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Unit 1:-

Definition of Business Policy

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

Business policies are the guidelines developed by an organization to govern its

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

Features of Business Policy

An effective business policy must have following features-

1. Specific- Policy should be specific/definite. If it is uncertain, then the

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

Difference between Policy and Strategy

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

1. Policy is a blueprint of the organizational activities which are

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

What is Corporate Strategy?

Corporate strategy is the highest strategic plan of the organization, which defines
the company goals and defines ways of the achievement within strategic
management.

Corporate strategy is hierarchically the highest strategic plan of

the organization, which defines the corporate overall goals and directions and the
way in which will be achieved within strategic management activities.
It is a long-term, clearly defined vision of the direction of a company or
organization. It helps determine the overall value of the organization, sets strategic
goals and motivates workers to achieve them. It sets out a basic plan for what is to
be achieved and when. This is done by using strategic goals and basic milestones.
However, corporate strategy is also a continuous process that must be able to
respond appropriately to changing conditions and surroundings - the market
situation.
Corporate strategy must include and influence all aspects of the organization and
its entire product portfolio.
What should a corporate strategy include and cover?
Clearly named vision and mission should be part of the strategy. Numerous
analytical techniques are used to develop the strategy
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(see PESTLE, SWOT, VRIO). When implementing the strategy, for example
the BSC is used in for the implementation.
Corporate strategy influences how a company creates value. This means that it
must cover both the product portfolio and the assumptions - resources and
organizational aspects.
 The product portfolio is the basis for the whole company and therefore for
the strategy direction. The company needs to be clear about what it wants to
deliver, to who it wants to deliver, what are the key competitive advantages,
pricing strategies and many other things. They are either part of a corporate
strategy or are elaborated in detail in separate but subordinate strategic
documents such as business strategies, marketing strategy and the like.
 Company resources are necessary to deliver products and to
propel processes. The corporate strategy must include at least a basic
assessment of existing resources (eg using VRIO) and a plan of how new
resources will be acquired so that the strategic goals can be achieved.
Again, this description is either part of the corporate strategy as such or it is
elaborated in detail in partial strategic documents (human resources
strategy, financial strategy, IT strategy, etc.). Resources are a key limitation
of the operation of companies. Most often lacking human resources.
Sometimes companies face a lack of financial resources, sometimes they do
not have sufficient technology, sometimes they miss a building permit to
build a production hall. The most limiting resource is people - the lack of
suitably qualified workers is the most common reason for not achieving the
company’s business goals.
 The organizational model then tells how to set up processes, organizational
structure and overall operating principles to achieve strategic goals. It is
necessary to set rules of operation, the policies, guidelines, organizational
structure, management system and powers and responsibilities of people so
that they effectively support to achieve strategic goals. In this respect, there
is no optimal model - it is always necessary to use a management system, set
processes and organization appropriately to the resources, culture and
overall situation in the organization and the market. What works great in one
company can cause problems for another company.
Thus, corporate strategy must not only define the product and business direction
(business, market and financial goals) but also what a firm has to do to achieve
these goals. What resources must invest to and how to organize them. What
people’s skill profiles need, which competencies must be developed and how they
must be used to develop the business.
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Business Strategy
Definition: Business strategy can be understood as the course of action or set of
decisions which assist the entrepreneurs in achieving specific business objectives.

It is nothing but a master plan that the management of a company implements

to secure a competitive position in the market, carry on its operations, please
customers and achieve the desired ends of the business.

In business, it is the long-range sketch of the desired image, direction and

destination of the organisation. It is a scheme of corporate intent and action, which
is carefully planned and flexibly designed with the purpose of:

 Achieving effectiveness,
 Perceiving and utilising opportunities,
 Mobilising resources,
 Securing an advantageous position,
 Meeting challenges and threats,
 Directing efforts and behavior and
 Gaining command over the situation.
A business strategy is a set of competitive moves and actions that a business uses
to attract customers, compete successfully strengthening performance, and achieve
organizational goals. It outlines how business should be carried out to reach the
desired ends.

Functional Strategy – Meaning of Functional Strategies

Functional strategies are at the heart of competitive advantage of any firm. These
strategies are a great help to the implementation of integrated business strategy of
the firm. They are as basis for attaining the strategic intent of the firm. Functional
strategies are formed in correlation with the changing competitive environment.
Every business firm is built around certain basic functions such as production,
marketing, finance, human resources, information system, operational research and
development, etc. Many other functions are supporting activities which are
significant for the business. Melvin J. Stanford says that for a firm to fulfill its
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purposes and progress towards it objectives, strategic alternatives within each of

these functional areas must be developed, selected and implemented by
management.
These are as follows:
1. Corporate Strategy – It is a strategy for the company and all of its businesses as
a whole.
2. Business Strategy – It is a strategy for each separate business the company has
diversified into.
3. Functional Strategy – Then there is a strategy for each specific functional unit
within a business. Each business usually has a production strategy, a marketing
strategy, a finance strategy, and so on.
4. Operating Strategy – And finally, this is a still narrower strategy for basic
operating units — plants, sales districts and regions, and departments within
functional areas.

