7076997 scdl pgdba finance sem 2 strategic management

8/6/2019 7076997 SCDL PGDBA Finance Sem 2 Strategic Management

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STRATEGIC MANAGEMENT

1. Explain the evolution, role and importance of business policy and strategic management. What would be the role of manager in thisage?

Introduction: The term strategic management has been traditionally used. New titlesuch as business policy, corporate strategy and policy, corporate policies isessentially and extensively used which means more less the same concept.

Evolution of Strategic Management:1) In early 1920’s and 1930’s the managers used day-to-day planning methods

to perform any task.2) To anticipate the future, they tried using tools like preparation of budgets and

control systems like capital budgeting and management by objectives.3) The techniques were unable to emphasize the future adequately.4) The next step was they tried using long range planning which was replaced

by strategic planning and later by strategic management.5) In mid 1930’s, according to the nature of business the planning was done

during Adhoc policy making.6) As many businesses had just started operations and were mostly in a single

product line, there arose a need for policy making.7) As companies grew they expanded their products and they catered to more

customer and which in turn increased their geographical coverage.8) The expansion brought in complexity and lot of changes in the external

environment. Hence there was a need to integrate functional areas.9) This integration was brought about by framing policies to guide managerial

action.10) Policies helped to have pre-defined set of actions, which helped people to

make decision.11) Policymaking was the owner’s prime responsibility.12) Due to increase in the environment changes, in 1930’s and 40’s policy

formulation replaced ad-hoc policy making, which led to emphasis shifted tothe integration of functional areas in this rapidly changing environment.

13) Especially after II World War there was more complexity and significantchanges in the environment.

14) Competition increased with many companies entering into the market.15) Policy making and functional area integration was not sufficient for the

complex needs of a business.

ROLE OF STRATEGIC MANAGEMENT: -

1) Due to increase in the competition, in 1960’s there was a demand for criticallook at the bane corrupt of business.

2) The environment played an important role in the business.

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3) The relationship of business with the environment lead to the concept of strategy.

4) In early sixties, this helped the management to manage between thebusiness and the environment.

5) In early eighties, as many companies were globalised which lead to thecompetition of the rivals access the world.

6) Japanese companies along with other Asian companies unleashed a forceacross the world and posed a threat for the US and European companies,which led to the current thinking.

7) Strategic management focused on 2 aspects: -

• Strategic process of business.

• Responsibilities of strategic management.

8) Unlike others, in this phase the role of senior management is vital and of utmost importance. Their role was important in decision-making like -

a) Whether a company promotes a joint venture/new decision.b) Decides to go for an expansion.c) Takes other important actions.

8) All these actions and decision had a long-term impact on the company andits future operations, which was the result of senior management decision-making.

9) Strategic management is both about the present and future course of action,which was the prime responsibility senior management.

Strategic Management isI. The study of function and responsibilities of senior managementII. A crucial problem that affects success in total enterprise.

III. The decision that determine the direction of the organization and shape of itsfutureIV. Identity and molding of its characterV. Mobilisation and their allocation of the resources.

Hence as managers had variety of choices, decisions were based on thecircumstances, which would take the company in specified directions.

IMPORTANCE AND ROLE OF MANAGERS IN STRATEGIC MANAGEMENT: -

I. Strategic management integrates the knowledge and experience gained invarious functional areas.

II. It helps to understand and make sense of complex interaction in variousareas of management.

III. It helps in understanding how policies are formulated and in creatingappreciation of complexities of environment that the senior managementfaces in policy formulation.

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IV. Managers need to begin by gaining an understanding of the businessenvironment and to in control.

Here are few steps Indian managers need to do.a) They should know to manage and understand information technology,

which is changing the face of business.

b) As public and common investors own and more companies managersneed to acquire skills to maximize shareholder value.

c) To have/take a strategic perspective, managers should foresee thefuture and track changes in customer expectation. Intuitive, logicreasoning is required for proper decision-making.

d) Successful companies depend on people. For people, managementmanagers should create capability for imitating and manage thingsthrough leadership and should possess qualities like patience,commitment and perseverance.

e) Managers need to provide speed responses to environmental changesthrough informational systems and organizational process.

f) As corporates are becoming more integrated with the public life,

corporate governance is becoming important which manager mayhave to practice.

g) Managers should learn to deal with confused and complex situations. They should know to deal with global managers, business protocolsand market conditions.

h) In complex and certain situations, managers should have the couragein decision-making to make unconventional decisions.

i) Managers should possess high ethical standards in business and focuson social responsibility.

