Purposes of Strategic Management Process
Strategic management basically aims as formulating and implementing effective strategies. Effective strategies, of course, are those that help a superior fit between the organization and its environment and the achievement of strategic goals (Andrews).
Table of Content
- 1 Purposes of Strategic Management Process
- 2 Steps in the Strategic Management Process
- 3 Strategy Formulation
- 4 Strategy Implementation
- 5 Strategic Intent: Vision, Mission and Objectives
- 6 Hierarchy of Strategic Intent
- 7 Vision
- 8 Mission
- 9 Characteristics of Objectives
- 10 Critical Success Factors (CSFs)
- 11 Corporate Social Responsibility
- 12 Causes of Growing Concern for Social Responsibilities
- 13 FAQ
Strategies necessarily change over time to suit environmental changes but, to remain competitive, organizations develop strategies that focus on core competence, develop synergy and create value for customers.
Core Competence: An organization‟s core competence is something it does not exceptionally well in comparison to its competitors. It reflects a distinct competitive advantage (like superior research and development, mastery of a technology, distribution channel, and manufacturing efficiency or customer service) that provides the firm
(a) access to variety of products/markers
(b) contributes greatly to customer benefits in the end products and easily copied by competitors.
Synergy: When organizational parts interact to produce a joint effort that is greater than the sum of the parts acting alone, synergy occurs.
Some call this the 1+1 = 3 effect. In strategic management, managers are urged to achieve as much market, cost, technology and management synergy as possible when arriving at strategic decisions (such as mergers, acquisitions, new products, new technology etc.
Value Creation: Exploiting core competencies and achieving synergy help organizations create value for their customers. Value is the sum total of benefits received and costs paid by the customer in a given situation.
Ideally, the purpose of a strategy should be to create a lasting value that is greater than the cost of resources that are used to create the same.
Steps in the Strategic Management Process
Dynamic in nature, the strategic management process is the full set of commitments, decisions and actions needed for a firm to achieve strategic competitiveness and earn above average returns. Strategic competitiveness is achieved when a firm successfully formulates and implements a value creating strategy.
When a firm implements such a strategy that other firms are unable to duplicate or find too costly to imitate, this firm has a suitable competitive advantage.
Strategic management offers benefits like providing an objective view of management problems, encouraging a favourable attitude and maximizing the effects of adverse conditions and changes.
The strategic management process is the full set of commitments, decisions and actions needed for a firm to achieve strategic competitiveness and earn above average returns.
Corporate level strategy formulation
Corporate level strategy pertains to the organization as a whole and the combination of business units and product lines that make up the corporate entry. It addresses the overall strategy that an organization will follow. The process generally involves selecting a grand strategy and using portfolio strategy approaches to determine the types of businesses in which the organization should be engaged.
Grand strategy is the general plan of major action by which a firm intends to achieve its long-term goals. It provides basic direction for the strategic actions of a firm. Grand strategies fall into four general categories: growth/expansion, stability, retrenchment and combination (explained later).
Grand strategy is the general plan of major action by which a firm intends to achieve its long-term goals. It provides basic direction for the strategic actions of a firm. Grand strategies fall into four general categories: growth/expansion, stability, retrenchment and combination (explained later).
Growth/Expansion Strategy: Organizations generally seek growth in sales, market share or some other measure as a primary objective. When growth becomes a passion and organizations try to seek sizeable growth (as against slow and steady growth), it takes the shape of an expansion strategy.
The firm tries to redefine the business, enter new businesses that are related or unrelated or look at its product portfolio more intensely. The firm can have as many alternatives as it wants by changing the mix of products, markets and functions. Thus, the growth opportunities may come internally or externally.
Stability Strategy: A stability strategy involves maintaining the status quo or growing in a methodical, but slow, manner. The firm follows a safetyoriented, status-quo-type strategy without effecting any major changes in its present operations.
The resources are put on existing operations to achieve moderate, incremental growth. As such, the primary focus is on current products, markets and functions, maintaining the same level of effort as at present.
Retrenchment Strategy: It is a corporate level; defensive strategy followed by a firm when its performance is disappointing or when its survival is at stake. When a firm is confronted with a precipitous drop in demand for its products and services, it is forced to effect across-the-board cuts in personnel and expenditures. Retrenchment strategy, as such, is adopted out of necessity, not by deliberate choice.
