Concept of Strategy

THEINTACTFRONT17 APR 2018 2 COMMENTS

Strategic management is the process in which an organization develops and implements plans that espouse the goals and objectives of that organization. The process of strategic
management is a continuous one that changes as the organizational goals and objectives evolve. Small businesses engage in strategic management to ensure that they adapt to trends
and external changes such as globalization. Several key concepts characterize strategic management and the development of organizational goals.

Goal Setting

At the core of the strategic management process is the creation of goals, a mission statement, values and organizational objectives. Organizational goals, the mission statement,
values and objectives guide the organization in its pursuit of strategic opportunities. It is also through goal setting that managers make strategic decisions such as how to meet sales
targets and higher revenue generation. Through goal setting, organizations plan how to compete in an increasingly competitive and global business arena.

Analysis Strategy Formation

Analysis of an organization’s strengths and weaknesses is a key concept of strategic management. Other than the internal analysis, an organization also undertakes external analysis
of factors such as emerging technology and new competition. Through internal and external analysis, the organization creates goals and objectives that will turn weaknesses to
strengths. The analyses also facilitate in strategizing ways of adapting to changing technology and emerging markets.

Strategy Formation

Strategy formation is a concept that entails developing specific actions that will enable an organization to meet its goals. Strategy formation entails using the information from the
analyses, prioritizing and making decisions on how to address key issues facing the organization. Additionally, through strategy formulation an organization seeks to find ways of
maximizing profitability and maintaining a competitive advantage.

Strategy Implementation

Strategy implementation is putting the actual strategy into practice to meet organizational goals. The idea behind this concept is to gather all the available and necessary resources
required to bring the strategic plan to life. Organizations implement strategies through creating budgets, programs and policies to meet financial, management, human resources and
operational goals. For the successful implementation of a strategic plan, cooperation between management and other personnel is absolutely necessary.

Strategy Monitoring

A final concept is monitoring of the strategy after its implementation. Strategy monitoring entails evaluating the strategy to determine if it yields the anticipated results as espoused
in the organizational goals. Here, an organization determines what areas of the plan to measure and the methods of measuring these areas, and then compares the anticipated results
with the actual ones. Through monitoring, an organization is able to understand when and how to adjust the plan to adapt to changing trends.

Vision, Mission, Goals and Objectives

THEINTACTFRONT17 APR 2018 2 COMMENTS

Every organization to be successful needs to be guided by a clear strategy. Vision, mission, and values form the ground for building the strategic foundation of the organization.
They direct and guide the purpose, principles and values that govern the activities of the organization and communicate this purpose of the organization internally and externally.

Successful organizations ensure that their goals and objectives are always in synergy with their vision, mission and values and consider this as the basis for all strategic planning
and decision making.

By developing clear and meaningful mission and vision statements, organizations can powerfully communicate their intentions and inspire people within and outside the
organization to ensure that they understand the objectives of the organization, and align their expectations and goals toward a common sense of purpose.

Importance of Mission, Vision, and Values

 Vision and mission statements play an important role in strategy development by −

 Providing means to create and weigh various strategic plans and alternatives.
 Laying down the fundamentals of an organization’s identity and defining its purpose for existence.
 Providing an understanding of its business directions.

By identifying and understanding how values, mission, and vision interact with one another, an organization can create a well-designed and successful strategic plan leading to
competitive advantage.

An organizational mission is a statement specifying the kind of business it wants to undertake. It puts forward the vision of management based on internal and external
environments, capabilities, and the nature of customers of the organization.

A mission statement therefore

 Communicates the organization’s reason for being.

 Reveals a company’s philosophy, as well as its purpose.
 Specifies how it aims to serve its key stakeholders.
 Defines the current and future business in terms of product, markets, customer, etc.
 Is often longer than vision statements and sometimes also includes a summation of the firm’s values.

Following are the mission statements of some of the most successful companies.

Microsoft

At Microsoft, our mission is to enable people and businesses throughout the world to realize their full potential. We consider our mission statement a commitment to our customers.
We deliver on that commitment by striving to create technology that is accessible to everyone—of all ages and abilities. Microsoft is one of the industry leaders in accessibility
innovation and in building products that are safer and easier to use.

Coke

Our Roadmap starts with our mission, which is enduring. It declares our purpose as a company and serves as the standard against which we weigh our actions and decisions.

 To refresh the world…

 To inspire moments of optimism and happiness…
 To create value and make a difference

A vision is a clear, comprehensive snapshot of an organization at some point in the future. It defines the company’s direction and entails what the organization needs to be like, to
be successful in future.

It is of strategic importance to an organization to create a clear and effective vision. A clear vision helps to define the values of the organization and guides the conduct of all
employees. A strong vision also leads to improved productivity and efficiency.

A Vision Statement is −
 A future-oriented declaration of the organization’s purpose and aspirations.
 Lays out the organization’s purpose for being.
 A clear vision helps in aligning everyone towards the same state of objective, providing a basis for goal congruence.

For example, the Vision Statement of PepsiCo is as follows − At PepsiCo, we’re committed to achieving business and financial success while leaving a positive imprint on society
− delivering what we call Performance with Purpose.

Role Played by Mission and Vision

Organization mission and vision are critical elements of a company’s organizational strategy and serves as the foundation for the establishment of company objectives.

Mission and vision statements play critical roles, such as −

 They provide unanimity of purpose to organizations and spell out the context in which the organization operates.
 They communicate the purpose of the organization to stakeholders.
 They specify the direction in which the organization must move to realize the goals in the vision and mission statements.
 They provide the employees with a sense of belonging and identity.

Values
Every organization has a set of values. Sometimes they are written down and sometimes not. Written values help an organization define its culture and belief. Organizations that
believe and pledge to a common set of values are united while dealing with issues internal or external.

An organization’s values can be defined as the moral guide for its business practices.

Core Values

Every company, big or small, has its core values which forms the basis over which the members of a company make decisions, plan strategies, and interact with each other and their
stakeholders. Core values reflect the core behaviors or guiding principles that guide the actions of employees as they execute plans to achieve the mission and vision.

Core values reflect what is important to the organization and its members.

Core values are intrinsic – they come from leaders inside of the company.

Core values are not necessarily dependent on the type of company or industry and may vary widely, even among organizations that do similar types of work.

For many companies, adherence to their core values is a goal, not a reality.

It is often said that companies that abandon their core values may not perform as well as those that adhere to them.

Stakeholders

Any individual or groups/group of individuals who believe and have an interest in an organization’s ability to deliver intended results and affect or are affected by its outcomes are
called stakeholders. Stakeholders play an integral part in the development and ultimate success of an organization.

An organization is usually accountable to a broad range of stakeholders, including shareholders, who are an integral part of an organization’s strategy execution. This is the main
reason managers must consider stakeholders’ interests, needs, and preferences. A stakeholder is anybody who can affect or is affected by an organization, strategy or project. They
can be internal or external and they can be at senior or junior levels.

Types of Stakeholders

Stakeholders are people who have the power to impact an organization or a project in some way.

Stakeholders can be of two types −

 Primary or Internal stakeholders

 External stakeholders

Primary or Internal Stakeholders

These are groups or individuals who are directly engaged in economic transactions within the business, such as employees, owners, investors, suppliers, creditors, etc.

For example, employees contribute their skill/expertise and wish to earn high wages and retain their jobs. Owners exercise control over the business with a view to maximizing the
profit of the business.

Secondary or External Stakeholders

These are groups or individuals who need not necessarily be engaged in transaction with the business but are affected in some way from the decisions of the business, such as
customers, suppliers, creditors, community, trade unions, and the government.

For example, the trade unions are interested in the organization’s well-being so that the workers are well paid and treated fairly. Customers want the business to produce quality
products at reasonable prices.

Identification of Key Stakeholders

It is very important for any business to identify its key stakeholders and scope their involvement as they play a vital role right from strategizing to implementation of outcomes
throughout the lifetime of a business.

Different stakeholders have different interests in the organization and the management has to consider all their interests and create a synergy among them to achieve its objectives.

Identifying all of a firm’s stakeholders can be a daunting task. It is important to have the optimum number of stakeholders, neither too many nor too few. Having too many
stakeholders will dilute the effectiveness of the company objectives by overwhelming decision makers with too much information and authority. Following are some effective
techniques to identify key stakeholders −

Brainstorming − This is done by including all the people already involved and aware of the company and its objectives, and encouraging them to come out with their ideas.
Stakeholders can be brainstormed based on categories such as internal or external.

Determining power and influence over decisions − Identify the individuals or groups that exercise power and influence over the decisions the firm makes. Once it is determined
who has a stake in the outcome of the firm’s decisions as well as who has power over these decisions, there can be a basis on which to allocate prominence in the strategy-
formulation and strategy-implementation processes.

Determining influences on mission, vision and strategy formulation − Analyze the importance and roles of the individuals or groups who should be consulted as strategy is
developed or who will play some part in its eventual implementation.

Checklist − Make a checklist or questions to help identify the more influential or important stakeholders.

1. Who will be affected positively or negatively, and to what extent?

2. Who influences the opinions about the company?
3. Who has been involved in any similar projects in the past?
4. Which groups will benefit from successful execution of the strategy and which may be adversely affected?

Involve the already identified stakeholders − Once the stakeholders are identified, it is important to manage their interests and keep them involved and supportive. This is a
daunting task to be performed tactfully by managers so that the organization’s higher objectives are not subordinated by individual interests.

External Environment Analysis

THEINTACTFRONT17 APR 2018 2 COMMENTS

External environment analysis is an important part of strategic management.

PESTEL Analysis

PESTEL analysis includes Political, Economic, Social, Technological, Environmental and Legal analysis. It is an external environment analysis for conducting a strategic analysis
or carrying out market research. It offers a certain overview of the varied macro-environmental factors that the company has to consider.

 Political factors: analysis is related with how and to what extent a government interferes in the economy. Specifically, political factors include tax policy, labor law, environmental law, trade
restrictions, tariffs, and political stability. Political factors may also be related with goods and services which the government allows (merit goods) and those that the government does not want
to allow (demerit goods). The government can have a great influence on the overall health, education, and infrastructure of a country.
 Economic factors: contain factors such as economic growth, interest rates, exchange rates and the inflation rate. These factors may have an influential effect on how the businesses operate and
make decisions. For example, interest rates can affect the firm’s cost of capital and thereby influence business growth and expansion. Exchange rates can affect the costs of export and the supply
and price of imports.
 Social factors: contain issues such as health consciousness, population growth rate, age distribution, career attitudes and emphasis on safety. Trends in the social factors may affect the demand
for a company’s goods and how the company operates. For example, ageing population leads to smaller and less-willing workforce (and increases the cost of labor). Moreover, companies may
change various management strategies in sync with the social trends (such as recruiting more females).
 Technological factors: include ecological and environmental aspects, such as R&D activity, automation, technology incentives and the rate of technological change. They can determine barriers
to entry, minimum efficient production level and influence outsourcing decisions. Furthermore, technological shifts can affect costs, quality, and lead to innovation.
 Environmental factors: are the conditions such as weather, climate, and climate change, which may especially influence tourism, farming, and insurance sectors. Growing awareness to climate
change are increasing the interest in how companies operate and what products they offer; it is both creating new markets and damaging the existing ones.
 Legal factors: include laws pertaining to discrimination, consumer affairs, antitrust, employment, and health and safety. These factors can affect the operations, costs, and the demand for the
products. Legal factors can also influence the brand value and reputation of a company. They are increasingly paid more attention to in the current decade.

