Main Project SM Project

INTRODUCTION

Strategic Management - An Introduction

Strategic Management is all about identification and description of the

strategies that managers can carry so as to achieve better performance and a competitive

advantage for their organization. An organization is said to have competitive advantage if

its profitability is higher than the average profitability for all companies in its industry.

Strategic management can also be defined as a bundle of decisions and acts

which a manager undertakes and which decides the result of the firm’s performance. The

manager must have a thorough knowledge and analysis of the general and competitive

organizational environment so as to take right decisions. They should conduct a SWOT

Analysis (Strengths, Weaknesses, Opportunities, and Threats), i.e., they should make best

possible utilization of strengths, minimize the organizational weaknesses, make use of

arising opportunities from the business environment and shouldn’t ignore the threats.

Strategic management is nothing but planning for both predictable as well as unfeasible

contingencies. It is applicable to both small as well as large organizations as even the

smallest organization face competition and, by formulating and implementing appropriate

strategies, they can attain sustainable competitive advantage.

Strategic Management is a way in which strategists set the objectives and

proceed about attaining them. It deals with making and implementing decisions about

future direction of an organization. It helps us to identify the direction in which an

organization is moving.

Strategic management is a continuous process that evaluates and controls the

business and the industries in which an organization is involved; evaluates its competitors

and sets goals and strategies to meet all existing and potential competitors; and then

reevaluates strategies on a regular basis to determine how it has been implemented and

whether it was successful or does it needs replacement.

Strategic Management gives a broader perspective to the employees of an

organization and they can better understand how their job fits into the entire

organizational plan and how it is co-related to other organizational members. It is nothing

but the art of managing employees in a manner which maximizes the ability of achieving

business objectives. The employees become more trustworthy, more committed and more

satisfied as they can co-relate themselves very well with each organizational task. They

can understand the reaction of environmental changes on the organization and the

probable response of the organization with the help of strategic management. Thus the

employees can judge the impact of such changes on their own job and can effectively

face the changes. The managers and employees must do appropriate things in appropriate

manner. They need to be both effective as well as efficient.

One of the major role of strategic management is to incorporate various

functional areas of the organization completely, as well as, to ensure these functional

areas harmonize and get together well. Another role of strategic management is to keep a

continuous eye on the goals and objectives of the organization.

What is strategy?

The word “strategy” is derived from the Greek word “stratçgos”; stratus

(meaning army) and “ago” (meaning leading/moving).

Strategy is an action that managers take to attain one or more of the

organization’s goals. Strategy can also be defined as “A general direction set for the

company and its various components to achieve a desired state in the future. Strategy

results from the detailed strategic planning process”.

A strategy is all about integrating organizational activities and utilizing and allocating the

scarce resources within the organizational environment so as to meet the present

objectives. While planning a strategy it is essential to consider that decisions are not

taken in a vacuum and that any act taken by a firm is likely to be met by a reaction from

those affected, competitors, customers, employees or suppliers.

Strategy can also be defined as knowledge of the goals, the uncertainty of events

And the need to take into consideration the likely or actual behavior of others. Strategy is

the blueprint of decisions in an organization that shows its objectives and goals, reduces

the key policies, and plans for achieving these goals, and defines the business the

company is to carry on, the type of economic and human organization it wants to be, and

the contribution it plans to make to its shareholders, customers and society at large.

Elements of Strategic Management

Strategic management, as minimum, includes strategic planning and strategic control.

Strategic planning describes the periodic activities undertaken by organizations to cope

with changes in their external environments (Lester A. Digman) it involves formulating

and evaluating alternative strategies, selecting a strategy, and developing detailed plans

for putting the strategy into practice. Strategic planning consists of formulating strategies

from which overall plans for implementing the strategy are developed. Strategic control

consists of ensuring that the chosen strategy is being implemented properly and that it is

producing the desired results.

Based on Robert Anthony's framework, three types of planning and control are required

by organizations:

* Strategic Planning and Control - the process of deciding on changes in organizational

objectives, in the resources to be used in attaining these objectives, in policies governing

the acquisition and use of these resources, and in the means (strategies) of attaining the

objectives. Strategic planning and control involve actions that change the character or

direction of the organization.

* Management Planning and Control - the process of ensuring that resources are obtained

and used efficiently in the accomplishment of the organization's objectives. Management

planning and control is carried on within the framework established by strategic planning

and is analogous to operating control.

* Technical Planning and Control - the process of ensuring efficient acquisition and use

of resources, with respect to those activities for which the optimum relationship between

outputs and resources can be accurately estimated (e.g., financial, accounting, and quality

controls).

Another important term in the study of strategic management is long-range planning.

Long-range planning, planning for events beyond the current year, is not synonymous

with strategic management (or strategic planning). Not all long-range planning is

strategic. Scope of Strategic Management

J. Constable has defined the area addressed by strategic management as "the management

processes and decisions which determine the long-term structure and activities of the

organization".

* Management process. Management process as relate to how strategies are created and

changed.

* Management decisions. The decisions must relate clearly to a solution of perceived

problems

* Time scales. The strategic time horizon is long. However, it for company in real trouble

can be very short

* Structure of the organization. An organization is managed by people within a structure.

The decisions which result from the way that managers work together within the structure

can result in strategic change

* Activities of the organization. This is a potentially limitless area of study and we

normally shall centre upon all activities which affect the organization. These all five

themes are fundamental to a study of the strategic management field and are discussed

further in this chapter and other part of this thesis.

Strategic planning

Strategic planning is a management tool, period. As with any management tool,

it is used for one purpose only: to help an organization do a better job - to focus its

energy, to ensure that members of the organization are working toward the same goals, to

assess and adjust the organization's direction in response to a changing environment. In

short, strategic planning is a disciplined effort to produce fundamental decisions and

actions that shape and guide what an organization is, what it does, and why it does it,

with a focus on the future.

A word by word dissection of this definition provides the key elements that

underlie the meaning and success of a strategic planning process: The process is strategic

because it involves preparing the best way to respond to the circumstances of the

organization's environment, whether or not its circumstances are known in advance;

nonprofits often must respond to dynamic and even hostile environments. Being strategic,

then, means being clear bout the organization's objectives, being aware of the

organization's resources, and incorporating both into being consciously responsive to a

dynamic environment.

The process is about planning because it involves intentionally setting goals (i.e.,

choosing a desired future) and developing an approach to achieving those goals. The

process is disciplined in that it calls for a certain order and pattern to keep it focused and

productive. The process raises a sequence of questions that helps planners examine

experience, test assumptions, gather and incorporate information about the present, and

anticipate the environment in which the organization will be working in the future.

Finally, the process is about fundamental decisions and actions because choices

must be made in order to answer the sequence of questions mentioned above. The plan is

ultimately no more, and no less, than a set of decisions about what to do, why to do it,

and how to do it. Because it is impossible to do everything that needs to be done in this

world, strategic planning implies that some organizational decisions and actions are more

important than others - and that much of the strategy lies in making the tough decisions

about what is most important to achieving organizational success.

The strategic planning can be complex, challenging, and even messy, but it is

always defined by the basic ideas outlined above - and you can always return to these

basics for insight into your own strategic planning process

SWOT Analysis and strategic planning

SWOT analysis is an examination of an organization’s internal strengths and

weaknesses, its opportunities for growth and improvement, and the threats the external

environment presents to its survival. Originally designed for use in other industries, it is

gaining increased use in healthcare.

Steps in SWOT Analysis

The primary aim of strategic planning is to bring an organization into balance with the

external environment and to maintain that balance over time. Organizations accomplish

this balance by evaluating new programs and services with the intent of maximizing

organizational performance. SWOT analysis is a preliminary decision-making tool that

sets the stage for this work.

Step 1 of SWOT analysis involves the collection and evaluation of key data.

Depending on the organization, these data might include population demographics,

community health status, sources of healthcare funding, and/or the current status of

medical technology. Once the data have been collected and analyzed, the organization’s

capabilities in these areas are assessed.

Step 2 data on the organization are collected and sorted into four categories:

strengths, weaknesses, opportunities, and threats. Strengths and weaknesses generally

stem from factors within the organization, whereas opportunities and threats usually arise

from external factors. Organizational surveys are an effective means of gathering some of

this information, such as data on an organization’s finances, operations, and processes.

