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- PARTHA S. SENAPATI

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Business Environment

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Business Environment

And Strategy

By

Partha Sarathi Senapati

EDUCREATION PUBLISHING (Since 2011)

www.educreation.in

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ABOUT AUTHOR

Author, Mr. Partha Sarathi Senapati, who is an

academician working as, Asst. Professor, in the affiliated

colleges under Utkal University, Bhubaneswar. He has

been a visiting faculty to a number of Management

institutes in state. He is an MBA degree holder under

Biju Patnaik University of Technology (BPUT). The

author is UGC-NET qualified and currently pursuing his

PhD in management in Berhampur University, Odisha.

The author has around 2 years experience in Corporate

and 9 years of experience in teaching management

students in Under graduate and Post graduate level in the

area of marketing management, strategic management,

corporate governance, business ethics, production and

operation management, etc. The author has published

number of research papers in reputed national and

international journals and presented papers at various

seminars. He is a member of Odisha Commerce

Association (OCA). His one book ‘Rural and

Agricultural Marketing’ is already published in 2014

and other upcoming books include ‘Marketing

environment and Business Ethics’.

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ABOUT THE BOOK

The knowledge of business policy and techniques of

strategic management is the need of the hour to

prospective business managers. The present competitive

environment has brought several drastic changes in

policy making and strategic management. Hence, there is

necessity of theoretical understanding about the business

policy as well as strategic management.

Most of the organizations have started adopting strategic

management system. Every manager ought to see

himself as a strategist because; as organizations become

increasingly flat in structure, managers at all levels are

becoming increasingly involved in strategy formulation.

An understanding of the basics of strategic management

will stand them in good stead whichever area they may

be in. The nuances of strategic management are

examined in great depth in this book, which includes a

supplement that unfolds the historical process and

growth of strategic thinking in India. The growing

importance of the subject has been well realized by the

marketers, policymakers and management interns. The

present book has endeavoured to cover the entire gamut

of Strategic Management. There are few books on

strategic management which mostly deal with this

subject.

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This book is unique and original in the way it has been

organized and the material that has gone into it. These

are apart from several other case studies that are used to

illustrate various concepts. All in all, this unique book is

just about the most comprehensive, easy to read, up-to-

date, entertaining and enlightening exposition on this

vital subject as the reader is likely to come across, and

represents great value for students, laymen and faculty

alike. The book is written in simple, easy to understand

and language.

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CONTENTS

Title Page

About the Author v

About the Book vi

Chapter-1

An Overview of Strategic Management 1

Defining Strategy 2

Understanding strategy & its evolution 3

Evolution of Strategic Management 4

Distinctions between Business Policy and

Strategic management 5

The strategic management process 5

Benefits of strategic management 7

Levels of strategy 7

What are SBUs? 8

Identifying & defining the vision, mission &

objective of the firm 9

Business definition 14

Chaper-2

Business Environment 16

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Types of Business Environment 17

Micro Environment & Macro environment 19

Scanning of business environment 22

Different sources of information on environment 22

Different approaches for scanning environment 23

Techniques of environmental scanning 24

SWOT Analysis 26

Minzberg’s model of strategies decision making 29

Strategic alternatives & choice 30

Grand strategies 32

Stability strategy 33

Expansion strategy 34

Retrenchment strategy 40

Combination strategy 45

Modernisation strategy 46

Chapter-3

Organizational appraisal 47

BCG Growth – share – Matrix 48

GE 9-cell planning grid Matrix 51

Hofer’s product-market evolution matrix. 53

Directional policy matrix 53

Strategic Position and Action Evaluation

(SPACE) 54

Generic competitive strategy 55

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Chapter-4

Functional strategies 60

Human resource strategy 65

Production strategy 68

Financial management strategy 71

Chapter-5

Strategic Implementation 76

Issues in strategic implementation 77

Mc Kinsey 7s frame work 78

Types of Implementations 80

Organization structure & strategy 84

Resource allocation 94

Chapter-6

Strategic evaluation and control 96

Different Types of Barriers in evaluation and

control 97

Strategic Control 97

Techniques of strategic evaluation and control 100

Case studies 103

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Business Environment and Strategy

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CHAPTER- 1

An overview of Strategic Management

Introduction

Strategic Management is a process .A process denotes

that it has various activities which are to be performed in

a systematic manner. The systematic analysis of the

factors associated with customers and competitors (the

external environment) and the organization itself (the

internal environment) to provide the basis for

maintaining optimum management practices. The

objective of strategic management is to achieve better

alignment of corporate policies and strategic priorities.

Strategy is the product of the output of the strategic

management process to win over the competitors.

