Strategic Management

Unit - I
What Is Strategy?
Strategy is a chosen path to a destination.
“Strategy is a framework for deciding how you will play the game of business.”
Strategy is the road map - consisting of milestones and actions - that charts a path to achieving a company’s vision.

Definition of Strategy
“Strategy is the direction and scope of an organization over the long-term. It helps achieve an advantage for the organization through its
configuration of resources within a challenging environment, to meet the needs of markets and fulfill stakeholder expectations.”

Nature or Features of Strategy

1. Relates Organization with Environment
- Strategy connects the organization with its external environment
- Considers market trends, customer needs, competitor activity, and socio-economic factors
- Aligns organizational goals with environmental opportunities and threats

2. Set of Actions
- Strategy is a deliberate plan of action
- Outlines specific steps to achieve organizational goals
- Guides decision-making and resource allocation

3. Provides Structure
- Strategy provides a framework for organizational operations
- Defines roles, responsibilities, and relationships among departments
- Establishes clear lines of communication and authority

4. System Oriented
- Strategy considers the organization as a system
- Recognizes interdependencies among departments and functions
- Optimizes overall system performance

5. Future-Oriented
- Strategy focuses on long-term goals and objectives
- Anticipates future challenges and opportunities
- Prepares organization for future growth and development

6. Integrated Approach
- Strategy integrates various functional areas (marketing, finance, operations, etc.)
- Coordinates efforts across departments and levels
- Ensures alignment with organizational goals and objectives

Levels of Strategy
In an organization, strategies can exist at all levels – right from the overall business to the individuals working in it. Here are some common
types of strategies:

Corporate Strategies – These are also explicitly mentioned in the organization’s Mission Statement. They involve the overall purpose
and scope of the business to help it meet the expectations of stakeholders. These are important strategies due to the heavy influence of
investors. Further, corporate strategies act as a guide for strategic decision-making throughout the business.

Business Unit Strategies – These are more about how a business competes successfully in a particular market. They involve strategic
decisions about:
Choosing products
Meeting the needs of the consumers
Gaining an advantage over the competitors
Creating new opportunities, etc.

Operational Strategies – These are about how each part of the business is organized to deliver the corporate and business unit level
strategic direction. Therefore, these strategies focus on the issues of resources, people, processes, etc.

Role of Strategy

1) Framework For Operational Planning.

Strategies provide the framework for plans by channeling operating decisions and often predeciding them. If strategies are developed
carefully and understood properly by managers, they provide more consistent framework for operational planning. If this consistency
exists and applied, there would be deployment of organizational resources in those areas where they find better use. Strategies define
the business area both in terms of customers and geographical areas served. Better the definition of these areas, better will be the
deployment of resources. For example, if an organization has set that it will introduce new products in the market, it will allocate more
resources to research and development activities, which is reflected in budget preparation.

2) Clarity in Direction of Activities.

Strategies focus on direction of activities by specifying what activities are to be undertaken for achieving organizational objectives. They
make the organizational objectives more clear and specific. For example, a business organization may define its objective as profit
earning or a non-business organization may define its objective as social objective. But these definitions are too broad and even vague for
putting them into operation. They are better spelled by strategies, which focus on operational objectives and make them more practical.
For example, strategies will provide how profit objective can be sharply defined in terms of how much profits is to be earned and what
resources Of how much profit is to be earned and what resources will be required for that. When objectives are spelled out in these terms,
they provide clear direction to per-sons in the organization responsible for implementing various courses of action. Most people perform
better if they know clearly what they are expected to do and where their organization is going

3) Increase Organizational Effectiveness.

Strategies ensure organizational effectiveness in several ways. The concept of effectiveness is that the organization is able to achieve its
objectives within the given resources. Thus, for effectiveness, it is not only necessary that resources are put to the best of their efficiency
but also that they are put in a way which ensures their maximum contribution to organizational objectives. In fact, taking
strategic management, which states the objective of the organization in the context of given resources, can do this. Therefore, each
resource of the organization has a specific use at a particular time. Thus, strategies ensure that resources are put in action in a way in
which these have been specified. If this is done, organization will achieve effectiveness

4) Personnel Satisfaction.
Strategies contribute towards organization effectiveness by providing satisfaction to the personnel of the organization. In organization
where formal strategic management process is followed, people are more satisfied by definite prescription of their roles thereby reducing
role conflict and role ambiguity. If the decisions are systematized in the organization, everyone knows how to proceed, how to contribute
towards organizational objectives, where the information may be available, who can make decisions, and so on. Such clarity will bring
effectiveness at the individual level and consequently at organizational level. Strategies provide all these things in the organization
through which everything is made crystal clear.
Strategy Formulation
Definition: Strategy Formulation is an analytical process of selection of the best suitable course of action to meet the organizational
objectives and vision. It is one of the steps of the strategic management process. The strategic plan allows an organization to examine its
resources, provides a financial plan and establishes the most appropriate action plan for increasing profits.