Step 3 It involves the development of a SWOT matrix for each business

alternative under consideration. For example, say a hospital is evaluating the

development of an ambulatory surgery center (ASC). They are looking at two options;

the first is a wholly owned ASC, and the second is a joint venture with local physicians.

The hospital’s expert panel would complete a separate SWOT matrix for each alternative.

Step 4 It involves incorporating the SWOT analysis into the decision-making

process to determine which business alternative best meets the organization’s overall

strategic plan.

Strengths

Traditional SWOT analysis views strengths as current factors that have

prompted outstanding organizational performance. Some examples include the use of

state-of-the-art medical Equipment, investments in healthcare informatics, and a focus on

community healthcare improvement projects. Other strengths might include highly

competent personnel, a clear understanding among employees of the organization’s goals,

and a focus on quality improvement.

Weaknesses

Weaknesses are organizational factors that will increase healthcare costs or

reduce healthcare quality. Examples include aging healthcare facilities and a lack of

continuity in clinical processes, which can lead to duplication of efforts. Weaknesses can

be broken down further to identify underlying causes. For example, disruption in the

continuity of care often results from poor communication. Weaknesses also breed other

weaknesses. Poor communication disrupts the continuity of care, and then this

fragmentation leads to inefficiencies in the entire system. Inefficiencies, in turn, deplete

financial and other resources. Other common weaknesses include poor use of healthcare

informatics, insufficient management training, a lack of financial resources, and an

organizational structure that limits collaboration with other healthcare organizations. A

payer mix that includes large numbers of uninsured patients or Medicaid patients can also

negatively affect an organization’s financial performance, and a lack of relevant and

timely patient data can increase costs and lower the quality of patient care.

Opportunities

Traditional SWOT analysis views opportunities as significant new business

initiatives available to a healthcare organization. Examples include collaboration among

healthcare organizations through the development of healthcare delivery networks,

increased funding for healthcare informatics, community partnering to develop new

healthcare programs, and the introduction of clinical protocols to improve quality and

efficiency. Integrated healthcare delivery networks have an opportunity to influence

healthcare policy at the local, state, and national levels. They also have an opportunity to

improve patient satisfaction by increasing public involvement and ensuring patient

representation on boards and committees. Organizations that are successful at using data

to improve clinical processes have lower costs and higher-quality patient care. For

example, healthcare organizations with CMS Hospital Compare quality scores above the

90th national percentile are eligible for CMS pay-for performance incentives. (See

Chapter 6 for information on CMS Hospital Compare). The greater the number of

organizations achieving such scores, the greater patients’ access to quality healthcare.

Such scores also enhance an organization’s Reputation in the Community.

Threats

Threats are factors that could negatively affect organizational performance.

Examples include political or economic instability; increasing demand by patients and

physicians for expensive medical technology that is not cost-effective; increasing state

and federal budget deficits; a growing uninsured population; and increasing pressure to

reduce health cost.

Components of Strategy Statements

The strategy statement of a firm sets the firm’s long-term strategic direction and broad

policy directions. It gives the firm a clear sense of direction and a blueprint for the firm’s

activities for the upcoming years. The main constituents of a strategic statement are as

follows:

1. Strategic Intent

An organization’s strategic intent is the purpose that it exists and

why it will continue to exist, providing it maintains a competitive advantage. Strategic

intent gives a picture about what an organization must get into immediately in order to

achieve the company’s vision. It motivates the people. It clarifies the vision of the vision

of the company. Strategic intent helps management to emphasize and concentrate on the

priorities. Strategic intent is, nothing but, the influencing of an organization’s resource

potential and core competencies to achieve what at first may seem to be unachievable

goals in the competitive environment. A well expressed strategic intent should guide/steer

the development of strategic intent or the setting of goals and objectives that require that

all of organization’s competencies be controlled to maximum value.

Strategic intent includes directing organization’s attention on the need of winning;

inspiring people by telling them that the targets are valuable; encouraging individual and

team participation as well as contribution; and utilizing intent to direct allocation of

resources. Strategic intent differs from strategic fit in a way that while strategic fit deals

with harmonizing available resources and potentials to the external environment, strategic

intent emphasizes on building new resources and potentials so as to create and exploit

future opportunities.

2. Mission Statement

Mission statement is the statement of the role by which an

organization intends to serve its stakeholders. It describes why an organization is

operating and thus provides a framework within which strategies are formulated. It

describes what the organization does (i.e., present capabilities), who all it serves (i.e.,

stakeholders) and what makes an organization unique (i.e., reason for existence). A

mission statement differentiates an organization from others by explaining its broad

scope of activities, its products, and technologies it uses to achieve its goals and

objectives. It talks about an organization’s present (i.e., “about where we are”). For

instance, Microsoft’s mission is to help people and businesses throughout the world to

realize their full potential. Wal-Mart’s mission is “To give ordinary folk the chance to

buy the same thing as rich people.” Mission statements always exist at top level of an

organization, but may also be made for various organizational levels. Chief executive

plays a significant role in formulation of mission statement. Once the mission statement

is formulated, it serves the organization in long run, but it may become ambiguous with

organizational growth and innovations. In today’s dynamic and competitive environment,

mission may need to be redefined. However, care must be taken that the redefined

mission statement should have original fundamentals/components. Mission statement has

three main components-a statement of mission or vision of the company, a statement of

the core values that shape the acts and behavior of the employees, and a statement of the

goals and objectives.

Features of a Mission

a. Mission must be feasible and attainable. It should be possible to achieve it.

b. Mission should be clear enough so that any action can be taken.

c. It should be inspiring for the management, staff and society at large.

d. It should be precise enough, i.e., it should be neither too broad nor too narrow.

e. It should be unique and distinctive to leave an impact in everyone’s mind.

f. It should be analytical, i.e., it should analyze the key components of the strategy.

g. It should be credible, i.e., all stakeholders should be able to believe it.

3. Vision

A vision statement identifies where the organization wants or intends to

be in future or where it should be to best meet the needs of the stakeholders. It describes

dreams and aspirations for future. For instance, Microsoft’s vision is “to empower people

through great software, any time, any place, or any device.” Wal-Mart’s vision is to

become worldwide leader in retailing. A vision is the potential to view things ahead of

themselves. It answers the question “where we want to be”. It gives us a reminder about

what we attempt to develop. A vision statement is for the organization and it’s members,

unlike the mission statement which is for the customers/clients. It contributes in effective

decision making as well as effective business planning. It incorporates a shared

understanding about the nature and aim of the organization and utilizes this

understanding to direct and guide the organization towards a better purpose. It describes

that on achieving the mission, how the organizational future would appear to be.

An effective vision statement must have following features-

a. It must be unambiguous.

b. It must be clear.

c. It must harmonize with organization’s culture and values.

d. The dreams and aspirations must be rational/realistic.

e. Vision statements should be shorter so that they are easier to memorize. In order to

realize the vision, it must be deeply instilled in the organization, being owned and shared

by everyone involved in the organization.

4. Goals and Objectives

A goal is a desired future state or objective that an

organization tries to achieve. Goals specify in particular what must be done if an

organization is to attain mission or vision. Goals make mission more prominent and

concrete. They co-ordinate and integrate various functional and departmental areas in an

organization. Well made goals have following features-

These are precise and measurable.

These look after critical and significant issues.

These are realistic and challenging.

These must be achieved within a specific time frame.

These include both financial as well as non-financial components. Objectives are

defined as goals that organization wants to achieve over a period of time. These

are the foundation of planning. Policies are developed in an organization so as to

achieve these objectives. Formulation of objectives is the task of top level

management. Effective objectives have following features-

These are not single for an organization, but multiple.

Objectives should be both short-term as well as long-term.

Objectives must respond and react to changes in environment, i.e., they must be

flexible.

These must be feasible, realistic and operational.

Strategic Management Process

Strategic management process means defining the organization’s strategy. It is

also defined as the process by which managers make a choice of a set of strategies for the

organization that will enable it to achieve better performance. Strategic management is a

continuous process that appraises the business and industries in which the organization is

involved; appraises its competitors; and fixes goals to meet the entire present and future

competitor’s and then reassesses each strategy. There probably is general acceptance of

the idea that strategic management is concerned with the strategic processes that produce

desired responses to an organization's changing environment. The strategic management

process is concerned with a long-run perspective. The time horizon involved often is at

least 3 years and normally may be 5 or 10 years into the future. However, in certain

extremely dynamic industries, the strategic management process could be concerned with

much shorter time frames. Strategic management is the management of change. This

involves the system of corporate values, the corporate culture, and all managerial process

of change, such as leadership, planning, control, and human resources management.

