BME02 Strategic Management

Concept of Business and Development of Business Culture

- Study of Business management is having a clear idea of what business is and how it
developed
- Business is the evolutionary growth of various activities developing from a simple to a
complex system.
- Space/computer technology is continuously improving so that life is very different from
the past and the developments we see today are unknown to the previous generations.
- Today, a simple push of the button brings conveniences of technology right at our
doorsteps in the same manner that a mere power breakdown is sufficient to disrupt
routinary and business activities.
- There is a much complexity in business because this area involves the whole range of
human wants and needs.
- Business primarily aims to satisfy the consumer’s basic and secondary needs. It can be
achieved through the use of effective business marketing practices and strategies for
reasonable returns to compensate for the businessman’s efforts and risk of loss.
- Profit is the main objective of business which distinguish it from charitable institutions
and government agencies

Relationship between Business Management and the Economy

- Business firms thus contribute to the country’s economic growth
- One measure of economic growth is the Gross National Product (GNP), defined as the
total market value of goods and services produced by a country in any given period
(usually quarterly, semi-annually and annually.
- Creating a demand for the outputs of other businesses.
- Pay wages to personnel to uplift their life
- Business firm co-exist and interrelates with other members in the economic system
- Manufacturing sectors includes both domestic and foreign trade

pays for the goods and services

produces goods and services

Economy Business

provides the factors of production

pays for the factors of production

Basically, the role of business is to produce goods and services which consumers need.
The business firm produces goods and services from the factors of production provided by
society. Consumers, in turn, buy these goods and services

Elements of a Business System

- Economics is the study of how a society produces and distributes its desired goods and
services. It deals with how society uses its resources to produce goods and services.
These economic resources to produce are called factors of production.

Land – pertains to all-natural resources, including timber, minerals, petroleum and the land itself
Labor – refers to the physical and mental input of the people who produce the goods and services
1
The Entrepreneur or businessman buys and organizes these three factors of production – land,
labor and capital to provide goods and services
LAND
Materials

CAPITAL BUSINESS ENTERPRISE LABOR

Money Manpower

ENTREPRENEUR
Management Skills

Why People Engage in Business

Human behavior, including consumer behavior, involves a complicated process of stimulus-and-
response system to many factors and motives
People engage in business because of the following:
- Earn profit
- Serve the community
- Achieve prestige because of certain stimuli

Motivational factors – hierarchy of needs (Abraham Maslow)

1. Physiological or biological need – the essentials for survival such as the need for food,
clothing, shelter, sex, air, water
2. Safety needs – the desire for security, stability, or protection against danger
3. Social need – the need for group belongingness, affection, love and friendship
4. Ego or self-esteem need – the need for self-recognition or group satisfaction
5. Self-fulfillment need – the need for the realization of personal goal or ambition

5 • self actualization needs

4 • self esteem needs
3 • love and belonging needs
2 • safety and security needs
1 • physilogical needs

Responsibility of a Business Enterprise

- Business enterprise is a part of a larger economic.
- Company must follow all government rules and regulations, besides being a responsible
corporate citizen in the community
- Business Association – Abide by decision of business associations of which it is a
member
- The company must recognize the union and negotiate with it
- Responsible to employ workers to help run the business – must pay fair wages and
benefits, provide a safe and healthy working environment
- Responsible to Customers in providing goods and services of satisfactory quality and
competitive price and more importantly, the goods must be genuine
- Responsible to Suppliers – must deal with suppliers fairly and pay duly for his purchase
and maintain their credibility to the industry
- Conducting business transactions must comply with the laws and regulations laid down
by the Government
- Responsible to the Community – strive to promote the social, economic and cultural
welfare

2
 Owners

Customers
Workers

Business Business
Suppliers
association firms

Labor union Government

Community

A business enterprise in relation to other members in the system

Kinds of Business
1. Industries – involve the conversion of raw materials into finished products or goods and
the application of labor upon raw materials so that greater usefulness becomes possible
after the process in the industrial group can be divided into extractive industries; farming,
fishing and mining.
2. Commerce – involves the process of buying and selling where the goods are moved from
the point of production to the point of consumption. Consumption involves purchasing
and the actual investment of capital in the merchandise handled with the intention of
reselling of profit
3. Service enterprise – are primarily concerned with the satisfaction of the needs and wants
of the consumers. These are subdivided into:
a. Public and community service
b. Professional of trade service
Services subdivided into:
Recreation services which include TV stations, movie productions and the theaters
Personal services which include hotels, restaurants, schools, beauty parlors

