless people want them to. They should be acceptable to chose to whom they apply, controls will be acceptable when they are (i) quantified, (ii) objective (iii) attainable and (iv) understood by one and all.

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Chapter 6 : Strategic Management Functions

Strategic management benefits a firm in several ways. Specifically it has four functions: identifying strategies, creating strategic plans, implementing strategy and monitoring strategies. Managers should familiarize themselves with these four functions so that they can understand the ways that strategic management can be used within their respective organizations. Defining Strategy The first function of strategic management is to define the firm's strategy. Usually, this is decided at the top of the firm, by the board of directors, chief executives or owners. Strategy definition involves deciding what the purpose of the firm is and what goals it should aim to achieve. Although this takes place at the highest level of the organization, it often involves the input of front-line workers. Developing Strategic Plans Another function of strategic management is to develop strategic plans. Strategic plans serve to convert the firm's goals into reality. For example, a firm might have the strategic goal of increasing revenues. There are a variety of strategic plans that can be used to achieve this goal, such as entering a new market, increasing market share or developing new products. Strategy Implementation One of the most important functions of strategic management is the implementation of the firm's strategy. Implementing a strategy can be difficult because people tend to resist changes. Implementing a strategy involves securing the help of influential people in the business who can influence people and encourage them to accept the changes. Due to the importance and difficulty of implementation, it may take place in several stages over a prolonged period of time.

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Monitoring Strategies The final function of strategic management is to monitor the strategies that have been implemented by the firm. This involves identifying the intended results of the strategies and collecting data to see if the results are positive. For example, if the firm decided to implement a strategy with the goal of increasing profits then the managers would simply monitor the profit levels to see if they improve. When strategies do not have the desired results, it becomes necessary to adjust them.

Difference between Business Vision and Company Mission Business Vision of a Company: A vision gives direction for the desired future scope and position of a company:

It deals with the future. It is ambitious. It is expressed in simple terms understandable at all levels of the company. It does not deal with details, but is concrete. It does not deal with solutions. It opens space for creative forward thinking, based on an (emotionally appealing) picture It is not a secret plan but an open declaration. A vision serves to create a common mind set throughout the organization. It helps to mobilize people. It creates momentum and initiative: Am I doing enough to increase the fit of my business with the corporate vision?

Mission of a firm:

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Mission of a firm is the expression of its strategic intent. Strategic intent is the fundamental ends a firm wants to pursue. Mission statement also reveals the self-concept of the firm. Thus, the mission of the business is a qualitative statement of overall business position that summarizes the key points with regard to products, markets, geographic locations and unique competencies. A mission statement abstracts the important points to guide the development of business. Besides others there are two pieces of information that must be contained in the mission statement. Clear definition of current and future business scope and second the unique competencies that distinguish the firm from others in the same industry. Following is the detailed description of the contents of the mission statement; i) Core values: It is the beliefs which guide the behavior of the firm. This is to be encoded in the mission statement so that the employees understand that it has to be followed at any cost. ii) Core purpose: It is the fundamental end for which an organization exists. It is the very reason of the existence of the firm in the market. iii) BHAGIt represents Big Hairy Audacious Goal. This implies, that the mission statement should be organized in such a manner that it fires up the competitive zeal of the employees. In their celebrated article, Garry Hamel and C.K.Prahlad state that rather than trimming ambitions to match available resources, managers should instead leverage resources to reach seemingly unattainable goals. This challenge is at the heart of a proper mission statement. iv) Vivid description of future: A mission statement is grossly incomplete without the clear definition of the expected future business scope. This has got two dimensions; business and ethical. Business dimensions includes;

Scope of the firm: the description of current and future market scope, product scope, geographical reach scope and customer scope.

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Positioning strategy: This explains on what basis the firm wants to compete and how the firm wants itself to be known in the market. There are two ways to create value for money for shareholders- cost leadership strategy and product differentiation strategy. The image of the firm will depend on this positioning strategy.