Conclusion Thus we can say the purpose of strategic management is manifold. To be

successful in the business one should possess/have holistic approach and shouldknow to integrate the knowledge gained in various functional area of management.By having generalistic approach, a senior manager can understand the complexinter linkages operating within the organisation and should have systematicapproach in decision-making in relation with the changes which takes place in theenvironment.Q2. What is strategy? At what levels is it formulated?

INTRODUCTION: -

To understand the process of strategic management the concept should beunderstood and controlled. The term strategy is derived from the Greek word

“STRATEGOS” Generalship. The actual direction of military force, as distinct fromgoverning its deployment. The word strategy means “ THE ART OF GENERAL ”.Based on the studies and views by various experts and management gurusStrategy in business has taken various connotations.

STRATEGY:

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1. Before making a decision managers have to look into the course of decidingsince

Strategy involves situations like

a) How to face the competition.b) Whether to undertake expansions/diversification

c) To be focused/ broad basedd) How to chart a turn arounde) Ensuring stability/should we go in for disinvestments etc

2. An establishment and successful company would start to face new threats inthe environment. This is due to its success and emergence of newcompetitors. It has to rethink the course of action it has been following. Thisis called strategy.

3. With such rethinking and environment analysis, new opportunities mayemerge and be identified.

4. To make use of these opportunities, the company might fundamentallyrethink and reason the ways and means, the actions it had been following in

the past. These are called “ strategies “.5. For a company to survive and to be successful strategy is one of the most

significant concepts to emerge in the field of management. According toAlfred chandler the determination of basic long-term goals and objectives of an enterprise and the adoption of the course of action and the allocation of resources for carrying out these goals.William Gluck defines strategy as “a unified, comprehension and integratedplan designed to assure that the basic objectives of the enterprises areachieved”.

6. Michael Porter views strategy as the “ core of general management isstrategy”.Managers must make companies flexible, respond rapidly, benchmark the

best practices, outsource aggressively, develop core competencies; Infactshould know how to play new roles everyday. Hyper competition is a commonphenomenon that rivals copy very fast.7. Companies can outperform rivals only if it can establish a difference it can

preserve and deliver greater value at a reasonable cost.8. Strategy rests on unique activities –“ The essence of strategy is in the

activities – choosing to perform things differently and to perform differentactivities than rivals”.

9. Strategy is long term. If company focus is only on operational effectiveness.It can become good and not better. Overemphasis on growth leads to thedilutions of strategy. Growth is achieved by deepening strategy.

10. Strategy is the future plan of action, which relates to the companiesactivities and its mission/vision i.e. when it would like to reach from itscurrent position.

11. It is concerned with the resource available today and those that will berequired for the future plan of action. It is about the trade off between itsdifferent activities and creating a fit among these activities.

LEVELS OF STRATEGY:

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1. When a company performs different business/ has portfolio of products, thecompany will organize itself in the form of strategic business units (SBU’s).

2. In order to segregate different units each performing a common set of activities, many companies are organized on the basis of operatingdivisions/decisions. These are known as strategic business units.

CORPORATE LEVEL

FUNCTIONAL LEVEL STRTEGIES [CORPORATE]

SBU1 SBU2 SBU3 (SBU LEVEL)

FUNCTIONAL LEVEL STRATEGIES3) Strategies are looked at

Corporate level

SBU level4) There exists a difference at functional levels like marketing, finance, productionsetc. Functional level strategies exist at both corporate and SBU level. It has to bealigned and integrated.5) CORPORATE LEVEL STRATEGY: It’s a broad level strategy and all its plan of actions is at corporate level i.e. what the company as a whole. It covers the variousstrategies performed by different SBU’s. Strategies needs should be in align withthe company objective.6) Resources should be allocated to each SBU and broad level functional strategies.