Kinds of Economic System

1. Capitalism – is a system in which the means of production are owned and operated by
private individuals. It is a system of economic organization wherein privately-owned
capital and property rights are privately invested with the ultimate aim of personal gain.
2. Socialism – means the ownership of production and capital by the government and the
regulation by society, as a whole of the process of production and distribution and of the
giving of essential.
Democratic socialism – to mean an economic system in which important industries such
as public utilities, postal services, and transportation are owned and operated by the
government and stabilizes employment because during recession – for instance,
government enterprise can increase employment by providing more jobs. (Singapore,
Britain, Sweden)
3. Communism – stands for the collective ownership by the government of consumption
goods and production goods. It is also a way of organizing the productive forces of a
society.

3
 Communism refers also to the economic system in the People’s Republic of China. In
this country, the state owns and controls all means of production. The government plans
economic activities. This country is sometimes called “centrally-planned economies”
whereas capitalist countries are referred to as “market economies”

Phase of Economic Development

- Development of a country’s economy from one phase to another is not drastic; the
various concepts used merely identify the more important attributes of the people’s way
of life in a certain period of time.
- Economic development is only possible if a country has maximized the use of its human
and natural resources.

Criteria in Classifying Phases of Economic Development

Means of Livelihood
1. Hunting and Fishing Phase – our ancestors obtained food by hunting and fishing taken
directly from the mountains, seas and the bounties of nature. They did not breed nor
domesticate animals
2. Pastoral Phase – creation of groups and presence of a large number of livestock have
made settle in an area for a longer period of time. This phase is made it necessary for man
to satisfy the needs of his group during seasons of inclement weather and the realization
of a greater need for planning, saving, and setting aside of stocks.
3. Handicraft Phase – items or objects were made by skilled and trained manual laborers. It
was the period of the medieval guilds. Guilds were association of artisans engaged in the
same trade. They made excellent workmanship of sculptures and other work of arts.
4. Agricultural Phase – Man’s need for a continuous supply of food led to the development
of agriculture and the concept of land ownership man began to work as a farmer or a
fisherman. In the Philippines, agriculture is the primary industry because of vast
agricultural land and the shortage of foreign exchange needed to buy modern machineries
and technologies.
5. Industrial Phase – characterized by the presence of manufacturing companies in certain
areas like Metro Manila. This period is an offshoot of the “Industrial Revolution”, which
came to England and Europe towards the end of 18th century. It was the period when
machineries were used in factories and industrial plants. Industrial production, with the
use of power and machines, led to the mass production of other machines such as
automobiles and appliances which have made modern living radically different from that
of the previous generations

INTRODUCTION TO STRATEGIC MANAGEMENT

- Derived from the term “strategy”. The concept of strategy is an ancient phenomenon
- James Stoner explains the term in relation to military action.

Strategy
- Comes from the Greek word strategeia – which means the art of science of being a
General (military head)
- The Greek knew the importance of generalship in winning and losing battles. An
effective General needs to define the purpose of leading an army, winning and holding
territories, protecting area from invasion, and wiping out enemies
- Army strategy can be defined as the actual pattern of action that it takes in response to the
army.

Strategy in involves: Planning and Actual pattern of action in light of the opposite party

Management
- The term Management is generic term and it implies many things.
- Management is knowledge consisting of concepts, principles, functions and processes.
- The knowledge is used for achieving organizational objectives by effective utilization of
resources and coordinated human efforts

4
 - Management is a process of planning, organizing, staffing, directing, and controlling
(budgeting and reporting) human efforts to achieve organizational objectives effectively

4 Aspects most authors considered in defining the term management

1. Economic Performance – achieving a high operational efficiency
2. Directing People – making the people work
3. Decision-making – taking and implementing decisions on various aspects
4. Functions – various functions like planning, organizing, staffing, directing, and
controlling that manager has to perform.