Responsibilities to the stakeholders: Here the firm has to spell out how it wants to treat its different stakeholders.

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Chapter 7 : Strategic mgmt process meaning, steps & components

The strategic management process means defining the organizations strategy. It is also defined as the process by which managers make a choice of a set of strategies for the organization that will enable it to achieve better performance. Strategic management is a continuous process that appraises the business and industries in which the organization is involved; appraises its competitors; and fixes goals to meet all the present and future competitors 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 organizations chosen strategy into action. Strategy implementation includes designing the organizations 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 its implementation meets the organizational objectives.

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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 situations requirement, so as to make essential changes.

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Chapter 8 : 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. Strategic Management Process The strategic management planning process plays a very important role in leading an organization towards its goals. Let us know more about the strategic management process. Nowadays, it is very important for companies to plan processes and procedures and work accordingly. They necessarily need a step-by-step management process which would make corporate goals and ambitions easy to achieve. The strategic management process is an efficacious tool that helps companies carry out their processes in a smooth manner. What is Strategic Management? Strategic management is a particular course of action that is meant to achieve a corporate goal. It is really significant in defining and setting up the organization's mission, goals and procedures. Generally, the owners and the founders of the company take the first step in creating a strategic management process. This process is responsible for carrying out several functions such as providing direction and guidance to the employees, setting up mensurable goals and a time span to achieve them, and designating duties to all corporate personnel. Marketing and sales projections are the most important elements in a conventional strategic plan which also includes the steps to assess the accomplishments of every department.

Mission of the Strategic Management Plan

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Every company has a mission statement which is the primary reason for running the business. The mission statement should mainly concentrate on the ambitions and purposes of the organization. Defining the mission statement is the first step for initializing a strategic management process, and all other work procedures are a part of devising a strategic plan. The organizational goals need to be set up after the mission is determined. The goals include fiscal anticipations which strongly emphasize on sales growth, profit levels, customer retention and attraction, and expenditure factors. The goals set up in the strategic planning process are required to be measurable and achievable, and effective schedules should be put into practice to review every aspect of the goals. Strategic Management Plan Assessment After the realizable goals have been properly set, the strategic management planning team needs to carry out the information-collecting tasks. A successful strategic plan is executed when employees, advisors, and freelancers contribute to every phase of the planning procedure. Sales and marketing practices provide data regarding the present scenarios in which the organization is operating. The Human Resource Management (HRM) department is responsible for providing data on aspects such as employee retention, health care expenses, and employee performance assessments. Freelancers are assigned the responsibility of studying market research and surveys and competitive intelligence to give a clear idea of the present business situations. After all the information and data is sorted out, the strategic management team then evaluates the reports and relegates the organization's strengths and weaknesses to formulate a final strategic plan.

The Strategic Plan

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Plans need to be devised and implemented once all the data is readily available. The advertising and marketing processes can now be put into practice. Cutbacks and costcutting measures may be executed to maintain and increase the profit levels according to the organizational goals. At this point of time, the company management may also take the decision of introducing new products and services in the market. All factors that increase the profitability of the company should be thought upon by the management, and the strategic leadership should be planned according to different strategies. The managers are required to be given time lines for deliverables, level of expectations, budget parameters, and certain obligations. Review of the Strategic Management Plan Efficient strategic thinking and a strategic management plan will always have controls and periodic reviews incorporated into the process. Each stage should be elaborated and then the changes should be made accordingly. The management team needs to keep a detailed record of the allotted deadlines, and the required particulars should be presented to the clients or stakeholders. The strategic planning team is required to review the integral strategic management process annually. Business situations, market projections, and technological furtherance demand present and regularly updated strategic planning to enable an organization to be successful in today's highly competitive environment. The periodic incorporation of the strategic management process is crucial for the smooth running of the company. As a result, companies are giving more importance to the strategic management process implementation.

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