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Chapter III

Strategic Management for Business

Aim

The aim of this chapter is to:

introduce the concept of strategic management

explain the need for strategic management

explain the concept of strategy formulation

Objectives

The objectives of this chapter are to:

enlist limitations of strategic management

explain strategic management process

elucidate the benefits of strategic management

Learning outcome

At the end of this chapter, you will be able to:

define strategic management

understand the benefits and limitations of strategic management

describe environmental scanning

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3.1 IntroductionStrategic management is the process of specifying an organisations objective, developing policies and plans to achieve these objectives, and allocating resources so as to implement the plans. It is the highest level of managerial activity, usually performed by the companys Chief Executive Officer (CEO) and executive team. It provides overall direction to the whole enterprise. An organisations strategy must be appropriate for its resources, circumstances and objectives. The process involves matching companies strategy advantages to the business environment. One objective of an overall corporate is to put the organisation into a position to carry out its mission effectively and efficiently. A good corporate strategy should integrate an organisations goals, policies and action sequences into a cohesive whole.

3.2 Need for Strategic ManagementA companys strategy provides a central purpose and direction to the activities of organisation. Company must employ strategies to accomplish its basic objectives. These strategies must be clearly communicated to the people working in the organisation. Need for strategic management is felt for the following reasons.

3.2.1 Due to ChangeOrganisation exists within external environment. Changes will keep happening in the external environment. Changes make planning difficult. Strategic management helps the top executives to forecast changes well in advance and to take advantage of the opportunities and reduce the risk.

3.2.2 Provides GuidelinesStrategic decision is the basis for the formulation of sub strategies. Operational strategies are formulated based on the strategic decisions. Strategic decision provides a framework within which all supporting decisions should be formulated.

3.2.3 Better PerformanceBetter performance is always related to formulation of better strategies and policies. Therefore, it is true that business which plan strategically have a higher probability of success than those which do not. 3.2.4 Improved Allocation of ResourcesStrategic management helps in better resource allocation of an organisation. Strategic management matches activities with the available resources. Reallocation of resources will take place whenever there is a change in the strategy due to change in the environment in which the organisation operates. 3.2.5 Competitive AdvantageStrategic management aims at gaining a sustainable competitive edge for the firm. Strategic management includes the nature and extent of competition and exploits available opportunities. This certainly helps the organisation to gain competitive edge over the competitors.

3.2.6 Provides Holistic ApproachStrategic management helps managers to understand the organisation completely. This helps managers to have holistic approach towards business problems.

3.2.7 Improved IntegrationStrategic management provides an integrated approach to the decision making process which provides a framework for decision making. Strategic management formulates decision to cover all functional areas and different activities intended to accomplish organisational goals.

3.2.8 Systematise Business DecisionsStrategic management exercises systematic and disciplined approach towards policy making. It relates to the enterprise as a whole. Thus, strategic planning is a forward-looking exercise which determines the future directions of the enterprise with special reference to its product-market, profitability, size, rate of innovation and external institutions.

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3.3 Strategic Management ProcessStrategic management decision involves four basic elements:

Environmental scanning Strategy formulation Strategy implementation Evaluation and control

3.3.1 Environmental ScanningEnvironmental Scanning is the monitoring, evaluating and disseminating of information from the external and internal environment to the key people within the organisation. Purpose of it is to identify strategic factors. Strategic factors here refer to those external and internal elements that will determine the future of the organisation. The simplest way to conduct environmental scanning is through SWOT (Strength, Weakness, Opportunities and Threats) analysis.

Opportunities and threats are the elements of external environment over which organisation does not have any control. Strength and weaknesse are the variables of the internal environment. These include available resources, culture, organisational structure, etc. Based on the opportunities, organisation can use its available core competencies to gain competitive advantage over its competitors. Proper blend of organisational resources certainly help the organisation to exploit the opportunities and minimise the weaknesses. 3.3.2 Strategy FormulationDevelopment of long term plans for the effective management of environmental opportunities and threats, in the light of corporate strengths and weakness is called strategy formulation. Strategy formulation includes defining corporate mission, specifying objectives, developing strategies and setting policy guidelines.

MissionAn organisations mission is the purpose or reason for the organisations existence. It tells what the company is providing to society - service or a product. Mission statement clearly specifies the purpose of the organisation.

Mission statement describes what the organisation is now and what it would like to become. Therefore, mission of business provides a statement to insiders and outsiders of what the company stands for.

ObjectivesObjectives are formulated to accomplish organisation mission. Objectives can be defined as the long term results that an organisation seeks to achieve in pursuing its basic mission.

Objectives should not be static, they should be dynamic. That is, changes in the environment or the changes in the organisational strengths and weakness may call for modification to objectives.

Objectives are operational definitions of the organisations goals.

They provide measurable parameters for evaluating the performance of the organisation.

Importance of objectivesObjectives indicate the purpose and aims and thereby the social justification for the existence of an organisation.Objectives provide directions for the functioning of an organisation. Objectives help an organisation to adjust itself to the existing environment. Objectives help in attaining employees co-ordination and thereby reduce conflicts.

By making clear what the result should be, objectives provide the basis for control and assessment of organisational performance.Objectives help decentralisation by assigning decision making to lower level personnel.

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Features of objectivesObjectives should be understandable Objectives should not be weak and ambiguous. They should be expressed clearly. Also, this should be made clearly known to the people who work for their accomplishment.Objectives should be related to the time frame Objectives must specify the time frame within which the stated objectives must be achieved.Objectives should be specific Objectives should state what exactly the company is trying to achieve within a specified time.

Participation To the possible extent, formulation of objectives should involve in the participation of important people responsible for the accomplishment of the objectives. The sense of participation will provide morale, motivation and a moral responsibility for the achievement of the objectives.Objectives must be realistic Objectives should be reasonable and realistic in the sense that they should be achievable taking the existing environment into consideration.Consistency Objectives should be mutually consistent throughout the organisation. If objectives are set concentrating on one area disregarding other areas, it will lead to problems. Therefore, different objectives of various functional areas should correlate with each other and they must be mutually supportive to accomplish the overall objectives.Measurability Objectives should be capable of being measured. To measure the performance of an objective it should be clearly defined either in quantitative or qualitative terms.

Flexibility Objectives should not be very rigid. It must provide scope for flexibility. Changes in the environment or changes in organisation strengths and weaknesses may call for modifications to the objectives.

Ranking An organisation with multiple objectives should assign relative priorities and indicate the time frame within which these objectives must be attained.

Strategic intentA strategic intent is a companys vision of what it wants to achieve in the long term. It must convey a significant stretch for a company, a sense of direction, discovery, and opportunity that can be communicated as worthwhile to all employees. It should not focus so much on todays problems, which are normally dealt with by company visions and missions, but rather on tomorrows opportunities.

3.3.3 Strategy ImplementationStrategy implementation is the process by which strategy and policies are put into action through the development programs, budgets and procedures.

ProgramsA program is a statement of activities or steps needed to accomplish a single used plan. It takes the action oriented strategy. It may involve restructuring the organisational change in the internal culture, etc.

BudgetsA budget is a statement of organisations programs in numeric terms. Budgets are expressed in financial terms. Budget lists the detailed cost of each program. There may be different budgets like capital expenditure budget, sales budget, cash budget, etc.

ProceduresProcedures are a system of sequential steps that describe in detail how a particular task is to be done. They are stated in detail to avoid confusion and duplication. Procedures define step by step execution of different activities. Hence, procedures can be defined as a series of related steps expressed in chronological order to achieve a specific purpose.

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3.3.4 Evaluation and ControlPerformance is the end result of activities. It includes the actual outcomes of strategic management process. The performance of strategic management is justified in terms of its ability to improve an organisations performance, typically measured in terms of profits and return on investment (ROI). For evaluation and control to be effective, managers must obtain clear, prompt and unbiased information from the people below them in organisational hierarchy. Using this information, managers compare the actual performance with the expected ones.

