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- PARTHA S. SENAPATI
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Business Environment
and Strategy….
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Business Environment
And Strategy
By
Partha Sarathi Senapati
EDUCREATION PUBLISHING (Since 2011)
www.educreation.in
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ABOUT AUTHOR
Author, Mr. Partha Sarathi Senapati, who is an
academician working as, Asst. Professor, in the affiliated
colleges under Utkal University, Bhubaneswar. He has
been a visiting faculty to a number of Management
institutes in state. He is an MBA degree holder under
Biju Patnaik University of Technology (BPUT). The
author is UGC-NET qualified and currently pursuing his
PhD in management in Berhampur University, Odisha.
The author has around 2 years experience in Corporate
and 9 years of experience in teaching management
students in Under graduate and Post graduate level in the
area of marketing management, strategic management,
corporate governance, business ethics, production and
operation management, etc. The author has published
number of research papers in reputed national and
international journals and presented papers at various
seminars. He is a member of Odisha Commerce
Association (OCA). His one book ‘Rural and
Agricultural Marketing’ is already published in 2014
and other upcoming books include ‘Marketing
environment and Business Ethics’.
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ABOUT THE BOOK
The knowledge of business policy and techniques of
strategic management is the need of the hour to
prospective business managers. The present competitive
environment has brought several drastic changes in
policy making and strategic management. Hence, there is
necessity of theoretical understanding about the business
policy as well as strategic management.
Most of the organizations have started adopting strategic
management system. Every manager ought to see
himself as a strategist because; as organizations become
increasingly flat in structure, managers at all levels are
becoming increasingly involved in strategy formulation.
An understanding of the basics of strategic management
will stand them in good stead whichever area they may
be in. The nuances of strategic management are
examined in great depth in this book, which includes a
supplement that unfolds the historical process and
growth of strategic thinking in India. The growing
importance of the subject has been well realized by the
marketers, policymakers and management interns. The
present book has endeavoured to cover the entire gamut
of Strategic Management. There are few books on
strategic management which mostly deal with this
subject.
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This book is unique and original in the way it has been
organized and the material that has gone into it. These
are apart from several other case studies that are used to
illustrate various concepts. All in all, this unique book is
just about the most comprehensive, easy to read, up-to-
date, entertaining and enlightening exposition on this
vital subject as the reader is likely to come across, and
represents great value for students, laymen and faculty
alike. The book is written in simple, easy to understand
and language.
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CONTENTS
Title Page
About the Author v
About the Book vi
Chapter-1
An Overview of Strategic Management 1
Defining Strategy 2
Understanding strategy & its evolution 3
Evolution of Strategic Management 4
Distinctions between Business Policy and
Strategic management 5
The strategic management process 5
Benefits of strategic management 7
Levels of strategy 7
What are SBUs? 8
Identifying & defining the vision, mission &
objective of the firm 9
Business definition 14
Chaper-2
Business Environment 16
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Types of Business Environment 17
Micro Environment & Macro environment 19
Scanning of business environment 22
Different sources of information on environment 22
Different approaches for scanning environment 23
Techniques of environmental scanning 24
SWOT Analysis 26
Minzberg’s model of strategies decision making 29
Strategic alternatives & choice 30
Grand strategies 32
Stability strategy 33
Expansion strategy 34
Retrenchment strategy 40
Combination strategy 45
Modernisation strategy 46
Chapter-3
Organizational appraisal 47
BCG Growth – share – Matrix 48
GE 9-cell planning grid Matrix 51
Hofer’s product-market evolution matrix. 53
Directional policy matrix 53
Strategic Position and Action Evaluation
(SPACE) 54
Generic competitive strategy 55
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Chapter-4
Functional strategies 60
Human resource strategy 65
Production strategy 68
Financial management strategy 71
Chapter-5
Strategic Implementation 76
Issues in strategic implementation 77
Mc Kinsey 7s frame work 78
Types of Implementations 80
Organization structure & strategy 84
Resource allocation 94
Chapter-6
Strategic evaluation and control 96
Different Types of Barriers in evaluation and
control 97
Strategic Control 97
Techniques of strategic evaluation and control 100
Case studies 103
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Business Environment and Strategy
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CHAPTER- 1
An overview of Strategic Management
Introduction
Strategic Management is a process .A process denotes
that it has various activities which are to be performed in
a systematic manner. The systematic analysis of the
factors associated with customers and competitors (the
external environment) and the organization itself (the
internal environment) to provide the basis for
maintaining optimum management practices. The
objective of strategic management is to achieve better
alignment of corporate policies and strategic priorities.
Strategy is the product of the output of the strategic
management process to win over the competitors.
