BUSINESS POLICY AND STRATEGIC MANAGEMENT

1.

Distinguish between strategic management and management.

Strategic management consists of the analysis, decisions, and actions an organization undertakes in order to create and sustain competitive advantages. This definition captures two main elements that go to the heart of the field of strategic management. First, the strategic management of an organization entails three ongoing processes: analysis, decisions, and actions. That is, strategic management is concerned with the analysis of strategic goals (vision, mission, and strategic objectives) along with the analysis of the internal and external environment of the organization. Next, leaders must make strategic decisions. These decisions, broadly speaking, address two basic questions: What industries should we compete in? How should we compete in those industries? These questions also often involve an organizations domestic as well as its international operations. And last are the actions that must be taken. Decisions are of little use, of course, unless they are acted on. Firms must take the necessary actions to implement their strategies. This requires leaders to allocate the necessary resources and to design the organization to bring the intended strategies to reality. As we will see in the next section, this is an ongoing, evolving process that requires a great deal of interaction among these three processes. Second, the essence of strategic management is the study of why some firms outperform others. Thus, managers need to determine how a firm is to compete so that it can obtain advantages that are sustainable over a lengthy period of time. That means focusing on two fundamental questions: How should we compete in order to create competitive advantages in the marketplace? For example, managers need to determine if the firm should position itself as the low-cost producer, or develop products and services that are unique which will enable the firm to charge premium prices-or some combination of both. Managers must also ask how to make such advantages sustainable, instead of highly temporary, in the marketplace. Management is the process of reaching organizational goals by working with and through people and other organizational resources. Management has the following 3 characteristics: 1. It is a process or series of continuing and related activities. 2. It involves and concentrates on reaching organizational goals. 3. It reaches these goals by working with and through people and other organizational resources.

The 4 basic management functions that make up the management process are described in the following sections: 1. 2. 3. 4. PLANNING ORGANIZING INFLUENCING CONTROLLING.

PLANNING: Planning involves choosing tasks that must be performed to attain organizational goals, outlining how the tasks must be performed, and indicating when they should be performed. ORGANIZING: Organizing can be thought of as assigning the tasks developed in the planning stages, to various individuals or groups within the organization. Organizing is to create a mechanism to put plans into action. INFLUENCING: Influencing is also referred to as motivating,leading or directing.Influencing can be defined as guiding the activities of organization members in he direction that helps CONTROLLING: Controlling is the following roles played by the manager: 1. Gather information that measures performance 2. Compare present performance to pre established performance norms. 3. Determine the next action plan and modifications for meeting the desired performance parameters. 2. What is Portfolio Analysis? Explain the components of portfolio analysis.

In financial terms, 'portfolio analysis' is a study of the performance of specific portfolios under different circumstances. It includes the efforts made to achieve the best trade-off between risk tolerance and returns. The analysis of a portfolio can be conducted either by a professional or an individual investor who may utilizes specialized software. Portfolio analysis involves quantifying the operational and financial impact of the portfolio. It is vital to evaluate the performances of investments and timing the returns effectively. The analysis of a portfolio extends to all classes of investments such as bonds, equities, indexes, commodities, funds, options and securities. Portfolio analysis gains importance

because each asset class has peculiar risk factors and returns associated with it. Hence, the composition of a portfolio affects the rate of return of the overall investment. Some basic concepts and components of portfolio management practices. The portfolio structure As we noted earlier, a portfolio structure identifies and contains a number of portfolios. This structure, like the portfolios within it, should align with significant planning and results boundaries, and with business components. If you have a product-oriented portfolio structure, for example, then you would have a separate portfolio for each major product or product group. Each portfolio would contain all the initiatives that help that particular product or product group contribute to the success of the enterprise business strategy. The portfolio manager This is a new role for organizations that embrace a portfolio management approach. A portfolio manager is responsible for continuing oversight of the contents within a portfolio. If you have several portfolios within your portfolio structure, then you will likely need a portfolio manager for each one. Portfolio reviews and decision making As initiatives are executed, the organization should conduct periodic reviews of actual (versus planned) performance and conformance to original expectations. Typically, organization managers specify the frequency and contents for these periodic reviews, and individual portfolio managers oversee their planning and execution. The reviews should be multi-dimensional, including both tactical elements (e.g., adherence to plan, budget, and resource allocation) and strategic elements (e.g., support for business strategy goals and delivery of expected organizational benefits). Governance Implementing portfolio management practices in an organization is a transformation effort that typically involves developing new capabilities to address new work efforts, defining (and filling) new roles to identify portfolios (collections of work to be done), and delineating boundaries among work efforts and collections. A good governance structure decomposes both the types of work and the authority to plan and oversee work. It defines individual and collective roles, and links them to an authority scheme. Policies that are collectively developed and agreed upon provide a framework for the exercise of governance.

The complexities of governance structures extend well beyond the scope of this article. Many organizations turn to experts for help in this area because it is so critical to the success of any business transformation effort that encompasses portfolio management. For now, suffice it to say that it is worth investing time and effort to create a sound and flexible governance structure before you attempt to implement portfolio management practices.

3.

What is social audit? What are the benefits of social audit?

A social audit is a systematic study and the evaluation of an organizations social performance, as distinguished from its economic performance. It is concerned with the possible influence on the social quality of life instead of the economic quality of life. Social audit leads to a report on the social performance of a business unit. Benefits of social audit The benefits of social audit are as follows: Social audit enables the company to take close look at itself and understand how far the company has lived up to its social objectives Related to the first benefit is the fact that social audit encourages greater concern for social performance throughout the organization. Social audit provides data for comparing effectiveness of the different types of programs. Social audit provides cost data on social programs so that management can relate the data to budgets, available resources, company objectives and projected benefits of programs. Social audit provides information for affective response to external claimants that make demands on the organization. News reporters, welfare organizations and variety of others want to know what a business is doing in areas of their special interest, and a business needs to respond as effectively as possible. The social audit shows a business where it is vulnerable to public pressure and where its strengths lie.