There are four steps in Strategic Management Process:

i. Environmental Scanning Internal and External analysis of Environment)

Organizational environment consists of both external and internal factors.

Environment must be scanned so as to determine development and forecasts of factors

that will influence organizational success. Environmental scanning refers to possession

and utilization of information about occasions, patterns, trends, and relationships within

an organization’s internal and external environment. It helps the managers to decide the

future path of the organization. Scanning must identify the threats and opportunities

existing in the environment. While strategy formulation, an organization must take

advantage of the opportunities and minimize the threats. A threat for one organization

may be an opportunity for another.

Internal analysis of the environment is the first step of environment scanning.

Organizations should observe the internal organizational environment. This includes

employee interaction with other employees, employee interaction with management,

manager interaction with other managers, and management interaction with shareholders,

access to natural resources, brand awareness, organizational structure, main staff,

operational potential, etc.

A business becomes more competitive, and there are rapid changes in the

external environment, information from external environment adds crucial elements to

the effectiveness of long-term plans. As environment is dynamic, it becomes essential to

identify competitors’ moves and actions. Organizations have also to update the core

competencies and internal environment as per external environment. Environmental

factors are infinite, hence, organization should be agile and vigil to accept and adjust to

the environmental changes. For instance - Monitoring might indicate that an original

forecast of the prices of the raw materials that are involved in the product are no more

credible, which could imply the requirement for more focused scanning, forecasting and

analysis to create a more trustworthy prediction about the input costs. In a similar

manner, there can be changes in factors such as competitor’s activities, technology,

market tastes and preferences

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

• immediate / industry environment

• national environment

• broader socio-economic environment

ii. Strategy Formulation

Strategy formulation refers to the process of choosing the most appropriate

course of action for the realization of organizational goals and objectives and thereby

achieving the organizational vision. The process of strategy formulation basically

involves six main steps. Though these steps do not follow a rigid chronological order,

however they are very rational and can be easily followed in this order.

a) Setting Organizations’ objectives - The key component of any strategy statement is to

set the long-term objectives of the organization. It is known that strategy is generally a

medium for realization of organizational objectives. Objectives stress the state of being

there whereas Strategy stresses upon the process of reaching there. Strategy includes both

the fixation of objectives as well the medium to be used to realize those objectives. Thus,

strategy is a wider term which believes in the manner of deployment of resources so as to

achieve the objectives.

While fixing the organizational objectives, it is essential that the factors which influence

the selection of objectives must be analyzed before the selection of objectives. Once the

objectives and the factors influencing strategic decisions have been determined, it is easy

to take strategic decisions.

b) Evaluating the Organizational Environment - The next step is to evaluate the general

economic and industrial environment in which the organization operates. This includes a

review of the organizations competitive position. It is essential to conduct a qualitative

and quantitative review of an organizations existing product line. The purpose of such a

review is to make sure that the factors important for competitive success in the market

can be discovered so that the management can identify their own strengths and

weaknesses as well as their competitors’ strengths and weaknesses. After identifying its

strengths and weaknesses, an organization must keep a track of competitors’ moves and

actions so as to discover probable opportunities of threats to its market or supply sources.

c) Setting Quantitative Targets - In this step, an organization must practically fix the

quantitative target values for some of the organizational objectives. The idea behind this

is to compare with long term customers, so as to evaluate the contribution that might be

made by various product zones or operating departments.

d) Aiming in context with the divisional plans - In this step, the contributions made by

each department or division or product category within the organization is identified and

accordingly strategic planning is done for each sub-unit. This requires a careful analysis

of macroeconomic trends.

e) Performance Analysis - Performance analysis includes discovering and analyzing the

gap between the planned or desired performance. A critical evaluation of the

organizations past performance, present condition and the desired future conditions must

be done by the organization. This critical evaluation identifies the degree of gap that

persists between the actual degree of gap that persists between the actual reality and the

long-term aspirations of the organization. An attempt is made by the organization to

estimate its probable future condition if the current trends persist.

f) Choice of Strategy - This is the ultimate step in Strategy Formulation. The best course

of action is actually chosen after considering organizational goals, organizational

strengths, potential and limitations as well as the external opportunities

iii. Strategy Implementation

Strategy implementation is also defined as is also defined as the manner in

which an organization should develop, utilize, and amalgamate organizational structure,

control systems, and culture to follow strategies that lead to competitive advantage and a

better performance. Organizational structure allocates special value developing tasks and

roles to the employees and states how these tasks and roles can be correlated so as

maximize efficiency, quality, and customer satisfaction-the pillars of competitive

advantage. But, organizational structure is not sufficient in itself to motivate the

employees. An organizational control system is also required. This control system equips

managers with motivational incentives for employees as well as feedback on employees

and organizational performance. Organizational culture refers to the specialized

collection of values, attitudes, norms and beliefs shared by organizational members and

group.

These are the main steps in implementing a strategy:

• Developing an organization having potential of carrying out strategy successfully.

• Disbursement of abundant resources to strategy-essential activities.

• Creating strategy-encouraging policies.

• Employing best policies and programs for constant improvement.

• Linking reward structure to accomplishment of results.

Excellently formulated strategies will fail if they are not properly implemented.

Also, it is essential to note that strategy implementation is not possible unless there is

stability between strategy and each organizational dimension such as organizational

structure, reward structure, resource-allocation process, etc.

Strategy implementation poses a threat to many managers and employees in an

organization. New power relationships are predicted and achieved. New groups (formal

as well as informal) are formed whose values, attitudes, beliefs and concerns may not be

known. With the change in power and status roles, the managers and employees may

employ confrontation behavior

iv. Strategy Evaluation

Strategy Evaluation is as significant as strategy formulation because it throws

light on the efficiency and effectiveness of the comprehensive plans in achieving the

desired results. The managers can also assess the appropriateness of the current strategy

in todays dynamic world with socio-economic, political and technological innovations.

Strategic Evaluation is the final phase of strategic management.

The significance of strategy evaluation lies in its capacity to co-ordinate the task

performed by managers, groups, departments etc, through control of performance.

Strategic Evaluation is significant because of various factors such as - developing inputs

for new strategic planning, the urge for feedback, appraisal and reward, development of

the strategic management process, judging the validity of strategic choice etc.

The steps in Strategic Evaluation are as follows

• Fixing benchmark of performance - While fixing the benchmark, strategists

encounter questions such as - what benchmarks to set, how to set them and how to

express them. In order to determine the benchmark performance to be set, it is essential to

discover the special requirements for performing the main task. The performance

indicator that best identify and express the special requirements might then be determined

to be used for evaluation. The organization can use both quantitative and qualitative

criteria for comprehensive assessment of performance. Quantitative criteria include

determination of net profit, ROI, earning per share, cost of production, rate of employee

turnover etc. Among the Qualitative factors are subjective evaluation of factors such as -

skills and competencies, risk taking potential, flexibility etc.

• Measurement of performance - The standard performance is a bench mark with

which the actual performance is to be compared. The reporting and communication

system help in measuring the performance. If appropriate means are available for

measuring the performance and if the standards are set in the right manner, strategy

evaluation becomes easier. But various factors such as managers contribution are difficult

to measure. Similarly divisional performance is sometimes difficult to measure as

compared to individual performance. Thus, variable objectives must be created against

which measurement of performance can be done. The measurement must be done at right

time else evaluation will not meet its purpose. For measuring the performance, financial

statements like - balance sheet, profit and loss account must be prepared on an annual

basis.

• Analyzing Variance - While measuring the actual performance and comparing it

with standard performance there may be variances which must be analyzed. The

strategists must mention the degree of tolerance limits between which the variance

between actual and standard performance may be accepted. The positive deviation

indicates a better performance but it is quite unusual exceeding the target always. The

negative deviation is an issue of concern because it indicates a shortfall in performance.

Thus in this case the strategists must discover the causes of deviation and must take

corrective action to overcome it.

• Taking Corrective Action - Once the deviation in performance is identified, it is

essential to plan for a corrective action. If the performance is consistently less than the

desired performance, the strategists must carry a detailed analysis of the factors

responsible for such performance. If the strategists discover that the organizational

potential does not match with the performance requirements, then the standards must be

lowered. Another rare and drastic corrective action is reformulating the strategy which

requires going back to the process of strategic management, reframing of plans according

to new resource allocation trend and consequent means going to the beginning point of

strategic management process.