Combination strategies: Large, diversified organizations generally use a mixture of stability, expansion or retrenchment strategies either simultaneously (at the same time in various businesses) or sequentially (at different times in the same business).
For example, growth could be achieved by an organization through acquisition of new businesses or diverging itself of unprofitable ventures. Depending on situational demands, therefore, an organization can employ various strategies to survive, grow and remain profitable.
Multi business firms would require strategy at two levels:
One is corporate level and other is business level. Both the strategies are interdependent.
Corporate level strategy Formulation: It would cover the corporation as a whole and all its businesses and is concerned with best utilisation of resources.
Business Level Strategy Formulation
Business level strategy deals with how a particular business competes. The principal focus is on meeting competition, protecting market share and earning profit at the business unit level. The strategies of growth, stability and retrenchment, discussed above, apply at the business level as well as the corporate level, but they are accomplished through competitive actions rather than by the acquisition or divestment of other businesses. It is also concerned with competition in the market.
Functional Level Strategy Formulation
Functional strategies are formulated by specialists in each area of a business such as marketing, production, finance, human resources and research and development. Functional strategies outline the action plans that must be put into practice to execute business level strategy.
Business level and functional specialists must coordinate their activities to ensure that the strategies pursued by them are consistent and lead to achievement of overall goals.
- Research and Development Strategy: Businesses cannot grow and survive without new products. It is the role of R&D specialists to generate new product ideas, nurture them carefully and develop them fully into commercially viable propositions.
Where innovation proves to be a costly exercise, imitation could also be tried as a fruitful option. Many Japanese electronics companies were quite successful in copying American technology and by avoiding R&D costs, improved their competitive strength significantly (Certo and Peter).
- Operations Strategy: This strategy outlines steps to keep costs under check and improve operational efficiency. The focus is on arriving at decisions regarding plant layout, plant capacity, production processes, inventory management etc.
- Financial Strategy: It deals with financial planning, evaluating investment proposals, securing funds for various investments and controlling financial resources. Thus raising funds, acquiring assets, allocating funds to operations, using funds efficiently etc. are all part of this strategy.
- Marketing Strategy: It deals with strategies relating to product, pricing, distribution and promotion of a company‟s offerings. Important issues here cover what type of products, at what prices, through which distribution channel and by the use of which promotional tool and sales force etc.
- Human Resource Strategy: HR Strategy deals with hiring, training, assessing, developing, rewarding, motivating and retaining the number and types of employees required to run the business effectively. Internal (union contracts, productivity indices, labour turnover, absenteeism, accidents etc.) and external factors (labour laws, sons of the soil, reservation, equal employment opportunity, employment of children and women etc.) need to be carefully evaluated while formulating HR strategies.
Strategy implementation is the process of translation of strategies and policies into action through the development of programmes, budgets and procedures. It is typically conducted by the middle and lower level management but is reviewed by the top management.
However, programmers and procedures are simply more detailed plans for the eventual implementation of strategy. Unless the corporation is appropriately organized, programmers are adequately staffed and activities are properly directed, these operational plans fail to deliver the goods.
To be effective, a strategy must be implemented through the right organization structure and appropriate management practices. In addition, management must also ensure that there is progress towards objectives according to plan by instituting a rigorous process of control over important activities. The following figure would help in understanding the process of strategy implementation.
Organizing is the management function where in organizational resources are allocated and responsibilities are delegated in order to accomplish long-term organizational goals. It ensures efficient use of organizational resources.
Where two or more persons work together for achieving a common goal, their activities have to be organized. Organizing is a process of integrating, coordinating and mobilizing the activities of members of a group for seeking common goals.
Staffing is process of hiring best people for the organization and allotting a specific work based on their skill to perform it. It covers procurement, development. Compensation, integration and maintenance of people in the organization to achieve individual, organizational and social goals.
The term staffing may be defined as the managerial function of hiring and developing the required personnel to fill in various positions in an organization. This function involves the determination of the size and categories of staff requirement.
Directing consists of a process or technique by which instruction can be issued and operations can be carried out as originally planned.