While in external analysis, three correlated environment should be studied and analyzed —

 immediate / industry environment

 national environment
 broader socio-economic environment / macro-environment

Examining the industry environment needs an appraisal of the competitive structure of the organization’s industry, including the competitive position of a particular organization
and it’s main rivals. Also, an assessment of the nature, stage, dynamics and history of the industry is essential. It also implies evaluating the effect of globalization on competition
within the industry. Analyzing the national environment needs an appraisal of whether the national framework helps in achieving competitive advantage in the globalized
environment. Analysis of macro-environment includes exploring macro-economic, social, government, legal, technological and international factors that may influence the
environment. The analysis of organization’s external environment reveals opportunities and threats for an organization.

Strategic managers must not only recognize the present state of the environment and their industry but also be able to predict its future positions.

Analyzing Companies Resource in Competitive Position

THEINTACTFRONT17 APR 2018 2 COMMENTS

SWOT Analysis is a strategic planning technique that is used to evaluate the strengths, weaknesses, opportunities, and threats of a project or in a business entity. It involves finding
out the objectives of the business venture or project, and also pinpointing the internal and external factors that are favorable and unfavorable to attain that objective.

SWOT analysis must begin with the definition of a desired result or objective. It is also sometimes incorporated into the strategic planning model.

 Strengths− Characteristics that give an advantage over others in the industry.

 Weaknesses− Characteristics that are a disadvantage.
 Opportunities− External chances to improve in the environment.
 Threats− External elements that could cause trouble for the business.

SWOT Analysis Breakdown

Strengths

Strengths must consider what the organization can do with the internal resources. Any asset of the firm could be classified as strength, but the extent of contribution to the
competitive situation of the firm can fluctuate greatly. A reputed brand-name, popular customer service, and/or exclusive access to systematic supply chain network are strengths.

Weaknesses

Any area in which the organization lacks strength is weakness. Poor product positioning, outdated production equipment, and poor customer service are weaknesses. High
employee turnover that leads to loss of talent is a major weakness of the firm.

Opportunities

In general, changes in the external environment that may uplift the company can be an opportunity to the firm. Weakening of competitors by a poor cash-flow position is an
opportunity to capture market share. Similarly, changes in tax structure, progress in economic trends, or the passage of favorable laws are all opportunities.

Threats

Threats stem from a deficiency of opportunities or from the strengths of competitors. Changes in consumer preferences, new competitor innovations, restrictive regulations, and
unfavorable trade barriers are all examples of threats.

Optimizing after SWOT

After completing the SWOT analysis, the company should be able to configure its overall position in the marketplace. This is an important step in strategic management. However,
every opportunity cannot be pursued and every strength is not necessarily an advantage. The organization should choose the factors to exploit to take complete advantage of its
position. Similarly, the organization should seek to minimize weaknesses and threats.

Mintzberg’s 5P’s of Strategy

 THEINTACTFRONT17 APR 2018 3 COMMENTS
Many of us brainstorm opportunities, and then plan how we’ll take advantage of them.

Unfortunately, while this type of approach is important, we need to think about much more than this if we want to be successful. After all, there’s no point in developing a strategy
that ignores competitors’ reactions, or doesn’t consider the culture and capabilities of your organization. And it would be wasteful not to make full use of your company’s strengths
– whether these are obvious or not.

Management expert, Henry Mintzberg, argued that it’s really hard to get strategy right. To help us think about it in more depth, he developed his 5 Ps of Strategy – five different
definitions of (or approaches to) developing strategy.

About the 5 Ps

Mintzberg first wrote about the 5 Ps of Strategy in 1987. Each of the 5 Ps is a different approach to strategy. They are:

Plan.

Ploy.

Pattern.

Position.

Perspective.

Terms reproduced from “The Strategy Concept 1: Five Ps For Strategy” by Henry Mintzberg’s in California Management Review, Vol. 30, 1, Fall 1987, pp. 11-24 © 1987 by
the Regents of the University of California. Reprinted by permission of the University of California Press.

By understanding each P, you can develop a robust business strategy that takes full advantage of your organization’s strengths and capabilities.

In this article, we’ll explore the 5 Ps in more detail, and we’ll look at tools that you can use in each area.

1. Strategy as a Plan

Planning is something that many managers are happy with, and it’s something that comes naturally to us. As such, this is the default, automatic approach that we adopt –
brainstorming options and planning how to deliver them.

This is fine, and planning is an essential part of the strategy formulation process.

The problem with planning, however, is that it’s not enough on its own. This is where the other four Ps come into play.

2. Strategy as Ploy

Mintzberg’s says that getting the better of competitors, by plotting to disrupt, dissuade, discourage, or otherwise influence them, can be part of a strategy. This is where strategy can
be a ploy, as well as a plan.

For example, a grocery chain might threaten to expand a store, so that a competitor doesn’t move into the same area; or a telecommunications company might buy up patents that a
competitor could potentially use to launch a rival product.

3. Strategy as Pattern

Strategic plans and ploys are both deliberate exercises. Sometimes, however, strategy emerges from past organizational behavior. Rather than being an intentional choice, a
consistent and successful way of doing business can develop into a strategy.

For instance, imagine a manager who makes decisions that further enhance an already highly responsive customer support process. Despite not deliberately choosing to build a
strategic advantage, his pattern of actions nevertheless creates one.

To use this element of the 5 Ps, take note of the patterns you see in your team and organization. Then, ask yourself whether these patterns have become an implicit part of your
strategy; and think about the impact these patterns should have on how you approach strategic planning.

Tools such as USP Analysis and Core Competence Analysis can help you with this. A related tool, VRIO Analysis, can help you explore resources and assets (rather than
patterns) that you should focus on when thinking about strategy.

4. Strategy as Position

“Position” is another way to define strategy – that is, how you decide to position yourself in the marketplace. In this way, strategy helps you explore the fit between your
organization and your environment, and it helps you develop a sustainable competitive advantage

5. Strategy as Perspective

The choices an organization makes about its strategy rely heavily on its culture – just as patterns of behavior can emerge as strategy, patterns of thinking will shape an
organization’s perspective, and the things that it is able to do well.

For instance, an organization that encourages risk-taking and innovation from employees might focus on coming up with innovative products as the main thrust behind its strategy.
By contrast, an organization that emphasizes the reliable processing of data may follow a strategy of offering these services to other organizations under outsourcing arrangements.

Using the 5 Ps

Instead of trying to use the 5 Ps as a process to follow while developing strategy, think of them as a variety of viewpoints that you should consider while developing a robust and
successful strategy.

As such, there are three points in the strategic planning process where it’s particularly helpful to use the 5 Ps:

When you’re gathering information and conducting the analysis needed for strategy development, as a way of ensuring that you’ve considered everything relevant.

When you’ve come up with initial ideas, as a way of testing that that they’re realistic, practical and robust.

As a final check on the strategy that you’ve developed, to flush out inconsistencies and things that may not have been fully considered.

Using Mintzberg’s 5 Ps at these points will highlight problems that would otherwise undermine the implementation of your strategy.

After all, it’s much better to identify these problems at the planning stage than it is to find out about them after you’ve spent several years – and millions of dollars – implementing
a plan that was flawed from the Start.
 Strategic Management Process, Corporate Governance
THEINTACTFRONT17 APR 2018 2 COMMENTS

Strategic Management Process

Strategic management is a process of analyzing the major initiatives that contain resources and performance in external environments, which a firm’s top management manages on
behalf of the company owners.

The following diagram illustrates the five important steps of strategic management process.

The Five Steps of Strategic Management

Strategic management is a very large, complicated, and always-evolving endeavor. Therefore, it is handy to group it into a set of solid steps to describe the process of strategic
management. The most common and used frameworks of strategic management include five steps, grouped in two general stages − Formulation and Implementation.

Formulation

 Analysis− Analysis involves comprehensive market, financial and business research on the external and competitive environments. The process includes conducting Porter’s Five Forces, SWOT,
PESTEL, and value chain management analyses and combining expertise in each industry that are part of the strategy.
 Strategy Formation− After analyzing internal and external environments, the organization arrives at a generic strategy (for instance, low-cost, differentiation, etc.) that is based upon the value-
chain implications. It is done for deriving and maximizing core competence and prospective competitive advantages.
 Goal Setting− Goal setting is the next step of strategy formation. As the defined strategy is in hand, management now tends to find out and communicates the goals and objectives of the
company that are linked to the predicted results, strengths, and opportunities.

Implementation

 Structure− The implementation phase has the basic function of structuring the management and operational processes. As there is a strategy in place, the business now wants to solidify the
organizational structure and leadership patterns (making many changes if required).
 Feedback− Feedback is the final stage of strategic management process. In this final stage of strategy, all of the budgetary figures are collected and disseminated for evaluation. Financial ratios
calculation and performance reviews are delivered to relevant managers, executives and concerned departments.

Corporate Governance

Corporate Governance refers to the way a corporation is governed. It is the technique by which companies are directed and managed. It means carrying the business as per the
stakeholders’ desires. It is actually conducted by the board of Directors and the concerned committees for the company’s stakeholder’s benefit. It is all about balancing individual
and societal goals, as well as, economic and social goals.

Corporate Governance is the interaction between various participants (shareholders, board of directors, and company’s management) in shaping corporation’s performance and the
way it is proceeding towards. The relationship between the owners and the managers in an organization must be healthy and there should be no conflict between the two. The
owners must see that individual’s actual performance is according to the standard performance. These dimensions of corporate governance should not be overlooked.

Corporate Governance deals with the manner the providers of finance guarantee themselves of getting a fair return on their investment. Corporate Governance clearly distinguishes
between the owners and the managers. The managers are the deciding authority. In modern corporations, the functions/ tasks of owners and managers should be clearly defined,
rather, harmonizing.

Corporate Governance deals with determining ways to take effective strategic decisions. It gives ultimate authority and complete responsibility to the Board of Directors. In today’s
market- oriented economy, the need for corporate governance arises. Also, efficiency as well as globalization are significant factors urging corporate governance. Corporate
Governance is essential to develop added value to the stakeholders.

Corporate Governance ensures transparency which ensures strong and balanced economic development. This also ensures that the interests of all shareholders (majority as well as
minority shareholders) are safeguarded. It ensures that all shareholders fully exercise their rights and that the organization fully recognizes their rights.

Corporate Governance has a broad scope. It includes both social and institutional aspects. Corporate Governance encourages a trustworthy, moral, as well as ethical environment.

Benefits of Corporate Governance

1. Good corporate governance ensures corporate success and economic growth.

2. Strong corporate governance maintains investors’ confidence, as a result of which, company can raise capital efficiently and effectively.
3. It lowers the capital cost.
4. There is a positive impact on the share price.
5. It provides proper inducement to the owners as well as managers to achieve objectives that are in interests of the shareholders and the organization.
6. Good corporate governance also minimizes wastages, corruption, risks and mismanagement.
7. It helps in brand formation and development.
8. It ensures organization in managed in a manner that fits the best interests of all.

External Environment Analysis: PESTEL

THEINTACTFRONT21 APR 2018 6 COMMENTS

External environment analysis is an important part of strategic management.