Characteristics/Features of Strategic Decisions

Strategic decisions have major resource propositions for an organization. These

decisions may be concerned with possessing new resources, organizing others or

reallocating others.

Strategic decisions deal with harmonizing organizational resource capabilities with

the threats and opportunities.

Strategic decisions deal with the range of organizational activities. It is all about

what they want the organization to be like and to be about.

Strategic decisions involve a change of major kind since an organization operates

in ever-changing environment. Strategic decisions are complex in nature.

Models Of strategic Management

1. BCG Matrix

Boston Consulting Group (BCG) Matrix is a four celled matrix (a 2 * 2 matrix)

developed by BCG, USA. It is the most renowned corporate portfolio analysis tool. It

provides a graphic representation for an organization to examine different businesses in it

portfolio on the basis of their related market share and industry growth rates. It is a two

dimensional analysis on management of SBU’s (Strategic Business Units). In other

words, it is a comparative analysis of business potential and the evaluation of

environment.

According to this matrix, business could be classified as high or low according to

their industry growth rate and relative market share.

Relative Market Share = SBU Sales this year leading competitors sales this year.

Market Growth Rate = Industry sales this year - Industry Sales last year.

The analysis requires that both measures be calculated for each SBU. The

dimension of business strength, relative market share, will measure comparative

advantage indicated by market dominance. The key theory underlying this is existence of

an experience curve and that market share is achieved due to overall cost leadership.

BCG matrix has four cells, with the horizontal axis representing relative market

share and the vertical axis denoting market growth rate. The mid-point of relative market

share is set at 1.0. If all the SBU’s are in same industry, the average growth rate of the

industry is used. While, if all the SBU’s are located in different industries, then the mid-

point is set at the growth rate for the economy.

Resources are allocated to the business units according to their situation on the

grid. The four cells of this matrix have been called as stars, cash cows, question marks

and dogs. Each of these cells represents a particular type of business.

2. Michael Porter Model

Michael Porter (Harvard Business School Management Researcher) designed

various vital frameworks for developing an organization’s strategy. One of the most

renowned among managers making strategic decisions is the five competitive forces

model that determines industry structure. According to Porter, the nature of competition

in any industry is personified in the following five forces

Rivalry among current competitors

Threat of new potential entrants

Threat of substitute product/services

Bargaining power of suppliers

Bargaining power of buyers

FIGURE: Porter’s Five Forces model

The five forces mentioned above are very significant from point of view of

strategy formulation. The potential of these forces differs from industry to industry.

These forces jointly determine the profitability of industry because they shape the prices

which can be charged, the costs which can be borne, and the investment required to

compete in the industry. Before making strategic decisions, the managers should use the

five forces framework to determine the competitive structure of industry.

The five factors of Porter’s model in detail:

Risk of entry by potential competitors: Potential competitors refer to the firms

which are not currently competing in the industry but have the potential to do so if given

a choice. Entry of new players increases the industry capacity, begins a competition for

market share and lowers the current costs. The threat of entry by potential competitors is

partially a function of extent of barriers to entry. The various barriers to entry are-

• Economies of scale

• Brand loyalty

• Government Regulation

• Customer Switching Costs

• Absolute Cost Advantage

• Ease in distribution

• Strong Capital base

Rivalry among current competitors: Rivalry refers to the competitive struggle for market

share between firms in an industry. Extreme rivalry among established firms poses a

strong threat to profitability. The strength of rivalry among established firms within an

industry is a function of following factors:

• Extent of exit barriers

• Amount of fixed cost

• Competitive structure of industry

• Presence of global customers

• Absence of switching costs

• Growth Rate of industry

• Demand conditions

Bargaining Power of Buyers: Buyers refer to the customers who finally

consume the product or the firms who distribute the industry’s product to the final

consumers. Bargaining power of buyers refer to the potential of buyers to bargain down

the prices charged by the firms in the industry or to increase the firms cost in the industry

by demanding better quality and service of product. Strong buyers can extract profits out

of an industry by lowering the prices and increasing the costs. They purchase in large

quantities. They have full information about the product and the market. They emphasize

upon quality products. They pose credible threat of backward integration. In this way,

they are regarded as a threat.

Bargaining Power of Suppliers: Suppliers refer to the firms that provide

inputs to the industry. Bargaining power of the suppliers refer to the potential of the

suppliers to increase the prices of inputs( labour, raw materials, services, etc) or the costs

of industry in other ways. Strong suppliers can extract profits out of an industry by

increasing costs of firms in the industry. Suppliers products have a few substitutes.

Strong suppliers’ products are unique. They have high switching cost. Their product is an

important input to buyer’s product. They pose credible threat of forward integration.

Buyers are not significant to strong suppliers. In this way, they are regarded as a threat.

Threat of Substitute products: Substitute products refer to the products

having ability of satisfying customer’s needs effectively. Substitutes pose a ceiling (upper

limit) on the potential returns of an industry by putting a setting a limit on the price that

firms can charge for their product in an industry. Lesser the number of close substitutes a

product has, greater is the opportunity for the firms in industry to raise their product

prices and earn greater profits (other things being equal).

The power of Porter’s five forces varies from industry to industry.

Whatever be the industry, these five forces influence the profitability as they affect the

prices, the costs, and the capital investment essential for survival and competition in

industry. This five forces model also help in making strategic decisions as it is used by

the managers to determine industry’s competitive structure.

Porter ignored, however, a sixth significant factor- complementary. This

term refers to the reliance that develops between the companies whose products work is

in combination with each other. Strong complementary might have a strong positive

effect on the industry. Also, the five forces model overlooks the role of innovation as

well as the significance of individual firm differences. It presents a stagnant view of

competition.

Strategic Leadership/Role of leader and strategy managers

Strategic leadership refers to a manager’s potential to express a strategic vision

for the organization, or a part of the organization, and to motivate and persuade others to

acquire that vision

A few main traits / characteristics / features / qualities of effective strategic leaders that

do lead to superior performance are as follows:

Loyalty- Powerful and effective leaders demonstrate their loyalty to their vision by

their words and actions.

Keeping them updated- Efficient and effective leaders keep themselves updated

about what is happening within their organization. They have various formal and

informal sources of information in the organization.

Judicious use of power- Strategic leaders makes a very wise use of their power.

They must play the power game skillfully and try to develop consent for their

ideas rather than forcing their ideas upon others. They must push their ideas

gradually.

Have wider perspective/outlook- Strategic leaders just don’t have skills in their

narrow specialty but they have a little knowledge about a lot of things.

Motivation- Strategic leaders must have a zeal for work that goes beyond money

and power and also they should have an inclination to achieve goals with energy

and determination.

Compassion- Strategic leaders must understand the views and feelings of their

subordinates, and make decisions after considering them.

Self-control- Strategic leaders must have the potential to control

distracting/disturbing moods and desires, i.e., they must think before acting.

Social skills- Strategic leaders must be friendly and social.

Role of Managers/board of directors in Strategy development

An organization's Chief Executive Officer is the most invisible and important

strategy manager. The CEO, as captain of the ship, has full responsibility for leading the

tasks of formulating and implementing the strategic plans of the whole organization, even

though many other managers have a hand in the process. The CEO functions as chief

direction setter, chief objective setter, and chief strategy - maker and chief strategy -

implementer for the total enterprise. What the CEO views as important usually moves to

the top of every manager’s priority list and the CEO has the final word on big decisions.

Vice President (V.P) for production, marketing, finance etc and other functional

departments have strategy making and strategy implementation responsibilities as well.

Normally, the production V.P. oversees production strategy; marketing VP heads up the

marketing strategy effort and so on. Managerial positions with strategy making and

strategy-implementation responsibility are by no means restricted to these few senior

executives. Every manager is a strategy-maker and strategy-implementer for the areas.