Steps of Strategy Formulation

The steps of strategy formulation include the following:

1. Establishing Organizational Objectives:
This involves establishing long-term goals of an organization. Strategic decisions can be taken once the organizational objectives are
determined.
2. Analysis of Organizational Environment:
This involves SWOT analysis, meaning identifying the company’s strengths and weaknesses and keeping vigilance over competitors’
actions to understand opportunities and threats.
3. Forming quantitative goals:
Defining targets so as to meet the company’s short-term and long-term objectives. Example, 30% increase in revenue this year of a
company.
4. Objectives in context with divisional plans:
This involves setting up targets for every department so that they work in coherence with the organization as a whole.
5. Performance Analysis:
This is done to estimate the degree of variation between the actual and the standard performance of an organization.
6. Selection of Strategy:
This is the final step of strategy formulation. It involves evaluation of the alternatives and selection of the best strategy amongst them to
be the best

Strategic Management
Strategic management is used to denote a branch of management that is concerned with the development of strategic vision, setting out
objectives, formulating and implementing strategies, and introducing corrective measures for the deviations to reach the organization’s
strategic intent.

Objectives of Strategic Management

To gain competitive advantage, to outperform the competitors, to achieve dominance over the market.
It is important to act as a guide to the organization to help it survive the changes in the business environment.

Characteristics Strategic Management

1. Long-term Focus: Strategic management focuses on achieving long-term goals and objectives.

2. Comprehensive Approach: It integrates various functional areas (marketing, finance, operations, etc.).

3. Goal-Oriented: Strategic management aims to achieve specific, measurable, achievable, relevant, and time-bound (SMART) goals.

4. Systematic Process: It involves a systematic process of analysis, planning, implementation, and evaluation.

5. Future-Oriented: Strategic management anticipates future challenges and opportunities.

6. Competitive Advantage: It seeks to create a sustainable competitive advantage.

7. Resource-Based: Strategic management allocates resources effectively.

8. Adaptive: It responds to changing environmental conditions.

9. Integrated: Strategic management integrates internal and external factors.

10. Continuous Monitoring: It involves continuous monitoring and evaluation.

Strategic Management Process
Strategic management is a dynamic process .it is continual, evolving, iterative process. it means that it cannot be a rigid, stepwise
collection of few activities arranged in a sequential order rather it is a continually evolving mosaic of relevant activities. Managers
perform these activities in any order contingent upon the situation they face at a particular time. And this is to be done again & again over
the time as the situation demands.
There are four major phases of strategic management process which are as under.
A) Establishment of strategic intent.
B) Formulation of strategies.
C) Implementation of strategies.
D) Strategic evaluation.

A. Establishment of strategic intent:

It is a first step in strategic management Process. It involves the hierarchy of objectives that an organization set for itself.
Generally it includes vision, mission, business definition and objectives establishing the hierarchy of strategic intent which includes –
1. Creating and communicating a vision.
2. Designing the mission statement.
3. Defining the business.
4. Adopting the business model.
5. Setting objectives.

The hierarchy of strategic intent lays the foundation for strategic management of any organization. The strategic intent makes clear what
organization stand for. In the hierarchy, the vision intent serves the purpose of stating what the organization wishes to achieve in the long
run. The mission relates the organization to the society. The business definition explains the businesses of the organization in terms of
customer needs, customer groups and alternative technologies. The business model clarifies how the organization creates revenue. And
the objectives of the organizations state what is to be achieved in a given period of time.