The traditional motivational techniques are based on a reward-punishment psychology and involve the use of performance appraisals and performance-based incentive programmes. These approaches, including MBO, indicate that specific results are best achieved by clearly outlining realistic goals and then suitably rewarding those managers who achieve them. They are overly reliant on money as the primary motivator; while overlooking other factors that might be truly motivating to many managers. According to Morse and Martin, motivating the organisation to implement strategy requires:
Strategic Intent: Vision, Mission and Objectives
Strategic Intent is the leveraging of a firm‟s internal resources, capabilities and core competencies to accomplish the firm‟s vision, mission and objectives in a competitive environment. It is all about winning competitive battles and gaining leadership position by putting organizational resources to best use. When established effectively, a strategic intent can cause people to turn out excellent performance (Hummel and Prahalad, 1989).
Strategic intent is said to exist when all employees and levels of a firm are committed to the pursuit of a specific but significant performance target (Hammel and Prahalad, 1994).
The intent can take the form of a broad vision or mission statement or a more focused route covering specific objectives and goals (Richards). In a way, thus, strategic intent tries to establish the parameters that shape the values, motives and actions of people throughout their organization (R.Howard).
Hierarchy of Strategic Intent
We will discuss these parameters as a hierarchy of strategic intent. As illustrated in Fig., the hierarchy of strategic intent includes the following elements (Miller).
- A broad vision of what the organization should be
- The organisation‟s mission
- The strategic objectives and specific goals to be pursued relentlessly
- The plans that are developed to accomplish the intentions of management in a concrete way
Eg: The diagram mentions the vision and mission a of a chemical company
The strategic Ends Pursued by an Organisation can be organised in a Hierarchy of Strategic Intent
The elements of the above hierarchy specify the pious intentions, lofty ideals and clear-cut ideas that serve to unify the energy and forces scattered throughout an organization. “They are beginning points for any formal planning process, but they also provide the sense of direction necessary to assure that incremental behaviour culminates in overall progresses. Strategic intent is said to have been expressed effectively when people believe fervently in their product and industry and when they are focused totally on their firm‟s ability to outperform its competitors (Sherman).
The world over, backwards and forwards in history, just one thing has fired the imaginations of the people: a vision of future that promises to right today‟s wrongs, a graphic image of a time when injustice, impoverishment and imprisonment will have disappeared. Moses used the vision of a land of milk and honey to motivate his people to set off for the Promised Land. India‟s freedom fighters used the vision of a country free of its colonial rulers to wrest independence (Sen).
In the corporate context, vision refers to an inspirational picture of a future that can be created, offering clarity amidst confusion, hope against despair, and unity of purpose amidst diversity of personal causes.
Basic elements of a vision statement
Vision is simply a combination of 3 basic elements.
- An organization‟s fundamental reason for existence beyond just making money.
- Its timeless, unchanging core values. The core values define the enduring character of an organization that remains unchanged as it experiences changes in technology, competition, management styles etc.
- Huge and audacious but achievable aspirations for its future (Big Hairy Audactious Goals or Simply BHAGs).
Examples of Corporate Vision Statements
- BHEL: “A world class innovative, competitive and profitable engineering enterprise providing total business solutions”.
- Colgate-Palmolive: “To be the company of first choice in oral and personal hygiene by continuously caring for consumers and partners”.
- NTPC: “To make available, reliable and quality power in increasingly large quantities”.
- Tata Steel, J.J.Irani …. “To strengthen India‟s industrial base through the effective utilization of men and materials. The means envisaged to achieve this are high technology and productivity, consistent with modern management practices…”
- Thermax, Anu R Aga…. “We aspire to become a leading technology company with a global business outlook, delivering world-class products and services to our customers. We exist to fulfil the needs of our customers – best understood through an enlightened partnership with them … “.
- Voltas: “We will be among the 10 most admired industrial corporations in the country with leadership focus on delivery of products and services which are globally competitive; continuous improvement of our products, processes, and people; a learning organization of committed and contributing employees who share the competitive agenda; continuing satisfaction of our customers and all our stakeholders; sensitive concern for society, environment and our values of justice, fair play and integrity; expansion in our areas of core competence and development of competencies for new product-market growth opportunities”.