He/she has authority over and supervises. Every part of the company - business unit,

division, operating department, plant or district office has a role to carry out (Thompson

and Strickland, 1992). The manager in charge of unit, with guidance from superiors,

usually ends up doing some or most of the strategy-making for the unit and implement

whatever strategic choices are made. However, managers further down in the managerial

levels have a narrower, more specific strategy making/strategy-implementing role than

managers close to the top. Another reason lower-echelon managers are strategy-makers

and strategy-implementers is that more geographically scattered and diversified an

organization’s operations are, the more impossible it becomes for a few senior executives

to handle all the strategic planning that needs to be done. Managers in the corporate

office do not know all the situational details in all geographical areas and operating units

to be able to prescribe appropriate strategies. Usually, they delegate some of the strategy-

making responsibility to lower level managers who head the organizational sub-units

where specific strategic results must be achieved. Delegating strategy-making role to

those managers who will be deeply involved in carrying out roles in their areas, fixes

accountability for strategic success or failure. When the managers who implement the

strategy are also its architects, it is hard for them to shift the blame or make excuses if

they do not achieved the targeted results.

In diversified or large companies where the strategies of several different businesses have

to be managed, there are usually four distinct levels of strategy managers:

The CEO and other senior corporation-level executives who have primary

responsibility and personal authority for big strategic decisions affecting the total

enterprise and the collection of individual businesses the enterprise has diversified

Managers who have profit-and-loss responsibility for some specific business unit

and who are delegated a major leadership role in formulating and implementing

the strategy for that unit.

Functional area managers within a given business unit have direct authority over a

major piece of the business and whose role it is to support unit’s overall strategy

with strategic actions in their own areas.

Managers of major operating departments and geographic field units who have

frontline responsibility for developing the details of strategic efforts in their areas

and for implementing and executing the overall strategic plan at grass roots level.

Globalization impact on strategic Management

The globalization of business has become so rapid that a new field called

"Global Strategic Management" has now emerged. This new field is a blend of strategic

management and international business that develops worldwide strategies for global

corporations. Whereas most studies in this field focus on ordinary business conditions,

the revolutionary events of the past few years make it clear that the present is not

ordinary. Such epoch-shattering events as the collapse of communism, the unification of

Europe, the information revolution, the arrival of an environmental ethic, and other

remarkable new developments signal that a new era is emerging in global affairs. This

article describes a broader approach to global strategic management that encompasses

these revolutionary changes.

The viewpoint presented here was developed in a project sponsored by the

World Future Society called "WORLD 2000." WORLD 2000 focuses on conducting a

global strategic management process among business, government, education, and other

sectors of society to define the emerging global system and help institutions adapt to

changes. It represents a fresh examination of the forces that are integrating the earth into

a coherent global order as well as those that are creating the disorder that tends to

characterize our time: the unification of markets and communications, as well as the vast

differences in cultures, local problems, and values erupting around the globe. By gaining

new insights into the emerging world system, social institutions may better understand

how they can adapt to these changes.

This seems to be an opportune time for such an examination. The transition to

a new global system is likely to be made during the next decade; the year 2000 offers a

highly symbolic turning point at which the emerging global order can be shaped and

molded.

Following is a global strategic plan, developed by synthesizing the literature

and then reviewing the plan with groups of executives. It follows the logic of a typical

strategic plan but carried to a global level. First, we summarize nine super trends that

describe a long-term trajectory toward an advanced stage of "global maturity." Second,

we note five principal obstacles that must be overcome to clear the way ahead. Third, we

argue that these issues can be resolved by a newly emerging perspective that recognizes

the essential unity of a global community.

The Trajectory To Global Maturity

The following trends represent the principal driving forces that are now moving the world

in new directions. They could be called "super trends." Little attempt is made to offer

justifications, and many other trends that capture finer details are not covered. This

summarizes the major features that characterize the emerging shape of the globe as it

moves along a long-term trajectory toward a new stage of global maturity.

Trend 1: A Stable Population of 10-14 Billion

The earth, which already is teeming with 5.5 billion people, is expected to

double its population to reach a stable level somewhere between 10-14 billion humans by

the mid-21st century. About 95 percent of this growth will occur in the less developed

countries (LDCs).

Trend 2: Industrial Output Will Increase by a Factor of 5-10

The aggregate level of material consumption, or industrial output, should

increase by a factor of 5-10 over the next few decades as most remaining parts of the

world industrialize to reach the equivalent standard of living enjoyed by Americans,

Europeans, and Japanese. Industrial throughout, however, is likely to grow less as more

efficient means are found to insure a sustainable form of development.

Trend 3: The Wiring of the Globe

Information technology (IT) is a revolutionary force that will continue to

overthrow governments, restructure corporations, and unify the world. This revolution

will wire the earth into a single communication network, a central nervous system for a

planetary society. However, the gap between information haves and have-nots is apt to

persist.

Trend 4: The High-Tech Revolution

The IT revolution is accelerating technical advances to create breakthroughs in

all fields: the mapping of DNA, genetic therapy, robotics, materials research, sustainable

"green technology," automated transportation, and even a "technology of consciousness."

Trend 5: Global Integration

The globe is becoming integrated into a single community connected by a

common communication system, a global economy, and a shared international culture. In

time, this process may unify today's growing economic blocs and political federations

into a universal system of open trade, a global banking system and common currency,

and some form of world governance.

Trend 6: Diversity and Complexity

It is a great paradox that global integration will be accompanied by

disintegration into a highly diverse system. Ethnic enclaves, such as those in the former

republics of the USSR, will continue to seek autonomy; various groups within nations

will form pockets of self-governing subcultures; and modern societies generally will

splinter into a far more complex, differentiated social order.

Trend 7: A Universal Standard of Freedom

Freedom and the recognition of human rights should continue spreading around

the globe, though this movement may ebb and flow at times. A majority of nations now

have political democracy and free market systems, and the number should grow to the

extent that freedom becomes the accepted norm, with authoritarian systems being the

exception.

Trend 8: Continued Crime, Terrorism, and War

Traumatic upheaval is likely to produce disgruntled individuals, groups, and

nations resorting to a variety of crimes, terrorism, and limited wars. However, global

wars and the old fear of nuclear holocaust now seem unlikely.

Trend 9: Transcendent Values

As this transformation unfolds, most people in advanced nations should strive

for quality of life, community, self-fulfillment, art, spirituality, and other higher-order

values that transcend material needs. Many are cynical about such claims, but as the

philosopher Andre Malraux predicted, the twenty-first century will be the century of

religion.

Strategic management process of e-business

The e-business strategic management process illustrated is based on the

traditional model of strategic management. It is a systematic process consisting of four

interrelated steps: (1) Analyze the external and internal environments, (2) Select the e-

business strategy, (3) Implement the e-business strategy, and (4) Evaluate the success of

the e-business strategy.

Step 1: Analyze The Company’s External And Internal Environments

In the traditional strategic planning model, managers identify their company’s

strengths and weaknesses, as well as the obstacles and opportunities in their business

environment. They are then ready to make strategic decisions that seek to balance their

company’s competencies with the business opportunities around them. This step is

equally crucial for e-business planning.

The main barriers to e-business adoption

A wait-and-see attitude and skepticism on the part of clients and partners can

put up barriers that discourage e-business solutions. In other cases, the nature of the

company’s product can make it more difficult to introduce e-business. Consider the

example of Moules Industrials, a Sherbrook, Que., firm that manufactures rubber and

plastic moulds-a customized product that is generally unsuitable for Web-based sales

because transactions cannot occur without prior personal contact. Moules Industrials can,

however, use the Web to foster initial client contact, and when an agreement is reached

with a client, the Internet can make further contact easier during the prototype

development phase.

For SMEs located outside major urban centers, it is sometimes hard to find

simple, economic solutions for distributing the products they sell on-line. La Ferme

Martinette, a maple-product business in Quebec’s Eastern Townships that markets its

merchandise on-line, must rely on Canada Post to deliver goods to its customers. La

Fermee Martinette operates at a disadvantage because merchandise pickup is not an

option for many customers, and because it does not have personal contact with customers

at the time of sale or product receipt. The Web makes it possible for SMEs like La Ferme

Martinette to increase their customer base, but it cannot solve all the logistical difficulties

related to the sale.

However, our study found that by far the most important obstacle to e-business

adoption among small- and medium-sized enterprises was lack of financial resources.