Evaluation and control is the process in which corporate activities and performance results are monitored with an intention of comparing actual performance with desired performance. Managers at all levels use the information collected to take corrective action. The evaluation and control function complete the strategic management model. Based on performance result, management may need to make adjustments in its strategy formulation, implementation or both.

3.4 Benefits of Strategic ManagementFollowing are some of the benefits of strategic management.

3.4.1 Proactive ApproachStrategic management helps an organisation to be proactive rather than reactive. Strategic management evaluates opportunities and threats outside the organisation and prepare the organisation to face the future well in advance.Strategic management helps in formulating machine and make objectives clear. 3.4.2 Facilitates Better DelegationStrategic management helps in better delegation and co-ordination.Executives working at the lower levels can formulate their respective functions and operational strategies within the board framework of the organisational strategy.

3.4.3 Exploiting OpportunitiesStrategic management helps a company to adopt suitable strategies for exploiting opportunities and fight threats.It will also help the company to drop those businesses which are not successful or which do not meet their objectives.

3.4.4 Assists in Realistic and Effective PlansStrategic management will help the company to have constant watch on the environment to identify changes and to modify the strategy when required. Based on these modifications executives are allowed to formulate their policies to suit the modified corporate strategy. This leads to formulations of realistic and effective plans.

3.4.5 To Gain Competitive AdvantageStrategic management enables a company to meet competitions more effectively. Careful understanding of changes in the external environment including completion helps the policy makers to frame policies to explore and exploit opportunities for the organisational benefit. Quick adaptation to the changing environment helps the company to gain competitive edge over competitors

3.4.6 Minimises Weaknesses

Every organisation will have both strengths and weaknesses. Prudent strategy maker converts these weaknesses into strength reinforcing appropriate strategies. Earlier identification of weakness helps an organisation to reduce it through proper measures.

3.4.7 Promotes Employees ParticipationTop level management formulates overall objective and develops corporate strategy based on the objectives to be accomplished. Operational functional policies are formulated by the executives working at the bottom line. This in turn helps in employee participation to a greater extent.

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3.4.8 Boost Profits

Number of research studies has suggested that a well designed strategic management can boost profits. Strategic management helps in identifying, evaluating and adopting best course of action from out of the alternatives available. This careful selection helps the company to go for improved action which would really improve the profitability of the organisation.

3.4.9 Systematic Approach for Management DecisionWell designed strategic management adopts system approach to problem solving. It concentrates on all functional areas of the organisation. It establishes co-ordination and integration between these functional areas. Strategic management designs appropriate authority and responsibility for each functional area. This leads to systematic allocation of organisational resources based on priority and urgency.

3.4.10 Empowerment of EmployeesStrategic management helps the organisation to achieve commitment from all the members of the organisation. This commitment helps managers and employees to become more creative and innovative. This process results in employee empowerment which in turn increases organisational effectiveness.

3.5 Limitations of Strategic ManagementStrategic management is not free from limitations. Strategic management has many advantages. Many firms fail despite adopting strategic management and many firms which do not have strategic management are successful. In short, strategic management by itself does not ensure success. Following are the limitations of strategic management:

Strategic management decisions are based on certain assumptions. If these assumptions are not valid, the plans based on them would not be realistic.Strategic management is a means to achieve organisational mission or objectives. If mission or objectives are unrealistic, strategy formulated based on these objectives will also turn out to be unrealistic.Sometimes it argues that strategic management makes an organisation over-ambitious. This over-ambitiousness leads to organisational failure.Strategic management uses SWOT analysis as a powerful tool for making suitable strategies. If this SWOT analysis is not right, strategy formulated to address the opportunities and kill threats is a failure.Strategic management decisions are based on environmental factors. Company do not have any control over external environment. Sudden changes call for alteration of strategies formulated earlier. Frequent changes in strategy reduce confidence of employees.

Success of strategic management is dependent not only on the strategy formulation but also on affective implementation. If implementation is not effective, even an excellent strategy would not produce excellent result. Many strategies fall at implementation phase.It is also argued that strategic management is a costly exercise. An elaborate exercise is needed to identify opportunities, understand weaknesses and threats. This also calls for analysis and implementation of best course of alternative.Strategic planning is a complex and difficult task. It requires people with vision, commitment and expertise. For the proper implementation, appropriate system must also exist.As mentioned earlier, strategic management provides for flexibility. It means that strategies will be reviewed and modified based on the change in the environment. People may resist adopting these changes frequently.

3.6 Strategies and their Role in Strategic ManagementFollowing are the strategies and their role in strategic management:

Strategy is determination of basic long-term goals and objectives of an enterprise and the adoption of courses of action and the allocation of resources for carrying out these goals. The success of strategy mainly depends on the skill, experience and analytical observations of the executive who is supposed to create and implement it.

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Executive in charge of strategy must know the principles of management, effect of business cycles and internal working condition. In addition, (s)he must also know government policy and existing competition. The executive cannot ignore human aspects in organisation. Corporate strategy can be made successful if all these factors are incorporated in it.

3.7 Role of Strategy in Strategic ManagementFollowing are some roles of strategy in strategic management.

3.7.1 Deliberate Attempt to Counteract Actions of OpponentsStrategies are deliberate attempts made by the management to win over its competitors. Strategies are formulated after carefully evaluating external environment including competition. External opportunities and threats are effectively addressed using internal strengths and resources.

3.7.2 Emergence of Tactful DecisionStrategies are determined sufficiently in advance having considered companys policies and objectives so that tactful decisions and actions can be taken to accomplish them. Strategies help an organisation to prepare them in advance to face possible future happenings. Strategies help an organisation to prepare them in advance to face possible future happenings.

3.7.3 Creates System ApproachStrategy is formulated on the basis of system approach. System approach is the overall planning of corporate enterprise concerned with configuring and directing the resource-conversion process. In this system, the interest and purpose of the total enterprise is given importance over departmental claims in determining objectives, priorities and resource allocation.

3.7.4 Helps in Formulating General PoliciesStrategy of an organisation is the basis for the formulation of all other policies. In order to translate strategic plans into action operating plans are formulated. Strategy gives framework within which other plans can be formulated.

3.7.5 Provides Integrated ApproachCorporate strategy takes into consideration all functional areas needed to accomplish basic objectives of the organisation. Therefore, it provides a mechanism for the interrelated parts to be co-ordinated. It supplies an integrated framework within which each of the functional plans and divisional are integrated and all are tied together into overall plans of the organisation.

3.7.6 Minimises RiskStrategies act as powerful tool in the hands of top management. They reduce business risk and insecurity that are expected on account of complexity of business operations and other social and political contingencies.

3.7.7 Optimum Use of Organisational ResourcesStrategy helps in structuring the companys human resources for maximum potential performance. The plan lists specific decisions pertaining to structuring of authority and responsibility relationships, workflows, information flows and flow of other resources.

3.7.8 Continues ReviewStrategy formulation is a continuous dynamic process. Strategy is reviewed and modified or reframed to suit the changed environment. Strategies should be modified and implemented at right time to extract available opportunities to the maximum.

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3.8 Reasons behind Failure of Strategic ManagementFollowing are the resaons for failure of strategic management:

Strategy is concerned with future course of action and the future being uncertain due to various reasons, definite strategy cannot be determined. It is likely to be erroneous if adopted. Hence, it leads to failure of strategic management.Business cycles, government rules, competitors role, etc, make strategy planners weak and force them to change strategy very often. Frequent changes indicate poor planning and then the management loses faith in strategy programme. Risk involved in the implementation of a strategy is more since strategy involves long-range planning which is subject to greater degree of uncertainty. As a result of it, strategy is likely to be erroneous.Success of strategy depends on the joint efforts and co-operation of people in the organisation and in practice, it is seldom expected and therefore, there are more unforeseen impediments in the successful implementation of the strategy.Conflicts between managers goals and the company goals may be an additional impediment. Because of such conflict, the manager is likely to use his/her own strategy which may defeat the overall strategy of the company.Management is generally reluctant either to drop or modify the predetermined strategy for achieving the benefits of market opportunities. Management, therefore, depends on short-term benefits, which could have been a change in the established strategy.To communicate, a strategy requires as much trouble and time as to conceive it. Under changing circumstances, strategy becomes obsolete unless it is suitably modified.