4. Explain the concept of social marketing. Social Marketing concepts and principles are not of themselves a process or recipe for success; rather they are the ingredients necessary for successful social programs that seek to influence behavior. It is important that they are not confused with process planning models i.e. how to plan and deliver or do social marketing. There ar e specific process planning models for this purpose (see the STELA Model and the TTP Model). Instead, the concepts and principles are essentially the key elements that indicate if a

programme is applying a social marketing approach. It is also important to recognise that these concepts and principles are not a random or arbitrary collection; rather they are derived from an evidence and experiential base about what works and what does not in the development and delivery of public sector programmes designed to deliver measurable change in behavior. Concept 1: Insight Driven Social marketing is based on the development of a deep insight into peoples lives, with a clear focus on what will and will not move, motivate or enable people to change in any given situation. Insight drills down from a wide understanding of the customer (customer orientation) to focus on identifying key factors and issues relevant to influencing particular a behaviour. The approach is focused on identifying and developing actionable insights based on all available relevant data to make considered judgments about what will help, these insights are subsequently tested through pilots and refined or rejected according to their utility. Concept 2: Exchange and Choice architecture Consists of understanding and developing interventions that make it more likely that people will adopt a particular behaviour. This core concept involves developing one of three approaches or a combination of them:1. A compelling positive exchange proposition based on customer analysis, about what a person will perceive as a value that outweighs the cost of change, i.e. an incentive based approach2. The development of a system, service or product that assists or nudges a person voluntarily towards a socially beneficial behaviour.3. The development of a system, service or product that requires a person to behave in a particular way or face a negative consequence i.e. a disincentive. Concept 3: Competition A robust competition analysis is a key principle of social marketing programmes. Competition analysis examines both internal and external competition and seeks to address these forces. Internal competition (e.g. psychological factors, pleasure, desire, risk taking, and addition) External competition (e.g. wider influences and influencers competing for the audiences attention, time, and behaviour, promoting and reinforcing alternative or counter behaviours)Strategies are then developed to minimize the potential impact of competition

8. Explain the techniques used in environmental analysis.

Tools and Techniques in Environmental Analysis Environmental Scanning Environmental scanning is the process that seeks information about events and relationships in a firms environment, the knowledge of which help top management chart the firms future. Environmental scanning entails partitioning the external environment into sectors, namely, cultural, economic, political, technological, and so on. This helps establish a firms information needs within those sectors. Data are usually collected by monitoring and forecasting changes in important variables identified in each sector. That data are then transformed into consolidated information, which is integrated into the firms strategic planning process (Georgantzas and Acar 1995). Environmental scanning is used to gather information from the environment. These information are used to craft a strategic plan that will help an organization achieve and maintain a competitive advantage. In order to be successful, the organization must align its strategies and plans with the information gathered from the environmental scanning.

SWOT Analysis SWOT (Strengths and Weaknesses, and Opportunities and Threats) is a basic analytical tool in management that has become popular in recent years. SWOT analysis is often used by strategic planners and top management in developing competitive strategies. It is typically used to decide corporate strategies and to make product or market level analyses (Reddy 1994). SWOT is a widely used thinking framework for identifying Strengths, Weaknesses, Opportunities and Threats. It enables key factors to be visibly recorded as a high-level summary of a business. The SWOT analysis on its own is not a strategy. It is merely a tool that helps an organization in making informed decisions. The SWOT analysis is primarily used to identify and analyze the strengths and weaknesses of the organization, as well as the opportunities and threats exposed by the information collected of the external environment. The SWOT analysis is a simple yet useful tool in analyzing both the internal and external environments of the organization. SWOT analysis together with other tools such as PEST (Political, Economic, Social, and Technological) analysis can be used as a basis for the analysis of business and environmental factors. PEST Analysis A PEST analysis looks at the Political, Economic, Social and Technological drivers of a particular industry. PEST are external factors that must be analyzed and understood in order for an organization to succeed. The PEST analysis focuses on the external forces that affects the organization. It is most useful when used together with other tools such as the SWOT analysis.

o Political Factors may have direct or indirect impact on the organizations operation. Decisions made by the government may have an effect on the business. The political arena has a big influence on how organizations operate, the purchasing power of the customers and other businesses. o Economic Factors the organization is affected by economic factors. Economy also affects the purchasing power and behavior of the consumers. o Sociological Factors include the demography, lifestyle, cultural aspects of the consumers. These factors have a big influence on the consumer needs and wants. Sociological factors also affect the size of potential markets. o Technological Factors technological change plays an important role in shaping how organizations operate. Technological factors are important in gaining competitive advantage. Technological innovations can improve production efficiency, quality and speed. New technology is changing how organizations operate. Porters Five Forces Analysis Porter identified the five forces model of competitive strategy. He identified the five forces as:
o o o o o

The threat of new entrants and the appearance of new competitors The degree of rivalry among existing competitors in the market The bargaining power of buyers The bargaining power of suppliers The threat of substitute products or services which could shrink the market

The strength of each of these forces varies from industry to industry, but taken together they determine long-term profitability. They help shape the process firms can charge, the costs they must pay for resources and the level of investment that will be needed to compete. The threat of new entrants limits market share and profit; powerful buyers or suppliers, using their superior bargaining power, can drive down prices or push costs up, eroding margins and so on (Witzel 2003). The five factors affect the strategy of the organization. It is important to analyze and study these five forces to be able to craft a successful strategy. To be successful, the organization must respond effectively to the pressures of these five forces.