PESTEL Analysis

PESTEL analysis includes Political, Economic, Social, Technological, Environmental and Legal analysis. It is an external environment analysis for conducting a strategic analysis
or carrying out market research. It offers a certain overview of the varied macro-environmental factors that the company has to consider.
 PESTEL

 Political factors analysis is related with how and to what extent a government interferes in the economy. Specifically, political factors include tax policy, labor law, environmental law, trade
restrictions, tariffs, and political stability. Political factors may also be related with goods and services which the government allows (merit goods) and those that the government does not want
to allow (demerit goods). The government can have a great influence on the overall health, education, and infrastructure of a country.
 Economic factors contain factors such as economic growth, interest rates, exchange rates and the inflation rate. These factors may have an influential effect on how the businesses operate and
make decisions. For example, interest rates can affect the firm’s cost of capital and thereby influence business growth and expansion. Exchange rates can affect the costs of export and the supply
and price of imports.
 Social factors contain issues such as health consciousness, population growth rate, age distribution, career attitudes and emphasis on safety. Trends in the social factors may affect the demand
for a company’s goods and how the company operates. For example, ageing population leads to smaller and less-willing workforce (and increases the cost of labor). Moreover, companies may
change various management strategies in sync with the social trends (such as recruiting more females).
 Technological factors include ecological and environmental aspects, such as R&D activity, automation, technology incentives and the rate of technological change. They can determine barriers to
entry, minimum efficient production level and influence outsourcing decisions. Furthermore, technological shifts can affect costs, quality, and lead to innovation.
 Environmental factors are the conditions such as weather, climate, and climate change, which may especially influence tourism, farming, and insurance sectors. Growing awareness to climate
change are increasing the interest in how companies operate and what products they offer; it is both creating new markets and damaging the existing ones.
 Legal factors include laws pertaining to discrimination, consumer affairs, antitrust, employment, and health and safety. These factors can affect the operations, costs, and the demand for the
products. Legal factors can also influence the brand value and reputation of a company. They are increasingly paid more attention to in the current decade.

While in external analysis, three correlated environment should be studied and analyzed:

 immediate / industry environment

 national environment
 broader socio-economic environment / macro-environment

Examining the industry environment needs an appraisal of the competitive structure of the organization’s industry, including the competitive position of a particular organization
and it’s main rivals. Also, an assessment of the nature, stage, dynamics and history of the industry is essential. It also implies evaluating the effect of globalization on competition
within the industry. Analyzing the national environment needs an appraisal of whether the national framework helps in achieving competitive advantage in the globalized
environment. Analysis of macro-environment includes exploring macro-economic, social, government, legal, technological and international factors that may influence the
environment. The analysis of organization’s external environment reveals opportunities and threats for an organization.

Strategic managers must not only recognize the present state of the environment and their industry but also be able to predict its future positions.

Analyzing Companies Resource in Competitive Position

THEINTACTFRONT21 APR 2018 1 COMMENT

SWOT Analysis is a strategic planning technique that is used to evaluate the strengths, weaknesses, opportunities, and threats of a project or in a business entity. It involves finding
out the objectives of the business venture or project, and also pinpointing the internal and external factors that are favorable and unfavorable to attain that objective.

SWOT analysis must begin with the definition of a desired result or objective. It is also sometimes incorporated into the strategic planning model.

 Strengths− Characteristics that give an advantage over others in the industry.

 Weaknesses− Characteristics that are a disadvantage.
 Opportunities− External chances to improve in the environment.
 Threats− External elements that could cause trouble for the business.

SWOT Analysis Breakdown

Strengths

Strengths must consider what the organization can do with the internal resources. Any asset of the firm could be classified as strength, but the extent of contribution to the
competitive situation of the firm can fluctuate greatly. A reputed brand-name, popular customer service, and/or exclusive access to systematic supply chain network are strengths.

Weaknesses

Any area in which the organization lacks strength is weakness. Poor product positioning, outdated production equipment, and poor customer service are weaknesses. High
employee turnover that leads to loss of talent is a major weakness of the firm.

Opportunities

In general, changes in the external environment that may uplift the company can be an opportunity to the firm. Weakening of competitors by a poor cash-flow position is an
opportunity to capture market share. Similarly, changes in tax structure, progress in economic trends, or the passage of favorable laws are all opportunities.

Threats

Threats stem from a deficiency of opportunities or from the strengths of competitors. Changes in consumer preferences, new competitor innovations, restrictive regulations, and
unfavorable trade barriers are all examples of threats.

Optimizing after SWOT

After completing the SWOT analysis, the company should be able to configure its overall position in the marketplace. This is an important step in strategic management. However,
every opportunity cannot be pursued and every strength is not necessarily an advantage. The organization should choose the factors to exploit to take complete advantage of its
position. Similarly, the organization should seek to minimize weaknesses and threats.

Concept of stretch, Leverage and Fit

 THEINTACTFRONT21 APR 2018 1 COMMENT

To achieve Strategic Intent – you need to Stretch. As of today there is a misfit between resources and aspirations. So instead of looking at resources, you will look at
resourcefulness. To achieve you will stretch and make innovative use of your resources.

This leads to Leveraging your resources. Leverage refers to concentrating your resources to your strategic intent, accumulating learning, experiences and competencies, in a manner
that a scarce resource base can be stretched to meet the aspirations that an organizational resources to its environment.

The strategic fit is the traditional way of looking at strategy. Using techniques such as SWOT analysis, which are used to assess organizational capabilities and environmental
opportunities, Strategy is taken as a compromise between what the environment has got to offer in terms of opportunities and the counteroffer that the organization makes in the
form of its capabilities.

Under fit, the strategic intent is conservative and seems to be more realistic, but you may not be aware of the potential; under stretch and leverage it could be improbable, even
idealistic, but then you look at something far beyond present possibilities and look at the potential possibilities.

Strategic Analysis and Choice

THEINTACTFRONT21 APR 2018 1 COMMENT
The first step in evaluating and choosing a strategy is to review the results of the strategic situation assessment consisting of an analysis of the general, industry, and internal
environments, in terms of factors critical to the success of the business.

George Steiner stated that three types of data are required to perform a situation audit: identifying threats, strengths, and weaknesses.

1. Past performance of the firm.

2. Data about the current situation, including:
o Analysis of customers and markets.
o Resources of the company.
o
o Environmental setting.
o Other performance measures or areas of interest.
3. Forecasts of the future.

Critical success factors (CSFs) for any business are the limited number of areas in which satisfactory results ensure successful competitive performance. Studies have shown that
three to six factors are usually critical to success in most industries.

In general, at least five criteria tend to determine which factors are critical to the business and their relative importance:

1. Impact on performance measures, such as market share, profits, cash flow, and the like.
2. Relationship to strategic thrusts, such as differentiation, costs, segmentation, preemptive, turnaround, renewal, and the like.
3. Relationship to life-cycle stage, that is, introduction, growth, maturity, and aging and decline.
4. Relates to a major activity of the business, such as marketing at IBM.
5. Involves large amounts of money relative to other activities of the firm.

There are several techniques for identifying CSFs for a business, its industry, and its general environment. It is important to evaluate the firm, but it is equally important evaluate
the capabilities of competitors.

The development and evaluation of alternatives should be two separate and distinct steps. Three basic questions must be asked during strategy evaluation:

1. How effective has the existing strategy been?

2. How effective will that strategy be in the future?
3. What will be the effectiveness of selected alternative strategies (or changes in the existing strategy) in the future?

The form of strategic analysis and choice varies considerably according to the stage of development of the firm, and the focus differs at the different firm levels.

The evaluation should take place at the corporate, business, and functional levels, with close scrutiny of policies and plans at each of these levels.

For multi-industry and multiproduct/product firm, strategic analysis begins at the corporate level.

Corporate strategy provides guidance for resource allocations among businesses and also indicates standards for adding new businesses or deleting existing ones.

Alternative business-level strategies must be examined within the context of each business unit in multi-industry firms.

Functional strategies must be identified to initiate and control daily business activities in a manner consistent with business strategy.

Factors Taken into Consideration for Strategic Analysis and Choice

Key Internal Factors

Marketing
Management
Operations/Production
Accounting/Finance
Computer Information Systems
Research and Development

Key External Factors

Political/Governmental/Legal
Economy
Technological
Social/Demographic/Cultural/Environmental
Competitive

Techniques Used in Strategic Analysis

The following devices or techniques are used in the procedure of strategic analysis:

Five Forces Analysis

PEST Analysis (Political, Economic, Social and Technological Analysis)
Market segmentation
Scenario planning
Competitor analysis
Directional policy matrix
SWOT Analysis (Strength, Weaknesses, Opportunities, and Threats Analysis)
Critical Success Factor Analysis

Characteristics of Strategic Analysis and Choice

 Following are the features of strategic analysis and choice:
Establishment of long term goals
Producing strategy options
Choosing strategies to act on
Selecting the best option and accomplishing mission and goals

Porter’s Five Forces Model

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Porter’s Five Forces is a business analysis model that helps to explain why different industries are able to sustain different levels of profitability. The model was originally
published in Michael Porter’s book, “Competitive Strategy: Techniques for Analyzing Industries and Competitors” in 1980.

The model is widely used to analyze the industry structure of a company as well as its corporate strategy. Porter identified five undeniable forces that play a part in shaping every
market and industry in the world. The forces are frequently used to measure competition intensity, attractiveness and profitability of an industry or market.

These forces are:

1. Competition in the industry;

2. Potential of new entrants into the industry;
3. Power of suppliers;
4. Power of customers;
5. Threat of substitute products.

Threat of new entrants. This force determines how easy (or not) it is to enter a particular industry. If an industry is profitable and there are few barriers to enter, rivalry soon
intensifies. When more organizations compete for the same market share, profits start to fall. It is essential for existing organizations to create high barriers to enter to deter new
entrants. Threat of new entrants is high when:

 Low amount of capital is required to enter a market;

 Existing companies can do little to retaliate;
 Existing firms do not possess patents, trademarks or do not have established brand reputation;
 There is no government regulation;
 Customer switching costs are low (it doesn’t cost a lot of money for a firm to switch to other industries);
 There is low customer loyalty;
 Products are nearly identical;
 Economies of scale can be easily achieved.

Bargaining power of suppliers. Strong bargaining power allows suppliers to sell higher priced or low quality raw materials to their buyers. This directly affects the buying firms’
profits because it has to pay more for materials. Suppliers have strong bargaining power when:

 There are few suppliers but many buyers;

 Suppliers are large and threaten to forward integrate;
 Few substitute raw materials exist;
 Suppliers hold scarce resources;
 Cost of switching raw materials is especially high.

Bargaining power of buyers. Buyers have the power to demand lower price or higher product quality from industry producers when their bargaining power is strong. Lower price
means lower revenues for the producer, while higher quality products usually raise production costs. Both scenarios result in lower profits for producers. Buyers exert strong
bargaining power when:

 Buying in large quantities or control many access points to the final customer;
 Only few buyers exist;
 Switching costs to other supplier are low;
 They threaten to backward integrate;
 There are many substitutes;
 Buyers are price sensitive.

Threat of substitutes. This force is especially threatening when buyers can easily find substitute products with attractive prices or better quality and when buyers can switch from
one product or service to another with little cost. For example, to switch from coffee to tea doesn’t cost anything, unlike switching from car to bicycle.

Rivalry among existing competitors. This force is the major determinant on how competitive and profitable an industry is. In competitive industry, firms have to compete
aggressively for a market share, which results in low profits. Rivalry among competitors is intense when:

 There are many competitors;

 Exit barriers are high;
 Industry of growth is slow or negative;
 Products are not differentiated and can be easily substituted;
 Competitors are of equal size;
 Low customer loyalty.