B. Formulation of strategy:
Formulation of strategy is relates to strategic planning. It is done at different levels i.e. corporate, business, and operational level. The
strategic formulation consists of the following steps.
1. Framing of mission statement : Here the mission states the philosophy and purpose of the organization. And all most all business
frames the mission statement to keep its activities in the right direction.
2. Analysis of internal & external environment: The management must conduct an analysis of internal and external environment. Internal
environment consists of manpower, machines, and other sources which resides within the organization and easily alterable and
adjustable. These sources reveal the strength and weakness of the organization. External environmental factor includes government,
competitions, consumers, and technological developments. These are not adjustable and controllable and relates to organizations
opportunities and threats.
3. Setting of objectives: After SWOT analysis, the management is able to set objectives in key result areas such as marketing, finance,
production, and human resources etc. While setting objectivities in these areas the objectives must be realistic, specific, time bound,
measurable, and easy attainable.
4. Performance comparison : By undertaking gap analysis management must compare and analyze its present performance level with the
desired future performance. This enables the management to find out exact gap between present and future performance of the
organization. If there is adequate gap then, the management must think of strategic measures to bridge the gap.
5. Alternative strategies : After making SWOT analysis and gap analysis management needs to prepare (frame) alternative strategies to
accomplish the organizational objectives. It is necessary as some strategies are to be hold and others to be implemented.
6. Evaluation of strategies : The management must evaluate the benefits and costs of each every alternative strategy in term of sales,
market share, profit, goodwill and the cost incurred on the part of the strategy in terms of production, administration, and distribution
costs.
7. Choice of strategy : It is not possible to any organization to implement all strategies therefore management must be selective. It has to
select the best strategy depending on the situation and it has to consider in terms of its costs and benefits etc.

C. Strategy Implementation:
Once the strategies are formulated the next step is to implement them. The strategic plan is put into action through six sub processes
known as project, procedural, resource allocation, structural, behavioral, and functional implementation. The project implementation
deals with the setting up of organization. Procedural implementation deals with the different aspects of the regulatory framework within
which organizations have to operate.
Resource allocation relates to the procurement and commitment of resources for implementation. The structural aspect of implementation
deals with the design of organizational structures and systems and reorganizing so as to match the structure to the needs of strategy. The
behavioral aspects consider the leadership style for implementing strategies and other issues like corporate culture, corporate politics, and
use of power, personal values and business ethics and social he responsibilities. The functional aspects relates to the policies to be
formulated in different functional areas.

The operational implementation deals with the productivity, processes, people and pace of implementing the strategies For any strategy
implementation there are five major steps. Such as
1. Formulation of plans.
2. Identification of activities.
3. Grouping of activities.
4. Organizing resources.
5. Allocation of resources.

D. Strategic Evaluation:
Strategic evaluation appraises the implementation of strategies and measures organizational performance. The feedback from strategic
evaluation is meant to exercise control over the strategic management process. Here the managers try to assure that strategic choice is
properly implemented and is meeting the objectives of the firm. It consists of certain elements which are given below.
1. Setting of standards:- The strategists need to set standards, targets to implement the strategies. it should be in terms of quality,
quantity, costs and time. The standard should be definite and acceptable by employees as well as should be achievable.
2. Measurement of Performance:- Here actual performances are measured in terms of quality, quantity, cost and time.
3. Comparison Of Actual Performance With Set Targets:- The actual performance needs to be compared with standards and find out
variations, if any.
4. Analyzing Deviation And Taking Corrective Measures:- If any deviation is found then higher authorities tries to find out the causes of
it and accordingly as per its nature takes corrective steps. Here some time authority may re-set its goals, objectives or its planning,
policies and standards.

Importance of Strategic Management

1. Fulfilling Responsibilities of Board Members:

- Ensures board members meet their fiduciary duties
- Provides guidance on governance and oversight
- Enhances accountability and transparency

2. Helps in Assessing Objectives:

- Helps establish clear and achievable goals
- Evaluates organizational performance and progress
- Aligns objectives with mission and vision

3. Develops Decision-Making Framework:

- Provides a structured approach to decision-making
- Considers multiple perspectives and options
- Enhances quality and consistency of decisions

4. Helps in Measuring Progress:

- Enables tracking of performance and goal achievement
- Identifies areas for improvement and adjustment
- Facilitates data-driven decision-making

5. Provides an Organizational Viewpoint:

- Fosters a unified understanding of the organization's purpose
- Aligns employees and stakeholders with shared goals
- Enhances collaboration and communication
6. Improves Stability:
- Enhances organizational resilience and adaptability
- Prepares for unexpected challenges and changes
- Ensures continuity and sustainability

7. Strong Labour Supply:

- Attracts and retains top talent
- Develops and engages employees
- Enhances productivity and performance

Difference between Strategy and Policy

What is a stakeholder in a business?