Strategy is a plan or course of action through which an

organization relate itself with the environment to achieve

the objective.

Strategic management is defined as a set of decisions

and action s in formulation and implementation of

strategies design to achieve the objective of an

organization.

Strategic management is a continuous process of relating

the organization with its environment by suitable course

of actions, which involves formulation, implementation

and control.

http://www.businessdictionary.com/definition/associated.html

http://www.businessdictionary.com/definition/practice.html

http://www.businessdictionary.com/definition/achieve.html


2

Defining Strategy

Before we could understand the strategic management

process we need to define what strategy is all about.

The word strategy comes from the Greek word

“StratAgos” it means the art of the general. It is mostly

used in the military and defense force against the

enemies. But now-a-days it is used in business and

industries against the competitors. Every farm is

required to develop an unique, comprehensive and

integrated plan to achieve the objectives in the

competitive industries.

Strategy is an abstract concept i.e. it doesn‟t have any

complete form. It is a long range plan and it has far

reaching impact on the business. It is an approach to a

problem. It is the direction and destination. It is a set of

decision such as

1. What business are we in?

2. What product will we offer?

3. Who are our customers?

4. At what price?

5. What will be our terms and conditions?

6. Who are our competitors?

7. What are our strength and weakness and how we

will compete?

Every business in an industry has to develop a strategy

by scanning the internal and external environment.

Strategy helps the business in becoming competitive and

win in the market place.

Without strategy an organization cannot perform

effectively nor can survive in the industry.

1. It is a set of important decision taken to achieve the

objective?



2. It is an unique, comprehensive, Integrated plan(UCI)

design to achieve the objective of the enterprise.

3. It is a balancing force between the organisation & its

environment & it consists of a set of actions to deal

with the changing environment.

4. It is the determination of the basic long team goals

& objectives of an enterprise & adoption of a course

of action & allocation of resources necessary for

carrying out these goals.

Understanding strategy and its evolution

The term strategy is mostly used in military & defence

force against the enemy. It is called the act of the

generals but now a days it is increasingly being used in

business & industry against competitors .Every firm in

an industry has to develop his strategy by scanning the

external environment & internal environment for

achieving the objective of the firm & surviving in the

industry. Without strategy an organisation can‟t perform

effectively & efficiently. A strategy is a,

Plan (to realize the goal of the Firm)

Position (A particular stand in the competitive

industry)

Pattern (particular course of action)

Ploy (A secret plan unknown to competitor)

Perspective (A view that guides/ opining

A Strategy in business is about perusing of competitive

advantages to win in the market place .Strategy is an

abstract concept. It is the act of (no concept form)

general it is wide spread & long ranges. It is an

approach to a problem. It is the direction & destination.

It is a set of decision such as


4

Evolution of Strategic Management

Business policy and strategic management as a separate

discipline was introduced in Havard Business school,

(HBS), USA in 1911. To reports in 1957

I. The Gorden and Howell Report sponsored by

Ford Foundation recommended a separate

course of business policy.

II. Pierson Report sponsored by Carnegie

foundation made a similar recommendation.

In 1969 a regulatory body of American business school

has made the course mandatory in the management

education. This subject is being taught in final semester

of the MBA degree course. Traditionally the term

business policy changes to the strategic management.

According to Glueck, the business policy has evolved

from the planning function of the management.

The evolution of strategic management process comes

from the planning function of the management

The business policy & strategic Management was 1st

introduced in Harvard business school in 1911.

Day to day

planning

Budgeting

contouring

MBO, Caper

Long range

planning

Strategic

planning

managing



In India, there is a separate forum called strategic

management forum of India. The business today

magazine always devotes some space for strategic

management. The business standard newspaper in its

every Sunday issue has a supplement called the

Strategist.

Distinctions between Business Policy and

Strategic management

Business Policy Strategic management

The business policy

starts from the practice

of management by the

manager and it has past

different phases to be

termed as strategic

management.

It is the guideline for

thinking and action for

those who make

decisions.

Policy can be delegated

and implemented for

the people.

Strategic Management

is a continuous process

of relating the

objective of the

organization with its

environment.

It is concerned with

direction of the

resources in order to

maximize the

achievement of the

objective.

Strategy can‟t be

delegated and it

requires changes in

time.

The Strategic Management Process

It consists of 3 parts

Strategic formation

Strategic implementation

Strategic evaluation & contra.


6

The process & step can be defected as follows.