Although, Porter originally introduced five forces affecting an industry, scholars have suggested including the sixth force: complements. Complements increase the demand of the
primary product with which they are used, thus, increasing firm’s and industry’s profit potential. For example, iTunes was created to complement iPod and added value for both
products. As a result, both iTunes and iPod sales increased, increasing Apple’s profits.

Concept of Value Chain

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 Manufacturing companies create value by acquiring raw materials and using them to produce something useful. Retailers bring together a range of products and present them in a
way that’s convenient to customers, sometimes supported by services such as fitting rooms or personal shopper advice. And insurance companies offer policies to customers that
are underwritten by larger re-insurance policies. Here, they’re packaging these larger policies in a customer-friendly way, and distributing them to a mass audience.

The value that’s created and captured by a company is the profit margin:

Value Created and Captured – Cost of Creating that Value = Margin

The more value an organization creates, the more profitable it is likely to be. And when you provide more value to your customers, you build competitive advantage.

Understanding how your company creates value, and looking for ways to add more value, are critical elements in developing a competitive strategy. Michael Porter discussed this
in his influential 1985 book “Competitive Advantage,” in which he first introduced the concept of the value chain.

A value chain is a set of activities that an organization carries out to create value for its customers. Porter proposed a general-purpose value chain that companies can use to
examine all of their activities, and see how they’re connected. The way in which value chain activities are performed determines costs and affects profits, so this tool can help you
understand the sources of value for your organization.

Elements in Porter’s Value Chain

Rather than looking at departments or accounting cost types, Porter’s Value Chain focuses on systems, and how inputs are changed into the outputs purchased by consumers. Using
this viewpoint, Porter described a chain of activities common to all businesses, and he divided them into primary and support activities, as shown below.

Primary Activities

Primary activities relate directly to the physical creation, sale, maintenance and support of a product or service. They consist of the following:

 Inbound logistics– These are all the processes related to receiving, storing, and distributing inputs internally. Your supplier relationships are a key factor in creating value here.
 Operations– These are the transformation activities that change inputs into outputs that are sold to customers. Here, your operational systems create value.
 Outbound logistics– These activities deliver your product or service to your customer. These are things like collection, storage, and distribution systems, and they may be internal or external to
your organization.
 Marketing and sales– These are the processes you use to persuade clients to purchase from you instead of your competitors. The benefits you offer, and how well you communicate them, are
sources of value here.
 Service– These are the activities related to maintaining the value of your product or service to your customers, once it’s been purchased.

Support Activities

These activities support the primary functions above. In our diagram, the dotted lines show that each support, or secondary, activity can play a role in each primary activity. For
example, procurement supports operations with certain activities, but it also supports marketing and sales with other activities.

 Procurement (purchasing)– This is what the organization does to get the resources it needs to operate. This includes finding vendors and negotiating best prices.
 Human resource management– This is how well a company recruits, hires, trains, motivates, rewards, and retains its workers. People are a significant source of value, so businesses can create a
clear advantage with good HR practices.
 Technological development– These activities relate to managing and processing information, as well as protecting a company’s knowledge base. Minimizing information technology costs,
staying current with technological advances, and maintaining technical excellence are sources of value creation.
 Infrastructure– These are a company’s support systems, and the functions that allow it to maintain daily operations. Accounting, legal, administrative, and general management are examples of
necessary infrastructure that businesses can use to their advantage.

Companies use these primary and support activities as “building blocks” to create a valuable product or service.

Using Porter’s Value Chain

To identify and understand your company’s value chain, follow these steps.

Step 1 – Identify subactivities for each primary activity

For each primary activity, determine which specific subactivities create value. There are three different types of subactivities:

 Direct activitiescreate value by themselves. For example, in a book publisher’s marketing and sales activity, direct subactivities include making sales calls to bookstores, advertising, and selling
online.
 Indirect activitiesallow direct activities to run smoothly. For the book publisher’s sales and marketing activity, indirect subactivities include managing the sales force and keeping customer
records.
 Quality assuranceactivities ensure that direct and indirect activities meet the necessary standards. For the book publisher’s sales and marketing activity, this might include proofreading and
editing advertisements.

Step 2 – Identify subactivities for each support activity.

For each of the Human Resource Management, Technology Development and Procurement support activities, determine the subactivities that create value within each primary
activity. For example, consider how human resource management adds value to inbound logistics, operations, outbound logistics, and so on. As in Step 1, look for direct, indirect,
and quality assurance subactivities.

Then identify the various value-creating subactivities in your company’s infrastructure. These will generally be cross-functional in nature, rather than specific to each primary
activity. Again, look for direct, indirect, and quality assurance activities.
 Step 3 – Identify links

Find the connections between all of the value activities you’ve identified. This will take time, but the links are key to increasing competitive advantage from the value chain
framework. For example, there’s a link between developing the sales force (an HR investment) and sales volumes. There’s another link between order turnaround times, and service
phone calls from frustrated customers waiting for deliveries.

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Grand Strategies
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The Grand Strategies are the corporate level strategies designed to identify the firm’s choice with respect to the direction it follows to accomplish its set objectives. Simply, it involves the
decision of choosing the long term plans from the set of available alternatives. The Grand Strategies are also called as Master Strategies or Corporate Strategies.

There are four grand strategic alternatives that can be followed by the organization to realize its long-term objectives:

1. Stability Strategy
2. Expansion Strategy
3. Retrenchment Strategy
4. Combination Strategy

The grand strategies are concerned with the decisions about the allocation and transfer of resources from one business to the other and managing the business portfolio efficiently, such
that the overall objective of the organization is achieved. In doing so, a set of alternatives are available to the firm and to decide which one to choose, the grand strategies help to find an
answer to it.

Business can be defined along three dimensions: customer groups, customer functions and technology alternatives. Customer group comprises of a particular category of people to whom
goods and services are offered, and the customer functions mean the particular service that is being offered. And the technology alternatives covers any technological changes made in
the operations of the business to improve its efficiency.

Stability Strategy

Definition: The Stability Strategy is adopted when the organization attempts to maintain its current position and focuses only on the incremental improvement by merely changing one or
more of its business operations in the perspective of customer groups, customer functions and technology alternatives, either individually or collectively.

Generally, the stability strategy is adopted by the firms that are risk averse, usually the small scale businesses or if the market conditions are not favorable, and the firm is satisfied with its
performance, then it will not make any significant changes in its business operations. Also, the firms, which are slow and reluctant to change finds the stability strategy safe and do not
look for any other options.

Stability Strategies could be of three types:

1. No-Change Strategy
2. Profit Strategy
3. Pause/Proceed with Caution Strategy

To have a better understanding of Stability Strategy go through the following examples in the context of customer groups, customer functions and technology alternatives.

1. The publication house offers special services to the educational institutions apart from its consumer sale through the market intermediaries, with the intention to facilitate a bulk buying.
2. The electronics company provides better after-sales services to its customers to make the customer happy and improve its product image.
3. The biscuit manufacturing company improves its existing technology to have the efficient productivity.

In all the above examples, the companies are not making any significant changes in their operations, they are serving the same customers with the same products using the same
technology.

Expansion Strategy

is adopted by an organization when it attempts to achieve a high growth as compared to its past achievements. In other words, when a firm aims to grow considerably by broadening the
scope of one of its business operations in the perspective of customer groups, customer functions and technology alternatives, either individually or jointly, then it follows the Expansion
Strategy.

The reasons for the expansion could be survival, higher profits, increased prestige, economies of scale, larger market share, social benefits, etc. The expansion strategy is adopted by
those firms who have managers with a high degree of achievement and recognition. Their aim is to grow, irrespective of the risk and the hurdles coming in the way.

The firm can follow either of the five expansion strategies to accomplish its objectives:
1. Expansion through Concentration
2. Expansion through Diversification
3. Expansion through Integration
4. Expansion through Cooperation
5. Expansion through Internationalization

Go through the examples below to further comprehend the understanding of the expansion strategy. These are in the context of customer groups, customer functions and technology
alternatives.

1. The baby diaper company expands its customer groups by offering the diaper to old aged persons along with the babies.
2. The stockbroking company offers the personalized services to the small investors apart from its normal dealings in shares and debentures with a view to having more business and a
diversified risk.
3. The banks upgraded their data management system by recording the information on computers and reduced huge paperwork. This was done to improve the efficiency of the banks.

In all the examples above, companies have made significant changes to their customer groups, products, and the technology, so as to have a high growth.

Retrenchment Strategy

is adopted when an organization aims at reducing its one or more business operations with the view to cut expenses and reach to a more stable financial position.

In other words, the strategy followed, when a firm decides to eliminate its activities through a considerable reduction in its business operations, in the perspective of customer groups,
customer functions and technology alternatives, either individually or collectively is called as Retrenchment Strategy.

The firm can either restructure its business operations or discontinue it, so as to revitalize its financial position. There are three types of Retrenchment Strategies:

1. Turnaround
2. Divestment
3. Liquidation

To further comprehend the meaning of Retrenchment Strategy, go through the following examples in terms of customer groups, customer functions and technology alternatives.

1. The book publication house may pull out of the customer sales through market intermediaries and may focus on the direct institutional sales. This may be done to slash the sales force
and increase the marketing efficiency.
2. The hotel may focus on the room facilities which is more profitable and may shut down the less profitable services given in the banquet halls during occasions.
3. The institute may offer a distance learning programme for a particular subject, despite teaching the students in the classrooms. This may be done to cut the expenses or to use the facility
more efficiently, for some other purpose.

In all the above examples, the firms have made the significant changes either in their customer groups, functions and technology/process, with the intention to cut the expenses and
maintain their financial stability.

Combination Strategy

means making the use of other grand strategies (stability, expansion or retrenchment) simultaneously. Simply, the combination of any grand strategy used by an organization in different
businesses at the same time or in the same business at different times with an aim to improve its efficiency is called as a combination strategy.

Such strategy is followed when an organization is large and complex and consists of several businesses that lie in different industries, serving different purposes. Go through the following
example to have a better understanding of the combination strategy:

* A baby diaper manufacturing company augments its offering of diapers for the babies to have a wide range of its products (Stability)and at the same time, it also manufactures the
diapers for old age people, thereby covering the other market segment (Expansion). In order to focus more on the diapers division, the company plans to shut down its baby wipes
division and allocate its resources to the most profitable division (Retrenchment).

In the above example, the company is following all the three grand strategies with the objective of improving its performance. The strategist has to be very careful while selecting the
combination strategy because it includes the scrutiny of the environment and the challenges each business operation faces. The Combination strategy can be followed either
simultaneously or in the sequence.

Porter’s Generic Strategies

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 The no-frills operators have opted to cut costs to a minimum and pass their savings on to customers in lower prices. This helps them grab market share and ensure their planes are
as full as possible, further driving down cost. The luxury airlines, on the other hand, focus their efforts on making their service as wonderful as possible, and the higher prices they
can command as a result make up for their higher costs.

Meanwhile, smaller airlines try to make the most of their detailed knowledge of just a few routes to provide better or cheaper services than their larger, international rivals.

Generic Strategies

These three approaches are examples of “generic strategies,” because they can be applied to products or services in all industries, and to organizations of all sizes. They were first
set out by Michael Porter in 1985 in his book, “Competitive Advantage: Creating and Sustaining Superior Performance.”