Nature or Characteristics of Management

1. Management is a Process – a process consists of a series of interrelated activities or steps
to be followed in a sequence and it always restarts with the first steps.
2. Abstract Phenomenon – cannot be seen or touched like a physical object. It is invisible
and intangible knowledge
3. Goal Oriented – the primary task of management is to achieve the goals (end-unexpected
result that can actualized in the future)
4. Decision-making – management is synonyms of decision-making and a manager is
known as a decision-maker because every function of management consists of a set
decision.
5. Working with and Through People – a manager makes the people in an organization
work.
6. Factor of Production – there are four factors of production (land, labour capital and
entrepreneur). Except entrepreneur – the other are passive, cannot contribute
automatically.
Entrepreneur organizes and coordinates these productive resources in an optimum
manner to achieve possible result
7. Integrated Activity – integrates activities and functions of various groups and department.
Integration is necessary to ensure that all people, groups, and departments work
consciously and active for the same purpose.
8. Management as an Art and A Science – it satisfies most of the conditions of an art and
some conditions of a science.
Art – concerns with practical use of knowledge
Science – systematic development of knowledge
9. Management as a Profession – specialized body of knowledge which is based on
intensive study, experience and observation and is used to serve others for fees.
10. Management as a Universal Activities – many experts management is universal with
reference to its fundamentals (concepts, principles and functions)
11. Multi-disciplinary – management is managing human beings. It enriched its knowledge
by borrowing concepts, principles and other theories from other disciplines like
economics, marketing and others.

Management and Administration

- Both terms are similar and can be used interchangeably, in the early stage of management
development the two terms were considered synonyms
- The difference lies in their use with reference to different fields of human activities.
- Administration with decision-making and management with execution function (1923
differentiated by Oliver Sheldon)

There are three viewpoints on the subject

1. Administration is above management
- Involved in different activities, through both are performed by the same individuals in
an organization.
- Administration is concerned with policy formulation while management is concerned
with policy execution
- Administration defines the goals and management strives towards it.

5
 -Administration is the phase enterprise that concerns itself with the overall
determination of institutional objectives and policies necessary to be followed in
achieving those objectives.
- Management is an executive function which is primarily concerned with carrying out
broad policies laid down by the administration.
2. Administration is a part of management
- Administration deals with routine, day-to-day function while management is
concerned with the policy-making function.
- Administration doesn’t involve decision-making.
- Administration is an implementing agency whereas management is determinative (the
deciding agency)
- Part of management that is concerned with the installation and involves a carrying out
of procedures by which it is laid down and communicated and involves process of
activities regulated and checked against plans.

Administrative and
Administration
(Policy Formulation Task)
Management Functions

Administration is a subordinate
function to management and is
concerned with its day-to-day
– routine and repetitive
functions

Management
(Policy Execution Task)

3. Administration and management are the same

- The terms, management and administration, are synonymous and can be used
interchangeably.
- The term administration is popularly used in the bureaucratic structure of government
and other public sector organization
- In government offices, we use administrator rather than manager
- The term management is commonly used in business activities where economic
excellence (or Profit) is given more priority.

Administration Management (Henry Fayol 1841-1925) was the chief contributor to

administration management. French mining Engineer and industrialist recognized as Father of
Management Theory.

Max Weber – has made significant contribution to administrative management in terms of

bureaucracy. He carefully analyzed functioning to church, government, military and business
organization and suggested bureaucratic structure for all organizations.

Bureaucratic structure – is the most rational means to exercise control over human being at work.
The system is directed to coordinate efforts of many people in the large organization.

Max Weber emphasizes on following key features of Bureaucracy:

1. Administrative class (full-time paid employees)
2. Specification (division of work)
3. Hierarchy of authority (vertical line of authority)
4. Official rules (formal provisions to exercise control)
5. Impersonality (impersonal relations)
6. Trained employees (provision of formal training to improve job-related skills)

6
 7. Official records (creating and maintaining official employee records for several purposes
such as promotion, demotion and transfer)
Problems associated with bureaucratic administrative pattern:
• Poor efficiency, Invalid bureaucratic assumptions, Over emphasizing on rules and
procedures, Lack of clear responsibility, Rigidly, Slow decisions, Goals displacement,
Impersonal approach, Evils of nepotism and favouritism, Close system perspective,
Inhumane approach, Lack of professionalism, incapability in turbulent environment,
Conflict between organizations and individuals.
• Lack of human aspects is the root-cause of major problems and criticism.