To ensure things there would need to have co-ordination of different business of theSBU’s.FUNCTIONAL STRATEGY: As the SBU level deals with a relatively. Smaller area thatprovides objectives for a specific function in that SBU environment are marketing,finance, production, operation etc.7) For most companies strategies plans are made at 3 levels.

a) FUNCTIONAL STRATEGYb) SOCIETAL STRATEGYc) OPERATIONAL STRATEGY

Societal Strategy: Larger Companies like conglometers with multiple business indifferent countries needs larger level strategy.

1) A relatively smaller company may require a strategy at a level higher thancorporate level.

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2) It’s how the company perceives itself in its role towards the society/ evencountries in terms of vision/ mission statement/ a set of needs that strives tofulfill corporate level strategies are then derived from the societal strategy.

Operational Level Strategy:In the dynamic environment & due to the complexities of business strategies are

needed to be set at lower levels i.e. one step down the functional level, operationallevel strategies.

There are more specific & has a defined scope. E.g. Marketing Strategy could besubdivided into sales Strategies for different segments & markets, pricing,distribution etc.Some of them may be common & some unique to the target markets.It should contribute to the functional objectives of marketing function. These areinterlinked with other strategies at functional level like those of finance, productionetc

MISSION/VISION LEVEL

CORPORATE LEVEL

FUNCTIONAL LEVEL STRTEGIES [CORPORATE]

SBU1 SBU2 SBU3 (SBU LEVEL)

FUNCTIONAL LEVEL STRATEGIES

OPERATIONAL LEVEL

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Corporate level is divided from the societal level strategy of a corporationS.B.U Level are put in to action under the corporate level strategy.Functional Strategies operate under SBU Level.Operational Level is derived from functional level strategies

Conclusion:

These are the levels at which strategies are formulated

3) What are the Issues in Strategic Decision Making? Explain the roleof Various Strategies.

Issues in Strategic Decision Making

1. While making a decision the company might have different people atdifferent periods of time.

2. Decision requires judgments; a personal related factors are important indecision-making. Hence decision ma y differs as person change.

3. Decisions are not taken individually, but often there is a task in decisionswhich could be Individual Vs Group decision making. There will be a

difference between the individual and group decision-making.4. On what Criteria a company should make its decision, for evaluation of the

efficiency & effectiveness of the decision making process, a company has toset its objectives which serves as main bench mark.

5. 3 Major Criteria in decision Making area. The concept of Maximization.b. The concept of satisfying.c. The concept of incrementalism.

Based on the concept chosen the strategic decisions will differ.6. Generally decision-making process is logical and there will be rationality in

decision-making.7. When it comes to Strategic decision making point of view there would be

proper evaluation & then exercising a choice from various availablealternative resource, which leads to attain the objectives in a best possibleway.

8. Creativity in decision-making is required when there is a complete situation& the Decision taken must be original & different.

9. There could be variability in decision-making based on the situation &Circumstances.

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Various Roles of Strategic Management.

Senior management plays n important role in Strategic Management.

Role of Board Of Directors: Board of Directors is the supreme Authority in acompany. They are the owners/ shareholders/ lenders. They are the ones who direct

and responsible for the governance of the company. The Company act and otherlaws blind them and their actions & they sometimes do get involved in operationalissues. Professionals on the B.O.D help to get new ideas, perspectives & provideguidance. They are the link between the company and the environment.

Role of C.E.O: Chief Executive Officer is the most important Strategist andresponsible for all aspects from formulations/Implementation to review of StrategicManagement. He is the leader, motivator & Builder who forms a link betweencompany and the board of directors and responsible for managing the externalenvironment and its relationship.

Role Of Entrepreneur: They are independent in thought and action and they set /

start up a new business. A Company can promote the entrepreneurial spirit and thiscan be internal attitude of an organization. They provide a sense of direction andare active in implementation.

Role of Senior Management: They are answerable to B.O.Directors & The C.E.Oas they would look after Strategic Management a responsible of certain areas /parts of terms.

Role of SBU – Level Executives: They Co-ordinate with other SBU’s & with SeniorManagement. They are more focused on their product / burners line.