Strategy is a plan or course of action through which an
organization relate itself with the environment to achieve
the objective.
Strategic management is defined as a set of decisions
and action s in formulation and implementation of
strategies design to achieve the objective of an
organization.
Strategic management is a continuous process of relating
the organization with its environment by suitable course
of actions, which involves formulation, implementation
and control.
Partha Sarathi Senapati
2
Defining Strategy
Before we could understand the strategic management
process we need to define what strategy is all about.
The word strategy comes from the Greek word
“StratAgos” it means the art of the general. It is mostly
used in the military and defense force against the
enemies. But now-a-days it is used in business and
industries against the competitors. Every farm is
required to develop an unique, comprehensive and
integrated plan to achieve the objectives in the
competitive industries.
Strategy is an abstract concept i.e. it doesn‟t have any
complete form. It is a long range plan and it has far
reaching impact on the business. It is an approach to a
problem. It is the direction and destination. It is a set of
decision such as
1. What business are we in?
2. What product will we offer?
3. Who are our customers?
4. At what price?
5. What will be our terms and conditions?
6. Who are our competitors?
7. What are our strength and weakness and how we
will compete?
Every business in an industry has to develop a strategy
by scanning the internal and external environment.
Strategy helps the business in becoming competitive and
win in the market place.
Without strategy an organization cannot perform
effectively nor can survive in the industry.
1. It is a set of important decision taken to achieve the
objective?
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2. It is an unique, comprehensive, Integrated plan(UCI)
design to achieve the objective of the enterprise.
3. It is a balancing force between the organisation & its
environment & it consists of a set of actions to deal
with the changing environment.
4. It is the determination of the basic long team goals
& objectives of an enterprise & adoption of a course
of action & allocation of resources necessary for
carrying out these goals.
Understanding strategy and its evolution
The term strategy is mostly used in military & defence
force against the enemy. It is called the act of the
generals but now a days it is increasingly being used in
business & industry against competitors .Every firm in
an industry has to develop his strategy by scanning the
external environment & internal environment for
achieving the objective of the firm & surviving in the
industry. Without strategy an organisation can‟t perform
effectively & efficiently. A strategy is a,
Plan (to realize the goal of the Firm)
Position (A particular stand in the competitive
industry)
Pattern (particular course of action)
Ploy (A secret plan unknown to competitor)
Perspective (A view that guides/ opining
A Strategy in business is about perusing of competitive
advantages to win in the market place .Strategy is an
abstract concept. It is the act of (no concept form)
general it is wide spread & long ranges. It is an
approach to a problem. It is the direction & destination.
It is a set of decision such as
Partha Sarathi Senapati
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Evolution of Strategic Management
Business policy and strategic management as a separate
discipline was introduced in Havard Business school,
(HBS), USA in 1911. To reports in 1957
I. The Gorden and Howell Report sponsored by
Ford Foundation recommended a separate
course of business policy.
II. Pierson Report sponsored by Carnegie
foundation made a similar recommendation.
In 1969 a regulatory body of American business school
has made the course mandatory in the management
education. This subject is being taught in final semester
of the MBA degree course. Traditionally the term
business policy changes to the strategic management.
According to Glueck, the business policy has evolved
from the planning function of the management.
The evolution of strategic management process comes
from the planning function of the management
The business policy & strategic Management was 1st
introduced in Harvard business school in 1911.
Day to day
planning
Budgeting
contouring
MBO, Caper
Long range
planning
Strategic
planning
managing
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In India, there is a separate forum called strategic
management forum of India. The business today
magazine always devotes some space for strategic
management. The business standard newspaper in its
every Sunday issue has a supplement called the
Strategist.
Distinctions between Business Policy and
Strategic management
Business Policy Strategic management
The business policy
starts from the practice
of management by the
manager and it has past
different phases to be
termed as strategic
management.
It is the guideline for
thinking and action for
those who make
decisions.
Policy can be delegated
and implemented for
the people.
Strategic Management
is a continuous process
of relating the
objective of the
organization with its
environment.
It is concerned with
direction of the
resources in order to
maximize the
achievement of the
objective.
Strategy can‟t be
delegated and it
requires changes in
time.
The Strategic Management Process
It consists of 3 parts
Strategic formation
Strategic implementation
Strategic evaluation & contra.
Partha Sarathi Senapati
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The process & step can be defected as follows.