Elements of Administrative Management

1. Classification of Business Activities / Operations – classified operations of industrial
organization in 6 groups
i. Technical activities – are related to production
ii. Commercial activities – are related to buying, selling or exchange
iii. Financial activities – are related to raising and utilizing funds
iv. Security activities – are related protecting property and persons
v. Accounting activities – are related to keeping records of various business
transactions
vi. Managerial activities – related to planning, organizing, commanding, coordinating
and controlling

2. Managerial Qualities – Henry Fayol was the first identify various qualities the manager
should possess for effective performance.
i. Physical qualities – health and vigor (stamina)
ii. Mental qualities – ability to learn and understand judgmental, mental vigor and
capability
iii. Moral qualities – energy, firmness and willingness to accept responsibility,
initiative, loyalty, tact and dignity
iv. Educational qualities – general acquaintances with matters related to general
functioning of the organization
v. Technical qualities – acquaintances with the functions being performed
vi. Experience qualities – experience arising from work

3. General Principles of Management – based on a vast practical experience (Henry Fayol)

derived certain common principles of management, may use to lead to the improvement
of managerial performance
i. Division of labour – division of work to take advantage of specialization
ii. Authority and responsibility – formal authority is derived from the manager’s
position and personal authority is derived by qualities, such as intelligence,
experience, moral worth, and past service. Responsibility arises from assignment
of work.
iii. Discipline – is the result of good leadership at all levels. Respect the rules and
agreements that govern organization. Self-imposed or commanded
iv. Unity of command – indicates that a person should be ordered and instructed only
by one superior
v. Unity of direction – principle suggests that the operations with same objectives
should be directed by one manager using one plan.
vi. Subordination of individual to General Interest – individual interest should be
subordinated to general interest. common goals of organization should be
communicated to all the members clearly.
vii. Remuneration of personnel – should be fair both employer and employees. Equal
to the level of performance and should be flexible
viii. Centralization – believed that manager should retain the final authority, but
should delegate to his subordinates enough to do their jobs
ix. Scalar principle – scalar chain of authority and communication for the top to the
bottom in the organization

7
 x. Order – related to the arrangement of things and people. There should be a place
for everything and everything should be in place.
xi. Equity – is a combination of justice, fairness, and kindness.
xii. Stability of tenure – stability of staff, reduce the unnecessary turnover, surety of
jobs and staff stability can contribute of efficiency
xiii. Initiative – within limits of authority and discipline, reasonable freedom to
conceive and carry out plans.
xiv. Esprit de Corps – concerned with promoting team spirit.

4. Elements of Management – are planning, organizing, commanding, coordinating and

controlling.

Levels in Management
- Refers to the classification of managerial functions on the basis of their relative
importance

I. Top Level Management – is comprised of key position includes the Board of Directors,
Chairman or Managing Director, Chief Executive or General Manager
Functions:
1. Analyze and evaluate the business environment and determine the firm’s response to it
2. Determine basic objectives for the enterprise
3. Formulate main long-term policies, rules, procedures, budgets, etc.
4. Decide the structure of the organization and select top executives
5. Deal with legal formalities and procedures
6. Deal with matters related to financial and technological issues
7. Finalize strategic decisions, such as long-term contracts, mergers, acquisitions, etc.
8. Guide, supervise, review, and control middle level executives
9. Integrate efforts of departmental heads

II. Middle Level Management – this level works directly under the top level and exercise direct
authority over the bottom level and includes departmental, divisional and sectional heads

Consists of Two-Sub Levels

A. Intermediate level management also called upper-middle level management, comprises of
departmental heads (production, financial, personnel and marketing manager.
- They are responsible for efficient functioning of their respective department as per basic
objectives, policies, rules, procedures … etc. laid down by the top-level management
- They plan their operations, guide employees, coordinate efforts, manage for resources,
control their efforts and maintain relations with other department