Step 1 : Strategy formulation

Step 2: Strategy implementation

Strategy formulation Strategy implementation

Identifying vision, mission &

objective

Resource mobilisation &

allocation

Environmental analysis

(SWOT, ETOP)

Procedural

implementation

Finding strategic alternatives

(stability, growth,

retrenchment, combination)

Behavioural

Strategic choice

Organisation changes &

innovation

Step 3:Strategic evaluation & control

Defining &

Identifying

the vision,

mission,

objectives of

the firm

Environmental

analysis &

SWOT

analysis

Identifyin

g the

alternativ

e choices

Strategic

implementation

Strategic

evaluation

control



Designing evaluation & control system

Strategic control

Financial performance

Social performance

Benefits of Strategic Management

Following are the benefits of strategic management:-

1. Financial benefit because the strategy is according

to the environment

2. Avoiding environmental uncertainty

3. Helps in Clear objective setting

4. Providing Right direction for the firm.

5. Proper use of resources such as work force, capital,

machinery, technology, material etc.

6. Motivation of employees & job satisfaction

7. Improving communication with inside and outside

of the org.

8. Better coordination in function & projects

9. Better forecasting of the environmental changes &

action.

10. Increase organisational effectiveness & efficiency.

Levels of Strategy

*SBU-Strategic Business Unit


8

A multi-product., multi business diversified corporate

have different divisions business & product group this

strategic are developed at different levels of this

corporations these have corporate level strategy business

unit level strategy finical strategy etc.

1. Corporate level strategy:-

The corporate level strategy is at the higher level of

strategy decision making .This strategy covers actions

dealing with defining the vision, mission, objective of

the firm, acquisition of resources allocation of resource

to different divisions & business coordination of the

various strategy of SBUs etc. the wane function of

corporate level strategy is to achieve operational level of

performance of its unite business unite products

diversified business portfolio.

2. Business unit level strategy:-

There are no. of SBUs under a corporate couch develop

their own strategy to wake best use of the rescores. The

corporate level strategy creates the roadmap guiding &

policies along which the SBUs conduct their operations.

The business level strategy aims at improving the

competitive positions in the industry & to achieve

market shake light then the other completion

What are SBUs?

SBUs are any part of a business organisation which is

treated separately for strategies management purpose.

These are also called profit centre & cost centre .It is an

organisational unit of a diversified corporation that

perform all the basic functions. Each SBUs of a

corporation is identified separately which have distinct

mission, objective, competitors & are managed by an

executive who responsible for its profit cost Ex:- HUL is

an eminent consumer product company having its



business in soap & detergent, food & beverages etc.

The each product of HUL is organised as an SBUs.

3. Functional level strategy: -

The functional level strategy is developed for the

specific function of a business organisation. The

strategy is developed for each of the functions of SBUs

such as marketing, finance, human resource,

productions, information etc.

4. Operational level strategy:-

This level of strategy comes below the functional level

strategy & it involves action relating to various sub

functions of a major functions Ex:- The marketing

function may be divided into various sub functions like

marketing research, sales promotion, sales, distribution

advertising etc.

Identifying & defining the vision, mission

& objective of the firm

An organisation develops its philosophy which is a set of

assumption, believes, values, aspirations & other

priorities. This philosophy becomes the guiding

principles for the strategic decision maker while it is

dealing with the different stakeholders of the

organisations.

Visions:-

i. The organisation develop its vision for the future

based upon the values beliefs, culture &

aspiration of the organisations

ii. Vision is a guidelines to implement strategy in

the future

iii. It is the future aim &aspiration of the

organisation

iv. It is broad all inclusive & forward thinking


10

v. It creates position that the firm would like to

achieve in the distance future

Missions:-

The mission is defined as the enduring statement of

purpose that distinguishes one organisation from other

similar organisations. The mission of the firm provides

guide lines that link its activities to the need of the

society, i.e. the mission of a company says what it can

do for the society in general. it defines why the

organization exist in the society what product & service

it can offer by utilizing the resources that are available

the mission of organization that can changes when the

organization became larger when there is changes in the

technology or the consumer taste & preference,

environmental changes. The mission statements of the

some of the companies are

1. Our mission is to make every Indian a Britannia

consumer, (Britannia industry)

2. Our mission is to organization world

information & make it universally accessible &

useful (google)

3. According to Peter Drucker to know what

business we have to start is the purpose. The

purpose is always outside the business it is in the

society since the business organization is the

part of society. So there is only definition of

business purpose is to create a customer.

Characteristics of mission statement:-

Mission statement should follow „SMART‟ concept.

S- Specific

M – Measurable

A – Achievable



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The knowledge of business policy and

techniques of strategic management is the

need of the hour to the prospective

business managers.

The present competitive environment

has brought several drastic changes in

policy making & strategic management.

Hence, there is necessity of theoretical

understanding about the business policy as

well as strategic management.

- Partha S. Senapati (Author)

__________________________________

Also available as an eBook

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