Functional Strategy – Definitions

The activities and processes—such as human resource management, research and
development, finance, production, and marketing — constitute the strategic
functions of an organisation. Strategies designed to enact these strategic functions
are referred to as functional level strategies. A functional strategy is the short-term
game plan for a key functional area within a company.

According to Thomas Wheelen and David Hunder, “Functional strategy is the

approach a functional area takes to achieve corporate and business unit objectives
and strategies by maximizing resource productivity. It is concerned with
developing and nurturing a distinctive competence to provide a company or
business unit with a competitive advantage. Just as a multidivisional corporation
has several business units, each with its own business strategy, each business unit
has its own set of departments, each with its own functional strategy.”

Functional Strategy – Reasons why Functional Strategies are Needed

Functional strategies tell the functional managers what to do in their areas to
achieve business objectives. Glueck and Jauch have described the following
reasons to point out why functional strategies are needed.

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The reasons why functional strategies are needed can be enumerated as

follows:
i. Aimed at making the strategies formulated at the top management level
practically feasible at the functional level.

ii. Provide flow of strategic decisions to the different parts of an organization.

iii. The basis for controlling activities in the different functional areas.

iv. The time spent by functional managers in decision-making is reduced as –

a. Plans lay down clearly what is to be done, and
b. Policies provide the discretionary framework within which decisions need to be
taken.

v. Help in bringing harmony and coordination as they remain an important part

integral part of major strategies.

vi. Similar situations occurring in different functional areas are handled in a

consistent manner by the functional managers.

Functional strategies play two important roles:

I. They provide support to the overall business strategy.

ii. They spell out how functional managers will work so as to ensure better
performance in their respective functional areas.

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UNIT – 2

What Is Corporate Planning?

Corporate planning is a process that is used by businesses to map out a course of

action to grow, increase profits, gain exposure, or strengthen brand identity.
Corporate planning is a tool that successful business uses to leverage their
resources more wisely than their competitors.

Why Plan?

No matter the size of your business, it is crucial to have a plan. A plan is not only
beneficial to keep your business organized, but it can also help increase

 Clarity & Direction

 Ensure efficiency use of resources
 Provide a way of measuring progress
 Support effective decision-making
 Coordinate activities
 Allocate responsibilities
 Motivate and guide staff

Six Key Elements of a Successful Plan

As a business, you must take many factors into consideration before you begin
planning a business strategy. You must take a step outside of your position in the
business and look at the following elements as if you were a competitor or a
consumer. To create a successful corporate plan, you will need to

1. Gather Information
2. Set objectives of the plan
3. Devise strategies to meet goals
4. Implement your plan
5. Monitor plan performance
6. Evaluate the effectiveness/success of your plan

Features of corporate planning:

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(i) Corporate planning is a total system of planning, under which concept

objectives are determined for the company as a whole and for each department of
it. This means that under the concept of corporate planning, no department of
company is allowed to have its own independent planning. All departmental plans
are a part of corporate planning, in a unified structure.

(ii) To realize the objectives of corporate planning, strategy formulation is done.

Strategy formulation is the core aspect of corporate planning. Success of corporate
planning depends on the success of strategy formulation

(iii) Determination of objectives of corporate planning and strategy formulation –

both are done against the background of SWOT analysis.

(iv) Strategies are translated (or converted) into tactical plans (or operational
plans), which are detailed in nature.

(v) Tactical plans are put to action at the right time, as decided by management.
This is the practical aspect of corporate planning.

(vi) Performance of tactical plans is judged in the light of the objectives of

corporate planning; so that necessary modifications might be made in the corporate
planning process and better corporate planning might be done in future.

(vii) Corporate planning has a long-term perspective; while operational plans have
a short-term prospective.

The 4 Types of Plans

Operational Planning

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“Operational plans are about how things need to happen,” motivational leadership
speaker Mack Story said at LinkedIn. “Guidelines of how to accomplish the
mission are set.”

This type of planning typically describes the day-to-day running of the company.
Operational plans are often described as single use plans or ongoing plans. Single
use plans are created for events and activities with a single occurrence (such as a
single marketing campaign). Ongoing plans include policies for approaching
problems, rules for specific regulations and procedures for a step-by-step process
for accomplishing particular objectives.

Strategic Planning

“Strategic plans are all about why things need to happen,” Story said. “It’s big
picture, long-term thinking. It starts at the highest level with defining a mission and
casting a vision.”

Strategic planning includes a high-level overview of the entire business. It’s the
foundational basis of the organization and will dictate long-term decisions. The
scope of strategic planning can be anywhere from the next two years to the next 10
years. Important components of a strategic plan are vision, mission and values.

Tactical Planning

“Tactical plans are about what is going to happen,” Story said. “Basically at the
tactical level, there are many focused, specific, and short-term plans, where the
actual work is being done, that support the high-level strategic plans.”

Tactical planning supports strategic planning. It includes tactics that the

organization plans to use to achieve what’s outlined in the strategic plan. Often, the
scope is less than one year and breaks down the strategic plan into actionable
chunks. Tactical planning is different from operational planning in that tactical
plans ask specific questions about what needs to happen to accomplish a strategic
goal; operational plans ask how the organization will generally do something to
accomplish the company’s mission.