B. Lower-middle level management operates between the upper-middle management and the
bottom level management. it comprises of duty or assistant heads, area, sales, branch managers,
chief accountants and office superintendents.
- They assist respective departmental heads to carry our relevant activities.
- The executives at this level serve as link between departmental heads and supervisory
management.
Functions:
1. Carry out operations according to the plan formulated by the top level
2. Make arrangement for necessary resources and facilities for the department
3. Coordinate and control efforts of people working in their department
4. Maintain amicable relations with other department
5. Serve as the link between the top level and the operating level
6. Recruit, select, and train supervisory personnel
7. Motivate employees working at the lower level
8. Collect and analyze necessary information and prepare report for the top management
9. Guide, instruct, and control lower level employees
10. Perform any task assigned by the higher authority

8
III. Lower/Bottom Level Management – also known as supervisory or operating management
consists of senior, functional and frontline supervisors or operating management
1. Extend all possible cooperation to higher authorities in implementing departmental plans
2. Prepare and implement operating plans for carrying out day-to-day activities effectively
3. Deal with recruitment, selection and training for workers
4. Supervise and control activities of workers / salesmen
5. Maintain discipline and order at work place
6. Create and maintain healthy work climate
7. Manage necessary materials and facilities for workers
8. Communicate problems of workers with the higher authorities and seek suitable solutions
9. Report performance of workers to the higher authority
10. Perform any activity assigned by the higher authority

Management Process and Function of Management

Henry Fayol/Father of Classical Management– has classified management function as planning,
organizing, commanding, coordinating, and controlling

Luther Gulick and Urwick – have described managerial functions in form of the Planning,
Organizing, Staffing, Directing, Coordinating, Reporting, Budgeting - POSDCORB formula
contains Reporting and Budgeting functions, they are just tools or techniques of controlling
(some writers consider coordination as one of the management functions which in fact, is not a
function is as result of a systematic / effective performance of all managerial functions.

Modern Management – most acceptable classification of management.

Every function is a bunch of related decisions. The process starts with planning, and ends with
controlling to achieve a new target.

The five steps / functions with their respective sub-functions:

1. Planning (including forecasting and decision-making)

- Primary function of management
- It is a thinking process and determines the future course of action by deciding what to do
(type of work), why to do (objectives), when to do (time), where to do (place and
location), how to do it (methods and procedures) and who are going to do (people)
- Planning helps in selecting the best course of action, among several alternatives that can
contribute the most to the objectives of the organization.
- Primary concerned with looking into the future, a planner needs to set planning premises,
conditions or, assumptions on which the plan is prepared
- Planning mainly includes two aspects which is forecasting and decision making

Process of planning
i. Analyzing business environment
ii. Establishing objectives
iii. Setting planning premises
iv. Identifying alternatives
v. Evaluating alternatives
vi. Selecting best alternatives
vii. Formulating secondary plans
viii. Implementing the plan and review the results

2. Organizing (including delegating)

- It aimed at preparing a formal structure or design of the organization, consisting of
people, tasks, responsible authority, communication network, and a scheme for arranging
all these aspects
- The structure so prepared facilities implementation of the plan. The structure is presented
in the form of an organization chart
- It ensures provision for all activities necessary for a accomplishment of desired objectives

9
 - As a result of organizing – various positions come into existence, different departments
and divisions are created, communication network is prepared, various levels of
management are also created and superior-subordinates relations are established

The process of organizing includes the following steps

i. Specifying the objectives
ii. Enumerating the activities (determining the activities to be performed)
iii. Classifying or grouping the activities
iv. Assigning the responsibility (or fitting individual with function)
v. Delegating the authority
vi. Establishing interrelationships
vii. Preparing organization chart and manuals

3. Staffing (including manpower planning, recruitment and selection, training and

development)
- It concerned manning (filling position with appropriate people) the positions created by
organizing.
- It involves acquiring, maintaining and developing necessary human resources for a
smooth functioning of various operations in the organizing.
- Perform the necessary activities required from recruitment of employees to their
retirement and ensures that a right person is appointed for the right post in the right way
- Also called Personnel Management or Human Resource Management

Staffing involves the following activities

i. Manpower planning, determining the need for people
ii. Recruitment, selection, and induction of employees
iii. Training and development of employees
iv. Wage and salary administration
v. Promotion and transfer
vi. Performance appraisal
vii. Grievances handling and maintaining good relations
viii. Security and welfare activities