They are more on the implementation role.

Role of Corporate Planning Staff: It provides administrative support tools andtechniques and is a Co-ordinate function.

Role of Consultant: Often Consultants may be hired for a specified new businessor Expertise even to get an unbiased opinion on the business & the Strategy.

Role of Middle Level Managers: They form an important link in strategizing &Implementation. They are not actively involved in formulation of Strategies andthey are developed to be the future management.

Conclusion: These are the issues in strategic decision-making and the role inStrategic Management.

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4) What is Strategic Management Process? Explain each step briefly.

Here are few definitions of Strategic Management Process.1) According to Glueck it’s a stream of decisions and actions that lead to the

development of an effective strategy/ Strategies to help achieve CorporateStrategies.

2) According to Hofer it’s the process, which deals with fundamentalOrganisational, renewal & growth with the development of strategies,Structures and Systems necessary to achieve such renewal and growth and

with the organizational systems needed to effectively manage the strategyformulation and implementation process.

3) Ansoff defines it as “ The Systematic approach & important responsibility of general management to position and relate the firm to its environment in away that will assure its Continued Success and make it secure fromsurprises”.

4) Sharplin defines as the formulation & implementation of plans and Carryingout activities related to the matters, which are vital, and of continuingimportance to the total organization.

5) According to Harrison & St John – Strategic Management is the processthrough which organization learn from their internal & external environment,establish strategic decision create strategies that are intended to helpachieve establish goals & execute there strategies achieve Establish goalsand execute there Strategies all in an effort to satisfy key organizationalstake holders.

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COMPANY VISION &MISSION/ REQUIREMENTSOF MAJOR STOCK HOLDERS STRATEGIC

EXTENAL & INTERNAL ANALYSIS /SWOT ENVIRONMENT ANALYSIS

DEFINE STRENGTHS/WEAKNESS/ CORECOMPENTENCIES

GENERATE STRATEGIC ALTENATIVES/EVALUATE & SELECT

IMPLEMENT/ FEEDBACK/CONTROL



From the above block diagram it states that Strategic Management is a process,which leads to the formulation of Strategy/ Set of Strategies & managing thru

Organisational System for the achievement of Vision, Mission Goals andObjectives.

Company Vision / Mission

1) Company Vision is What a Company Wishes to become or aspire to be.2) Company Mission is what the Company is and why it exists3) James Parras & James Collins divides Vision/Mission into 2 Parts.

Vision/ Core Ideology Core Values

Core Purpose

Mission Envisioned Future Audaclous GoalsVivid Description

Core Ideology: Is the unchanging part of organization. It is the character of anorganization, this would not change for a longer time even it were disadvantage.Core Values : what it believes in.Core Purpose: Existence of Organization and that goes far behind

Envisioned Future: Are the goals to be reached.It is classified into:Audaclous Goals: These are the goals that the company would like to achieve. Theyare tough needs extraordinary commitment and effort.Vivid Description: These Goals are put into words that evoke a picture of what itwould be like to achieve the Audaclous Goals.

SWOT Analysis: External & Internal Analysis:1. The External Environment is made up of all the Factors, Conditions &

influences outside the organizations.2. it gives rise to opportunities which can be exploited or it may give rise to

threats which can weaken / cause problem to the organization.

STRENGTHS/WEAKNESS/CORE COMPETENCIES

Strengths: it’s always in relation to the environment. It’s an unborn capacity, whichneeds to fulfill two conditions.

1) Requirement for success.2) It gives the Strategic Advantage.

It has strengths more than the competitor; it could gain more than the Competitor.E.g. Superior research where new products & Innovations are required.

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Weakness: It’s something required for success is missing/inherent inadequacy. Itgives strategic disadvantage to the Organisation.E.g. Over dependence on a single product line in a mature market.

Core Competencies: Is developed over a period of time, using these competenciesexceeding well, it develops a fine art of Competition with its rules. This capacity of

exercing turns them to core competencies.

General Strategic Alternatives / Evaluate & Select.It means that there is a proper evaluation and exercing a choice from variousalternative available resources in such a way it may lead to the achievement of company’s objective.