Contingency Planning

Contingency plans are made when something unexpected happens or when

something needs to be changed. Business experts sometimes refer to these plans as
a special type of planning.

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Contingency planning can be helpful in circumstances that call for a change.

Although managers should anticipate changes when engaged in any of the primary
types of planning, contingency planning is essential in moments when changes
can’t be foreseen. As the business world becomes more complicated, contingency
planning becomes more important to engage in and understand.

What is strategic planning?

“Strategy” creates a common understanding of what the enterprise wants to

achieve and what it needs to do to achieve it. Strategic plans bridge the gap from
that overall direction to the specific projects and day-to-day actions that
ultimately execute the strategy.

What are the elements of strategic planning?

The key elements of a successful strategic plan include:

 Mission and vision. The organization’s mission articulates its reasons for
being, and the vision lays out where the organization hopes to be. The strategic
plan, which links the two, must be adaptive enough to respond if the context
changes during execution.
 Strategic assumptions. To build a successful strategic plan, leadership
should scope for trends and disruptions, and assess their potential impact on
enterprise goals.
 Strategic plan design. A rigorous strategic planning design effectively
translates the strategy into plans that can and will be executed. Poor plans lead
to poor execution.

Strategic Decisions - Definition and Characteristics

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

Characteristics/Features of Strategic Decisions

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a. Strategic decisions have major resource propositions for an organization.

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

The differences between Strategic, Administrative and Operational decisions can

be summarized as follows-

Strategic Decisions Administrative Operational Decisions

Decisions

Strategic decisions are Administrative decisions Operational decisions

long-term decisions. are taken daily. are not frequently taken.

These are considered These are short-term These are medium-

where The future planning based Decisions. period based decisions.
is concerned.

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Strategic decisions are These are taken These are taken in

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

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

These deal with These are in welfare of These are related to

organizational Growth. employees working in production and factory
an organization. growth.

Making Strategic Decisions - 5 Steps for Success

1. Define the Problem - Consider these questions:

 What is the problem? Can it be solved? Is this the real problem or a

symptom of a larger one?
 Does it need immediate attention or can it wait? Is it likely to go away by
itself? Can I risk ignoring it?
 What is my objective? What’s to be accomplished by the decision?
2. Gather Information - Seek information on how and why the problem
occurred:

 Stakeholders: Talk to individuals or groups affected by the problem

 Facts and data: research, benchmarking studies, interviews with credible
sources, observed events
 Constraints: Lack of funding, resources, cultural barriers
 Ask: What am I not seeing? What have I missed?
3. Develop and Evaluate Options - Generate a wide range of options:

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 Choose options that show promise, need more information, can be combined
or eliminated, or will be challenged.
 Weigh advantages/disadvantages of each. Consider cost to the business,
potential loss of morale/teamwork, time to implement the change, whether it
meets standards, and how practical the solution is.
 Predict the consequences of each option. (“If/Then” or “What if?”)
 Ask: What is the worst solution?
4. Choose the Best Action - Select the option that best meets the
decision objective:

 Consider factual data, your intuition, and your emotional intelligence when
deciding a course of action.
 Accept that the solution may be less than perfect.
 Consider the middle ground. Compromising on competing solutions may
yield the best decision.
5. Implement and Monitor the Decision - Develop a plan to implement
and monitor progress on the decision:

 Step-by-step process or actions for solving the problem

 Communications strategy for notifying stakeholders
 Resource identification/allocation
 Timeline for implementation
 Measurements/benchmarks to gauge progress
In business (and in life), decisions can fail because the issue has not
been clearly defined and alternatives have not been carefully considered.
Rather than delay the decision or make one based on faulty information,
this model ensures that the right problem gets solved at the right time
and in the right way.
What are the vision mission and objective of Companies?
1. Vision:
A vision is a Big Picture of “What” the organization wants to achieve in Future. It
should inspire people in the organization. It excites people to be part of “What.”
And, also motivate to put their energy and time to achieve the future. How do you
write a good vision statement? What does a vision stamen include? Let’s take an

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example of an agriculture business:

“A Vibrant Economy is driven by value-added agriculture” Here the Vibrant
Economy has the ability to inspire the people involved in this agricultural
business. A good vision statement inspires to create a movement. It describes the
desired outcome to invoke a mental image of the organization.
2. Mission:
A Mission is about what the organization does to achieve the vision. A mission is
an action statement to achieve the vision. A mission statement is not required to be
inspirational. Instead, it provides a clear focus on what an organization does and
what it doesn’t.

What should be included in a mission statement? What do you think a good

mission statement can look like for the above vision statement?

Let’s see the below example…

“To create and facilitate the development of value-added agriculture”

Here “Create and facilitate” are two clear focus areas. The organization put its
energy into these two areas. The organization makes efforts for the development
(Create) and to ease (facilitate) the agriculture business. And, whatever is not
mentioned here, the organization is not involved. It is a clear direction about what
the organization does and what it doesn’t.
A mission statement is simple, direct and operative. Now the question is – how do
you write a powerful mission statement? What makes an effective mission
statement? Let’s see the following characteristics of a good mission statement:

 Short: The mission statement should be easy to remember. Each person in

organizations should be aware of the mission statement to use in context with
the work he/she does.
 Simple: Mission statement language should be of everyday life. We do not
use words like stakeholder values, financial goals, and best practices in daily
life. For example, a mission statement – “Help people in achieving work using
best practices.” How many people dream about best practices? The answer is
very few; do you believe, people talk in such a language. The answer is ‘NO.’
 Operative: A mission statement should provide a clear direction. It should
focus on what an organization does. It also gives a clear route about initiative
and resource allocation.