4. Directing (motivating, leadership, communication and supervision) sometimes it is

called coordination – because coordination is a result of direction
- Directing is also known as the commanding or executing function and involves
instructing, guiding, inspiring and supervising employees to make them work according
to the plan
- The manager needs to suitably and adequately direct employees to ensure a better
coordination and integration in their efforts, so as to achieve the objectives
- The efforts of employees can be directed by using some techniques/tools

Main directing tools or techniques (sub-functions of directing) include:

i. Leadership – it is concerned with guiding and instructing employees at work
ii. Motivation – concerned with inspiring and encouraging people at work
iii. Communication – concerned with providing and receiving necessary information within
(and outside) the organization
iv. Supervision – concerned with observing and correcting employees’ performance and it
involves overseeing people at work

5. Controlling (Budgeting and Controlling)

- Critical function of management and regulating function which contains measuring,
comparing and correcting performance.
- It ensures that plan has been implemented successfully and its accomplishing objectives
and a suitable control mechanism or controlling system helps in achieving objectives
effectively and efficiently
- Useful in finding out what is wrong and how it can be rectified

10
 - Various traditional and modern techniques are used for the purpose and helps in both
preventing and improving poor performance

The process of controlling involves the following steps

i. Setting standards (expected results)
ii. Measuring actual results
iii. Comparing actual results with expected results
iv. Identifying deviation between actual results and expected results
v. Taking corrective actions so that actual results match with expected results

Planning and controlling are interrelated and interdependent. Planning provides a base on which
control can be exercised. And controlling ensures effective implementation of the plan. It can be
sad that – planning is meaningless, if there is no control, and controlling is impossible, if there is
no plan.

Significance of Management

Management is as important as the brain in human beings. It is pivotal in achieving any

objective. Business management includes knowledge of all the functional areas, like production,
marketing, finance and human resources, and also the external business environment. It has the
potential to contribute in the overall development of the nation. Management is important in
personal life too. Knowledge management can be used to improve quality of life of people.

Significance of management can be discussed with regard to its contribution, described as under:
1. Achieving Goals and Objectives – management is responsible for acquiring and utilizing
productive resources, appointing competent people, organizing and coordinating
activities, directing and coordinating efforts of people, and exercising control over their
operations
2. Optimum Utilization of Resources – management ensures the optimum – management
ensures the optimum utilization of resources. Effective use of Men, Money, Materials,
Machines, can help an organization achieve its objectives in time and reduce unnecessary
wastage, duplication and misuse of the resource.
3. Efficient Running of Business Organization – management involves leadership,
motivation, communication and supervision that are crucial for guiding, encouraging and
informing the people in an organization. It integrates employees with the organization
and ensures that their coordinated efforts result into a successful completion of the work.
Improved quality, increased productivity and better human relations are the outcomes of
good management.
4. Sound Organizational Structure – management establishes a pattern of authority-
responsibility relationships, and helps in creating a formal structure. It specifies roles,
status, positions, and direction of communication to facilitate action. It helps coordination
and control of human efforts and facilitate in creating a sound organizational structure.
5. Smooth (undisruptive) Functioning of Organization – management works to avoid
conflicts and promote cooperation. It minimizes possibilities of strikes, lockout, mass
leaves and other disruptive events.
6. Image, Reputation and Goodwill in Market – many companies, with local and foreign
origin, like SM group of companies, Cola-cola and other few, reputed companies in the
corporate world due to their quality management.
7. Successful Implementing Change – management helps in identifying, inviting and
incorporating useful innovations successfully. This help the organization in adjusting and
coping with changing business environment and keeps organization alert, active, and
alive.
8. Management Role for Conflict and Stress – poor managerial is responsible for conflict
and can be a source of employee stress. Managerial functions are performed effectively,
unnecessary conflicts and excessive stress level of employee can be reduced. Stress an

11
 conflict do not relate to a particular function, they are the result of the whole management
process and practice.
9. Better Industrial Relations – industrial relations include both internal and external
relations. Management helps in establishing and maintaining healthy relations with
outside parties like customers, suppliers, financiers, governments, service providers,
media owners.
10. Other: in addition, the following points highlight the significance of management
• Tackling complexities, competition and uncertainties
• Prosperity and improved living standard
• Dealing with vast cultural diversities
• Economic, social, and cultural development of the nation
• Surviving during tough time
• Development of human resources
• Fulfillment of social obligations

Management is such a powerful device that transforms impossible into potential, difficult into
easy, easy into effective and effective into successful.