In business, a stakeholder is any individual, group, or party that has an interest in an organization and the outcomes of its actions.

Roles of Stakeholders
Direct the Management
The stakeholders can be a part of the board of directors and therefore help in taking actions. They can take over certain departments like
service, human resources or research and development and manage them for ensuring success.

Bring in Money
Stakeholders are the large investors of the company and they can anytime bring in or take out money from the company. Their decision
shall depend upon the company’s financial performance.

Help in Decision Making

Major stakeholders are part of the board of directors. Therefore they also take decisions along with other board members. They have the
power to disrupt the decisions as well.

Corporate Conscience
Large stakeholders are the major stakeholders of the company and have monitored over all the major activities of the company.

Classifications of Stakeholders
Internal stakeholders
Internal stakeholders participate in the management of the company. They can influence and can be influenced by the success or failure
of the entity because they have vested interest in the organization. Internal stakeholders are also known as primary stakeholders.
Employees and managers are internal stakeholders impacted by organizational strategy and success, with some influence on the
organization's decisions. Owners have a larger impact on organizational management, and take a larger amount of accountability
compared to managers and employees. When it comes to developing and keeping a good relationship with internal stakeholders, a vital
practice in business, the best thing an organization can do is act with good, sound ethical practices. If a corporation is unconcerned with
today’s social issues and makes no effort to tie it in with the local community, it is unlikely to receive much public support, and it’s
pretty difficult to build a strong customer base (and generate revenue, consequently) without a positive image.
The following are major internal stakeholders:
1. Employees
Employees are primary internal stakeholders. Employees have significant financial and time investments in the organization, and play a
defining role in the strategy, tactics, and operations the organization carries out. Well run organizations take into account employee
opinions, concerns, and values in shaping the strategy, vision, and mission of the firm. Having a good reputation among employees is an
important aspect of a strong reputation, because the greatest reputation leverage can be achieved through them, as they shape other
stakeholders’ perceptions of the firm.

2. Managers
Managers play a substantial role in determining the strategy of the organization, and a significant voice in operational decisions.
Managers are also accountable for the decisions made, and act as a point of contact between shareholders, the board of directors, and the
organization itself.

3. Owners
Owners (who in publicly traded organizations can include shareholders) are the individuals who hold significant shares of the firm.
Owners are liable for the impacts the organization has, and have a significant role in strategy. Owners often make substantial decisions
regarding both internal and external stakeholders.

External stakeholders
External stakeholders are not directly involved in decision making and other business affairs and, therefore, may or may not be affected
by the company’s decisions or operations. External Stakeholders, do not participate in the day to day activities of the entity, but the
actions of the company influence them. They deal with the company externally. They have no idea about the internal matters of the
company are.

1. Customers
Customers are one of the most immediate external stakeholders that a company must consider. The primary purpose of providing goods
and services is to fill needs. Understanding the needs of an organization's core customer base, and optimizing operations to best fill those
needs, is therefore a significant part of managing a business. Attracting, retaining and generating loyalty from core consumer markets is
critical for competitiveness.

2. Suppliers
Suppliers are external entities that provide goods, services, or raw materials to help businesses streamline operations. They are essential
partners in the supply chain, influencing quality, reliability, and product pricing. Managing positive relationships with suppliers and
vendors ensures steady and efficient sourcing

3. Government
Government agencies and regulatory bodies greatly influence business operations. These entities set and enforce laws, regulations, and
policies that affect businesses, whether at the local, national, or international level. These external stakeholders cover taxation, trade,
environmental protection, labor practices, and consumer protection. It's imperative to comply with legal requirements set by these
regulatory bodies to avoid fines, penalties, and legal disputes.

4. Shareholder
A shareholder is any person or an institution that owns one or more shares in a company. Due to the holder of a share in a company, they
can be regarded as partial owners. They receive monetary benefits in the form of dividends as and when the company earns profit from
the market.

Shareholders do not engage in the management of a firm’s operations. A board of directors set up by the shareholder looks after the
operations.

There are two kinds of shareholders, those who own less than 50% of a company’s stock are known as ‘minority shareholders’, whereas
the shareholders who control 50% or more of a company’s stock are called ‘majority shareholders’.