Implement / Feedback/ ControlImplementation is the responsibility of CEO. He is responsible from implementationto review of Strategic Management.

5) Explain Strategic intent, stretch leverage & Fit.

Introduction: for an effective strategic intent one has to develop effective strategy,rather than focusing at the resourcefulness of Competition & their pace at whichthey are building competencies one has to focus on existing position.

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Strategic Intent is something more than the unfettered ambition. It’s not a softtarget. According to Prahlad & Gray

1) It forsee’s a desired leadership position and establishes the criteria theorganization will chart it’s progress.

2) It Captures the essence of winning & is stable over time.

3) It requires personal effort, Commitment and bit of luck to achieve the target.4) The Important thing that a company asks for is not “How Well Next Year be

different”? But they ask, “ What must we do differently next year to getcloser to our strategic intent?”

5) Most companies look at change and innovations in isolation6) Innovations come from everywhere & top Management role is to add value to

it.7) Strategic intent leaves room for creativity, innovation & top Management

directs it.8) There must be a balance between resources as a Constrain Vs Resource as

leverage so as to reduce risk. Former is done through building a balancedportfolio of cash generating and cash consuming business and in the latter a

well balanced and sufficiently broad portfolio/ collection of advantages isassured.

9) It implies a seryable stretch for an organization.10) Since the current capabilities & resources are not------- it will force

inventiveness and the management will keep on involving challenges andthey give time to digest one challenge before launching another.

11) One important parameter is reciprocal responsibility - Which means equalblame & credit for both operating levels & top management.

12) Companies with good strategic intent know the importance of documentingfailure but instead of blame fixing and nailing people they are moreinterested in the management reasons and the orthodoxy, that may have ledto future.

Stretch: To Achieve strategic intent one has to stretch forward and has to look atthe resourcefulness instead of looking at resources. One has to make use of Innovation and resources. Stretch leads to leverage.

Leverage: Refers to concentrating on the resources to achieve strategic intent,accumulating, learning, experiences & Competencies in a manner to meet theaspirations by stretching the scarce resource that an organizational resource to theenvironment.Instead of allotting the competitors blindly & taking their head companies mustleverage the resources.

Fit: Strategic fit is the traditional way of looking at strategy. Strategic fit isconservative and seems to be more realistic but u may not be aware of thepotential. Under stretch & leverage Strategic extent could be impossible, idealisticbut under fit strategic something far beyond possibilities and look at the potentialpossibilities.

Conclusion.

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Thus Strategic intent is what the organization strives for e.g. Canon wanted to beatXerox. It’s an obsession to an organization & it is to win at all levels of theorganization, sustaining that obsession is in quest for global leadership.

6) Write a detailed note on Goals and Objectives.

Goals: - Goal – Targeta) It’s a target that a company wants to achieve in a future period of time. b) An organization sets a combination of goals, which might be Qualitatively,

Quantitative, and Financial & Non Financial. These Goals must be clear andunambiguous.

c) On an organizational level goals are broad in nature and they could set goalson turnover, profits, returns on assets/equity, market share, Customersatisfaction, Employee satisfaction.

d) Goals should be limited, manageable, and clear& Consistent with each other,otherwise it may lead to confusion & Contradictions.

e) Goals may be Qualitative, Quantitative in specification.

Objectives:a) Objectives are the ends that specify how the goals shall be achieved. b) They are concrete and specific and they are in contrast with the goals.

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c) Objectives make the goals operational and tend to Quantitative inspecifications.

d) Objectives are set in a way that what the organisation has to achieve for itsemployees, shareholders, customers etc.,

e) Objectives are in relation with the environment. They are the brains of Strategic Decision Making.

f) They are framed in line with the vision/mission of the organization and ithelps to pursue them.

g) Objectives are invariably Quantitative and provide clear measures andstandards for performance.

h) It helps to see whether the Organisation is in right track or not.i) Objectives should be concrete, specific, and understandable & should have

clearly defined time frame. j) It must be measurable, actionable, challenging but controllable.k) There must be co-relation with other objectives.l) While setting objectives these are the factors to be evaluated. It should be

specific at the level, which it is being set. It should not be either too narrowor too broad.

m) There need to be multiplicity of objectives.n) It should be formulated at different time frames like short term, medium

term, and long term & should be linked & consistent.o) Since its in relation with the environment it needs to check whether they are

fulfilling the needs of customers, share holders etc.,p) It should be In reality with the organizational resources and internal

constraints, including policies & lower relationship.