Objectives of Management
- Objectives are viewed as the expected end result
- Mission, goals, aims, purpose, targets… etc. are closely related to objectives

1. Economic Objectives – are concerned with the economic / financial performance.

Normally, these enjoy the highest priority among all kinds of objectives as every manager
strives for the firm’s economic excellence.
- To earn adequate profit/fair rate of return on investment
- To survive and grow continuously
- To achieve high operational efficiency
- To use up-to-date technology
- To strengthen competitive edge of the company
- To protect company’s economic interest in all possible ways
2. Social Objectives – every business enterprise has to work within the society. It cannot
survive and grow without social support. Therefore, it is the duty of a manager to fulfill
its social obligations towards customers, shareholders, suppliers, general public,
government and the country.
- To satisfy customers in view of their long-term interests
- To improve living standards of people
- To ensure fair dealing with employees and other stakeholders
- To contribute liberally in activities of social significance
- To refrain from any activities, contracts or commitments that affects the society
adversely
- To undertake necessary steps for the well-being of the society (such as pollution control
and protection of ecological balance)
- To create and maintain firm’s image and reputation in the society
3. Human Objectives – primarily relate to the people in the organization. Human resources
play a crucial role in determining success of a business enterprise. Without employee’s
active support, it is impossible for an organization to survive and grow.
- To employ qualified, capable and experienced employees in the organization
- To undertake necessary steps for training ad development of the human resource
- To utilize creative and innovative capabilities of employees
- To maintain staff stability overtime
- To support employees in all possible ways for their job satisfaction
- To build and maintain healthy human relations with people in the organization
- To ensure provision for sufficient employees’ welfare activities
- To formulate and implement attractive motivation policies to boost their morale

12
 4. National Objective – every business unit can directly or indirectly contribute to the
development of the nation, modern managers generally try to achieve one or more of the
following:
- To pay levies (taxes, duties, charges and etc.) honestly, regularly to help the nation
undertake developmental activities
- To support government(s) in implementation policies in the interest of the nation
- To extend all possible cooperation for national unity and integrity
- To help the nation during natural climate – like epidemics, typhoons, floods, tsunami,
earthquakes. And man-made calamities (like strikes, riot, wars, etc.)
- To use influence with international level agencies in favour of the nation
- To help the nation achieve global recognition, fame, and credibility
- To refrain from any act that effects national interest adversely
- To ensure careful use of natural resources and conservation of ecological balance
- To donate liberally for the activities aimed at overall development of the nation

STRATEGIC MANAGEMENT
Since today’s business operations are undertaken in an intense competition, strategic
management seems to be more relevant

Strategic management contains a bundle of strategic decisions and acts which a manager
undertakes and which decide the result of the firm’s performance. Strategic decisions indicate
– long-term, risky, expensive, controversial and critical decisions aimed at achieving long-term
objectives and determining a strong response to the environment.

In turbulence and fast changing business environment – the term Management has transformed
into “STRATEGIC MANAGEMENT”

Definition of Strategic Management

Strategic Management involves the following:
- strategic decision-making, implementation and control
It is concerned with:
- strategic analysis of relevant environment
- strategic choice
- strategic implementation
- strategic assessment (evaluation)
- strategic control

Some definitions of strategic management are:

1. Concerned with deciding on strategy and planning, and how that strategy is to be put into
effect (Gerry Johnson and Kevin Schole)
2. It is continuous, interactive, and cross-functional process aimed at keeping an
organization as a whole appropriately matched with its environment (S.C. Certo and J.P.
Peter)
3. Primarily concerned with relating the organization to its environment, formulating
strategies to adapt the environment, and assuring that implementing of strategies is taken
place (Steiner, Miner and Gray)
4. It is a set of decisions and actions resulting in formulation and implementation of
strategies designed to achieve the objectives of an organization (John A. Pearce and
Richard Robinson)

Organization’s response to its environment is the key aspect of strategic management

- Strategic Management concerned with defining and achieving long-term goals and
objectives by effective interaction and adaptation with dynamic environment on a
continuous basis within limit of given resources.
- It mainly involves strategy formulation, implementing, and control

13
In strategic management – managerial decisions are taken by the top executive known as:
• Chief Executive Officer (CEO)
• Managing Director (MD)
• Chairman
• Executive Director
• President
• They are also called Strategist or the strategy maker

Key Role in strategic management

– strategic formulation,
– implementation,
– evaluation and control.