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So, what kinds of resources needed for the mission statement mentioned above for
the agriculture business?

 Probably SME, who can provide their services for the development and
facilitation of the agriculture business.
 And farmers involved for the financial support in the venture.
A mission statement should help to understand:

 “Who we are”,
 “What we do”
 and to “which industry we belong to”
For example, mission statements like “Increasing customer satisfaction”. Well, it
is impossible, anyways – does it provide to which industry a mission belongs to?
Or what the organization controls? The answer is no, and hence we cannot claim it
as a mission statement. An organization should try to find out a mission statement,
which can drive them.

3. Goals & Objectives:

Goals are statements of mileposts to achieve the vision. Goals describe – what you
want to achieve through your efforts.

And, an objective is a time-sensitive statement to achieve the goals. We defined it

in measurable terms.
Goals for the above-mentioned vision of agriculture business can be defined as, but
not limited to:

 Improve profitability
 Increase volume
 Provide stability

Unit 3

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1) Stability Strategy:

When a company finds that it should continue in the existing business

and is doing reasonably well in that business but no scope for
significant growth, the stability is the strategy to be adopted.

Jauch and Glueck observe, ‘a stability strategy is a strategy that a firm

pursues when- 1. It continues to serve the customers in the same
product or service, market, and function sectors as defined in its
business definition, or in very similar sectors. 2. Its main strategic
decisions focus on incremental improvement of functional
performance.’

The stability strategy is not a “do nothing” strategy. It may involve

incremental improvements.

Long-term stability strategy also requires reinvestment, R& D and

innovation. However, the business definition remains the same.

Reasons for Adopting Stability Strategy:

1. The company is doing fairly well or perceives itself as successful and
expects the same in the future.

2. The stability strategy is less risky. Frequent changes involving new

products or new ways of doing things may lead to failure of the firm.
The larger the firm and the more successful it has been, the greater is
the resistance to the risk.

3. The stability strategy can evolve because the managers prefer action
to thought and do not tend to consider any other alternatives. Many of

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the firms that follow stability strategy do this unconsciously. Such

companies react to the changes in the forces in the environment.

4. To follow a stability strategy, it is easier and more comfortable for

all concerned as activities take place in routines.

5. The management pursuing stability strategy does not have the

mind-set of a strategist to appraise the environmental opportunities
and threats and take advantage of the opportunities.

6. The company that has core competence in the existing business

does not want to take the risk of diverting attention from the current
business by opting for diversification.

7. It is a frequently employed strategy.

An organization adopts the stability strategy when it aims at an

incremental improvement of its functional performance but marginal
changes to one or more of its businesses in terms of their respective
customer groups, customer functions or alternative technologies are
required. Its focus is confined to improving functional efficiencies in
an increment way, through better deployment and utilization of
resources.

2. Growth & Expansion Strategy:

Jauch and Glueck define Growth & expansion strategy ‘as a strategy
that a firm pursues when- 1. It serves the public in additional product
or service sectors or adds markets or functions to its definition. 2. It

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focuses its strategic decisions on major increases in the pace of activity

within its present business definition.’

This strategy involves redefining the business either adding to the

scope of activity or substantially increasing the efforts of the present
business.

When expansion strategy is pursued, it could lead to addition of new

products or new markets or functions. Even without a change in
business definition many firms undertake major increases in the pace
of activities.

Expansion strategy is often considered as “entrepreneurial” strategy

where firms develop and introduce new products and markets or
penetrate markets to build share. Expansion is usually thought as the
way to improve performance.

Strategists need to distinguish between desirable and undesirable

expansion.

Reasons for Adopting Expansion Strategy:

1. If business environments are volatile, expansion may be a necessary
strategy for survival.

2. Many executives may feel more satisfied with the prospects of

growth expansion.

3. Chief Executive Officer may feel pride in presiding over

organizations perceived to be growth-oriented.

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4. Some executives believe that expansion is in the benefit of the

society.

5. Expansion provides more financial and other rewards.

6. Expansion enables to reap advantages from the experience curve

and scale of operations.

Type # 3. Retrenchment Strategy:

Retrenchment strategy may require a firm to redefine its business and

may involve divestment of a major product line or an SBU, abandon
some markets or reduce its functions. Retrenchment in pace may
necessitate a firm to use layoffs, reduce R&D or marketing or other
outlays, increase the collection of receivables etc.

The efforts aimed at redefining the business and reducing the pace of
activities can improve performance of a firm. Retrenchment in
combination with expansion is not uncommon. “Retrenchment alone
is probably the least frequently used generic strategy”

Retrenchment strategy involves a partial or total withdrawal either

from products, markets or functions in one or more of a firm’s
businesses.