Porter called the generic strategies “Cost Leadership” (no frills), “Differentiation” (creating uniquely desirable products and services) and “Focus” (offering a specialized service in
a niche market). He then subdivided the Focus strategy into two parts: “Cost Focus” and “Differentiation Focus.” These are shown in Figure 1 below.

The Cost Leadership Strategy

Porter’s generic strategies are ways of gaining competitive advantage – in other words, developing the “edge” that gets you the sale and takes it away from your competitors. There
are two main ways of achieving this within a Cost Leadership strategy:

 Increasing profits by reducing costs, while charging industry-average prices.

 Increasing market share through charging lower prices, while still making a reasonable profit on each sale because you’ve reduced costs.

Tip:
Remember that Cost Leadership is about minimizing the cost to the organization of delivering products and services. The cost or price paid by the customer is a separate issue!

The Cost Leadership strategy is exactly that – it involves being the leader in terms of cost in your industry or market. Simply being amongst the lowest-cost producers is not good
enough, as you leave yourself wide open to attack by other low-cost producers who may undercut your prices and therefore block your attempts to increase market share.

The Differentiation Strategy

Differentiation involves making your products or services different from and more attractive than those of your competitors. How you do this depends on the exact nature of your
industry and of the products and services themselves, but will typically involve features, functionality, durability, support, and also brand image that your customers value.

To make a success of a Differentiation strategy, organizations need:

 Good research, development and innovation.

 The ability to deliver high-quality products or services.
 Effective sales and marketing, so that the market understands the benefits offered by the differentiated offerings.

Large organizations pursuing a differentiation strategy need to stay agile with their new product development processes. Otherwise, they risk attack on several fronts by competitors
pursuing Focus Differentiation strategies in different market segments.

The Focus Strategy

Companies that use Focus strategies concentrate on particular niche markets and, by understanding the dynamics of that market and the unique needs of customers within it,
develop uniquely low-cost or well-specified products for the market. Because they serve customers in their market uniquely well, they tend to build strong brand loyalty amongst
their customers. This makes their particular market segment less attractive to competitors.

As with broad market strategies, it is still essential to decide whether you will pursue Cost Leadership or Differentiation once you have selected a Focus strategy as your main
approach: Focus is not normally enough on its own.

But whether you use Cost Focus or Differentiation Focus, the key to making a success of a generic Focus strategy is to ensure that you are adding something extra as a result of
serving only that market niche. It’s simply not enough to focus on only one market segment because your organization is too small to serve a broader market (if you do, you risk
competing against better-resourced broad market companies’ offerings).

The “something extra” that you add can contribute to reducing costs (perhaps through your knowledge of specialist suppliers) or to increasing differentiation (though your deep
understanding of customers’ needs).

Strategies for Competing in Global Markets

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Entering A New Market

When companies decide to compete internationally, they should not automatically use the same strategies that they used in local markets. Thompson, Strickland, and Gamble
suggest that companies should consider:

Whether to customize products or services by market or produce the same thing everywhere

Whether to use the same strategy everywhere or modify it by market

Locating production, distribution, service centers, and offices to make the most of the location advantages

Best practices for positioning their company in new markets

A company’s approach to strategy is key to gaining a competitive edge. A survey report from Oxford Economics, Manufacturing Transformation, shows that many executives are
rethinking their current strategies in order to go beyond operational excellence to gain a competitive edge. As companies explore new markets, knowing how to adopt a strategy to
fit new markets is key.
 Understanding Local Labor Laws

Compliance with local labor laws is one of the most important aspects of a company’s global expansion. Every country has slightly different standards for how employers should
treat employees. For instance, countries such as Japan, France, and Brazil make it difficult for companies to dismiss a worker. Companies that fail to comply with local labor laws
in countries where they have operations may face fines, work stoppages, or lawsuits.

One of the best ways to ensure compliance in global markets is to work with an International PEO to help navigate labor laws in new markets. This Employer of Record solution
helps your organization avoid needless costs and delays, so you can focus on international success.

Speed to Market

If a company is unable to enter a market quickly, it may not see the success it expects, no matter how innovative its product and service offerings are. A slow speed to market can
result in a company’s product or service being considered outdated, especially if their competition was able to enter the market faster.

Here are some ways to improve speed to market:

Foster collaboration and communication within the team

Focus on improving efficiency in the organization

Develop an effective, detailed strategy for market entry

Keep the team on track to eliminate wasted time

Best Practices for Success in the Global Marketplace

1. Scour Emerging Markets

International companies based in mature economies can use their relationships in emerging markets to speed along innovation. Whether a company chooses to bring new products
from emerging economies into mature ones or is taking current offerings into a developing country, emerging markets are ripe with opportunities. Taking advantage of these
growing economies can give a company the competitive edge they are looking for in global markets.

2. Form Strategic Partnerships

Thompson, Strickland, and Gamble write that strategic partnerships can help by “filling gaps in technical expertise and/or knowledge of local markets.” As we mentioned above,
partnering with an International PEO gives companies access to in-country experts. An International PEO not only provides insight into local labor laws but also helps companies
on-board top talent in their desired country, even in countries that might face labor shortages.

3. Innovate Everywhere

Innovation should be a part of every aspect of a business. Companies need to innovate at every level, especially when planning for a global expansion. The key to innovation is to
develop a strategy that harnesses market trends, as opposed to reacting to them. Companies that are able to do so successfully as they expand into new markets gain the edge over
their competition.

By employing a strong strategy, understanding local labor laws, focusing on speed to market, and using partnerships to drive efficiency and innovation, companies can gain the
competitive edge they are looking for in the global marketplace.

Diversification Strategies
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Diversification strategy probably takes place, when company or business organizations introduce a new product in the market. These strategies are known as diversification
strategies. There are three types of diversification strategies.

Types of Diversification Strategy

1. Concentric Diversification Strategies

2. Horizontal Diversification Strategies
3. Conglomerate Diversification Strategies

Diversification strategy actually minimizes the risk of loss in a business organization by splitting different categories of products in different markets geographically. In early
1960’s & 1970’s there is rapid growth in diversification of businesses. But with the passage of time it became difficult to manage much diversified activities of business
organization. Even in recent years it is quite hard for any business organization to operate in diversification mode because there are a lot of different requirements that must be
taken into account by the business organization.

1. Concentric Diversification Strategy:

The introduction of new but related products in the new markets is considered as concentric diversification strategy. For example, the AT&T Company in America is involved in
the application of concentric diversification strategy by adding cable lines for fast internet services across the country. The previous product of the company was telephone line but
it spends $120 billion for the acquisition of cable television. In this way the AT&T jointly works with America Online (AOL) to provide cable internet access to the AOL
customers.

Guidelines for Concentric Diversification:

 There are certain conditions that are favorable for the application of concentric diversification strategy. For this purpose following are some of the guidelines that specify the
effectiveness of the concentric diversification strategy.

 It is healthier for the business organization to competes in industry where there is no or slow growth
 The sale of current products is enhanced by adding new but related products in the pool of business organization
 When new & related products are introduced, these must be offered at competitively reasonable prices
 In certain conditions when the current products are passing through declining stage of the product development life cycle, it is quite feasible to add new but related products in new markets
 The management team of the organization should be strong enough

1. Conglomerate Diversification Strategy:

Diversification strategies include conglomerate diversification in which new products are added in the pool of the business organization that are not related to the existing ones.
There are certain organizations that are involved in the conglomerate diversification on the basis of expectation that they can earn profit by acquiring other firm and breaking &
selling its parts in a piecemeal.

Guidelines for Conglomerate Diversification:

In certain situations the conglomerate diversification strategy becomes effective enough to be pursued by the organization. Following are some of the guidelines which are feasible
for this strategy.

 When the sales & profits are declining on annual basis

 There is sufficient managerial & capital talent possessed by the organization to compete in the new industry successfully
 There is acquired as well as acquiring firms and both of them have financial synergy
 In situations when there is complete saturation for the present markets of the present products

1. Horizontal Diversification Strategy:

Horizontal diversification occurs when new & unrelated products are provided to the existing customers. Horizontal diversification strategy is less risky than conglomerate
diversification because of the fact that the current customers of the organization are already exposed.

Guidelines for Horizontal Diversification:

There are certain situations where the horizontal diversification strategy is much effective by the organization. Following are some of the guidelines in this regard.

 When new & unrelated products are added with the existing ones, the revenue of the existing products increase significantly
 The industry that contains low margins & returns and is highly competitive
 The new products are marketed to the current customers though current distribution channels
 There are sales patterns of counter cyclical nature of the new products compared to the current products.

Creating Corporate Value and the Issue of Relatedness

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Creating Corporate Value

1. Leadership brainstorming
2. Refinement
3. Team brainstorming
4. Collation and refinement
5. Feedback cycle
6. Adoption

Let me take you through the process, step by step.

Leadership Brainstorming

Firstly, the directors were asked to write up half a dozen values. We purposefully wrote these in private, without input from ne another, and then once ready we shared them with
each other and discussed them.

We found plenty of overlap, however we also found a number of unique values that only one director had considered.

Refinement of Values

Once we had our set of values from the leadership, we worked together as a group, to refine the list down to around a dozen phrases or words.

This was achieved over a week, through a combination of both emails and physical meetings, between the directors.

Team Brainstorming

Once the leadership felt that the values we had created were refined enough to open up for discussion, we scheduled one of our ‘town hall’ meetings and invited all of our
employees.

These town hall meetings we run are a chance for everyone to participate; it’s not management speaking at employees, it’s all of the team coming together and everyone having an
equal voice.

In the meeting, we explained we were creating company values, and the employees were given the values the directors had created as examples, and asked to work in small teams
to workshop through what values they liked, or what values they would like to suggest.

Once this exercise was complete, we came back together, and then everyone floated the values their small groups had created.

We wrote them up on a whiteboard, and ended up with a list of 30 or more potential company values. Many of these suggested values overlapped each other; sure they were worded
differently, however they had similar meanings and intent.

The entire team worked through this long list in the same afternoon, and the group then short-listed these down to around a dozen.

Collation and refinement

Over the next few days, the directors took these dozen ideas (of which probably half were from our original set) and distilled the meanings and direction down to six words.

We wrote up what these words meant, and what they embodied, and then we shared these value statements with the entire team for endorsement.

Feedback

Once distributed, we discussed the values and their meanings with the entire team, both in person and via email, and we all finally agreed to the outcome.

These values and meanings were, within a few weeks of undertaking this process, adopted by the entire company.
 The resulting values are different from many other organisations, because;

 The entire company was involved in the creation

 They have been given a revision cycle (review each calendar year)
 They are being used in everything we do. No filing these values in a drawer with a tick on a task list.

What this means is that these company values have real weight; they were discussed and created by everyone, so they had real buy-in from everyone.

We went about creating company values that are a promise, both by and to ourselves, but also our colleagues.

Adoption

We now have a set of corporate value statements. Great work, team!

We can now decide to either put them in some lengthy corporate document and forget about them entirely, or use the effort and thoughts we have put in so far, and carry through
these values, to ensure they are truly adopted and are ‘real’.

We chose the latter approach, knowing that having undertaken this collaborative process, we can’t just ignore them.

True adoption of our company values

We started by undertaking a variety of activities when the values were first adopted. These included;

Creating large posters and placing them in high traffic areas throughout our office.