- Whirlpool: “Grow with new opportunities and be the leader in an everchanging global market. We will be driven by our commitment to continuous quality improvement and to exceeding all our customers‟ expectations. We will gain competitive advantage through this and by building on existing strengths and developing new competencies. We will be market-driven, efficient and profitable. Our success will make Whirlpool a company that worldwide customers, employees and other stakeholders can depend on.
- Wipro: “Be among the 10 most admired Indian corporations. Excellence in quality, customer focus, and service deliverables. Be in the top 25 among Indian groups in profit after tax of Rs.3, 000 million to ensure competitive financial power. By 2000, have international operations/exports contribute more than 50 per cent of corporation profit after tax. To determine our own destiny, at least 85 per cent of our profit after tax would come from Wipro controlled business units.
- Arvind Mills: “To achieve global dominance in select businesses built around our core competencies, through continuous product and technical innovation, customer orientation, and a focus on cost-effectiveness”. Evidently, vision does not put emphasis on specific businesses, products or even markets; it is, instead on the three factors that the business uses as its loadstars, with a single minded goal in mind – achieving global dominance. Vision preserves the core of the company while stimulating progress towards the future.
There is a certain amount of controversy on this issue. Some Chief Executive Officers (CEOs) feel that vision should be abstract, inspirational and should not be reachable. A difficult target will stretch people to the extreme and compel them to scale new heights every year. Others feel that there is no use chasing a pie in the sky. Vision must be clear and within a reasonable distance so that people do not get frustrated after repeated attempts result in failures.
Some CEOs feel that the vision statement should be pithy enough to be read, understood and preferably memorized quickly. It should be short enough to be written on the back of even a business card! Others, however, feel that brevity should not be at the cost of clarity. “To make the vision come alive, to make it relevant, you have to spell it out”. After all in an organization, everyone has the right to know the leader‟s dream, and how it can be achieved.
Building a Vision
The vision statement should be built around certain core values. Thus, Sony‟s vision rests on values of encouraging individual creativity and its determination to be a pioneer. Such core values reflect how you want your future to look, the timeless principles to be followed while running the show – irrespective of what happens in and around the organization. Values thus are the essential glue of vision.
Most managers, now-a-days, talk about a shared vision, meaning that individuals from across the organization have a common mental image and a mutually supported set of aspirations that serve to unite their efforts. People at all levels must share a common inspirational image that compels them to give their best and realize their own dreams. The vision once finalized, must be injected into the veins of the organization, being shared, owned and lived by every single person in the company.
Strategic gains of a definitive vision
It is important for a corporation to have clarity of vision because the organization can stay focused and not wander off into unrelated areas that arise as a result of opportunities or apparent synergies. Without a vision, people fall into the activity trap. They end up cutting stone when they should be building the temple. Keeping the eyes focused on the destination is important at the employee level also because the specialization of tasks makes it impossible for the job itself to provide the complete picture. As one CEO commented “vision is the hallmark of an enlightened, forward looking organization. Enlightened people in an organization need a passion that they can follow with missionary zeal.
Organizations are founded for a purpose. Although the purpose may change over time, it is essential that stakeholders understand the reason for the organization‟s existence, that is, the organization‟s mission. The mission describes the organization‟s values, aspirations and reason for being. It reveals the longterm vision of an organization in terms of what it wants to be, where exactly it wants to go, and whom it wants to serve. According to Thompson, “The mission reflects the essential purpose of the organization, concerning particularly why it is in existence, the nature of the business (es) it is in, and the customers it seeks to serve and satisfy”. The mission is generally expressed in a broad manner and it is unlikely that it can be ever achieved completely.
The mission is an enduring statement of purpose that distinguishes one business from other similar firms. It identifies the scope of its operations in product and market terms. It implies the image the firm seeks to project and reflects the values and priorities of the firm‟s strategic decision makers. The obvious purpose of a mission statement is to give a public announcement to insiders and outsiders about what the firm stands for, what makes the firm different (instead of stating the obvious) and a more effective competitor. Firms which succeed long-term are those which create competitive advantages and sustain their strong positions with flexibility and improvement. In the long run, the mission statement should support this position.
- Clarity: The mission statement should be clear enough to lead to action. The corporate dream must be presented in crystal-clear manner preferably in a positive tone. For example, SBI – „with you, all the way‟.