Retrenchment strategy is generally followed during the period of

decline of a business when it is thought possible to bring profitability
back to the firm. If the prospects of restoring profitability are not
good, abandoning market share, reducing expenses and assets can use
controlled divestment.

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Reasons for following retrenchment strategy:

1. The firm is doing poorly.

2. If there is pressure from various groups of stakeholders to improve

performance.

3. If better opportunities of doing business are available elsewhere a

firm can better utilize its strengths.

The retrenchment strategy is particularly followed for dealing with

crises. For minor crises pace retrenchment will be suitable, for
moderate crises, divestiture of some division or units may be
inevitable whereas for serious crises, a liquidation strategy will be
imperative.

Combination Strategy:

When an organization adopts a mix of stability, expansion and

retrenchment either simultaneously or sequentially for the purpose of
improving its performance, it is said to follow the combination generic
strategy. With combination strategies, the strategists consciously
apply several generic strategies to different parts of the firm or to
different future periods.

“The logical possibilities for a simultaneous approach are stability in

some areas, expansion in others; stability in some area, retrenchment
in others; retrenchment in some areas, expansion in other; and all
three strategies in different areas of the company. The logical
possibilities for time-phased combinations are greater, especially

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when the products, markets, and functions are considered and when
the choice occurs through changing the pace or the business
definition.” For example a paints company adopts combination
strategies when it augments its offering of decorative paints to provide
a greater variety to its customers (stability) and increases its product
range to add industrial and automotive paints (expansion), and closes
down the paint-contracting division (retrenchment).

Reasons for following Combination strategies:

1. When the organization is large and faces a fast changing complex
environment.

2. The company’s products are in different stages of the life-cycle.

3. A combination strategy is suitable for a multiple-industry firm at

the time of recession.

4. The combination strategy is best for firms, divisions of which

perform unevenly or do not have the same future potential.

Diversification strategy

Diversification strategy, as we already know, is a business

growth strategy identified by a company developing new
products in new markets. That definition tells
us what diversification strategy is, but it doesn’t provide any
valuable insight into why it’s an ideal business growth strategy
for some companies or how it’s implemented.

Why do companies diversify?

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First and foremost, companies diversify to achieve greater

profitability. Diversification is used by businesses to help them
expand into markets and industries that they haven’t currently
explored. This is achieved by adding new products, services,
or features that will appeal to the customers in these new
markets.

By expanding their reach and appeal, businesses are able to

explore new avenues for sales, and in turn, have the potential
to vastly increase their profits.

In addition to achieving higher profitability, companies choose

to diversify for a variety of other reasons. For instance,
diversification can also allow a company to minimize the risk
of an industry downturn, it can boost brand image, and it can
also be used as a defense mechanism to protect a company
from strong competition.

On the other hand, diversification strategy is not without its

downsides. Out of the four growth strategies proposed by
Ansoff, diversification is not only the riskiest but also the most
complex.
Turnaround Strategy:
A turnaround strategy involves management measures designed to
reverse certain negative trends and to bring the firm back to normal
health and profitability.
Definition of turnaround:
According to Dictionary of Marketing (edited by P. H. Collin),
Turnaround means ‘making a company profitable again’.

There are three phase in turnaround management:

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1. Diagnosis of the problem faced by the company.

2. Choosing the appropriate turnaround strategy.

3. Implementation of the strategy.

Features of Turnaround: 1. Turnaround involves

restructuring. It involves bringing back the sick industrial unit to
its original position. Turnaround is aimed at reversing the trend
of declining performance of the business firm.

2. Turnaround is applicable to sick industrial units who are

passing through economic and financial distress.

3. Turnaround is a long-term strategy. A sick unit cannot be

revived over night. Proper planning and implementation to
convert a loss-making unit into a profitable one. It is a lengthy
and a time consuming process.

4. A sick unit is not in a position to make optimum utilisation of

the resources. Turnaround involves reorganizing of physical,
financial and human resources by making optimum utilisation of
the available resources.

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5. Turnaround require co-operation of all the sections of the

society such as shareholders, financial institutions, suppliers,
employees, customers etc.

6. Capital is the lifeblood of every business. Turnaround requires

money. Finance is required to implement the plans of
restructuring. Sufficient finance is required to undertake further
production and remove deficiencies of the business.

7. Turnaround is undertaken by both internal experts and outside

consultants. A proper skill is required to undertake turnaround
strategy.

Essentials of successful turnaround strategy:

Turnaround is a complex action, which requires execution of
proper planning and support of various groups such as
employees, customers, shareholders, financial institutions etc.

The following are the essentials of successful

turnaround strategy:
1. Diagnosing the problem:
This is the first step in the restructuring implementation process.
To implement turnaround strategy requires diagnosis of the
sickness problem. Exact cause of the business failure is to be
identified to frame plans for the revival process. Proper screening
helps to trap the root cause of the industrial problem.

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2. Proper planning and execution:

Once the evaluation has been completed, the next critical step in a
turnaround in turnaround planning. Proper planning is too made
regarding resources, time frame and policies to be executed. The
sick company needs to hire a Corporate Turnaround Expert with
many years of turnaround experience

3. Communication:
Communication is a key factor for success in a business.
Turnaround requires rapid response from the shareholders,
financial institutions, employees and the company management.
Complete, clear and prompt communication is necessary to
implement turnaround strategy.