The size of the investment and the long and sometimes uncertain payback period

frequently cause SMEs to postpone investing in e-business. For example, 20 per cent of

Polar Plastic’s customers wanted the Montreal-based plastic-ware manufacturer to adopt

an electronic data interchange (EDI) system, which was too costly, given the company’s

small client base. Polar Plastic knew that it would be very difficult to pay off the $30,000

cost of the system over the short term. Instead, the company opted for EDI Gateway, a

technological solution offered by an external supplier that processes customer orders and

lets Polar Plastic transmit information to its clients’ EDI systems. Through this

intermediary company, Polar could receive and transmit information by fax to clients like

McDonald’s Restaurants. Until recently, the cost of contracting this particular EDI

solution through an intermediary was a few hundred dollars per month.

What conditions enable e-business adoption?

When developing their e-business strategic plan, managers must take into

account the number and nature of external factors that are compatible with the adoption

of e-business.

Depending on the industry, government financing may be an incentive for

adopting e-business. Other proven incentives are the time spent with SMEs to understand

their needs and the investments in technological infrastructure made by the leaders of

sector-based associations like the QICG (Quebec Institute of Graphic Communications)

and the funding and technological expertise of partners such as government agencies and

large corporations. Many companies know how to identify and take advantage of such

arrangements. In our study, the triggering factor was usually the initiative of managers

who realized the potential advantages of e-business. For example, the vision and

technological know-how of managers at Auberge de La Fontaine, a small hotel in

Montreal, and Colibri Tours, a travel agency, led these companies to develop a Web site.

After many years of negative growth, Revue Gestion, a magazine for business

practitioners and academics, also sought to boost readership by going on-line.

Step 2: Select An E-Business Strategy

The selection of an e-business strategy requires solid knowledge of how e-

business can create economic value for the firm. Successful SMEs know how to identify

the scope of their activities and determine which products, clients and geographic

markets they should target. They also know how to set clear and measurable goals.

How can e-business create economic value?

The ultimate goal of any strategic decision is to create value. Amit and Zotto

identified four opportunities to create value with the help of e-business: efficiency,

complementarities, novelty and lock-in. Efficiency is mainly derived from lower costs

due to faster transactions, increased automation of the company’s operations, and the ease

with which clients can research relevant information. Novelty refers to the design and

adoption of new operational methods in a given sector that link up new or existing

participants, or introduces new products and services. By locking in to a particular,

reliable technological solution, a company gains approval and trust among its client base.

Complementarities are mainly concerned with the bundling of resources and

technological capabilities, as well as the bundling of products and services, of various

partners in one electronic network. In our study, the principal value driver was efficiency

for the firm and the customer. Using e-business allowed SMEs to reduce costs and find

new clients, as was the case with Montreal’s Auberge de La Fontaine, whose Web

presence boosted the inn’s revenues by 30 per cent. The inn was also able to save on

advertising costs by reducing the number of promotional flyers it printed. Its trilingual

site (French, English and Spanish) allows customers to view available rooms and obtain

information on Montreal’s tourist and cultural offerings, adding value for its patrons and

streamlining the booking process.

Value can also be created through complementarities and lock-in. Caractéra-

Neomédia, a Quebec-based printing and new-media company, retains clients by

providing them with comprehensive content-management services and alternative

publishing methods.

Step 3: Implement The E-Business Strategy

After defining the targeted client base and geographic markets for new or

traditional products, SME managers should plan the implementation of their e-business

and decide what type of technological solution and supply chain to adopt.

What are the most suitable technological solutions?

Companies have a wide range of technological options from which to choose (see Table

1). Our study shows that SMEs usually develop Web sites and e-shops that complement

their products and services, and fulfill their need for identity and independence. SMEs in

plastics and printing often are reluctant to embrace technological solutions that impose

standardization on the entire industry. In fact, portal solutions, virtual communities and e-

malls are usually not attractive to SMEs because they do not support the SMEs’ need for

identity and independence.

Thanks to its Web site, Maison Laprise, a manufacturer of factory-built homes, is

able to provide customers with a complete catalogue of its products, along with the

relevant technical specifications for each home. The site’s search engine allows clients to

input the features they want in a home and quickly access an appropriate model. About

60 per cent of buyers said they visited the Web site before heading to the company’s

showroom. The company’s on-line presence has bolstered its sales volume.

Some businesses prefer to involve other retailers or partners in their technological

solutions, and to devise a technical format that is tailored to the specific operations of

their association or sector. RECF, for example, runs an e-mall where editor partners can

advertise their products.

Step 4: Evaluate the success of the e-business strategy

After acquiring a sound understanding of how to create economic value with e-

business and determining the firm’s desired positioning, managers must finalize

objectives relating to sales growth, cost reduction and profitability. They must also select

the indicators that will enable them to assess the success of the e-business solution-

scorecards showing financial, client, internal process and learning and growth indicators

can be vital tools.

Indicators for evaluating e-business success

Overall, the businesses in this study used a small number of unsophisticated indicators.

They placed importance on the profitability of transactions, and measured performance

by analyzing additional sales volume and the savings realized by using e-business. In our

study, only Revue Gestion established a set of indicators to assess the performance of its

e-business project prior to implementing e-business. Many of these indicators are

automatically captured on Revue Gestion’s Web site.

Strategic management of HUL

Introduction:

Soon after followed Lifebuoy in 1895 and other famous brands like Pears, Lux

and Vim. Vanaspati was launched in 1918 and the famous Dalda brand came to the

market in 1937.

In 1931, Unilever set up its first Indian subsidiary, Hindustan Vanaspatii

Manufacturing Company, followed by Lever Brothers India Limited (1933) and United

Traders Limited (1935). These three companies merged to form HUL in November 1956;

HUL offered 10% of its equity to the Indian public, being the first among the foreign

subsidiaries to do so. Unilever now holds 67.25% equity in the company. The rest of the

shareholding is distributed among about three lakh individual shareholders and financial

institutions.

The erstwhile Brooke Bond's presence in India dates back to 1900. By 1903,

the company had launched Red Label tea in the country. In 1912, Brooke Bond & Co.

India Limited was formed. Brooke Bond joined the Unilever fold in 1984 through an

international acquisition. The erstwhile Lipton's links with India were forged in 1898.

Unilever acquired Lipton in 1972 and in 1977 Lipton Tea (India) Limited was

incorporated. Pond's (India) Limited had been present in India since 1947. It joined the

Unilever fold through an international acquisition of Chesebrough Pond's USA in 1986.

Since the very early years, HUL has vigorously responded to the stimulus of

economic growth. The growth process has been accompanied by judicious

diversification, always in line with Indian opinions and aspirations.

The liberalization of the Indian economy, started in 1991, clearly marked an

inflexion in HUL's and the Group's growth curve. Removal of the regulatory framework

allowed the company to explore every single product and opportunity segment, without

any constraints on production capacity.

Simultaneously, deregulation permitted alliances, acquisitions and mergers. In one of the

most visible and talked about events of India's corporate history, the erstwhile Tata Oil

Mills Company (TOMCO) merged with HUL, effective from April 1, 1993. In 1996,

HUL and yet another Tata company, Lakme Limited, formed a 50:50 joint venture,

Lakme Unilever Limited, to market Lakme's market-leading cosmetics and other

appropriate products of both the companies. Subsequently in 1998, Lakme Limited sold

its brands to HUL and divested its 50% stake in the joint venture to the company.

HUL formed a 50:50 joint venture with the US-based Kimberly Clark

Corporation in 1994, Kimberly-Clark Lever Ltd, which markets Huggies Diapers and

Kotex Sanitary Pads. HUL has also set up a subsidiary in Nepal, Unilever Nepal Limited

(UNL), and its factory represents the largest manufacturing investment in the Himalayan

kingdom. The UNL factory manufactures HUL's products like Soaps, Detergents and

Personal Products both for the domestic market and exports to India.

In 2007, the Company name was formally changed to Hindustan Unilever

Limited after receiving the approval of share holders during the 74th AGM on 18 May

2007. Brooke Bond and Surf Excel breached the Rs 1,000 crore sales mark the same year

followed by Wheel which crossed the Rs.2000 crore sales milestone in 2008.On 17th

October 2008 HUL completed 75 years of corporate existence in India. In January 2010,

the HUL head office shifted from the landmark Lever House, at Back bay Reclamation,

Mumbai to the new campus in Andheri (E), Mumbai. On 15th November, 2010, the

Unilever Sustainable Living Plan was officially launched in India at New Delhi. In

March, 2012 HUL’s state of the art Learning Centre was inaugurated at the Hindustan

Unilever campus at Andheri, Mumbai. In April, 2012, the Customer Insight & Innovation

Centre (CiiC) was inaugurated at the Hindustan Unilever campus at Andheri; Mumbai

HUL completes 80 years of corporate existence in India on October 17th, 2013.