Process of Strategic Management

Analysing Current Situation

Deciding on Strategies

Putting Strategies in Action

Evaluating Changing Strategies

Feedback

Situation Analysis

Evaluation and Control

StrategyFormulation

StrategyImplementation

External/ Internal Analysis

strategicintent

StrategicIntent Management Issues

Competitive Strategy

Functional Issues

Business

Organisation Issues

Corporate

Fig. 3.1 Process of strategic management

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SummaryStrategic management is the process of specifying an organisations objective, developing policies and plans to achieve these objectives, and allocating resources so as to implement the plans.Strategic management helps the top executives to forecast changes well in advance and to take advantage of the opportunities and reduce the risk.Strategy formulation includes defining corporate mission, specifying objectives, developing strategies and setting policy guidelines.A strategic intent is a companys vision of what it wants to achieve in the long term. A budget is a statement of organisations programs in numeric terms. Budgets are expressed in financial terms.The performance of strategic management is justified in terms of its ability to improve an organisations performance, typically measured in terms of profits and return on investment (ROI).

Top level management formulates overall objective and develops corporate strategy based on the objectives to be accomplished.Success of strategic management is dependent not only on the strategy formulation but also on affective implementation.Executive in charge of strategy must know the principles of management, effect of business cycles and internal working condition.Risk involved in the implementation of a strategy is more since strategy involves long-range planning which is subject to greater degree of uncertainty.Success of strategy depends on the joint efforts and co-operation of people in the organisation and in practice, it is seldom expected and therefore, there are more unforeseen impediments in the successful implementation of the strategy.

ReferencesHarrison, J. S., 2009. FoundationinStrategicManagement. 5th ed., South-Western College Pub. Hunger, J. D., 2006 Essentials of Strategic Management. 4th ed., Prentice Hall. THESTRATEGICMANAGEMENTPROCESS , [Pdf] Available at: [Accessed 14 May 2013].The Strategic Management Process , [Pdf] Available at: [Accessed 14 May 2013].2012, Introduction to Strategic Management [Video online]Available at: [Accessed 14 May 2013].

2008. Strategic Management, 2012. [Video online]Available at: [Accessed 14 May 2013].

Recommended ReadingHoskisson, R. E., 2006. StrategicManagementConcepts. 7th ed.,South-Western College Pub.Greer, C. R., 2000. Strategic Human Resource Management: A General Managerial Approach. 2nd ed., Prentice Hall.Thompson, J. L., 1997. StrategicManagement:Awareness andChange. 2nd ed., International Thompson Business Press, London.

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Self Assessment

Which of the following statements is false?1. A companys strategy provides a central purpose and direction to the activities of organisation.a. Strategic management including the nature and extent of competition and exploits available opportunities.b. Strategic management exercises systematic and disciplined approach towards policy making.c. Strategic formulation exercises systematic and disciplined approach towards policy making.d.

What are expresses in financial terms?2. Budgetsa. Profitsb. Losesc. Strategiesd.

Strategic management helps the _________ to forecast changes well in advance and to take advantage of the 3. opportunities and reduce the risk.

middle level managementa. first line managementb. top executivesc. CEOd.

Which of the following statements is false?4. The simplest way to conduct environmental scanning is through SWOT analysis.a. Opportunities and threats are the elements of external environment over which organisation does not have b. any control.Strength and weaknesses are the variables of the external environment.c. Strength and weaknesses are the variables of the internal environment.d.

_______ statement clearly specifies the purpose of the organisation.5. Strategica. Missionb. Visionc. Managementd.

________ are operational definitions of the organisations goals.6. Strategic statementa. Strategic intentb. Objectivesc. Mission statementd.

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Which of the following statements is true?7. Strategic statement should not focus so much on todays problems, which are normally dealt with by company a. visions and missions, but rather on tomorrows opportunities.Strategic panning should not focus so much on todays problems, which are normally dealt with by company b. visions and missions, but rather on tomorrows opportunities.Strategic intent should focus so much on todays problems, which are normally dealt with by company c. visions and missions, but rather on tomorrows opportunities.Strategic intent should not focus so much on todays problems, which are normally dealt with by company d. visions and missions, but rather on tomorrows opportunities.

What involve restructuring the organisation change in the internal culture?8. Programsa. Proceduresb. Budgetsc. Profitsd.

_________ helps a company to adopt suitable strategies for exploiting opportunities and fight threats.9. Strategic formulationa. Strategic planningb. Strategic managementc. Strategic intentd.

_________ is a continuous dynamic process.10. Strategic planninga. Strategy formulationb. Strategic managementc. Strategic intentd.

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Chapter IV

Corporate Strategy

Aim

The aim of this chapter is to:

introduce the concept of corporate strategy

explain corporate planning

elucidate the essentials of corporate planning

Objectives

The objectives of this chapter are to:

explain various corporate strategies

explicate the concept of corporate policy and its features

explain the steps in formulation of policy

Learning outcome

At the end of this chapter, you will be able to:

identify factors leading to the need for corporate management

describe various types of corporate policy

understand corporate strategy

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4.1 IntroductionCorporate management is a broad phenomenon and covers a wide spectrum of activities. It is the direction an organisation takes with the objective of achieving business success in the long term. Recent approaches have focused on the need for companies to adapt to and anticipate changes in the business environment, i.e., a flexible strategy. The development of a corporate strategy involves establishing the purpose and scope of the organisations activities and the nature of the business it is in, taking the environment in which it operates, its position in the marketplace, and the competition it faces into consideration; mostly analysed through a SWOT analysis.

4.2 Corporate StrategyCorporate strategy is related mostly to external environment. Corporate strategy is formulated at the higher level of management. At operational level, operational strategies are also formulated. It requires systems and norms for its efficient adoption in any organisation. Corporate strategy is concerned with a unified direction and efficient allocation of organisational resources and encompasses the entire management process. It is also concerned with the choice of alternatives, determination of future course of action, mobilisation of resources and deployment of resources for attainment of goals. It is both short term and long term. It is related to all levels of management. Strategic issues, however, are related to top management. Corporate strategy is concerned with coping uncertain future with active intervention. It is based on various types of plan namely, strategic plan, functional plan, operating plan, organisational plan, etc. It is all pervasive and integrated.

4.2.1 Scope of Corporate ManagementThe term corporate management is an extension of the term corporate planning and also includes implementation and control aspects. More specifically, the scope of corporate management is spread over different areas. They are as follows:

Role of top management in corporate governance. Code of conduct including audit committee, governance committee, etc. Competitive scenario for dynamic and global markets. Market structures and network externalities. Strategic enablers like IT, R&D, knowledge and innovations, etc. Corporate social responsibility including ethics, values and social audit. Philanthropy as a strategic choice.

4.3 Corporate PlanningCorporate planning is a comprehensive planning process which involves continued formulation of objectives and the guidance of affairs towards their attainment. It is undertaken by top management for the company as a whole on a continuous basis. According to Hussey Corporate long range planning is not a technique, it is a complete way of running a business. Corporate planning is a way of keeping the companys eye open. The object of corporate planning is to identify new areas of investments and marketing. The purpose of corporate planning process is to formulate the organisations mission. Objectives, goals, policies, programme strategies and major action plans to achieve its objectives.

4.3.1 Essentials of Corporate PlanningFollowing are the essentials of corporate planning:

Corporate planning deals with the future of current decisions. The process of corporate planning integrates strategic planning with short range operational plans. A few authorities use comprehensive corporate planning, strategic planning, long range planning, formal planning, corporate planning, etc, as synonymous to each other.Corporate planning is viewed as an organisational process resulting in developing strategic intent and action plans to achieve the objectives.