4. Availability of funds:
The key elements of any turnaround are financial restructuring. Lack
of investment leads to low crop yield and huge wastages. Availability
of adequate funds brings the sick unit back to good health, by
implementing sound financial management and control.

5. Co-operation:
Turnaround requires co-operation from various groups of the business
such as employees, shareholders, management, investors, suppliers,
creditors etc. It mainly requires the support of the employees as their
workload increases.

6. Viability of business:

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Turnaround should be applicable only if there are chances of revival of

business firm. Sometimes business may not have bright future, but the
survival of such unit may be difficult in the long run.

In such cases, implementation of turnaround strategy is not viable. In

short viability of business is an essential requirement of a good
turnaround strategy.

Unit 4
Strategy Implementation

Definition: Strategy Implementation refers to the execution of the plans and

strategies, so as to accomplish the long-term goals of the organization. It converts
the opted strategy into the moves and actions of the organisation to achieve the
objectives.

Simply put, strategy implementation is the technique through which the firm
develops, utilises and integrates its structure, culture, resources, people and control
system to follow the strategies to have the edge over other competitors in the
market.

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Strategy Implementation is the fourth stage of the Strategic Management process,

the other three being a determination of strategic mission, vision and objectives,
environmental and organisational analysis, and formulating the strategy. It is
followed by Strategic Evaluation and Control.

7 KEY STEPS IN THE IMPLEMENTATION PROCESS

1. Set Clear Goals and Define Key Variables

The first step of the process is straightforward: You must identify the goals that the
new strategy should achieve. Without a clear picture of what you’re trying to
attain, it can be difficult to establish a plan for getting there.

One common mistake when goal setting—whether related to personal growth,

professional development, or business—is setting objectives that are impossible to
reach. Remember: Goals should be attainable. Setting goals that aren’t realistic can
lead you and your team to feel overwhelmed, uninspired, deflated, and potentially
burnt out.

To avoid inadvertently causing low morale, review the outcomes and performances
—both the successes and failures—of previous change initiatives to determine
what’s realistic given your timeframe and resources. Use this past experience to
define what success looks like.

Another important aspect of goal setting is to account for variables that may hinder
your team’s ability to reach them and to lay out contingency plans. The better
prepared you are, the more successful the implementation will likely be.

2. Determine Roles, Responsibilities, and Relationships

Once you’ve determined the goals you’re working toward and the variables that
might get in your way, you should build a roadmap for achieving those goals, set

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expectations among your team, and clearly communicate your implementation

plan, so there’s no confusion.

In this phase, it can be helpful to document all of the resources available, including
the employees, teams, and departments that will be involved. Outline a clear
picture of what each resource is responsible for achieving, and establish a
communication process that everyone should adhere to.

Implementing strategic plans requires strong relationships and, as a manager,

you’ll be in charge of telling people not only how to interact with each other and
how often, but also who the decision-makers are, who’s accountable for what, and
what to do when an unforeseen issue arises.

3. Delegate the Work

Once you know what needs to be done to ensure success, determine who needs to
do what and when. Refer to your original timeline and goal list, and delegate
tasks to the appropriate team members.

You should explain the big picture to your team so they understand the company's
vision and make sure everyone knows their specific responsibilities. Also, set
deadlines to avoid overwhelming individuals. Remember that your job as a
manager is to achieve goals and keep your team on-task, so try to avoid the urge to
micromanage.

4. Execute the Plan, Monitor Progress and Performance, and Provide Continued
Support

Next, you’ll need to put the plan into action. One of the most difficult skills to
learn as a manager is how to guide and support employees effectively. While your
focus will likely be on delegation much of the time, it’s important to make yourself
available to answer questions your employees might have, or address challenges
and roadblocks they may be experiencing.

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Check in with your team regularly about their progress and listen to their feedback.

One effective strategy for monitoring progress is to use daily, weekly, and monthly
status reports and check-ins to provide updates, re-establish due dates and
milestones, and ensure all teams are aligned.

Related: How to Give Feedback Effectively

5. Take Corrective Action (Adjust or Revise, as Necessary)

Implementation is an iterative process, so the work doesn’t stop as soon as you

think you’ve reached your goal. Processes can change mid-course, and unforeseen
issues or challenges can arise. Sometimes, your original goals will need to shift as
the nature of the project itself changes.

It’s more important to be attentive, flexible, and willing to change or readjust plans
as you oversee implementation than it is to blindly adhere to your original goals.

Periodically ask yourself and your team: Do we need to adjust? If so, how? Do we
need to start over? The answers to these questions can prove invaluable.

6. Get Closure on the Project, and Agreement on the Output

Everyone on the team should agree on what the final product should look like
based on the goals set at the beginning. When you’ve successfully implemented
your strategy, check in with each team member and department to make sure they
have everything they need to finish the job and feel like their work is complete.

You’ll need to report to your management team, so gather information, details, and
results from your employees, so that you can paint an accurate picture to
leadership.