Strategic thinking of HUL

Vision Of HUL

HUL's vision is to continuously innovate technologies to further reduce water

consumption and further increase conservation in its operations. Simultaneously, HUL

sites will progressively help communities, wherever required, to develop watersheds.

Mission Statement

Unilever's mission is to add Vitality to life. We meet everyday needs for

nutrition, hygiene, and personal care with brands that help people feel good, look good

and get more out of life.

Corporate purpose

Unilever's mission is to add Vitality to life. We meet everyday needs for

nutrition; hygiene and personal care with brands that help people feel good, look good

and get more out of life. Our deep roots in local cultures and markets around the world

give us our strong relationship with consumers and are the foundation for our future

growth. We will bring our wealth of knowledge and international expertise to the service

of local consumers - a truly multi-local multinational. Our long-term success requires a

total commitment to exceptional standards of performance and productivity, to working

together effectively, and to a willingness to embrace new ideas and learn continuously.

To succeed also requires, we believe, the highest standards of corporate

behavior toward severe one we work with, the communities we touch, and the

environment on which we have an impact. This is our road to sustainable, profitable

growth, creating long-term value for our shareholders, our people, and our business

partners.

Values at HUL- Unilever has earned a reputation for conducting its business

with integrity and with respect for the interests of those our activities can affect. This

reputation is an asset, just as real as our people and brands .Our first priority is to be a

successful business and that means investing for growth and balancing short term and

long term interests. It also means caring about our consumers, employees and

shareholders, our business partners and the world in which we live. To succeed requires

the highest standards of behavior from all of us. The general principles contained in this

Code set out those standards. More detailed guidance tailored to the needs of different

countries and companies will build on these principles as appropriate, but will not include

any standards less rigorous than those contained in this Code. We want this Code to be

more than a collection of high sounding statements. It must have practical value in our

day to day business and each one of us must follow these principles in the spirit as well as

the letter.

Standard of Conduct

We conduct our operations with honesty, integrity and openness, and with

respect for the human rights and interests of our employees. We shall similarly respect

the legitimate interests of those with whom we have relationships.

Obeying the Law

Unilever companies and our employees are required to comply with the laws

and regulations of the countries in which we operate.

Employees

Unilever is committed to diversity in a working environment where there is

mutual trust and respect and where everyone feels responsible for the performance and

reputation of our Company. We will recruit, employ and promote employees on the sole

basis of the qualifications and abilities needed for the work to be performed. We are

committed to safe and healthy working conditions for all employees. We will not use any

form of forced, compulsory or child labor .We are committed to working with employees

to develop and enhance each individual's skills and capabilities. We respect the dignity of

the individual and the right of employees to freedom of association. We will maintain

good communications with employees through company based information and

consultation procedures.

Community Involvement

Unilever strives to be a trusted corporate citizen and, as an integral part of

society, to fulfill our responsibilities to the societies and communities in which we

operate Company. We will recruit, employ and promote employees on the sole basis of

the qualifications and abilities needed for the work to be performed We are committed to

safe and healthy working conditions for all employees. We will not use any form of

forced, compulsory or child labor .We are committed to working with employees to

develop and enhance each individual's skills and capabilities. We respect the dignity of

the individual and the right of employees to freedom of association. We will maintain

good communications with employees through company based information and

consultation procedure

Consumers

Unilever is committed to providing branded products and services which

consistently offer value in terms of price and quality, and which are safe for their

intended use. Products and services will be accurately and properly labeled, advertised

and communicated.

Shareholders

Unilever will conduct its operations in accordance with internationally

accepted principles of good corporate governance. We will provide timely, regular and

reliable information on our activities, structure, financial situation and performance to all

shareholders.

Business Partners

Unilever is committed to establishing mutually beneficial relations with our

suppliers, customers and business partners .In our business dealings we expect our

business partners to adhere to business principles consistent with our own

Public Activities

Unilever companies are encouraged to promote and defend their legitimate

business interests.Unilever will co-operate with governments and other organizations,

both directly and through bodies such as trade associations, in the development of

proposed legislation and other regulations which may affect legitimate business interests.

Unilever neither supports political parties nor contributes to the funds of groups whose

activities are calculated to promote party interests.

Strategic Planning by HUL

Strategy adopted by HUL

HUL (Hindustan Uni Lever Ltd) formerly HLL and see how the complex

task of brand management is actually handled. This company is taken for this article as

HUL is considered as one of the most successful in Brand Management.HLL has a large

brand portfolio consisting of nearly 110 bands. In every product line, it has built a

number of brands over a period of time. Quite a few brands have come to its fold from

the parent company. It has also acquired several ongoing brands from the market. HLL

also vigorously pursues brand extension strategy. And concurrently, HLL undertakes line

pruning and brand restructuring and consolidation, based on marketing compulsions.

HLL is also playing there juvenation and re-launch game. With great benefit the

corporate-level endeavors at business expansion and diversification are also throwing

new challenges on the brand strategy front. HLL lends itself for a proper understanding

of the complexity of the brand management task. We shall examine how HLL handles the

complex demands in brand management. Such an array of brands is the outcome of a

conscious corporate strategy by HLL. As corporate, HLL wants to be a leader in every

one of its businesses and the strategy is to fight on the strength of the competitive

advantage arising from the possession of strong brands. It is this strategy that is getting

reflected in the development of a multitude of strong brands. If we take the business of

bathing soaps, as an example, HLL has the objective of being a national player (not a

niche or a regional marketer) and the leader therein. HLL also wants about 30 per cent of

the corporate income to come from this line. So, HLL opted for the strategy of

developing quite a few strong brands in this line, and among them they cover different

market segments and price points. Dove, Lux, Liril, Rexona, Pears and Lifebuoy are the

outcome of such a well planned brand strategy

Action plan by HUL:

The Chairman of Hindustan Lever Limited (HLL), Mr. M.S. Banga,

addressing the company’s Annual General Meeting, presented an action-plan for a ‘Food

Revolution’ to sustainably accelerate agricultural growth which, in turn, will regenerate

and sustain demand across the economy. With over 70% of the population being

dependent on it, agricultural growth has a multiplier effect driving demand across all

sectors of the economy and overall GDP growth. He announced that HLL’s modeling had

shown that a 3% incremental growth in agriculture will lead to a 2.6% growth in the

manufacturing sector, taking overall GDP growth closer to the 8% mark.

Food Revolution:

Mr. Banga outlined a strategy which will lead to a significant reduction in

prices of food, making food more affordable and thereby increasing consumption. The

growth in food consumption in turn will increase farmers’ incomes, the slowdown of

which is a key reason for downturn in Indian industry. “We as a country have responded

to crises through concerted action born out of national consensus. The success of the

Green Revolution and the White Revolution are proof of this. Now, we need a Food

Revolution to foster a virtuous cycle of regenerative, broad-based growth,” he said.

Calling it the paradox of Indian agriculture, Mr. Banga pointed out that while godowns

were overflowing, about 42% of the rural population and 49% of the urban population

received less than the accepted daily calorie intake norm. This is because these

consumers cannot afford food at the current prices. Since food consumption has hit a

plateau, farmers’ incomes have stagnated, despite rising procurement prices.Mr. Banga

said that the policy framework has so far sought to increase agricultural income by

increasing minimum support prices or subsidies. But with food going out of the reach of

large sections even at current prices, the only way to increase farmers’ income is to

increase consumption of food. HLL’s modeling has demonstrated that if, for example, the

price of wheat can be reduced by Rs.2 per kg, and consumption will increase by 25%

(about 41 million tons) among the lower income groups.

Challenge Cost:

To reduce costs, Mr. Banga said that agricultural pricing could be guided

byHLL’s philosophy of ‘Challenge Cost’, instead of the prevalent cost-plus model. The

company first determines what the consumer is willing to pay for the benefits a product

offers. It then determines an appropriate margin. The target consumer price less the target

margin gives the ‘Challenge Cost’ that HLL achieves through its expertise in R&D,

manufacturing and supply chain.