- Broad and Enduring: The mission is a grand design of the firm‟s future. It is a general statement of the firm‟s intent, a kind of self-image the firm intends to project for years to come. However, it should not be so narrow as to restrict the firm‟s operations nor should it be too general to make itself.meaningless.
To make things clear, mission statements come in two forms: primary mission (a general category of business to be engaged in) and secondary mission (defining everything more specifically) TELCO, for example, is in the transportation business (primary business). It provides passenger car and truck products to a wide variety of customers and markets (secondary mission).
- Identity and Image: The mission sets a firm apart from other firms of its style. Though this statement the firm wants to maintain its distinct image and character in terms of excellent quality and service, latest technology, and unique product offerings etc. For example, Asian Paints stresses, „Leadership through Excellence‟; MTNL presents itself as „Lifeline of Delhi and Mumbai‟; BPL puts emphasis o „Entertainment at its best‟; the Advertising Standards Council of India projects its image as the watchdog of the Indian Advertising Industry.
- Realistic: Missions should be realistic and achievable, of course, by running that extra mile. Air India would be deluding itself if it adopted the mission to become “the world‟s favourite airline”.
- Specific: Missions should be specific. They must define the competitive scopes within which the company will operate, that is the range of industries in which a company will operate (industrial goods, consumer goods, services); the range of products and applications the company will supply; he range of core competencies that a company will master and leverage; the type of customers a company will serve; and the range of regions, countries in which a company will operate (Kotler).
- Values and Beliefs and Philosophy: The mission lays emphasis on the values the firm stands for – what it intends to do, so that it stands out in a crowd, what is unique about its offerings, how it strives to meet the needs of its customers, employees, suppliers and dealers.
- Vision: The mission is an expression of the vision of the corporation; its leader or founder. A vision statement usually describes what the company wishes to become in the (long-term) future. Whereas mission is what an organization is and why it exists.
- Dynamic: The concept of mission is dynamic and not a static one. It must strike a happy balance between the narrow and broad ways of doing things in the years ahead; between the present requirements and future expectations. It is worth remembering that the future of a business is usually determined by the way it defines its business today.
For a painfully long time, people in the film industry thought that they were in the movie business and not in the entertainment business.The General Electric Corporation of the United States declared two decades back: “We are in the energy business”, although the company was primarily engaged in manufacturing and selling electrical goods.
An organization, obviously, needs to define its business covering three vital aspects: (1) The product/service offering (2) customer segment (3) value creation.
Role of Objectives
Objectives serve the following functions:
Legitimacy: Objectives describe the purpose of the organization so that people know what it stands for and will accept its existence and continuance. Thus, Ford sells „American transportation‟, Chrysler sells „know-how‟ and Godrej sells „quality products‟. Objectives help to legitimize the presence of organization in its environment. Now the organization can emphasise its uniqueness, identity and its raison deter.
Legitimacy: Objectives describe the purpose of the organization so that people know what it stands for and will accept its existence and continuance. Thus, Ford sells „American transportation‟, Chrysler sells „know-how‟ and Godrej sells „quality products‟. Objectives help to legitimize the presence of organization in its environment. Now the organization can emphasise its uniqueness, identity and its raison deter.meet the goals. „Without seeing the target, a manager would be like a blindfolded archer-expending useless effort and creating havoc”.
Coordination: Objectives keep activities on the right track. They make behaviour in organizations more rational, more coordinated and thus more effective, because everyone knows the accepted goals to work toward. In setting effective goals, managers help members at all levels of the organization to understand how they can „best achieve their own goals by directing their behaviour towards, the goals of the organisation‟.
Benchmarks for Success: Objectives serve as performance standards against which actual performance may be checked. They provide a benchmark for assessment. They help in the control of human effort in an organization.
Motivation: Goals are motivators. The setting of a goal that is both specific and challenging leads to an increase in performance because it makes it clear to the individual what he is supposed to do. He can compare how well he is doing now versus how well he has done in the past and in some instance how well he is performing in comparison to others. According to Latham and Yukl, goal specificity enables the workers to determine how to translate effort into successful performance by choosing an appropriate action plan.