7. Conduct a Retrospective or Review of How the Process Went

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Once your strategy has been fully implemented, look back on the process and
evaluate how things went. Ask yourself questions like:

 Did we achieve our goals?

 If not, why? What steps are required to get us to those goals?
 What roadblocks or challenges emerged over the course of the project that
could have been anticipated? How can we avoid these challenges in the future?
 In general, what lessons can we learn from the process?

What Is an Organizational Structure?

An organizational structure is a system that outlines how certain activities are directed
in order to achieve the goals of an organization. These activities can include rules,
roles, and responsibilities.
The organizational structure also determines how information flows between levels
within the company. For example, in a centralized structure, decisions flow from the top
down, while in a decentralized structure, decision-making power is distributed among
various levels of the organization.

Centralized vs. Decentralized Organizational Structures

An organizational structure is either centralized or decentralized. Traditionally,
organizations have been structured with centralized leadership and a defined chain of
command. The military is an organization famous for its highly centralized structure,
with a long and specific hierarchy of superiors and subordinates. In a centralized
organizational system, there are very clear responsibilities for each role, with
subordinate roles defaulting to the guidance of their superiors.
There has been a rise in decentralized organizations, as is the case with many
technology startups. This allows companies to remain fast, agile, and adaptable, with
almost every employee receiving a high level of personal agency. For example,
Johnson & Johnson is a company that's known for its decentralized structure. 2 As a
large company with over 200 business units and brands that function in sometimes
very different industries, each operates autonomously. Even in decentralized
companies, there are still usually built-in hierarchies (such as the chief operating officer
operating at a higher level than an entry-level associate). However, teams are
empowered to make their own decisions and come to the best conclusion without
necessarily getting "approval" from up top.

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Types of Organizational Structures

Functional Structure

Four types of common organizational structures are implemented in the real world. The
first and most common is a functional structure. This is also referred to as
a bureaucratic organizational structure and breaks up a company based on the
specialization of its workforce. Most small-to-medium-sized businesses implement a
functional structure. Dividing the firm into departments consisting of marketing, sales,
and operations is the act of using a bureaucratic organizational structure.

Divisional or Multidivisional Structure

The second type is common among large companies with many business units. Called
the divisional or multidivisional structure, a company that uses this method structures
its leadership team based on the products, projects, or subsidiaries they operate. A
good example of this structure is Johnson & Johnson. With thousands of products and
lines of business, the company structures itself so each business unit operates as its
own company with its own president.

Flatarchy Structure

Flatarchy, a newer structure, is the third type and is used among many startups. As the
name alludes, it flattens the hierarchy and chain of command and gives its employees
a lot of autonomy. Companies that use this type of structure have a high speed of
implementation.

Matrix Structure

The fourth and final organizational structure is a matrix structure. It is also the most
confusing and the least used. This structure matrixes employees across different
superiors, divisions, or departments. An employee working for a matrixed company, for
example, may have duties in both sales and customer service.

Resource allocation

Resource allocation is the process of assigning and managing assets in a

manner that supports an organization's strategic goals.

Resource allocation includes managing tangible assets such as hardware to

make the best use of softer assets such as human capital. Resource

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allocation involves balancing competing needs and priorities and determining

the most effective course of action in order to maximize the effective use of
limited resources and gain the best return on investment.

In practicing resource allocation, organizations must first establish their

desired end goal, such as increased revenue, improved productivity or
better brand recognition.

Resource allocation, also known as resource scheduling, recognizes

and assigns resources for a specific period to various activities.
These activities can be either project or non-project work such as
BAU, admin, support, operation, etc.

What are the benefits of

resource allocation in project
management?
Resource allocation is essential in project management as it allows
you to plan and prepare for project implementation or achieving
goals. In addition, it helps schedule resources in advance and
provides an insight into the project team’s progress.
Resource allocation is much more than just delegating assignments.
It plays a vital role in project and operations management and
eventually improves business performance. It also helps
achieve optimum utilization and enhances ROI.
Here are some key benefits of resource allocation in project
management:
i) Reduce project resource costs significantly
ii) Maximize the productivity of resources on projects
iii) Enhance employee engagement and satisfaction

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iv) Facilitate client satisfaction with successful project delivery

v) Achieve the best outcome within existing resource constraints

Developing Functional Strategies

Step 1: Be strategic minded

Before you even start your functional planning process, commit to keeping a
strategic mindset and not allowing yourself to be hijacked by short-termism,
tactical execution plans and other “check the box” activities. This includes your
mindset on cost management and budgeting.

All too often, concerns about meeting short-term targets, fear of failure and a
preoccupation with operational issues overwhelm aspiration.
Step 2: Outline expectations

At the outset, clearly define the enterprise and business context for all
stakeholders to prevent managers and executives from misunderstanding one
another and derailing the process. Outline the responsibilities, process
timelines and expected outcomes for each participant, especially in cases
where the planning and budgeting processes cross functions. Identify who
among the stakeholders will ultimately sign off on your strategy/budget plans.
Step 3: Verify the business context

Interview business leaders and have them describe the current and desired
future state of the business, lay out the goals and capabilities required to
support and enable those business aspirations, and specify suitable metrics to
gauge progress against those goals.

