(SM) - CH - 1 (Nature & Value for Strategic Management)

8/10/2019 (SM) - CH - 1 (Nature & Value for Strategic Management)

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YASH CLASSES M.Com II (S.M)

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Chapter1

Nature & Value for Strategic Management

Q. 1 : What are the benefits & risk of strategic management ?

OR

Give the Advantages & Limitation of Strategic Management ?

(Guj. 2001, 2003, 2004, 2005)

Ans.:

Introduction :

The concept of strategic management became well accepted in the field of business

& that proves it utility. In modern time stability in organization. Control & also for the

development, Strategic management is considered necessary. To face the futureuncertainty, the concept of strategic management become more useful. Strategic process

ins not a short term process. For this the officers & employees have to sacrifice for a long

time. At the view point of management, strategies are economically advantageous but even

employees considered themselves responsible for the profit.

Thus, strategic management has both advantages & as well as limitations. So let us

discuss them in brief as under.

Advantages of strategic management :

Due to strategic management, company receive the following types of economic &

non economic advantages.(1) Increase in rate of return on investment :

Due to strategic management, these is a noble increase in the rate of return

on investment made in the project. On the basis of the information received through

analysis of internal & external environment. The managers can increase the rate of

return on investment by making maximum use of resources.

(2) Increase in profitability :

The profitability of the unit depends up on the maximum use of the limited

resources. Through strategically management process. The managers can not only

make the maximum use of financial resources but also they can use maximum

manpower to increase the overall productivity & profitability of the unit.

(3) Motivation to group activity :

By taking strategic decisions through the group integration between group

members increases on accepting various optional strategies. Which result in

co-operation & unity. Not only that but the managers can get the advantage of

special strength of group members.

(4) Increase in the efficiency of the employees :

The officers & experienced employees of all the three levels of the

management are also included in the strategic management process. The necessary


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interprocess is done with them & for the success of the strategy, the necessary

training is also given to them. By this these is a notable increase in efficiency of

employees & they get inspiration to work more.

(5) Prevention of overlapping work :

When the same activity is done by more than one employee. At that timethere is a wastage of time & materials. The problem of co-ordination also arises with

the help of strategic process. The managers can prevent the overlapping of work.

(6) Prevention of organizational gap :

Out of departmental activities of organization, if any activity is not allotted to

any employee, that activity is known as organizational gap. If allotment of any

activity is left out by mistake then none of the employees can be help responsible for

it. In strategic management process, because of the interacting process being done

with each employee, all the employees are given equal works & so these does not

arise a question of organizational gaps.

Limitations :

The limitations of strategic management are as under.

(1) Time consuming :

For taking strategic decisions, the managers make a study of internal &

external environment. For this the process of forecasting is being used.

Besides this, interacting process is being done with various officers &

employees. For all these work, a lots of time is being consumed.

(2) Ignorance of other managerial functions :

The responsibility of chief officer is more who are connected with framing &

implementation of strategy & due to continuously following the work of strategies

they are unable to concentrate on other managerial works.

(3) Depression due to failure in target :

Many times during the framing of strategy. High targets are being fixed & if

these targets are not achieved then dissatisfaction takes place among employees.

(4) Demand for more rewards & facilities :

The extent to which strategies depend on financial resources. To that extent,

employees also demand more remuneration & facilities. If their demands are not

fulfilled, then industrial disputes & unrest are created.

(5) Dependability :

If the employees are continuously demanded for co-operation for the

training & implementation of strategy then they also feel dependability of managers

over them. In these circumstances, the demand of employees go on increasing.

Q.2 Explain characteristics of strategic decisions at the level of corporate, strategic

business unit & functional level (2000, 2002, 2004)

Ans. Introduction :

Basic of success of business unit is on effective strategy & its implementation.


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For this, it is necessary to take proper decision at corporate level, for increase in

production & control on cost, keeping mission of unit. Business unit, operating level

in to account companys internal & external environmental factors are affecting

decision making at all level & therefore management should examine

inter-relationship of factors, by making its proper analysis. Strategic decisions arerelated with activities at all level & therefore proper study of it, has primary

importance.

CORPORATE LEVEL

BUSINESS

LEVEL

FUNCTIONAL LEVEL

Characteristics of strategic managerial activities & decisions :

Concept of strategic management can be understood at three levels. It is

natural that characteristics of such decisions are different because the

characteristics of activities at three level are different. The characteristics of strategic

management vary with the level of strategic activities are considered as under :

(1) Corporate level decisions :

Corporate level decisions tend to be value oriented, conceptual & less

concrete than those at business or functional level of strategic formulation &

implementation. The corporate level decisions are also characterized by greater risk,

cost, profit potential as well as by longer time horizons & greater needs for flexibility.

The characteristics are logical consequences of the more far reaching futuristic,

innovative, pervasive nature of corporate level strategic activity. e.g. choice of

business, divided, policies, sources, of long term financing & priorities for growth.

The corporate level decisions are taken

[Horizons : kekes

Futuristic : not traditional

Innovative : introduce something new

Pervasive : Spread throughout]

for raising longterm funds, purchasing of assets & machinery. Decisions regarding

Corporate

Strategy

SBU1Strategy

SBU2Strategy

SBU3Strategy

Marketing

Strategy

Production

Operation

Management

Strategy

Financial

Strategy

Personnel

Labour

Relation

Strategy

Accounting

Strategy

R & D

Strategy


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new technology, distribution of profit etc.

(2) Functional level decisions :

While functional level decisions principally involve action oriented

operational issue. These decisions are made periodically & lead directly to

implementation of some part of the overall strategy formulation at corporate &business level. Therefore, functional level decisions are relatively short range &

involve low risk & modest costs because they are dependent on available resources.

Functional level decisions are taken for repairing & maintenance of machinery for

continuity in production, changes in quality of product as per competition, fashion &

business requirement, co-ordination of activities, wages to employees, bonus to

employees, nature of material, training in relation to work & reduction in accident

etc.

(3) Business level decisions :

Business level decisions bridges corporate & functional level. Business level

decisions are less costly, less risky & potentially less profitable than corporate level

decisions. But they are more costly, more riskly & potentially more profitable than

functional level decisions. Business level decisions includes re-structuring of

machinery, purchase of direct materials, financial matters including promotion of

employees, development of new product etc.

e.g. Plant location, market segmentation, Geographic coverage & distribution

channels etc.

No. Characteristics Corporate

Strategy

Business

Strategy

Functional

Strategy

1 Type conceptual mixes operational

2 Frequency periodic or sporadic periodic or sporadic periodic

3 Adaptability

(change)

low medium high

4 Relation to present

activities

innovative mixed supplementary

5 Risk wide range moderate low

6 Profit Potential large medium small

7 Cost major medium modest

8 Time horizons long range medium short range

9 Flexibility high medium low

10 Co-operation

Required

considerable moderate little

(SM) - CH - 1 (Nature & Value for Strategic Management)

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