Mr. Banga proposed a three-pronged strategy encompassing a) Precision Farming to

improve farm productivity within the current land-holding pattern; b) creating a structure

to facilitate growth of a vibrant food processing industry and c) identifying various

enablers for the model to work. Precision Farming: Under Precision Farming, a farmer

adjusts farm practices to match the variation of soil and terrain across time and the area of

his plot rather than following the current practice of a “one size fits all” approach which

manages crops at the lowest common denominator. Farmer Service Centre: A close

linkage between agriculture and industry should be forged through the establishment of

Farmer Service Ceners. These would be partnership webs between the farmer and agri-

input companies, banks, insurance companies, grain handling and storage companies, and

food processors. To be run as a private enterprise, Farmer Service Centers would have an

appropriate radius of operation. Enablers for the model: The model can be implemented

with reorientation of Government policies towards promoting efficiencies and value

addition; amendments in the legal framework; rationalization of fiscal levies; and

progressively making packaging of food products mandatory.

Common Indian Market:

Movement and storage of food grains must be freed, creating a Common

Indian Market. A Futures Market should be created for more demand-driven crop

planning. The role of agencies like the FCI should be changed to administer the Futures

Market and the Common Indian Market, and coordinate exports For free movement of

agriculture produce and to enable the food processor to directly purchase the farmer’s

output, the Market Committee legislation of various States need to be dropped. Forward

contracts, backed by assured enforceability, should be permitted so that the processor can

enter into a contract even before sowing.

Harmonized laws, single Ministry:

Equally essential would be harmonizing the various food laws, which

often have contradictory requirements, and housing them under a single Ministry. India’s

food laws, which restrict innovation, should be brought in line with the widely followed

international Codex. It would encourage innovation, without diluting consumer

protection in anyway, Mr. Banga said.

Rationalization of fiscal levies:

The various taxes and levies imposed on commodities at various stages

have a cascading effect on prices, and also hinder free flow of output from the farm to the

factory. Mr. Banga suggested that they be replaced with a uniform additional excise duty.

Summing up, Mr. Banga said, “The model I have outlined would increase agricultural

productivity, which would in turn increase farm incomes and make food more affordable.

Increased farm incomes would drive demand for the rest of the industry and services

sectors, leading to a sustainable growth cycle. The creation of a vibrant food processing

industry would add further value, generating employment and prosperity.”

Case Study on Strategic Management

DD is the India’s premier public service broadcaster with more than 1,000

transmitters covering 90% of the country’s population across on estimated 70 million

homes. It has more than 20,000 employees managing its metro and regional channels.

Recent years have seen growing competition from many private channels numbering

more than 65, and the cable and satellite operators (C & S). The C & S network reaches

nearly 30million homes and is growing at a very fast rate.

DD’s business model is based on selling half – hour slots of commercial

time to the programme producers and Charging them a minimum guarantee. For instance,

the present tariff for the first 20 episodes of a programmeRs.30 lakh plus the cost of

production of the programme. In exchange the procedures get 780 seconds of commercial

time that he can sell to advertisers and can generate revenue. Break-even point for

procedures, at The present rates, thus is Rs.75, 000 for a 10 second advertising spot.

Beyond 20 episodes, the minimum guarantee is Rs.65 lakh for which the procedures has

to charge Rs.1, 15,000 for a 10 second spot in order to Break-even. It is at this point the

advertisers face a problem – the competitive rates for a 10 second spot isRs.50,000.

Procedures are possessive about buying commercial time on DD. As a result the DD’s

projected growth of revenue is only commercial time on DD. As a result the DD’s

projected growth of revenue is only 6-10% as against 50-60% for the private sector

channels. Software suppliers, advertisers and audiences are deserting DD owing to its

unrealistic pricing policy. DD has options before it. First, it should privates, second it

Should remain purely public service broadcaster and third, a middle path. The challenge

seems to be exploiting DD’s immense potential and emerge as a formidable player in the

mass media.

What is the best option, in your view, for DD?

Analyze the SWOT factors the DD has?

Why do you think that the proposed alternative is the best?

Answers

1) For several years Doordarshan was the only broadcaster of television programmes in

India. After the opening of the sector to the private entrepreneur (cable and satellite

channels), the market has witnessed major changes. The number of channels has

increased and also the quality of programmes, backed by technology, has improved. In

terms of quality of programmers, opportunity to advertise, outreach activities, the

broadcasting has become a popular business. Broadcasters too have realized the great

business potential in the market. But for this, policies need to be rationalized and be

opened to the scope of innovativeness not only in term of quality of programmes. This

would not come by simply going to more areas or by allowing bureaucratic set up to

continue in the organization. Strategically the DD needs to undergo a policy overhaul.

DD, out of three options, namely privatization, public service broadcaster or a middle

path, can choose the third one, i.e. a combination of both. The whole privatization is not

possible under the diversified political scenario. Nor it would be desirable to hand over

the broadcasting emotively in the private hand as it proves to be a great means of

communication many socially oriented public programmers. The government could also

think in term of creating corporation (as it did by creating Prasar Bharti) and provide

reasonable autonomy to DD. So far as its advertisement tariff is concerned that can be

made fairly competitive. However, at the same time cost of advertising is to be compared

with the reach enjoyed by the doordarshan. The number of viewers may be far more to

justify higher tariffs. of advertising is to be compared with the reach enjoyed by the

doordarshan. The number of viewers may be far more to justify higher tariffs.

2) The SWOT analyses involve study of strengths, weaknesses, opportunities and threats

of an organization.

SWOT factors that are evidently available to the Door Darshan are as follows:

S – Strength

More than 1000 transmitters.

Covering 90% of population across 70 million homes against only 30 million

home by C & S.

More than 20,000 employees.

W – Weakness

Rigid pricing strategy.

Low credibility with certain sections of society.

Quality of program’s is not as good as compared to C & S network

O-Opportunities

Infrastructure can be leased out to cable and satellite channel.

Digital terrestrial transmission.

Regional focused channels

T – Threats

Desertion of advertisers and producers may result in loss of revenues.

Due to quality of program the reach of C & S network is continuously expanding.

As the C& S network need the trained staff, some employees of DD may

switchover and take new jobs

3) It is suggested that the DD should adopt a middle path. It should have a mix of both

the options. It should Economized on its operational aspects and ensure more

productivity in term of revenue generation and Optimization of use of its infrastructure.

Wherever, the capacities are underutilized, these may be leased out to the private

operations. At the same time quality and viewership of programmes should be improved.

Bureaucracy may reduce new strategic initiatives or make the organization less

transparent. Complete privatization can fetch a good sum and may solve many of the

managerial and operational problems. However, complete public monopoly is not

advisable because that denies the government to fully exploit the avenue for social and

public use. The government will also lose out as it will not be able to take advantage of

rising Potential of the market.

Conclusion

Business history shows that high performing enterprises often initiate and lead,

not just react and defend. They launch strategic offensive to secure sustainable

competitive advantage and then use their market edge to achieve superior financial

performance. Aggressive pursuit of a creative, opportunistic strategy can propel a firm

into a leadership position, paving the way for its goods and services to become the

industry standard. In a dynamic and uncertain environment, strategic management is

important because it can provide managers with a systematic and comprehensive means

for analyzing the environment assessing their organization's strengths and weakness and

identifying opportunities for which they could develop and exploit a competitive

advantage. The strategic management process includes eight steps – identifying the

organization's current mission, objectives and strategies, analyzing the environment,

identifying opportunities and threats in the environment, analyzing the organization

resources, identifying the organization's strengths and weaknesses, formulating strategies,

implementing strategies and evaluating.

BIBLIOGRAPHY

Andrews K.R. 1987. The Concept of Corporate Strategy. Richard D. Irwin.

Gluck F.W. 1985 A Fresh Look at Strategic Management. Journal of Business

http://srinivasatimes.com/Strategic%20management%20case%20studies.pdf

http://my.safaribooksonline.com/book/management/9788131759844/case-study-

on-tata-sky-strategic-advantage-through-technology/c11-sec1-

005#X2ludGVybmFsX0h0bWxWaWV3P3htbGlkPTk3ODgxMzE3NTk4NDQlM

kZjMTEtc2VjMS0wMDQmcXVlcnk9

http://www.hul.co.in/aboutus/ourhistory/

http://www.managementstudyguide.com/strategic-management-process.htm

http://www.ache.org/pdf/secure/gifts/Harrison_Chapter5.pdf

http://jupapadoc.startlogic.com/compresearch/papers/JCR07-2.pdf

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