Conclusion: Thus an organization is set up to make Prompt and Accurate decision.Hence goals & objectives are set for the accomplishment of an organization.

7) What is Environment ? How is it Changing?

Introduction : -Environment means the surrounding. It includes both internal and external objects,factors & influences under which someone/something exist.

Environment :

1) The Environment of an organization is the aggregate/total of all conditionsevents that influences itself & it’s Surroundings,

2) The dynamic & has relationships with each other.3) The factors in environment may affect the company and visa versa.4) It has a great impact on the company.

Environment – Changes:

According to Michael Hommer and James Chapey.

1) An Organisation must be flexible enough to adjust quickly with this changingenvironment.

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2) The Efficiency of the company comes at the expenses of the efficiency of thecompany as a whole.

3) It requires co-operation & Co-ordination within the organization.4) Few Companies are rigid, non-competitive, inefficient and losing money

because they are not able to adjust themselves with the changingenvironment.

5) In 1776 Adam Smith described in his book, “The Wealth of Nations.” ThePrinciple of division of labour for increasing the productivity and there byreducing the cost of goods. American Companies became best in the worldafter applying the principles.

6) But in today’s world, nothing is constant or predictable & these principlesdon’t work.

7) Market growth, customer demand, the rate of technological change, andnature of competition keeps changing.

8) The three forces that drives company areCustomersCompetition &Change.

Customers : Earlier days, Customers had little choice they used to buy the productthat was offered to them. These days customers come with more specifications andthey demand for customized products and they want individual attention. Hencecustomers have upper hands these days. It’s difficult for an organization to survivein the long run unless they satisfy customers needs.

Competition : As many companies emerges, the competition rises. They offer goodquality of products at lesser price and consumers prefer such products. Earlier thecompany could get into market with an acceptable product/service at the best pricewould go to sell. But these days customers prefer high quality at lowest price. TheCompany, which offers these at best price, goes high quality and best servicebecomes standard of all the competitors.

Changes : Changes has become both pervasive and persistent because companiesface a greater competitors and each one introduces a product and serviceinnovation to the market with the globalisation of the economy. Hence thecompanies need to move fast in pace with the changing environment otherwise it’sdifficult to move.

CONCLUSION: In today’s environment nothing is constant and predictable hence fora company to survive in the long run, it has to satisfy customer needs and copewith the changes in the environment at a faster rate.

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Q8) Explain the process of SWOT analysis? Elaborate what you would study in the environment?

INTRODUCTION

The external environment is made of factors, conditions that influencesoutside the organization. The external environment gives rise toopportunities, which can be accomplished, or it may cause problems tothe organization.

SWOT ANALYSIS:

The internal environment refers to all factors within the control of and within theorganization. These factors may impart strengths that can be utilised by theorganization or cause weakness, which becomes threat to the organization.

S – Strength O- OpportunityW – Weakness T – Threats

Strength: –It is an inherent capacity that is in relation to the environment. For anorganization to be a success it requires strength and it gives strategic advantage togain more than the competition.E.g. Innovation and new products are required for superior research anddevelopment facilities.

Weakness: - It is an inherent inadequacy that is again in relation to theenvironment. It gives strategic disadvantage and something that required forsuccess is missing. It leads to competition where weakness can be used to gainmore due to inherent limitation / constraint/inadequacy.E.g.1) In a mature market over dependence on a single product line.

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2) Lack of capabilities for the development of new product, which is potentiallyrisky for a company during the time of crisis.

OPPORTUNITY: can be accomplished and can help to consolidate and strengthen theorganization. It’s a favorable condition for an organization in its environment.

E.g. Due to better GDP growth a company provides increase in demand for theproducts/services. It helps in strengthening its position.