Characteristics of Objectives
Objectives have the following features:
Objectives Form a Hierarchy: In many organizations objectives are structured in a hierarchy of importance. These are objectives within objectives. They all require painstaking definitions and close analysis if they are to be useful separately and profitable as a whole. The hierarchy of objectives is a graded series in which an organisation‟s goals are supported by each succeeding managerial level down to the level of the individual.
The objectives of each unit contribute to the objectives of the next higher unit. Each operation has a simple objective which must fit I and add to the final objective. Hence no work should be undertaken unless it contributes to the overall goal.
Objectives Form a Network: Objectives interlock in a network fashion. They are interrelated and inter-dependent. The concept of network of objectives implies that once objectives are established for every department and every individual in an organization, these subsidiary objectives should contribute to meet the basic objectives of the total organization. If the various objectives in an organization do not support one another, people may pursue goals that may be good for their own function but may be detrimental to the company as a whole.
Multiplicity of Objectives: Organizations pursue multifarious objectives. At every level in the hierarchy, goals are likely to be multiple. For example, the marketing division may have the objective of sale and distribution of products. This objective can be broken down into a group of objectives for the product, advertising, research, promotion managers.
The advertising manager‟s goals may include: designing product messages carefully, create marketing managers. To describe a single, specific goal of an organization is to say very little about it. It turns out that there are several goals involved. This may be due to the fact that the enterprise has to meet internal as well as external challenges effectively. Internal problems may be posed by government, society, stockholders, customers, etc.
Long and short-range objectives: Organisational objectives are usually related to time. Long-range objectives extending over five or more years are the ultimate or „dream‟ objectives for the organization. For example, planning in India has got objectives like eradication of poverty, checking population growth through birth control, etc., which reflect certain „ideals‟ the government wishes to accomplish in the long run. Short-range objectives (one-year goals) and medium-range objectives (two to four-year period goals), reflect immediate, attainable goals. The short-range and mediumrange objectives are the means for achieving long-term goals and the longterm goals supply a framework within which the lower level goals are designed.
Following are the areas where objectives have to be set:
|Growth||Revenue, assets, profits|
|Market Share||Competitive position|
|Productivity||Reducing defect rate ,Resource|
utilization , cost savings
|Technology and R& D||Innovation, modernization|
|Business portfolio flexibility||Corporate image|
|Human Resources||Acquisition of new skills, talent|
|CSR||Community welfare, civic roles,|
vioural Theory The organizational goal-setting process is not a perfect rational activity. Perfect rationality implies full knowledge of opportunities, constraints, capacity and willingness to focus attention on the entire goal-setting process. These conditions are rarely satisfied and, in most organizations, goals are compromises only. Actual goals come about from a constant series of negotiations among both internal and external groups. Each group will try to influence the goals. This leads to coalition (groups) formation and these coalitions will ultimately decide the goals for the organization.
Management by Objectives (MBO)
Another approach to goal-setting has been advanced by Odiorne, Peter Drucker and others in early 60s, known as Management by Objectives. According to Odiorne, MBO is a „process whereby the superior and subordinate managers of an organization jointly identify its common goals, define each individual‟s major areas of responsibility in terms of results expected of him, and use these measures as guides for operating the unit and assessing the contribution of each of its members.
- MBO emphasizes participative set goals that are tangible, verifiable and measurable.
- MBO focuses attention on what must be accomplished (goals) rather than how it is to be accomplished (methods).
- MBO, by concentrating on key result areas, translates the abstract philosophy of management into concrete phraseology. The technique can be put to general use. Further, it is „a dynamic system which seeks to integrate the company‟s need to clarify and achieve its profit and growth goals with the manager‟s need to contribute and develop him‟.
- MBO is a systematic and rational technique that allows management to attain maximum results from available resources by focusing on achievable goals. It allows the subordinate plenty of room to make creative decisions on his own.
Critical Success Factors (CSFs)
While framing corporate objectives, managers may find it useful to identify the key factors, which are needed to be kept in view to ensure organizational success. According to Ohmae, these critical success factors (strategic factors or key factors for success) should form the basis for business strategy in any industry. CSFs allow the business to put concentrated focus on a particular area and exploit the opportunities available therein to its advantage. This, of course, involves a three-step process:
- What does it take to be successful in this business< (Generate CSFs)
- What should the organization‟s objectives and goals be with regard to CSFs? (Drawing CSFs into objectives).