Management and Strategic Management

- strategic management is not completely different from simple management
- it is a revised form of management
- increased complexity and sophistication in business decision-making
- multifaceted internal activities
- intensified competition and ever-changing nature of firm’s immediate external
environment have necessitated the use of strategic management
- it is applicable to both small as well as large organizations as even smallest organization
face competition
- by formulating and implementing a appropriate strategies, they can be attain sustainable
competitive advantage
- factual today’s management is (prefix ‘strategy’ is used or not) always strategic
management because every manager had managed business operations and processes for
long-term goals and has to responds to competitors and interact with the dynamic
business environment
- aside from business - is equally applicable to all other fields of human activities like
politics, education, religion and others.

Strategic Options - All long-term decisions like mergers, acquisition, takeover, expansion,
diversification, backward and forward integration, strategic alliance with other companies,
outsourcing and have strategic implications

General Management and Strategic Management

- shows important strategic aspects that transform general management into a strategic
- strategic management involves managing activities (planning, organizing, staffing,
directing and controlling) with

Dimension of Strategic Management

- Involves strategy-related decisions like strategic decisions and relevant actions. Strategic
decisions have 6 identifiable dimensions

1. Strategic decisions (issues) require involvement of top level management

2. Strategic decisions involve the allocation of a large amount of company resources
3. Strategic decisions are likely to have a significant impact on the long-term prosperity of
the firm
4. Strategic decisions are future oriented
5. Strategic issues usually have major multifunctional or multi-business consequences
6. Strategic decisions necessitate consideration of factors in the firm’s external environment

14
 Strategic
Management Emphasis on Strategic Issues or Strategic Orientation
Management

- Long-term Goal and Objectives

- Priority to Survival and Growth
- Role of Strategic Alliance
- Planning - Emphasis on Environmental Diagnosis and - Strategic Planning
- Organizing Analysis - Strategic Organizing
- Staffing - Futuristic and Practive - Strategic Staffing
- Directing - Offensive / Defensive options to React Rivalry - Strategic Directing
Firms
- Controlling - Strategic Controlling
- Decisions with Long-lasting Impact
- Long-term Strategic options like Acquisition,
Merger, Takeover, Turnaround, etc.
- Active Involvement of Top Management

Characteristics of Strategic Management

1. Revised Form of Traditional Management – Strategic management is the revised form
of traditional management. It involves well-considered, well-calculated, well-prepared
and broad-based long-term decisions. All managerial functions become strategic
functions.
2. Setting Goals and Devising Means – It mainly involves setting long-term goals and
determining ways and tools to realize these goals. It focuses on careful and minute search
for better opportunities and options.
3. Survival and Development Priorities – Strategic management has a deterministic role
on survival and growth of business firm. It prioritizes organization’s long-term survival
sand continuous development.
4. Top Management’s Job – top management is actively involved in strategic decisions
5. Reaction to Environment – external environment plays a critical role and it is a key
consideration in it. Primary concerned with diagnosis and analysis of external
environment and in determining effective interaction with it. Also concerned with
responding to competitors and it tries to seek adjustment.
6. Three Facets – consists of strategic formulation, strategic implementation and strategic
evaluation and control.
7. Types of Decisions – decisions tend to be innovative, future-oriented, sporadic-irregular
flexible and well-thought in nature to adjust with a dynamic nature of relevant
environment. Merger, acquisition, strategic alliances, forward and backward integration –
are long-term strategic decision.
8. Long-term investment and impact – it is based on conscious and well-calculated
deployment of resource. Decisions have significant impact on the present and future
operations and prosperity of the firm.
9. Levels of strategic decision – can be made at various levels, such as corporate level,
business level and functional level, and they take into consideration all key operations of
firm’s main departments.
10. Need for SWOT Analysis – SWOT analysis is the prime determinant of strategic
response to environment. It shapes firm’s strategic management. Strategic formulation,
implementation and evaluation depend on the SWOT analysis.

15