Printed out and discussed with each employee within the company

Subsequently written about and promoted on our company blog

Shortly afterwards, we then also created a set of activities to ensure they are measured and adopted into the future. These included;

Weekly team stand ups

In our weekly scrum-like meetings with staff, we ask people for examples of how they’ve lived up to these values. We ask for an example of at least one value (Awesome,
Community, Ethical, Passion, Pride & Teamwork) and what they have personally done, to display by their own actions, these goals.

Employee performance reviews

We’ve also added these to our quarterly employee performance reviews.

We do reviews with everyone here at least every 3-4 months. Rather than a large annual review, we prefer to keep these meetings more frequent, to ensure the feedback cycle is
short.

When we say feedback, we use these review sessions not just for employees, but we use these to find out how each individual feels about the business, our values and our current
direction.

We also utilise happiness scores to understand what they like and dislike about their roles here, and look for ways to positively change outcomes.

Recruitment process

We’ve also added these values to our recruitment processes, and we take time during any interviews with candidates to explain them.

We also pitch questions related to these values and often ask for previous examples of how candidates have displayed the traits these values embody. The candidates attitude and
answers to these are taken into account during the decision making process.

Induction process

We have also created a 2-3 hour values induction process for new hires that is part of our standard induction process for all employees, regardless of their role.

This ensures that any new recruits that came on board after the initial planning and creation are up to speed with what our company values are, and what we expect as leadership
and a values-driven team.

Issue of Relatedness

Vertical Integration
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Specifically, vertical integration occurs when a company assumes control over several production or distribution steps involved in the creation of its product or service. Vertical
integration can be carried out in two ways: backward integration and forward integration. A company that expands backward on the production path into manufacturing is
assuming backward integration, while a company that expands forward on the production path into distribution is conducting forward integration.

Types of vertical integration strategies

As we have seen, vertical integration integrates a company with the units supplying raw materials to it (backward integration), or with the distribution channels that carry its
products to the end-consumers (forward integration).

For example, a supermarket may acquire control of farms to ensure supply of fresh vegetables (backward integration) or may buy vehicles to smoothen the distribution of its
products (forward integration).

A car manufacturer may acquire tyre and electrical-component factories (backward integration) or open its own showrooms to sell its vehicle models or provide after-sales service
(forward integration).

There is a third type of vertical integration, called balanced integration, which is a judicious mix of backward and forward integration strategies.
 When is vertical integration attractive for a business?

Several factors affect the decision-making that goes into backward and forward integration. A company may go in for these strategies in the following scenarios:

 The current suppliers of the company’s raw materials or components, or the distributors of its end products, are unreliable
 The prices of raw materials are unstable or the distributors charge high fees
 The suppliers or distributors earn big margins
 The company has the resources to manage the new business that is currently being taken care of by the suppliers or distributors
 The industry is expected to grow significantly

Advantages of vertical integration

What are the benefits of vertical integration? Let us take the example of a car manufacturer implementing this strategy. This company can

 smoothen its supply chain (by ensuring ready supply of tyres and electrical components in the exact specifications that it requires)
 make its distribution and after-sales service more efficient (by opening its own showrooms)
 absorb for itself upstream and downstream profits (profits that would have gone to the tyre and electrical companies and showrooms owned by others)
 increase entry barriers for new entrants (by being able to reduce costs through its own suppliers and distributors)
 invest in specific functions such as tyre-making and develop its core competencies

Disadvantages of vertical integration

But what is the downside? What are the drawbacks of vertical integration? Let us see the main disadvantages.

 The quality of goods supplied earlier by external sources may fall because of a lack of competition.
 Flexibility to increase or decrease production of raw materials or components may be lost as the company may need to sustain a level of production in pursuit of economies of scale.
 It may be difficult for the company to sustain core competencies as it focuses on the integration of the new units.

However, there are alternatives to vertical integration, such as purchases from the market (of tyres, for example) and short- and long-term contracts (for showrooms and with
service stations, for example).

Coordinating the Value Chain

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The value chain concept is based on the process view of organizations. It is an idea of considering a manufacturing (or service) organization as a dynamic system, made up of
various subsystems each with inputs, transformation processes and outputs.

The inputs, transformations, and outputs require the acquisition and consumption of company resources, such as money, equipment, materials, labor, buildings, land, administration
and management. The management process of carrying out value chain activities determines the costs and affects the profitability of organizations.

Most of the organizations in the real world engage in hundreds, even thousands of activities while converting its inputs to outputs. These activities are classified as either primary or
support activities.

According to Michael Porter (1985), the primary activities are −

 Inbound Logistics− Inbound logistics refers to the terms with the suppliers and includes all of the activities needed to receive, store, and disseminate inputs.
 Operations− Operations refer to the entire activities needed to transform the various inputs into outputs (the products and services).
 Outbound Logistics− Outbound logistics include all sets of activities needed to collect, store, and distribute the output.
 Marketing and Sales− Marketing and sales include the activities to inform buyers regarding the products and services, induce the buyers to purchase them, and enable their
purchase.
 Service− Service refers to those activities needed to keep the product or service functioning effectively after it is sold and delivered.

Secondary activities include the following:

 Procurement− The inheritance of inputs or the various resources for the firm.
 Human Resource Management− The activities involved in recruiting, training, improving, compensating and also dismissing personnel.
 Technological Development− The equipment, hardware and software, processes and technical knowledge involved in the transformation of inputs into outputs.
 Infrastructure− The functions or departments such as accounts, legal and regulative, finance, planning and executing, public affairs and public relations, government relations,
quality management and general management.
 The growth of the Firm: Internal Development
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I. Internal Growth Strategies

1. Expansion:

Business expansion refers to raising the market share, sales revenue and profit of the present product or services. The business can be expanded through product development,
market development, expanding the line of product etc.

Expansion leads to better utilisation of the resources and to face the competition efficiently. Business expansion provides economics of large-scale operations.

Business can be expanded through:-

1. Market penetration strategy:

This strategy involves selling existing products to existing markets. To penetrate and capture the market, a firm may cut prices, improve distribution network, increase promotional
activities etc.

1. Market Development strategy:

This strategy involves extending existing products to new market. This strategy aims at reaching new customer segments or expansion into new geographic areas. Market
development aims to increase sales by capturing new market area.

1. Product Development strategy:

This strategy involves developing new products for existing markets or for new markets. Product development means making some modifications in the existing product to give
value to the customers for their purchase.

1. Diversification:

Diversification is another form of internal growth strategy. The purpose of diversification is to allow the company to enter new lines of business that are different from current
operations. There are four types of diversification:

a) Vertical diversification

b) Horizontal diversification

c) Concentric diversification

d) Conglomerate diversification

a) Vertical Diversification

Vertical diversification is also called as vertical integration. In vertical integration new products or services are added which are complementary to the present product line or
service. The purpose of vertical diversification is to improve economic and marketing ability of the firm. Vertical diversification includes:

1. Backward integration:

In backward integration, the company expands its business activities in such a way that it moves backward of its present line of business.

Example:

Despite of being the leaders in Textiles, to strengthen his Position, Dhirubhai Ambani decided to integrate backwards and produce fibres.

1. Forward integration:

In forward integration, the company expands its activities in such a way that it moves ahead of its present line of business.

Example:

New Zealand based Natural health care products company Comvita purchased its Hong Kong distributor Green Life Ltd. And thus achieved forward integration by having access to
greenlife’s retail stores, sales staff and in store promoters.

b) Horizontal Diversification:

Horizontal diversification involves addition of parallel products to the existing product line. For example: A company, manufacturing refrigerator may enter into manufacturing air
conditioners. The purpose of horizontal diversification is to expand market area and to cut down competition.

c) Concentric Diversification:

When a firm diversifies into business, which is related with its present business it is called concentric diversification. It is an extreme form of horizontal diversification. For
example: Car dealer may start a finance company to finance hire purchase of cars.

d) Conglomerate Diversification:

When a firm diversifies into business, which is not related to its existing business both in terms of marketing and technology it is called conglomerate diversification.

It involves totally a new area of business. There is no relation between the new product and the existing product.

Merger & Acquisition and Strategic Alliances Restructuring Strategies

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Mergers & Acquisitions

In Mergers & Acquisitions, a home company may merge itself with a foreign company to enter an international business. Alternatively, the home company may buy a foreign
company and acquire the foreign company’s ownership and control. M&A offers quick access to international manufacturing facilities and marketing networks.

 Advantages− Immediate ownership and control over the acquired firm’s assets; Probability of earning more revenues; The host country may benefit by escaping optimum capacity level or
overcapacity level
 Disadvantages− Complex process and requires experts from both countries; No addition of capacity to the industry; Government restrictions on acquisition of local companies may disrupt
business; Transfer of problems of the host country’s to the acquired company.

Strategic Alliances
Strategic alliances are agreements between two or more independent companies to cooperate in the manufacturing, development, or sale of products and services or other business
objectives.

For example, in a strategic alliance, Company A and Company B combine their respective resources, capabilities, and core competencies to generate mutual interests in designing,
manufacturing, or distributing of goods or services.

Types of Strategic Alliances

There are three types of strategic alliances: Joint Venture, Equity Strategic Alliance, and Non-equity Strategic Alliance.

#1 Joint Venture

A joint venture is established when the parent companies establish a new child company. For example, Company A and Company B (parent companies) can form a joint venture by
creating Company C (child company).

In addition, if Company A and Company B each own 50% of the child company, it is defined as a 50-50 Joint Venture. If Company A owns 70% and Company B owns 30%, the
joint venture is classified as a Majority-owned Venture.

#2 Equity Strategic Alliance

An equity strategic alliance is created when one company purchases a certain equity percentage of the other company. If Company A purchases 40% of the equity in Company B,
an equity strategic alliance would be formed.

#3 Non-equity Strategic Alliance

A non-equity strategic alliance is created when two or more companies sign a contractual relationship to pool their resources and capabilities together.

Reasons for Strategic Alliances

To understand the reasoning for strategic alliances, let us consider three different product life cycles: Slow cycle, Standard cycle, and Fast cycle. The product life cycle is
determined by the need to innovate and continually create new products in an industry. For example, the pharmaceutical industry operates a slow product lifecycle, while the
software industry operates in a fast product lifecycle. For companies whose product falls in a different product lifecycle, the reasoning for strategic alliances are different:

#1 Slow Cycle

In a slow cycle, the company’s competitive advantages are shielded for relatively long periods of time. The pharmaceutical industry operates in a slow product life cycle as the
products are not developed yearly and patents last a long time.

Strategic alliances are formed to gain access to a restricted market, maintain market stability (setting product standards), and establishing a franchise in a new market.

#2 Standard Cycle

In a standard cycle, the company launches a new product every few years and may or may not be able to maintain their leading position in an industry.

Strategic alliances are formed to gain market share, try to push out other companies, pool resources for large capital projects, establish economies of scale, and gain access to
complementary resources.

#3 Fast Cycle

In a fast cycle, the company’s competitive advantages are not protected and companies operating in a fast product lifecycle need to constantly develop new products/services to
survive.

Strategic alliances are formed to speed up the development of new goods or services, share R&D expenses, streamline market penetration, and overcome uncertainty.

Value Creation in Strategic Alliances

Strategic alliances create value by:

1. Improving current operations

2. Changing the competitive environment
3. Ease of entry and exit

Current operations are improved due to:

 Economies of scale from successful strategic alliances

 The ability to learn from the other partner(s)
 Risk and cost being shared between partner(s)

Changing the competitive environment through:

 Creating technology standards (for example, Sony and Panasonic announced to work together to produce a new-generation TV). This would help set a new standard in the competitive
environment.
 Creating tacit collusion.