- How will we know whether the organization has been successful on this factor? (Identifying performance standards).
It is however, doubtful whether concentrated deployment of resources in a few areas would ensure the success of a firm in a competitive situation. Others may attack the arena with all their might. Such a myopic view would prevent a firm from peeping into areas hitherto unexplored, which could fetch substantial returns. To overcome this problem, if the firm distributes its resources in several areas, it may lose its focus and distinct competitive advantage(s).
An important question facing managers today is whether corporations have some responsibility to improve the world or only to improve their profits. Until the middle of the twentieth century, a firm was generally viewed, as an economic institution to provide wanted goods and services for public consumption and a profit for the owners. In the classic economic model, a firm is an economic institution governed by economic values and subject to the economic machinations of the marketplace.
Two significant developments changed all of this. The first occurred in the first half of the twentieth century as professional managers replaced owners in running big companies. Professional managers played more of a trustee role; they were responsible to the board of directors and interest of suppliers, customers, employees, and other claimants. The second development was the change in public attitude towards big businesses.
A healthy organization should visualize these impacts realistically and deal with them firmly by converting these social problems into opportunities for successful performance and positive contribution. As Drucker has pointed out, a healthy business cannot exist in a sick, impoverished society. Areas where there is need for public private partnership.
There were times when business used to be run only as a sole-ownership concern. But today while that institution (sole-ownership) still continues, we are witnessing different types of business concerns (partnership firms, public and private limited companies and even multinationals etc.,) thanks to the revolution in science and technology and tremendous progress in socio-economic and political fields. In keeping with the significant changes in other walks of life, business also has been changing its patterns, priorities and perceptions in tune with the times.
- Growing Awareness due to Education: With the growing literacy rate, more and more people are becoming increasingly aware of their right to a decent and healthy life. They have started analysing and comparing the goods and services available in the market in terms of quality, purity and cost. Keeping in view the public demand, businessmen have started thinking more in terms of quality and cost-effectiveness than in terms of profit alone.
- Newspapers and Consumer Organizations: The proliferation of language and dialect newspapers has made it easier and cheaper to reach out to the consumes even in far-flung areas. Besides, of late, various „consumer organizations‟ have been coming up in urban areas to protect the interests of consumers and to expose the malpractices or bad elements of business with the sole object of enlightening or forewarning the consumers.
- Fear of Government’s Interference: In the event of any business enterprise persisting in its fraudulent or deceitful ways to quench its hunger for more profit, the enlightened public can, through the various means at its command, compel the government to introduce legislation to check the malpractices of business.
- Trade Union Movement: Well-organized Trade Unions have become omnipresent and omnipotent in almost all big business establishments these days. The bargaining power and strength of these Unions keep the Captains of Industry on tenterhooks and ensure that they behave responsibly towards not only employees but also the public at large.
- Public Image: Building up a better public image is essential for any business to survive and grow. Hence, enlightened entrepreneurs or professional managers of today are all locked up in a healthy competition to build up their public image, even if it mean lesser and lesser profits.
- Competitive Market Forces: The cut-throat competition in the market has certainly played its part in forcing the businessmen to narrow down their profits in the interests of survival.
- Public Relations: Maintaining good public relations is sine qua non to success in business. Whether a customer or an employee or a government servant-a businessman has deal with all of them in a humble and polite way.
- Managerial Skills: The Industrial Revolution has brought in its wake a new breed of competent and professional managers who vie with one another in evolving and developing a more durable and balanced trade policy.
There were times when business used to be run only as a sole-ownership concern. But today while that institution (sole-ownership) still continues, we are witnessing different types of business concerns (partnership firms, public and private limited companies and even multinationals etc.,)
What is Characteristics of Objectives?
Objectives Form a Hierarchy: In many organizations objectives are structured in a hierarchy of importance. These are objectives within objectives. They all require painstaking definitions and close analysis if they are to be useful separately and profitable as a whole.
What is Purposes of Strategic Management Process?
Strategic management basically aims as formulating and implementing effective strategies. Effective strategies, of course, are those that help a superior „fit‟ between the organization and its environment and the achievement of strategic goals (Andrews).