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4.3.2 Steps of Corporate Planning ProcessFollowing are the steps of corporate planning process:

Formulation of strategic intent Environmental appraisal General of strategic alternatives Evaluation of alternatives Decisions in terms of strategy, policies and programmes

4.3.3 Benefits of Corporate Planning

Following are the benefits of corporate planning:

Corporate planning ensures a rational allocation of resources and improves co-ordination between various units or divisions.With corporate planning, significant improvement in performance is reflected.

A formal planning system can help the management in responding to a dynamic environment and in managing a strategically complex organisation with limited resources.With corporate planning, a sense of making a systematic and critical review of business is developed. This develops a visionary approach. A habit of forward thinking is encouraged in forward planning.

4.3.4 Reasons Attributed to the Failure of Corporate PlanningFollowing are the reasons attributed to the failure of corporate planning:

Failure to keep the corporate planning system simple. Failure to develop awareness about corporate planning process in the organisation. A low status is given to a planner by the Chief Executive. Failure to modify the corporate planning system with the charging conditions in the company. Planner has only a part time interest in planning. Insufficient time is provided in the corporate planning process.

4.3.5 Prerequisites for Success in Corporate PlanningFollowing are the prerequisites for success in corporate planning:

The chief executive must be totally committed and involved in the corporate planning process. Participation of those executives who would be responsible for implementation must be ensured. The process of corporate planning should be introduced on continuous basis to cope with ever changing environmental factors.The executives must understand that the real purpose of corporate planning is to provide direction to the organisation.

4.4 Need for Corporate ManagementFollowing points enlist the need of corporate management:

Scarcity of resources Fast technological changes Changing human values Multiplicity of stake holders Growing competition Liberalisation, privatisation and globalisation Growing scale of business operations

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Faster and quicker modes of transportation and communication Professionalism in management

4.5 Components of Corporate StrategyThe major components of corporate strategy are purpose and objectives, vector, competitive advantage, synergy, personal values and aspirations and social obligations.

4.5.1 ObjectivesCorporate objectives should be stated in such a way that they may provide a clear idea about the scope the enterprises business. Objectives give direction for which action plan is formulated. Objectives are open-ended attributes denoting a future state. Objectives translate the purpose into goals. An objective should be:

with a timeframe attainable challenging understandable measurable and controllable

For having clarity in objectives, the business domain is defined specifically in terms of a product class, technology, customer group, market need or some other combination.

4.5.2 VectorVector gives directions within an industry and across industry boundaries which the firm proposes to pursue. If an organisation has the objective to maximum sales, the series of decisions will be to enhance salesmans commission, release nationwide advertisement, introduce total quality management and introduce new product range. Vector signifies that a series of decisions are taken in the same direction to accomplish the objectives.

4.5.3 Competitive AdvantageCorporate strategy is relative in nature. In the formulation of corporate strategy, the management should isolate unique features of the organisation. The steps to be taken must be competitively superior. While making plans, competitors may be ignored. However when we formulate corporate strategies, we cannot ignore competitors. If an organisation does not look at competitive advantage, it cannot survive in a dynamic environment. This aspect builds internal strength of the organisation and enhances the quality of corporate strategy. 4.5.4 SynergySynergy means measurement of the firms capability to take advantage of a new product market move. If decisions are made in the same directions to accomplish the objectives there will be synergic impacts. The corporate strategy will give the synergy benefit.

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4.6 Functions of Corporate StrategyFollowing are the functions of corporate strategy:

It provides a dual approach to problem solving. Firstly, it exploits the most effective means to overcome difficulties and face competition. Secondly, it assists in the deployment of scarce resources among critical activities.It focuses attention upon changes in the organisational set up, administration of organisational process affecting behaviour and the development of effective leadership.It offers a technique to manage changes. The management is totally prepared to anticipate, respond and influenced to look at changes. It also offers a different way of thinking.It furnishes the management with a perspective whereby, the latter gives equal importance to present and future opportunities.It provides the management with a mechanism to cope with highly complex environment characterised by diversity of cultural, social, political and competitive forces.

4.7 Kinds of Corporate StrategyThere are four grand strategic alternatives. They are stability, expansion, retrenchment and any combination of these three. These strategic alternatives are also called grand strategies. 4.7.1 Stability StrategyIt is adopted by an organisation when it attempts to improve functional performance. They are further classified as follows:

No change strategy Profit strategy

Pause/Proceed with caution strategy

4.7.2 Expansion StrategyIt is followed when an organisation aims at high growth. They operate through:

Concentration Integration Diversification

Co-operation Internationalisation

4.7.3 Retrenchment StrategyIt is followed when an organisation aims at a contraction of its activities. It is done through turnaround, divestment and liquidation in either of the following modes:

Compulsory winding up Voluntary winding up Winding up under supervision of the court

4.7.4 Combination StrategiesThey are followed when an organisation adopts a combination of stability, expansion and retrenchment either at the same time in different businesses or at different times in the same business.

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4.8 Significance of Corporate StrategyFollowing points illustrates the significance of Corporate Strategy:

Corporate strategy rationalises allocation of scarce resources. Corporate strategy motivates employees examples to shape their work in the context of shared corporate goals.Strategy assists management to meet unanticipated future changes. Organisational effectiveness is ensured through implementing and evaluating the strategy. Corporate strategy is a powerful tool for the management to deal with the future which is uncertain and hazy in all respects.Corporate strategy improves the capability of management in coping with the volatile external environmental forces.Corporate strategy encourages the management to choose the best course of action to realise the objectives. Strategy planning system provides an objective basis for measuring performance.

4.9 Limitations of Corporate StrategyFollowing are the limitations of Corporate Strategy:

The process of strategy formulation is not an easy task. The process of forming corporate strategy is complex, cumbersome and complicated.Corporate strategies are useful for long range problems. They are not effective to overcome current exigencies.The corporate strategy formulation process calls for considerable time, money and effort. Developing appropriate corporate strategy is not a simple and economical proposition. For financially weak companies, cost becomes a great hindrance.As future is uncertain and cannot be predicted accurately, the strategic planning system based on hazy and uncertain estimates is not exact.Implementation of corporate strategy is influenced by organisational factors, behavioural factors and motivational factors. The gap between formulation and implementation of corporate strategy does not give desired results to the organisation.

4.10 Concept and Meaning of Corporate PolicyCorporate policy is the guide post to decision making. It helps in the managerial thinking process and thus leads to the efficient and effective attainment of the objectives of any organisation. Corporate policy clarifies the intention of management in dealing with various problems faced. It gives managers a transparent guideline to make appropriate decisions. Corporate policy helps the manager to identify the solution to the problems. It provides the framework in which the decisions are to be taken.

Following are the distinct views regarding policies categorised in three board groups:The first category holds the opinion that policy and strategy are synonymous.

The second group of experts view that corporate policy is the process of implementing strategy. The third view considers corporate policy to be decisions regarding the future of an organisation.

4.11 Features of Corporate PolicyFollowing are the features of corporate policy:

General statement of principles Policies are general statement of principles followed by corporate for the attainment of organisational objectives. These principles provide a guide to action for the executives at different levels.Long term perspective Corporate policies have a long life and are formulated with a long term perspective. They provide stability to the organisation.

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Achievement of objectives Corporate policy is aimed at the fulfilment of organisational objectives. They provide a framework for action and thus help the executives to work towards the set goals.Qualitative, conditional and general statement Corporate policy statements are qualitative in nature. They are conditional and defined in general manner. These statements use words as to maintain, to follow, to provide, etc. They can be specific at times but most of the times, a corporate policy tends to be general.