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Be clear what impact business priorities and challenges will have on your
function’s imperatives, opportunities and risks, and therefore what you need to
emphasize, deemphasize or stop doing.
Step 4: Assess capabilities

Evaluate the maturity and importance of key functional capabilities required to

support the overall business goals. There shouldn’t be a big difference
between the function’s self-assessment and business partners’ perceptions of
its strengths and weaknesses. Generate a prioritized list of functional
capabilities to bolster or gaps to fill to support business goals.

Step 5: Set objectives

Develop a prioritized list of objectives with discrete and measurable steps that
describe how a specific goal will be accomplished. Each strategic business
goal can be supported by a few objectives with a time horizon of one to two
years.

Step 6: Look to fund innovation and growth

Strategic growth objectives should be ambitious by definition, but they still

have to be funded — with budget, talent and technology. The challenge is how
to allocate scarce resources to the most critical initiatives and growth
investments.

Start with a rigorous view of your baseline budget — the resources required to
conduct all ongoing functional activities. Then develop a sound plan, anchored
in strategic objectives, of the trade-offs your function can make to keep
resources moving toward key initiatives.

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Step 7: Put your strategy on a page

Capture the elements of your strategic plan on a single page. Gartner

suggests creating a template outlining where the functional organization is,
where it is going and how it will get there.

Communicate how you are adding value today and demonstrate how you plan
to impact future business across the coming year. Include a statement of
strategy, a before-and-after description of the state of the function, one or two
critical assumptions underpinning the strategy, and five to seven initiatives
required to meet the functional objectives established to support business
goals.

Step 8: Drive the plan home

Do this by articulating the objectives and strategy across the function and
company. The one-page strategy template is a helpful tool, as it makes the
plan easy for employees to consume, but you’ll still need a deliberate process
for communicating the plan — and ensuring that key constituencies
understand and agree with it.

You need a clear and consistent message that drives buy-in and commitment
from your functional leadership team, engagement and motivation among the
workforce to implement the plan, and understanding across the enterprise of
how your priorities are changing, and why.

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Step 9: Prepare to respond to change

Once the strategic plan is adopted and shared, it’s critical to measure
progress against the objectives, revisit and monitor the plan to ensure it
remains valid, and adapt the strategy as business conditions change:
 Monitor triggers to track the effectiveness of the strategic plan

 Cancel underperforming projects quickly

 Track and validate assumptions periodically

Lastly, make sure you have an agreed-upon action plan for the specific steps
to take or decisions to make when monitoring triggers an alarm to increase
the chances of success.

UNIT 5

Strategy evaluation

 Measuring the effectiveness of the organizational strategy. It's extremely important to

conduct a SWOT analysis to figure out the strengths, weaknesses, opportunities and
threats (both internal and external) of the entity in question. This may require to take
certain precautionary measures or even to change the entire strategy.

In corporate strategy, Johnson and Scholes present a model in which strategic options are
evaluated against three key success criteria:

 Suitability (would it work?)

 Feasibility (can it be made to work?)
 Acceptability (will they work it?)

[.] Suitability

Suitability deals with the overall rationale of the strategy. The key point to consider is whether
the strategy would address the key strategic issues underlined by the organisation's strategic
position.

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 Does it make economic sense?

 Would the organisation obtain economies of scale, economies of scope or experience
economy?
 Would it be suitable in terms of environment and capabilities?

Tools that can be used to evaluate suitability include:

 Ranking strategic options

 Decision trees
 What-if analysis

[.] Feasibility

Feasibility is concerned with the resources required to implement the strategy are available, can
be developed or obtained. Resources include funding, people, time and information.

Tools that can be used to evaluate feasibility include:

 cash flow analysis and forecasting

 break-even analysis
 resource deployment analysis

[.] Acceptability

Acceptability is concerned with the expectations of the identified stakeholders (mainly

shareholders, employees and customers) with the expected performance outcomes, which can be
return, risk and stakeholder reactions.

 Return deals with the benefits expected by the stakeholders (financial and non-financial).
For example, shareholders would expect the increase of their wealth, employees would
expect improvement in their careers and customers would expect better value for money.
 Risk deals with the probability and consequences of failure of a strategy (financial and
non-financial).
 Stakeholder reactions deals with anticipating the likely reaction of stakeholders.
Shareholders could oppose the issuing of new shares, employees and unions could
oppose outsourcing for fear of losing their jobs, customers could have concerns over a
merger with regards to quality and support.

Tools that can be used to evaluate acceptability include:

 what-if analysis
 stakeholder mapping

STRATEGIC EVALUATON AND CONTROL MEANING:

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Strategic evaluation and control is the process of determining the effectiveness of a given strategy in
achieving the organizational objectives and taking corrective actions whenever required.

Control can be exercised through formulation of contingency strategies and a crisis management team.

There can be the following types of control:

• Operational control: It is aimed at allocation and use of organization resources through evaluation of
performance of organizational units, divisions, SBU;’s to assess their contribution in achieving
organizational objectives.

• Strategic control: It takes into account the changing assumptions that determine a strategy,
continually evaluate the strategy as it is being implemented and take the necessary steps to adjust the
strategy to the new requirements.

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