5. Supplier
Supplier is an individual or organization that provides goods, services, or materials to another organization. Suppliers play a crucial role
in the procurement and supply chain processes of businesses and can be categorized as primary, secondary, or tertiary suppliers based on
their relationship with the buyer.
Primary suppliers are directly involved in the production of goods or the provision of core services and have a significant impact on the
final product or service quality. Secondary suppliers provide components or services that support the primary production process, and
tertiary suppliers offer goods or services that are not directly integrated but are essential for the organization's operations.

Issues in Stakeholders Management

Stakeholder engagement is a delicate process. There are many factors that affect the effectiveness of your management, and the outcome
of the projects.

1. Trying to align many different Stakeholders

Often the defining question is are they an individual or are they part of a group, or even is the group part of another group. This can be a
lot trickier than it sounds with understanding the stakeholder’s influence and power at each level and understanding how they are best
served during the project.
This part takes time and you may wish to map out different scenarios to see which works best for your project. Remember also that
stakeholder analysis is not fixed and firm. If you find during your project that it’s just not working for you or that you find out new
information, you are at liberty to amend the analysis.

2. Competing priorities between stakeholders

The needs are not requirements, requirements are specific attributes of your deliverable within your project, i.e. “I’d like my user
interface blue”. Needs are related to the ongoing demands from your stakeholders during the project i.e. a project that delivers machinery
to replace shop floor workers could be opposed by trade unions who may need the project to fail. One simple method is to review project
elements that can be opposed/supported and map them using a simple stakeholder needs analysis box, see our example below. Mapping
out these needs can give you considerable insight into the desires of your stakeholders and again help you to manage them.

3. Resource Constraints
While most protect leaders will say that identifying stakeholders is the easy part it’s surprising how many brainstorming sessions can go
wrong. All too often one of the key issues here is the dynamics between individuals within the contributing project group. Some “loud”
individuals can dominate these sessions and in this situation, the projects managers key task here is to ensure that everyone has an equal
voice and can contribute.
What’s important here is that the stakeholders get mapped out and being loud and domineering does not always equate to knowing
everything so facilitating the situation to get maximum input from your team is a must.

4. Breakdown Communication
Effective communication is critical in stakeholder management, but it's often challenging to get it right. Common mistakes include:
a) Lack of Clear Purpose
- Failing to define the purpose of each communication, leading to:
- Information overload
- Confusion among stakeholders
 - Ineffective influence or engagement
b) Inappropriate Communication Methods
- Using a one-size-fits-all approach, rather than:
- Choosing the right method for each stakeholder or group
- Considering bespoke methods for specific individuals
- Ensuring accessibility and inclusivity
c) One-Way Communication
- Neglecting to establish two-way communication channels, resulting in:
- Stakeholders feeling ignored or unheard
- Missed opportunities for feedback and engagement
- Ineffective issue resolution and conflict management

5. Restrain to share information

A critical oversight in stakeholder management is neglecting the interconnectedness of stakeholders. Stakeholders influence each other,
creating a complex web of relationships that can impact project outcomes.
Overlooking Inter-Stakeholder Influence
- Failing to recognize that stakeholders interact and influence each other
- Ignoring the potential for stakeholders to mobilize support or opposition through their networks
Consequences
- Unanticipated opposition or resistance
- Missed opportunities for building alliances and support
- Ineffective stakeholder engagement and communication
Example:
A project relocating a business may face opposition from the local community, who may influence local government officials to
intervene. Similarly, a supportive stakeholder group can positively influence an unsupportive individual or group.

Strategic Intent
A pre-defined future state is one that the organization is planning to reach within a stipulated period.
“Strategy Intent is long-term goals that reflect the preferred future position of the firm.” – Lovas and Ghoshal
Collective Consciousness in Common End

Hierarchy of Strategic Intent

Vision
Vision is the category of intentions that are broad, all-inclusive, and forward-thinking – Miller and Dess
Vision Statement – Statement defining the company’s long-term goals.
Example:
To establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow.
Process of Envisioning

1. Understanding the Organization

The process of envisioning involves a series of steps to develop a clear and compelling vision statement for an organization.

2. Conduct an Audit
- Assess the organization's current state, including its strengths, weaknesses, opportunities, and threats.
- Identify the organization's values, mission, and existing vision statement (if any).

3. Narrow Down the Vision

- Identify the key areas of focus for the organization's vision.
- Determine the scope and parameters of the vision statement.

4. Set-up the Context for the Vision Statement

- Define the organization's purpose and goals.
- Establish the foundation for the vision statement.