Easing entry and exit of companies through:

 A low-cost entry into new industries (A company can form a strategic partnership to easily enter into a new industry).
 A Low-cost exit from industries (A new entrant can form a strategic alliance with a company already in the industry and slowly take over that company, allowing the company that is already in
the industry to exit).

Challenges in a Strategic Alliance

Although strategic alliances create value, there are many challenges to consider:

 Partners may misrepresent what they bring to the table (lie about competencies that they do not have).
 Partners may fail to commit resources and capabilities to the other partners.
 One partner may commit heavily to the alliance while the other partner does not.
 Partners may fail to use their complementary resources effectively.

Structural Considerations and Organizational Design

THEINTACTFRONT21 APR 2018 1 COMMENT

The framework which companies use to figure out their management authority, and internal and external communication processes is known as organizational structure. The
structure includes policies, duties and responsibilities of each and every individual in the organization. Organizational structure is influenced by several factors, both internal and
external. Business owners are responsible for creating the organizational structure framework of their company.

Size

Size is one of the driving factors for a company’s organizational structure. Smaller businesses do not need a vast structure but larger business organizations generally require a more
intense framework.

Companies require more managers for supervising employees if the employee base is large. Highly specialized businesses require a more formal and specialized organizational
structure.

Life Cycle

The company’s life cycle affects the development of an organizational structure. Business owners who usually tend to grow and expand their operations develop an organizational
structure to outline their business mission, vision and goals.

Businesses that reach peak performance generally have a detailed and more mechanical organizational structure. This occurs due to the fact that chain of command goes on
increasing from the top to bottom. Organizational structure can also be a tool to improve efficiency and profitability. Such improvements may be required as more competitors enter
the marketplace.

Strategy

Business strategies influence the development of organizational structure. High-growth firms generally have smaller organizational structures to quickly adapt to changes in the
business environment. Business owners are often reluctant to reduce managerial control in operations.

Smaller firms looking to illustrate their business strategy may usually delay creating an organizational structure. Business owners are found to be increasingly interested in setting
business strategies rather than creating an internal business structure.

Business Environment

The external business environment affects the organizational structure of the company. Dynamic environments having rapid and constantly changing consumer behavior are often
more turbulent and shaky than stable environments.

Companies that seek to address the consumer demands can struggle while creating an organizational structure in a rapidly changing and dynamic environment. More time and
capital can also be spent in dynamic

A good organizational structure allows its workers to focus on creating quality products and awesome services. Productive organizations offer opportunities to its employees to
create and use new skills. This allows constant improvement in business operations and ensures that the company maintains an edge to sustain in a dynamic global marketplace.
Following are the steps to keep in mind while creating an organizational structure −

Step 1 − Analyze the plans, policies and procedures. Structure the management framework to help make efficient production processes. Align the various group’s performance
goals with the company’s strategic objectives. Develop and/or revise the organization’s mission, vision and goals. Keep account of social and economic changes taking place in the
external environment.

Step 2 − Keep record of and document the company’s hierarchical structure and do not forget to publish it on the company’s website, via email or in print form. This helps
everyone in the company to see the reporting structure, the roles and responsibilities.

Step 3 − It is wise to utilize the resources provided by the Society of Human Resource Management website to learn and keep track of industry trends. Ensure that the business
adheres to the rules and regulations, such as annual leave laws or hours of rest required.

Step 4 − Annual survey is an important part. Initiate anonymous response by the employees to gauge environment support for employees. A survey allows to measure employee
perceptions about the company and its operations. Annual surveys can let one compare results from year to year.

Step 5 − Identify the areas that need fast improvement to keep an organization healthy and safe for workers. Online tools, such as the Mind Tools Problem Solving Techniques
website, can help you create cause and effect diagrams to identify problems.

Step 6 − Employees should be motivated to adapt to change by communicating regularly. Make sure that all of the employees respect and support the people around them.
Facilitate cultural diversity, handle workplace conflict and respond to time management policies. Professional development can also enable employees to act and react appropriately
in case of turbulences.

Step 7 − Encourage employees to share their skills and knowledge. Make meaningful connections with people who may not work in the same location.

Step 8 − Allow personnel to receive knowledge and mentoring to further their careers. A good organization recognizes and motivates for value of individual achievements. By
providing feedback and advice, new personnel can be inspired to take on additional responsibilities.

Step 9 − Encourage performance-based management. Evaluation of employees depending on their ability to achieve their own goals affirm their personal accountability. By
retaining and nourishing motivated employees, the company can keep its competitive edge intact.

Step 10 − Use professional and personal skills development programs to help the employees to do their jobs better. Encourage the employees to enroll in and clear performance
related exams linked with professional credentials.

Leadership and Corporate Culture

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Changing Organizational Culture Through Leadership

Culture is made up of three layers, represented here by an iceberg:

 Behaviors, systems, policies and processes surrounding the way things are done
 Ideals, goals, values, and aspirations set by leadership
 Underlying assumptions that guide behavior

When it comes to driving organizational change, leaders play a critical role in using their behavior by setting the tone for what’s acceptable within a company.

“The moment you found a company, culture comes into the conversation,” says O’Keefe. “In the early stages, you’re focusing on building a core team and taking what you value
and applying that to your hiring strategies. As you grow from those early stages, leaders have a responsibility to help define, teach, live, measure, and reward the culture they want
to build.”

As a business grows — especially in startups — it’s up to the founders and CEOs to show alignment between the company’s
beliefs and the behaviors that the leadership team reinforces when changing corporate culture.

“The more leaders can share what a company values in its culture, the easier it’s going to be for the culture to become a reality and not just these random words uttered without
meeting or random quotes on a wall,” says O’Keefe.

Leading organizational change also comes down to how you reward employees. For example, if you say you value teamwork but give bonuses for individual performance, what
behavior are you really reinforcing? Or if you say you want to treat your team with respect and support innovation, but there’s a really long process for anyone to start something
new, what message are you really sending?

Your leadership decides whether or not what your company believes, what it says, and what employees see align. And it’s up to leaders to implement different strategies that match
the organizational culture change you’re trying to make.

For example, at CommonBond, the CEO believes in open communication and honest answers. While he could easily have announced an “open doors policy” and sat back to see if
anyone took him up on it, he instead decided to act on that value. Every Friday, he sits down and holds an “Ask Me Anything” sessionwhere employees can ask questions and get
feedback directly from the CEO. If open communication is an important goal within your organization, activities like this show that openness and sharing are more than mottos —
they’re behaviors you lead with.

Changing Organizational Culture With Focus

According to the Harvard Business Review, more than 70% of transformation efforts fail. So, what’s a leader to do when the odds are against you? According to Shanklin, the
answer is focus.

“As leaders, managers, and employees, we’ve got so many day-to-day responsibilities that it’s simply not realistic to try to change more than one or two behaviors at a time,” says
Shanklin. “Focus is the first piece, and only then can you figure out which points of change will be the most beneficial for an organization.”

The image above represents an example of how CultureIQ focuses on a small number of themes based on the data from employee feedback. By digging deep into distinct focus
areas, a company can truly focus on what behaviors, policies, and assumptions are at play and identify strategic ways to transform this trend.

“Leaders need to be really aware of when efforts in changing corporate culture are going awry or not shaping up to be what they want them to be,” says O’Keefe. “They need to be
observant because they have the power to support necessary changes to get the culture back on track or make it better.”

For example, a common challenge amongst clients is communication. When we dig into the data, we might find that employees hoard information because it is their only
opportunity to get recognized, or that there’s a strong perception that information should only be shared for strategic, political reasons. Using a framework like the image above,
CultureIQ can guide you along the process of acknowledging the negative behaviors, understanding how they impact existing policies, and uncovering and correcting underlying
assumptions.

Changing Organizational Culture Within Your Organization

Ready to take the reins of changing organizational culture? Embrace the opportunity, but not 100% full responsibility.

“Listening, empathy, transparency, and communicating are all important leadership traits, but leaders alone cannot change or fix a culture or make it perform at its highest
potential,” says O’Keefe. “It’s incumbent on everyone within an organization, not just leaders and managers, to take responsibility for company culture and make it what they
want.”

As a leader, it’s not your job to fix everything and get the accolades — it’s your job to be intentional about changing organizational culture and the behaviors you want to see and
empower your team to live and participate in the culture as a group.

Strategy Evaluation
THEINTACTFRONT21 APR 2018 1 COMMENT
Strategy Evaluation is as significant as strategy formulation because it throws light on the efficiency and effectiveness of the comprehensive plans in achieving the desired results.
The managers can also assess the appropriateness of the current strategy in todays dynamic world with socio-economic, political and technological innovations. Strategic
Evaluation is the final phase of strategic management.

The significance of strategy evaluation lies in its capacity to co-ordinate the task performed by managers, groups, departments etc, through control of performance .
Strategic Evaluation is significant because of various factors such as – developing inputs for new strategic planning, the urge for feedback, appraisal and reward, development of
the strategic management process, judging the validity of strategic choice etc.

The process of Strategy Evaluation consists of following steps:

1. Fixing benchmark of performance – While fixing the benchmark, strategists encounter questions such as – what benchmarks to set, how to set them and how to express them. In
order to determine the benchmark performance to be set, it is essential to discover the special requirements for performing the main task. The performance indicator that best
identify and express the special requirements might then be determined to be used for evaluation. The organization can use both quantitative and qualitative criteria for
 comprehensive assessment of performance. Quantitative criteria includes determination of net profit, ROI, earning per share, cost of production, rate of employee turnover etc.
Among the Qualitative factors are subjective evaluation of factors such as – skills and competencies, risk taking potential, flexibility etc.
2. Measurement of performance – The standard performance is a bench mark with which the actual performance is to be compared. The reporting and communication system help
in measuring the performance. If appropriate means are available for measuring the performance and if the standards are set in the right manner, strategy evaluation becomes easier.
But various factors such as managers contribution are difficult to measure. Similarly divisional performance is sometimes difficult to measure as compared to individual
performance. Thus, variable objectives must be created against which measurement of performance can be done. The measurement must be done at right time else evaluation will
not meet its purpose. For measuring the performance, financial statements like – balance sheet, profit and loss account must be prepared on an annual basis.
3. Analyzing Variance – While measuring the actual performance and comparing it with standard performance there may be variances which must be analyzed. The strategists must
mention the degree of tolerance limits between which the variance between actual and standard performance may be accepted. The positive deviation indicates a better performance
but it is quite unusual exceeding the target always. The negative deviation is an issue of concern because it indicates a shortfall in performance. Thus in this case the strategists must
discover the causes of deviation and must take corrective action to overcome it.
4. Taking Corrective Action – Once the deviation in performance is identified, it is essential to plan for a corrective action. If the performance is consistently less than the desired
performance, the strategists must carry a detailed analysis of the factors responsible for such performance. If the strategists discover that the organizational potential does not match
with the performance requirements, then the standards must be lowered. Another rare and drastic corrective action is reformulating the strategy which requires going back to the
process of strategic management, reframing of plans according to new resource allocation trend and consequent means going to the beginning point of strategic management
process.