THREATS: when the opportunities are not utilized properly it can cause problem tothe to the organization which causes threat. It is unfavorable condition for theorganization. It causes risk/damage to an organization.E.g. Due to opening up of economy, the emergence of multinational companies,which are stronger and has good resources, offers stiff competition to the existingcompanies in an industry.

CONCLUSION

An understanding of both internal and external environment in terms of opportunities, threat, strength, weaknesses important for existence, growth andprofitability of an organization. A systematic approach and understanding theenvironment is SWOT analysis all about.

Environment to be studied

1) Events: Is some specific occurrence that takes place in differentenvironmental sectors. E.g. Bilateral agreement between 2 countries inwhich the company is operating and facing competition from localcompanies.

2) Trends: is the way the environment is shaping up. They are he course of action along which events take place like global warming, nuclear familiesetc.

3) Issues: are the current concerns that arise in response to events and trends.E.g. Pollution Control, Business ethics after scams.

4) Expectations: are the demands made by interested groups in light of theirconcern. Like corporate governance, greater transparency, stricted auditingnorms.

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Q9. What are the core competencies and organization capabilities?

CORE COMPENTENCIES:1) An organization with its resources and the capacity of converting the

resources in to outputs and the behaviour of there (i.e. capability andresources) develops certain strength and weakness, which their combinedlead to synergistic effects.

2) Synergy – Total (is greater) sum of the parts. In terms of organizationalcompetencies it manifest themselves in advantages over competition.

3) Competencies develop over a period of time.4) It’s a fine art of competing with its rivals over a period of time and it uses

these competencies to exceed well. The capability of using thesecompetencies to exceed well turns them into core competence.

5) Core competencies have joined greater currency and popularity as per C.K Prahaled and Gary Hamel. It’s a portfolio of products/services/differentbusiness.

6) In short run competencies for a company is derived from the priceperformance and in longer run it’s the ability to build at lower cost andspeedily than others.

7) A diversified company is like a large tree. What are not easily visible andapparent – are the core products and leaves, flowers, fruits are the endproduct.

8) Root is akin to “Core Competence”.9) Core competence is communication, collective learning and co-ordination of

diverse production skills and deep involvement and commitment to work anddelivery of value across all levels and functions.

10) Core competencies are the glue that binds existing business and guidemarket entries instead of market attractiveness.

11) Core competencies can be identified by conducting 3 tests i.e providespotential access to wide variety of markets and significant contributions tothe benefit of the end product difficult for competitors to imitate.

12) Building competencies are not sharing costs by SBU’ (or) out pending rivalson R and D

13) By not building competencies in emerging markets you may lose the chanceof competing in existing markets.

It’s important to maintain the competencies even it not active in the market.

ORGANISATIONAL CAPABILITY: -

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1) It’s the inherent capacity of an organization to use its strengths andovercome weakness to exploit opportunities and face threats in the externalenvironment.

2) It’s comparable & it’s very difficult to measure the capability of anorganization.

3) Strategist would like to know what capacity exist within the organization &

what potentials should be developed so that opportunities can be exploited &how it can face threats.

4) Organisational capability includes Financial, Marketing, Operations,Personnel, and Information Management & General Management.

Financial Capability:

1) Source of Funds – How well the company can raise funds, their cost &availability.

2) Management & use of funds – how optimally it utilizes the funds where andhow they are used.

3) Factor governing marketing capability are the from P’s i.e. Product, Price

Place & Promotion related factors how it generates systematically.4) Factors influencing personal capability are R & D System, production &

Control Systems.5) Factors leading to personal Capability are industrial & personnel relations,

organizational & employees Characteristics.6) Factors that lead to information management capability are integrative,

systematic & supportive factors.

The retrieval, usage, Acquisition, processing, synthesis, transmission &dissemination of information.

General Management methods & Techniques.

To carry at the organizational study internal analysis tools can be used asmentioned below.

1) Value Chair Analysis2) Qualitative & Quantitative analysis both financial non financial.3) Comparative analysis, bench marking, industrial norms.4) Comprehensive Analysis using new tools Balance score card/key factor

making.

Conclusion: These are the factors that influence them.

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Q.10)

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7076997 scdl pgdba finance sem 2 strategic management

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