Guide for repetitive operations Corporate policies are formulated to act as a guide for repetitive day to day operations. They are best as a guide for the activities that occur frequently or repeatedly.Hierarchy Corporate policies have a hierarchy, i.e. for each set of objectives at each level of management there is a set of policies. The top management determines the basic overall policy, then the divisional and / or departmental policies are determined by the middle level management and lower level policies are more specific and have a shorter time horizon than policies at higher levels.Decision making process Corporate policy is a decision making process. In formulating corporate policy one has to make choices and the choice is influenced by the interests and attitudes of managers engaged in making the policies.Mutual application Corporate policies are meant for mutual application by subordinates. They are made for some specific situation and have to be applied by the members of the organisation.

Unified structure Corporate policies tend to provide predetermined issues and thus avoid repeated analysis. They provide a unified structure to other types of plans and help managers in delegating authority and having control over the activities.Positive declaration Corporate policy is a positive declaration and a command to its followers. It acts as a motivator for the people following it and thus they work towards the attainment of the objectives effectively. The corporate policy lays down the values which dominate organisations actions.

4.12 Scope of Corporate PolicyCorporate policies are statements of guidelines for corporate thinking and action. They lay down the approach before the management to deal with the challenges in the environment. They cover the following broad areas that affect the decisions of the organisation.

Corporate policy consists of a variety of subject that affects various interest groups in the organisation and outside it.Corporate policy is concerned with the various functional areas like production, human resources, marketing and finance.

We can understand corporate policy areas in two broad categories namely, major and minor policies. The overall objectives, procedures and control are covered in major policies. These policies are concerned with each and every aspect of the organisation, its structure, its financial status, its production stature, its human resources and all those issues which require attention like mergers, research, expansion, etc. Basically, the top management is involved in the framing of such major policies. Further, the operations and activities are also carried out by executives so that the organisational objectives are met.The minor policies are concerned with each segment of the organisation with emphasis on details and procedures. These policies are part of the major policies. The operational control can be made possible only if the minor policies are implemented efficiently. The minor policies are concerned with the day to day operations and are decided at the departmental levels. The minor policies may cover relations with dealers, discount rates, terms of credit, etc. Thus, corporate policies cover wide range subjects ranging from operational level policies to the top level policies.

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4.13 Classification of Corporate Policies Below given is the classification of corporate policies.

4.13.1 Classification on the Basis of Scope

On the basis of scope of an organisation, policies are classified as follows:

Basic policies These are framed by the top management and spell out the basic approach of a company to its activities and its environment.General policies These are framed by the middle management level and are more specific. They apply to large segments of the organisation.Specific policies These are framed by the foremen and supervisors and are very specific in nature. They are applicable to routine activities.

4.13.2 Classification on the Basis of Expression

On the basis of expression, corporate policies can either be expressed or implied.Expressed policies: The policies which are expressed in clear words either orally or in writing are the expressed policies. These are most suitable for small organisations.Implied policies: The policies which are understood by the employees, code of conduct or behaviour and are not expressed orally or through written statements are known as implied policies. They flow from philosophy, values and traditions of the organisation.

4.13.3 Classification on the Basis of Level

Different policies are formed at different levels of management. They are as follows:Top management policies: These are framed by the top management and it is only responsible for them. The policies are derived from top management planning and top management planning and top management sees that they are put into effect and judge the results.Middle level management policies: These are laid down by the middle level managers and deal with the organisational activities like selection of executives, employee training, deciding processes, methods, techniques, etc.Lower level management: Those people who have direct control over the working force comprise the lower level management. These people set up policies with respect to the accomplishment of tasks of sub divisions of the organisations.

4.13.4 Classification on the Basis of Origin

On the basis of origin, policies are classified as follows:

Original policies: These policies are formed from the company objectives. These are formed by the top management and the top management is responsible for guiding and directing them and the subordinates are responsible in the attainment of organisation objectives.Appealed policies: These are also called suggested policies because they are made by taking into account the suggestions of subordinates or people who implement these policies.Imposed policies: External forces sometimes force the company to accept certain policies forcibly. These policies are called imposed policies. The external forces could include government rules and suggestions, arguments with trade unions etc.Derivative policies: These policies are operational in nature and are derived from companys major policies. They are made as guidelines to perform day to day operations.

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4.13.5 Classification on the Basis of Functional Areas

In an organisation, various functional areas are seen. The policies are classified according to functional areas, i.e. production policies, marketing and sales policies, financial policies and personnel policies.

Production policies: These policies are concerned with production of a product, type of technology, equipment, selection of plant layout, location and size, manufacturing cost, inventory control, quality control, etc.Marketing & sales policies: The policies which relate to policies in market analysis, business law, salesmanship and advertising are concerned with total process of marketing mix and product mix. These include decisions with respect to customers, channels of distribution, dealers, sales control, promotion, etc.Financial policies: The success of business depends upon these policies. These consist of policies with respect to capital structure, methods of raising funds, the utilisation of funds, credit policy, dividend decisions, profit policy, costing and accounting policy, etc.Personnel policies: Employees are very important for the organisation and the personnel policies are concerned with issues like recruitment, selection, training and development, promotion and transfer, wages and incentives, etc.

4.13.6 Classification of Policies on the Basis of Nature of Management

The main functions of an organisation consist of planning, organising, actuating and controlling. The policies may therefore be classified as planning policies, organising policy, actuating policy and controlling policy.

Planning policies: These policies are concerned with the determination of ways to attain the objectives of the organisation. Such policies decide corporate objectives, alternative courses of action, comparison of alternatives, establishment of budgets, schedules, procedures, etc.Organising policies: These policies are concerned with allocation of activities to members of the group so that through their collective efforts, objectives could be achieved. These are those policies which provide issues like organisation structures, authority, responsibility, delegation, centralisation and various relationships.Actuating policies: The actuating policies include providing leadership, integrating tasks and communication and organisation environment. These policies are concerned with organising the employees of the organisation.Controlling policies: Controlling is the process by which the performance is compared with the set objectives. These policies provide for establishment of standards, pointing out deviations, ascertaining causes for deviation and taking corrective actions.

4.14 Importance of Corporate PolicyFollowing points illustrates the importance of corporate policy:

Policies are needed to carry out the business activities in a smooth manner. They provide clear cut courses for attainment of business objectives. If a proper explicit policy has been formulated, many of the details could be conveniently handled by the subordinates and management would not unnecessarily waste its time and energy in doing them.Policies provide a guide and framework for decision making. Policies encourage delegation of the power of decision making. Good policies provide a direction in which all management activities are focused. Policies provide stability to the action of the members of the firm.

Policies deter the subordinates to rethink on the day to day issues and thus avoid repetitive analysis of issues. Policies facilitate evaluation of performance by acting as a standard. They enhance employees enthusiasm and loyalty for the organisation. They help solving the problems for optimum utilisation of scarce recourses. The sound policies help building good public image of the business. Policies provide the firm with clear objectives with which the managers can decide the future course of action.They act as tool for co-ordination and control.

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SummaryCorporate management is a broad phenomenon and covers a wide spectrum of activities. Corporate strategy is formulated at the higher level of management. At operational level, operational strategies are also formulated.Corporate planning is a comprehensive planning process which involves continued formulation of objectives and the guidance of affairs towards their attainment. The process of corporate planning integrates strategic planning with short range operational plans. A formal planning system can help the management in responding to a dynamic environment and in managing a strategically complex organisation with limited resources.The chief executive must be totally committed and involved in the corporate planning process. The process of corporate planning should be introduced on continuous basis to cope with ever changing environmental factors.Corporate strategy improves the capability of management in coping with the volatile external environmental forces.The corporate strategy formulation process calls for considerable time, money and effort. Corporate policy helps the manager to identify the solution to the problems. Corporate policy consists of a variety of subject that affects various interest groups in the organisation and outside it.Corporate policy areas have two broad categories namely, major and minor policies. Good policies provide a direction in which all management activities are focused.