Step 1 : Strategy formulation
Step 2: Strategy implementation
Strategy formulation Strategy implementation
Identifying vision, mission &
objective
Resource mobilisation &
allocation
Environmental analysis
(SWOT, ETOP)
Procedural
implementation
Finding strategic alternatives
(stability, growth,
retrenchment, combination)
Behavioural
Strategic choice
Organisation changes &
innovation
Step 3:Strategic evaluation & control
Defining &
Identifying
the vision,
mission,
objectives of
the firm
Environmental
analysis &
SWOT
analysis
Identifyin
g the
alternativ
e choices
Strategic
implementation
Strategic
evaluation
control
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Designing evaluation & control system
Strategic control
Financial performance
Social performance
Benefits of Strategic Management
Following are the benefits of strategic management:-
1. Financial benefit because the strategy is according
to the environment
2. Avoiding environmental uncertainty
3. Helps in Clear objective setting
4. Providing Right direction for the firm.
5. Proper use of resources such as work force, capital,
machinery, technology, material etc.
6. Motivation of employees & job satisfaction
7. Improving communication with inside and outside
of the org.
8. Better coordination in function & projects
9. Better forecasting of the environmental changes &
action.
10. Increase organisational effectiveness & efficiency.
Levels of Strategy
*SBU-Strategic Business Unit
Partha Sarathi Senapati
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A multi-product., multi business diversified corporate
have different divisions business & product group this
strategic are developed at different levels of this
corporations these have corporate level strategy business
unit level strategy finical strategy etc.
1. Corporate level strategy:-
The corporate level strategy is at the higher level of
strategy decision making .This strategy covers actions
dealing with defining the vision, mission, objective of
the firm, acquisition of resources allocation of resource
to different divisions & business coordination of the
various strategy of SBUs etc. the wane function of
corporate level strategy is to achieve operational level of
performance of its unite business unite products
diversified business portfolio.
2. Business unit level strategy:-
There are no. of SBUs under a corporate couch develop
their own strategy to wake best use of the rescores. The
corporate level strategy creates the roadmap guiding &
policies along which the SBUs conduct their operations.
The business level strategy aims at improving the
competitive positions in the industry & to achieve
market shake light then the other completion
What are SBUs?
SBUs are any part of a business organisation which is
treated separately for strategies management purpose.
These are also called profit centre & cost centre .It is an
organisational unit of a diversified corporation that
perform all the basic functions. Each SBUs of a
corporation is identified separately which have distinct
mission, objective, competitors & are managed by an
executive who responsible for its profit cost Ex:- HUL is
an eminent consumer product company having its
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business in soap & detergent, food & beverages etc.
The each product of HUL is organised as an SBUs.
3. Functional level strategy: -
The functional level strategy is developed for the
specific function of a business organisation. The
strategy is developed for each of the functions of SBUs
such as marketing, finance, human resource,
productions, information etc.
4. Operational level strategy:-
This level of strategy comes below the functional level
strategy & it involves action relating to various sub
functions of a major functions Ex:- The marketing
function may be divided into various sub functions like
marketing research, sales promotion, sales, distribution
advertising etc.
Identifying & defining the vision, mission
& objective of the firm
An organisation develops its philosophy which is a set of
assumption, believes, values, aspirations & other
priorities. This philosophy becomes the guiding
principles for the strategic decision maker while it is
dealing with the different stakeholders of the
organisations.
Visions:-
i. The organisation develop its vision for the future
based upon the values beliefs, culture &
aspiration of the organisations
ii. Vision is a guidelines to implement strategy in
the future
iii. It is the future aim &aspiration of the
organisation
iv. It is broad all inclusive & forward thinking
Partha Sarathi Senapati
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v. It creates position that the firm would like to
achieve in the distance future
Missions:-
The mission is defined as the enduring statement of
purpose that distinguishes one organisation from other
similar organisations. The mission of the firm provides
guide lines that link its activities to the need of the
society, i.e. the mission of a company says what it can
do for the society in general. it defines why the
organization exist in the society what product & service
it can offer by utilizing the resources that are available
the mission of organization that can changes when the
organization became larger when there is changes in the
technology or the consumer taste & preference,
environmental changes. The mission statements of the
some of the companies are
1. Our mission is to make every Indian a Britannia
consumer, (Britannia industry)
2. Our mission is to organization world
information & make it universally accessible &
useful (google)
3. According to Peter Drucker to know what
business we have to start is the purpose. The
purpose is always outside the business it is in the
society since the business organization is the
part of society. So there is only definition of
business purpose is to create a customer.
Characteristics of mission statement:-
Mission statement should follow „SMART‟ concept.
S- Specific
M – Measurable
A – Achievable
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The knowledge of business policy and
techniques of strategic management is the
need of the hour to the prospective
business managers.
The present competitive environment
has brought several drastic changes in
policy making & strategic management.
Hence, there is necessity of theoretical
understanding about the business policy as
well as strategic management.
- Partha S. Senapati (Author)
__________________________________
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