Importance and Nature of Strategic Evaluation

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Strategy is an action that managers take to attain one or more of the organization’s goals. Strategy can also be defined as “A general direction set for the company and its various
components to achieve a desired state in the future. Strategy results from the detailed strategic planning process”.

A strategy is all about integrating organizational activities and utilizing and allocating the scarce resources within the organizational environment so as to meet the present
objectives. While planning a strategy it is essential to consider that decisions are not taken in a vacuum and that any act taken by a firm is likely to be met by a reaction from those
affected, competitors, customers, employees or suppliers.

Strategy can also be defined as knowledge of the goals, the uncertainty of events and the need to take into consideration the likely or actual behavior of others. Strategy is the
blueprint of decisions in an organization that shows its objectives and goals, reduces the key policies, and plans for achieving these goals, and defines the business the company is
to carry on, the type of economic and human organization it wants to be, and the contribution it plans to make to its shareholders, customers and society at large.

Features of Strategy

1. Strategy is Significant because it is not possible to foresee the future. Without a perfect foresight, the firms must be ready to deal with the uncertain events which constitute the business
environment.
2. Strategy deals with long term developments rather than routine operations, i.e. it deals with probability of innovations or new products, new methods of productions, or new markets to be
developed in future.
3. Strategy is created to take into account the probable behavior of customers and competitors. Strategies dealing with employees will predict the employee behavior.

Strategy is a well defined roadmap of an organization. It defines the overall mission, vision and direction of an organization. The objective of a strategy is to maximize an
organization’s strengths and to minimize the strengths of the competitors.

Strategy, in short, bridges the gap between “where we are” and “where we want to be”.

1. Strategic Intent

An organization’s strategic intent is the purpose that it exists and why it will continue to exist, providing it maintains a competitive advantage. Strategic intent gives a picture about
what an organization must get into immediately in order to achieve the company’s vision. It motivates the people. It clarifies the vision of the vision of the company.

Strategic intent helps management to emphasize and concentrate on the priorities. Strategic intent is, nothing but, the influencing of an organization’s resource potential and core
competencies to achieve what at first may seem to be unachievable goals in the competitive environment. A well expressed strategic intent should guide/steer the development of
strategic intent or the setting of goals and objectives that require that all of organization’s competencies be controlled to maximum value.

Strategic intent includes directing organization’s attention on the need of winning; inspiring people by telling them that the targets are valuable; encouraging individual and team
participation as well as contribution; and utilizing intent to direct allocation of resources.

Strategic intent differs from strategic fit in a way that while strategic fit deals with harmonizing available resources and potentials to the external environment, strategic intent
emphasizes on building new resources and potentials so as to create and exploit future opportunities.

2. Mission Statement

Mission statement is the statement of the role by which an organization intends to serve it’s stakeholders. It describes why an organization is operating and thus provides a
framework within which strategies are formulated. It describes what the organization does (i.e., present capabilities), who all it serves (i.e., stakeholders) and what makes an
organization unique (i.e., reason for existence).

A mission statement differentiates an organization from others by explaining its broad scope of activities, its products, and technologies it uses to achieve its goals and objectives. It
talks about an organization’s present (i.e., “about where we are”). For instance, Microsoft’s mission is to help people and businesses throughout the world to realize their full
potential. Wal-Mart’s mission is “To give ordinary folk the chance to buy the same thing as rich people.” Mission statements always exist at top level of an organization, but may
also be made for various organizational levels. Chief executive plays a significant role in formulation of mission statement. Once the mission statement is formulated, it serves the
organization in long run, but it may become ambiguous with organizational growth and innovations.

In today’s dynamic and competitive environment, mission may need to be redefined. However, care must be taken that the redefined mission statement should have original
fundamentals/components. Mission statement has three main components-a statement of mission or vision of the company, a statement of the core values that shape the acts and
behaviour of the employees, and a statement of the goals and objectives.

Features of a Mission

1. Mission must be feasibleand attainable. It should be possible to achieve it.

2. Mission should be clearenough so that any action can be taken.
3. It should be inspiringfor the management, staff and society at large.
4. It should be preciseenough, i.e., it should be neither too broad nor too narrow.
5. It should be uniqueand distinctive to leave an impact in everyone’s mind.
6. It should be analytical,i.e., it should analyze the key components of the strategy.
7. It should be credible, i.e., all stakeholders should be able to believe it.

3. Vision

A vision statement identifies where the organization wants or intends to be in future or where it should be to best meet the needs of the stakeholders. It describes dreams and
aspirations for future. For instance, Microsoft’s vision is “to empower people through great software, any time, any place, or any device.” Wal-Mart’s vision is to become
worldwide leader in retailing.

A vision is the potential to view things ahead of themselves. It answers the question “where we want to be”. It gives us a reminder about what we attempt to develop. A vision
statement is for the organization and it’s members, unlike the mission statement which is for the customers/clients. It contributes in effective decision making as well as effective
business planning. It incorporates a shared understanding about the nature and aim of the organization and utilizes this understanding to direct and guide the organization towards a
better purpose. It describes that on achieving the mission, how the organizational future would appear to be.

An effective vision statement must have following features-

1. It must be unambiguous.
2. It must be clear.
3. It must harmonizewith organization’s culture and values.
4. The dreams and aspirations must be rational/realistic.
5. Vision statements should be shorter so that they are easier to memorize.

In order to realize the vision, it must be deeply instilled in the organization, being owned and shared by everyone involved in the organization.

4. Goals and Objectives

A goal is a desired future state or objective that an organization tries to achieve. Goals specify in particular what must be done if an organization is to attain mission or vision. Goals
make mission more prominent and concrete. They co-ordinate and integrate various functional and departmental areas in an organization. Well made goals have following features-

1. These are precise and measurable.

2. These look after critical and significant
3. These are realisticand challenging.
4. These must be achieved within a specific time
5. These include both financial as well as non-financial components.

Objectives are defined as goals that organization wants to achieve over a period of time. These are the foundation of planning. Policies are developed in an organization so as to
achieve these objectives. Formulation of objectives is the task of top level management. Effective objectives have following features-

1. These are not single for an organization, but multiple.

2. Objectives should be both short-term as well as long-term.
3. Objectives must respond and react to changes in environment, i.e., they must be flexible.
4. These must be feasible, realistic and operational.

Strategic and Operational Control

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Strategic control looks at the strategy of a process, from implementation to completion, and analyzes how effective the strategy is and where changes can be made to improve it.
Operational control focuses on day-to-day operations. Both strategic and operational control have advantages that can be utilized by organizations if they implement the correct
control in the right setting. For example, operational control should be used when looking at sales numbers, whereas strategic control should be used when looking at the sales
process.

Factors Affecting Control

Strategic control can be affected by external factors and external data. Operational control is concerned with internal operating factors. The environment and the market have a lot
more to do with strategic control, whereas operating control deals with everyday issues that may arise, such as personnel problems or technological meltdowns.

Time Frame

The time frame element in the two types of control is very different. Strategic control deals with a process over time, looking at the different steps to evaluate how effective they are
and where changes could be made. The process could take weeks or months to finish, yet strategic control lasts longer than that. Once the process is completed, the evaluation
continues. Operational control takes place on a day-to-day basis, examining everyday problems that arise and working on improving them on the spot.

Corrections

Correcting mistakes or taking action to fix problems is more effective in operational control because it happens right away. With strategic control a problem may be found, but with
evaluation and analysis having to be done regarding what brought on the problem in the first place, it takes a lot more time. With operational control, problems are addressed
immediately to ensure the organization can continue running effectively.

Reporting Intervals

Much like corrective actions, reporting intervals in strategic control take time over a period of months, whereas operational control has reports compiled daily and weekly. Strategic
control looks at bigger organizational issues, such as a new market to break into, so it takes longer to collect research and make reports. Operational control looks at production
numbers, sales figures and daily operations. These numbers present themselves much more easily and therefore can be reported quickly and more efficiently.

Need for Balanced Scorecard

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The balance scorecard is used as a strategic planning and a management technique. This is widely used in many organizations, regardless of their scale, to align the organization’s
performance to its vision and objectives.

The scorecard is also used as a tool, which improves the communication and feedback process between the employees and management and to monitor performance of the
organizational objectives.

As the name depicts, the balanced scorecard concept was developed not only to evaluate the financial performance of a business organization, but also to address customer
concerns, business process optimization, and enhancement of learning tools and mechanisms.

The Basics of Balanced Scorecard

Following is the simplest illustration of the concept of balanced scorecard. The four boxes represent the main areas of consideration under balanced scorecard. All four main areas
of consideration are bound by the business organization’s vision and strategy.

The balanced scorecard is divided into four main areas and a successful organization is one that finds the right balance between these areas.

Each area (perspective) represents a different aspect of the business organization in order to operate at optimal capacity.
 Financial Perspective –This consists of costs or measurement involved, in terms of rate of return on capital (ROI) employed and operating income of the organization.
 Customer Perspective –Measures the level of customer satisfaction, customer retention and market share held by the organization.
 Business Process Perspective –This consists of measures such as cost and quality related to the business processes.
 Learning and Growth Perspective –Consists of measures such as employee satisfaction, employee retention and knowledge management.

The four perspectives are interrelated. Therefore, they do not function independently. In real-world situations, organizations need one or more perspectives combined together to
achieve its business objectives.

For example, Customer Perspective is needed to determine the Financial Perspective, which in turn can be used to improve the Learning and Growth Perspective.

Features of Balanced Scorecard

From the above diagram, you will see that there are four perspectives on a balanced scorecard. Each of these four perspectives should be considered with respect to the following
factors.

When it comes to defining and assessing the four perspectives, following factors are used:

 Objectives –This reflects the organization’s objectives such as profitability or market share.
 Measures –Based on the objectives, measures will be put in place to gauge the progress of achieving objectives.
 Targets –This could be department based or overall as a company. There will be specific targets that have been set to achieve the measures.
 Initiatives –These could be classified as actions that are taken to meet the objectives.

A Tool of Strategic Management

The objective of the balanced scorecard was to create a system, which could measure the performance of an organization and to improve any back lags that occur.

 The popularity of the balanced scorecard increased over time due to its logical process and methods. Hence, it became a management strategy, which could be used across various functions
within an organization.
 The balanced scorecard helped the management to understand its objectives and roles in the bigger picture. It also helps management team to measure the performance in terms of quantity.
 The balanced scorecard also plays a vital role when it comes to communication of strategic objectives.
 One of the main reasons for many organizations to be unsuccessful is that they fail to understand and adhere to the objectives that have been set for the organization.
 The balanced scorecard provides a solution for this by breaking down objectives and making it easier for management and employees to understand.
 Planning, setting targets and aligning strategy are two of the key areas where the balanced scorecard can contribute. Targets are set out for each of the four perspectives in terms of long-term
objectives.

However, these targets are mostly achievable even in the short run. Measures are taken in align with achieving the targets.

Strategic feedback and learning is the next area, where the balanced scorecard plays a role. In strategic feedback and learning, the management gets up-to-date reviews regarding
the success of the plan and the performance of the strategy.

The Need for a Balanced Scorecard

Following are some of the points that describe the need for implementing a balanced scorecard:

 Increases the focus on the business strategy and its outcomes.

 Leads to improvised organizational performance through measurements.
 Align the workforce to meet the organization’s strategy on a day-to-day basis.
 Targeting the key determinants or drivers of future performance.
 Improves the level of communication in relation to the organization’s strategy and vision.
 Helps to prioritize projects according to the timeframe and other priority factors.