ReferencesCorporateStrategy , [Pdf] Available at: [Accessed 14 May 2013].ConceptofCorporateStrategy , [Pdf] Available at: [Accessed 14 May 2013].Dransfield, R., 2001. CorporateStrategy, Heinemann.Colley, J., 2002. CorporateStrategy, Tata McGraw-Hill Education.2008. What is Good Corporate Strategy? [Video online] Available at: [Accessed 15 May 2013].

2008. CorporateStrategy [Video online] Available at: [Accessed 15 May 2013].

Recommended ReadingThompson, J. L., 2001. Understanding corporate strategy,Cengage Learning EMEA.Leontiades, J., 1987. Multinational corporate strategy, Lexington Books.Sutton, C. J., 1980. EconomicsandCorporateStrategy, CUP Archive.

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Self Assessment

Which of the following statements is false?1. Corporate strategy is related mostly to external environment.a. Corporate strategy is formulated at the higher level of management.b. Corporate management is a broad phenomenon and covers a wide spectrum of activities.c. Corporate planning is a broad phenomenon and covers a wide spectrum of activities.d.

Which is a comprehensive planning process which involves continued formulation of objectives and the guidance 2. of affairs towards their attainment?

Corporate planninga. Corporate policyb. Corporate strategyc. Strategy planningd.

The _________ must be totally committed and involved in the corporate planning process.3. managersa. middle level managersb. chief executivec. first line managersd.

_________ signifies that a series of decisions are taken in the same direction to accomplish the objectives.4. Synergya. Vectorb. Policyc. Strategyd.

What means measurement of the firms capability to take advantage of a new product market move?5. Synergya. Policyb. Vectorc. Objectived.

Which of the following statements is false?6. Corporate strategy motivates employees examples to shape their work in the context of shared corporate a. goals.Strategy assists management to meet unanticipated future changes.b. Organisational effectiveness is ensured through implementing and evaluating the strategy.c. Corporate objective motivates employees examples to shape their work in the context of shared corporate d. goals.

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Which of the following statements is true?7. Implementation of corporate planning is influenced by organisational factors, behavioural factors and a. motivational factors. The gap between formulation and implementation of corporate strategy does not give desired results to the organisation.Implementation of corporate policy is influenced by organisational factors, behavioural factors and b. motivational factors. The gap between formulation and implementation of corporate strategy does not give desired results to the organisation.Implementation of corporate strategy is influenced by organisational factors, behavioural factors and c. motivational factors. The gap between formulation and implementation of corporate strategy does not give desired results to the organisation.Implementation of corporate objective is influenced by organisational factors, behavioural factors and d. motivational factors. The gap between formulation and implementation of corporate strategy does not give desired results to the organisation.

_________ is concerned with the various functional areas like production, human resources, marketing and 8. finance.

Corporate objectivea. Corporate policyb. Corporate strategyc. Strategic planningd.

Which policies are framed by the top management and spell out the basic approach of a company to its activities 9. and its environment?

General policiesa. Basic policiesb. Specific policiesc. Expressed policiesd.

The policies which are understood by the employees, code of conduct or behaviour and are not expressed orally 10. or through written statements are known as _________.

expressed policiesa. general policiesb. implied policiesc. basic policiesd.

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Chapter V

Top Management

Aim

The aim of this chapter is to:

explain various management levels

elucidate the duties of borad of directors

explicate the chief responsibilities and skills of top management

Objectives

The objectives of this chapter are to:

introduce the ranks of management

explain the responsibilities of different management levels

expose them to skills and responsibilities of an CEO

Learning outcome

At the end of this chapter, you will be able to:

understand various levels/ranks of management

identify the roles and responsibilites of top level managers

describe top management roles

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5.1 IntroductionHighest ranking executives with titles such as chairman, chief executive officer, managing director, president, executive directors, executive vice-presidents, etc, are responsible for the growth of the entire enterprise. Top management translates the policy formulated by the board of directors into goals, objectives and strategies and projects a shared vision of the future. It makes decisions that affect everyone in the organisation, and is held entirely responsible for the success or failure of the enterprise.

5.2 Management LevelsManagers are organisational members who are responsible for the work performance of other organisational members. Managers have formal authority to use organisational resources and to make decisions. In organisations, there are typically three levels of management, namely, top level, middle level, and first level. These three main levels of managers form a hierarchy, in which they are ranked in order of importance. In most organisations, the number of managers at each level is such that the hierarchy resembles a pyramid; with many more first level managers, fewer middle level managers and the fewest managers at the top level. There are a number of changes that are occurring in many organisations that are changing the management hierarchies in them, such as the increasing use of terms, the prevalence of outsourcing and the flattening of organisational structures.

5.2.1 Top Level ManagersFollowing are the functions of top level managers.

Top level managers or top managers are also senior management or executives. These individuals are at the top one or two levels in an organisation and hold titles such as Chief Executive Officers (CEO), Chief Financial Officer (CFO), Chief Operation Officer (COO), Chief Information Officer (CIO), Chairperson of the Board, President, Vice President, Corporate head.Often, a set of these managers will constitute the top management team, which is composed of the CEO, the COO and other department heads. Top level managers make decisions affecting the entirety of the firm.

Top managers do not direct the day-to-day activities of the firm; rather, they set goals for the organisation and direct the company to achieve them. Top managers are ultimately responsible for the performance of the organisation, in terms of the growth of the organisation.Top managers in most organisations have a great deal of managerial experience and have moved up through the ranks of management within the company or in another firm.

An exception to this is a top manager who is also an entrepreneur; such an individual may start a small company and manage it until it grows enough to support several levels of management.

5.2.2 Middle Level ManagersFollowing are the functions of middle level managers:

Middle level managers are those in the levels below top level managers. Middle managers job titles include General Manager, Plant Manager, Regional Manager and Divisional Manager.Middle level managers are responsible for carrying out the goals set by top management. They do so by setting goals for their departments and other business units.Middle level managers can motivate and assist first line managers to achieve objectives.

Middle managers may also communicate upward, by offering suggestions and feedback to top managers. Because middle managers are more involved in the day-to-day workings of a company, they may provide valuable information to top managers to help improve the organisations bottom line.

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5.2.3 First Level ManagersFollowing are the functions of first level managers:

First level managers are also called first-line managers or supervisors.

These managers have job titles such as: Office Manager, Shift Supervisor, Department Manager, Foreperson, Crew Leader, Store Manager.First line managers are responsible for the daily management of line workers, the employees who actually produce the product or offer the service. There are first-line managers in every work unit the organisation.

Although first-level managers typically do not set goals for the organisation, they have a very strong influence on the company.These are the managers that most employees interact with on a daily basis, and if the managers perform poorly, employees may also perform poorly, may lack motivation, or may leave the company.

5.3 Board of DirectorsA board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organisation. The body sometimes has a different name, such as board of trustees, board of governors, board of managers, or executive board. It is often simply referred to as the board. A boards activities are determined by the powers, duties and responsibilities delegated to it conferred on it by an authority outside itself. These matters are typically detailed in the organisations bylaws. The bylaws commonly also specify the number of members of the board, how they are to be chosen, and when they are to meet. In an organisation with voting members, the board acts on behalf of, and is subordinate to, the organisations full assembly, which usually chooses the members of the board. In a stock corporation, the board is elected by the stockholders and is the highest authority in the management of the corporation. In a non-stock corporation with no general voting membership, e.g. a university, the board is the supreme governing body of the institution.

5.3.1 Duties of Board of DirectorsFollowing are the duties of board of directors:

Governing the organisation by establishing broad policies and objectives. Selecting, appointing, supporting and reviewing the performance of the chief executive. Ensuring the availability of adequate financial resources.

Approving annual budgets. Accounting to the stakeholders for the organisations performance. Setting their salaries and compensation.

5.4 Sub CommitteeA subcommittee is a subordinate committee cocsists of members who belong to a larger committee. Subcommittees are a critical part of committee organisation, as they allow committees to focus on several issues without needing to involve all of the members, and they create more flexibility within the committee structure. There are two main types subcommittees: standing and working.

A standing subcommittee is one which is always in existence, covering specific issues which pertain to the committee in general. One special type of standing subcommittee, the executive subcommittee, can make executive decisions on behalf of the larger group. A working committee is tasked with dealing with a specific and often temporary issue.

Members of a subcommittee are usually chosen or elected by other members of the committee, and they are selected on the basis of experience, qualification and willingness to serve.

The subcommittee usually agrees to meet together at set intervals, taking care not to overlap with regular committee meetings and the members may be tasked with making periodic reports to the general committee on their progress and concerns.

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Subcommittee meetings may also be closed to the public for privacy reasons, particularly when open committee meetings cannot be held in closed sessions for legal reasons and committee members want a chance to meet officially without public oversight.

Serving on a subcommittee can require some diplomatic skills. Members of a subcommittee must keep the spirit of the larger group in mind, and since they may end up speaking on behalf of other members of the committee, they have to be careful to ensure that their statements and positions are worded appropriately.In the case of an executive standing subcommittee, members must also consider issues like budgeting, which can become critical when making executive decisions.

5.5 Chief Responsibilities and Skills of Top ManagementChief responsibilities and skills of top management are discussed below.

5.5.1 Planning

Objectives are the goals that management wants to achieve and planning is the process to accomplish these objectives. It is a road map of improvement. Planning should be realistic based and framework within which a new strategy will be implemented. But it is evident that mostly top management considers planning as the starting point only not as the integral part of managing necessary tasks. Top management assigns the planning process to planning department yet it plays a vital role in recognising the hidden opportunities and clear understanding of goals, market and completion.

5.5.2 Organising

Organising is the act of arranging certain elements following some rules. The entire role of organising is to achieve the overall completion of organisations objectives. It is obligatory to organise all kind of resources including men, material, money and machine to make the optimum use in achieving certain specialisation. This specialisation can be achieved through employing different tasks to specify people who are specialists in that area. Top managements ability to organise all resources well helps in expanding business.

5.5.3 Controlling

Controlling is one of the foremost managerial functions like planning and organising but it is continuous, and can be entrenched at any of hierarchy. It is very important for the top management to check the errors, and then take the corrective action so that deviation from standards should be visualised clearly and declared purposes will be attained in a preferred mode.

5.6 Chief Executive Officer (CEO)A chief executive officer is also known as a managing director or chief executive. The executive officer is the highest ranking corporate officer or administrator in charge of total management of an organisation. An individual appointed as a CEO of a corporation, company, organisation, or agency reports to the board of directors. 5.6.1 ResponsibilitiesFollowing are the responsibilites of CEO:

The responsibility of the chief executive officer is to align the company, internally and externally, with strategic vision. The core duty of a CEO is to facilitate business outside the company while guiding employees and other executive officers towards a central objective.

The size and sector of the company will dictate the secondary responsibilities.

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A CEO must have a balance of internal and external initiative to build a sustainable company. For corporations, the chief executive officer primarily coordinates external initiatives at a high level. As there are many other c-level executives (e.g. marketing, information, technical, financial, etc) seldom do corporate CEOs have low-level functions.For emerging entrepreneurs, their acting position as a CEO is much different than that on the corporate level. As often other c-level executives are not incorporated in small operations, it is the duty of the CEO to assume those positions.

Chairman

Chief Executive Officer

Chief Financial Officer

Board of Directors

President

Fig. 5.1 Board of directors

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SummaryHighest ranking executives with titles such as chairman, chief executive officer, managing director, president, executive directors, executive vice-presidents, etc, are responsible for the growth of the entire enterprise.Managers are organisational members who are responsible for the work performance of other organisational members. In organisations, there are typically three levels of management, namely, top level, middle level, and first level. Top level managers or top managers are also senior management or executives. Middle level managers are those in the levels below top level managers. Middle managers job titles include General Manager, Plant Manager, Regional Manager and Divisional Manager.First level managers are also called first-line managers or supervisors.

First line managers are responsible for the daily management of line workers, the employees who actually produce the product or offer the service. A board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organisation. A subcommittee is a subordinate committee consists of members who belong to a larger committee. Subcommittees are a critical part of committee organisation, as they allow committees to focus on several issues without needing to involve all of the members, and they create more flexibility within the committee structure.

Planning should be realistic based and framework within which a new strategy will be implemented. Organising is the act of arranging certain elements following some rules. Controlling is one of the foremost managerial functions like planning and organising but it is continuous, and can be entrenched at any of hierarchy. The executive officer is the highest ranking corporate officer or administrator in charge of total management of an organisation.

ReferencesLevels of Management , [Pdf] Available at: [Accessed 14 May 2013].Top Level Management, [Online] Available at: [Accessed 16 May 2013].Koontz, H. & Weihrich, H., 2007. EssentialsOfManagement, 7th ed., Tata McGraw-Hill Education.Dubrin, A. J., 2008. Essentials of management, 8th ed., Cengage Learning.2009. OrganizationalManagement, [Video online] Available at: [Accessed 17 May 2013].2011. Business Environment and Corporate Environment, [Video online] Available at: [Accessed 17 May 2013].

Recommended ReadingShaikh, S., 2010. Business Envrionment, 2nd ed., Pearson Education India.Prasad, V., 2010. Business Environment, Gyan Publishing House.Reddy, J., 2010. Business Environment, APH Publishing.

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Self Assessment

Which of the following statements is false?1. Managers are organisational members who are responsible for the work performance of other organisational a. members.Board of directors has formal authority to use organisational resources and to make decisions.b. In most organisations, the number of managers at each level is such that the hierarchy resembles a c. pyramid.Managers have formal authority to use organisational resources and to make decisions.d.

___________ make decisions affecting the entirety of the firm.2. Top level managersa. Middle level managersb. First line managersc. Executive officersd.

Which of the following statements is true?3. First line managers do not direct the day-to-day activities of the firm; rather, they set goals for the organisation a. and direct the company to achieve them.Middle level managers do not direct the day-to-day activities of the firm; rather, they set goals for the b. organisation and direct the company to achieve them.Top managers do not direct the day-to-day activities of the firm; rather, they set goals for the organisation c. and direct the company to achieve them.Managers do not direct the day-to-day activities of the firm; rather, they set goals for the organisation and d. direct the company to achieve them.

Who is responsible for carrying out the goals set by top management?4. Executivesa. First line managersb. Officersc. Middle level managersd.

Who are also called first-line managers or supervisors?5. First level managersa. Middle level managersb. Top level managersc. Managersd.

There are ___________ in every work unit the organisation.6. managersa. middle level managers b. first level managersc. top level managersd.

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A __________ is a body of elected or appointed members who jointly oversee the activities of a company or 7. organisation.

sub committeea. working committeeb. standing committeec. board of directorsd.

In a non-stock corporation with no general voting membership, e.g. a university, who is the supreme governing 8. body of the institution?

The committeea. The sub committeeb. The boardc. The standing committeed.

A ___________ is a subordinate committee consists of members who belong to a larger committee.9. committeea. sub committeeb. boardc. standing committeed.

Which of the following statements is false?10. A working committee is tasked with dealing with a specific and often temporary issue.a. A working subcommittee is one which is always in existence, covering specific issues which pertain to the b. committee in general.Members of a subcommittee are usually chosen or elected by other members of the committee, and they are c. selected on the basis of experience, qualification and willingness to serve.

A standing subcommittee is one which is always in existence, covering specific issues which pertain to the d. committee in general.

Chapter IBusiness EnvironmentAimObjectivesLearning outcome1.1 Introduction1.2 Definition of Business1.3 Characteristics of Business1.4 Components of Business1.4.1 Industry1.4.2 Commerce

1.5 Purpose of a Business1.6 Characteristics of Business Environment1.7 Environmental Influences and Analysis on Business1.7.1 Environmental Analysis1.7.2 Environment influence on SWOT

1.8 Components of Business Environment1.9 Relationships between Organisation and its Environment1.10 Internal Analysis of the Organisation/Company1.11 External Environment1.11.1 Micro Environment1.11.2 Macro Environment

1.12 Economic Environment1.13 Political-Legal Environment1.14 SocioCultural Environment1.15 Demographic Environment1.16 Natural Environment1.17 Technological EnvironmentSummaryReferencesRecommended Reading

Self Assessment Chapter IIIntroduction to Business StrategyAimObjectivesLearning outcome2.1 Introduction2.1.1 Features of Strategy

2.2 Strategy at Different Levels of Business2.2.1 Corporate Strategy2.2.2 Business Unit Strategy2.2.3 Operational Strategy

2.3 Nature of Business Policy2.3.1 Types of Policies2.3.2 Features of Business Policy2.3.3 Difference Between Policy and Strategy

2.4 Objectives of Business2.5 Classification of Objective of Business2.5.1 Economic Objectives2.5.2 Social Objectives2.5.3 Human Objectives2.5.4 National Objectives2.5.5 Global Objectives

SummaryReferencesRecommended Reading

Self AssessmentChapter IIIStrategic Management for BusinessAimObjectivesLearning outcome3.1 Introduction3.2 Need for Strategic Management3.2.1 Due to Change3.2.2 Provides Guidelines3.2.3 Better Performance3.2.4 Improved Allocation of Resources3.2.5 Competitive Advantage3.2.6 Provides Holistic Approach3.2.7 Improved Integration3.2.8 Systematise Business Decisions

3.3 Strategic Management Process3.3.1 Environmental Scanning3.3.2 Strategy Formulation3.3.3 Strategy Implementation3.3.4 Evaluation and Control

3.4 Benefits of Strategic Management3.4.1 Proactive Approach3.4.2 Facilitates Better Delegation3.4.3 Exploiting Opportunities3.4.4 Assists in Realistic and Effective Plans3.4.5 To Gain Competitive Advantage3.4.6 Minimises Weaknesses3.4.7 Promotes Employees Participation3.4.8 Boost Profits3.4.9 Systematic Approach for Management Decision3.4.10 Empowerment of Employees

3.5 Limitations of Strategic Management3.6 Strategies and their Role in Strategic Management3.7 Role of Strategy in Strategic Management3.7.1 Deliberate Attempt to Counteract Actions of Opponents3.7.2 Emergence of Tactful Decision3.7.3 Creates System Approach3.7.4 Helps in Formulating General Policies3.7.5 Provides Integrated Approach3.7.6 Minimises Risk3.7.7 Optimum Use of Organisational Resources3.7.8 Continues Review

3.8 Reasons behind Failure of Strategic ManagementSummaryReferencesRecommended Reading

Self AssessmentChapter IVCorporate StrategyAimObjectivesLearning outcome4.1 Introduction4.2 Corporate Strategy4.2.1 Scope of Corporate Management

4.3 Corporate Planning4.3.1 Essentials of Corporate Planning4.3.2 Steps of Corporate Planning Process4.3.3 Benefits of Corporate Planning4.3.4 Reasons Attributed to the Failure of Corporate Planning4.3.5 Prerequisites for Success in Corporate Planning

4.4 Need for Corporate Management4.5 Components of Corporate Strategy4.5.1 Objectives4.5.2 Vector4.5.3 Competitive Advantage4.5.4 Synergy

4.6 Functions of Corporate Strategy4.7 Kinds of Corporate Strategy4.7.1 Stability Strategy4.7.2 Expansion Strategy4.7.3 Retrenchment Strategy4.7.4 Combination Strategies

4.8 Significance of Corporate Strategy4.9 Limitations of Corporate Strategy4.10 Concept and Meaning of Corporate Policy4.11 Features of Corporate Policy4.12 Scope of Corporate Policy4.13 Classification of Corporate Policies 4.13.1 Classification on the Basis of Scope4.13.2 Classification on the Basis of Expression4.13.3 Classification on the Basis of Level4.13.4 Classification on the Basis of Origin4.13.5 Classification on the Basis of Functional Areas4.13.6 Classification of Policies on the Basis of Nature of Management

4.14 Importance of Corporate PolicyReferencesRecommended Reading

Self AssessmentChapter VTop ManagementAimObjectivesLearning outcome5.1 Introduction5.2 Management Levels5.2.1 Top Level Managers5.2.2 Middle Level Managers5.2.3 First Level Managers

5.3 Board of Directors5.3.1 Duties of Board of Directors

5.4 Sub Committee5.5 Chief Responsibilities and Skills of Top Management5.5.1 Planning5.5.2 Organising5.5.3 Controlling

5.6 Chief Executive Officer (CEO)5.6.1 Responsibilities

SummaryReferencesRecommended Reading

Self AssessmentChapter VIStrategic PlanningAimObjectivesLearning outcome6.1 Introduction6.2 Strategic Planning6.2.1 Methodologies

6.3 Strategic Planning Process6.3.1 Organisation Mission and Purposes6.3.2 Importance of Vision Statement6.3.3 Importance of Mission Statement6.3.4 Benefits of Vision6.3.5 Developing a Mission Statement6.3.6 Developing a Vision Statement6.3.7 Setting Organisational Goals and Objectives

6.4 SWOT Analysis6.4.1 Internal and External Factors6.4.2 Avoiding Errors

6.5 The SWOT Matrix6.5.1 Formulating Strategic Alternatives6.5.2 Selecting the Best Strategy6.5.3 Preparing an Operational Plan6.5.4 Resource Allocation6.5.5 Co-ordinating Internal Factors6.5.6 Integrating Strategy and Operational Plan

SummaryReferencesRecommended Reading

Self AssessmentChapter VIIImplementation of StrategyAimObjectivesLearning outcome7.1 Activating Strategy7.2 Strategy Formulation vs. Strategy Implementation7.3 Aspects of Strategy Implementation7.4 Steps in Implementation of a Strategy7.5 Issues in StrategyImplementation7.5.1 Project Implementation7.5.2 Procedure implementation

7.6 Importance of Organisational Structure7.6.1 Structural Considerations

7.7 Other Important Strategies7.8 BCG Matrix7.8.1 Market Growth7.8.2 The Growth Share Model and Cash Position7.8.3 Uses and Benefits of the BCG Matrix7.8.4 Limitations of the BCG Matrix

7.9 G. E. Multi Factorial Analysis7.10 Factors Affecting Market Attractiveness7.11 PEST AnalysisSummaryReferencesRecommended Reading

Self AssessmentChapter VIIISocial ResponsibilityAimObjectivesLearning outcome8.1 Introduction8.2 Characteristics of Social Responsibility8.3 Components and Areas of Social Responsibility8.3.1 Towards Owners of Enterprise8.3.2 Towards Workers8.3.3 Towards Consumers8.3.4 Towards the Society8.3.5 Toward the Government8.3.6 Toward the Weaker Section of Society8.3.7 Towards the Economic Policy of State

8.4 Arguments Against Social Responsibility of Business8.5 Importance of Business Ethics8.6 Social Responsibility for Economic Growth8.7 Outcomes of Social Responsibility8.8 Social Audit8.9 Need for Social Audit8.10 Types of Social Audit8.10.1 Social Process Audit 8.10.2 Financial Statements Format Social Audit8.10.3 Macro-Micro Social Indicator Audit8.10.4 Social Performance Audit

8.11 Uses of Social AuditingSummaryReferencesRecommended ReadingSelf Assessment

Fig. 1.1 Environment forces (influences) on businessFig. 1.2 Components of business environmentFig. 1.3 External environmentFig. 1.4 Micro environment elementsFig. 1.5 Macro environment elementsFig. 3.1 Process of strategic managementFig. 5.1 Board of directorsFig. 7.1 BCG matrixFig. 7.2 PEST analysisTable 2.1 Difference between policy and strategyTable 6.1 Strengths and weaknesses of SWOT analysisTable 6.2 Opportunities and threats of SWOT analysisTable 7.1 Business attractiveness and business strengths