5. Create a New Future Statement

- Develop a statement that describes the organization's desired future state.
- Consider the organization's aspirations, values, and goals.

6. Formulate Alternative Vision Statements

- Develop multiple potential vision statements based on the new future statement.
- Consider different perspectives and ideas.

7. Select the Final Vision Statement

- Evaluate and compare the alternative vision statements.
- Choose the most compelling and effective vision statement.

Guidelines for Developing a Vision

Mission
Mission Statement – refers to corporate reasons for the existence of an organization.
No time frame or measurement associated with it.

Definition of mission
“A mission provides the basis of awareness of a sense of purpose, the competitive environment, the degree to which the firm’s mission
fits its capabilities and the opportunities which the government offers”- David F Harvey

Provide customers with the best tasting, most nutritious choices in a wide range of food and beverage categories on eating from morning to night!

Components of Mission Statements

A well-crafted mission statement should address the following essential elements:

1. Product/ Service
The mission of a business also focuses on the products/services of the firm.What are the major products and whether they are according
to the needs and wants of the target customers? Mission statement should clearly identify the products.

2. Target Market
Another important component of the company’s mission is the target market. It should through some light/identify the target market of
the company. The target market of the company is the geographical boundaries in which the company is or is willing to operate and
deliver its product/services.

3. Technology
An ideal mission statement also declares the technology of the company.What technology the company is using and what are the
methods of operation and process. Or in general, how the flow of value chain is occurring in the company.

4. Philosophy
This component declares something bout the culture of the business It throws light on the basic beliefs, values and aspirations and
ethical priorities of the company.

5. Policy for employees

To recruit, develop, motivate, reward, and retain personnel of exceptional ability, character, and dedication by providing good working
conditions, superior leadership, compensation on the basis of performance, an attractive benefit program, opportunity for growth, and a
high degree of employment security.

6. Self concept
Self concept means that what is the company’s core competency. What is its core business and distinctive competitive advantage. The
mission statement should deliver some information about it.

7. Concern for survival/profit/growth

This component of the mission statement shows the basic aim of the company, whether it is for profit or for social benefits. Whether it is
committed to growth, survival or profitability. All the decisions about the cost and prices are made in the light of this component.

8. Public Images
This component of the mission statement shows the company’s intentions to be responsiveness towards the social, environmental and
other community aspects. It shows the concern of the company toward the public opinion. It also throws light on the post purchase
behavior. All f these factors represents the public image of the company.
Guidelines for Effective Mission Statements

Step 1: Gather Information, Form a Planning Team and Organize a Meeting

Agree on the membership of a planning team. Usually, the planning team will include representation from the board of directors, senior
management and staff of the organization.

Step 2: Define Whom the Organization Serves

Since no organization is large enough to meet the diverse needs of everyone, the planning team should specify who its priority
beneficiaries are by answering the question, “Whom does this organization serve?” To answer this broad question, ask the three more
narrow questions below.

Whom does the organization serve? Example

a. Health and development communication practitioners

a. To whom does the organization offer its products and services?
b. Well educated; working for government or non-
b. What are the characteristics of the target population or market?
governmental organizations; most are African
c. Where is the target population or market located?
c. Africa

Step 3: Clarify What the Organization Does

Now the team needs to describe the purpose of the organization: what it does or, if it is a new organization, what it will do. Clearly
identify the needs of the populations served and specify what products and services the organization offers to address those needs.

What does/will the organization do? Example

a. Annual award for excellence in health communication,

a. What products and services does the organization offer?
SBCC training program and regional SBCC conferences
b. What do its beneficiaries or clients need and want?
b. Tools and assistance to improve the quality and
c. How well do its current products and services meet the needs and
effectiveness of the SBCC work they do
desires of its clients or beneficiaries?
c. They match well

Step 4: Explain Why the Organization Does What it Does

Next answer the question, “Why do we do what we do?” The answer generally describes a response to a broad social problem. It also
provides a basis for decisions concerning what the organization does moving forward.

Why does the organization do its work? Example

a. What are the needs and desires of the organization’s clients or a. To more effectively improve health practices
beneficiaries? b. Improved health practices contribute to the health and
b. Why is this important? development of Africa

Step 5: Describe How the Organization Delivers Products and Services

In this optional step, define the strategies, means and resources by which the organization delivers services and meets the needs of its
clients or beneficiaries. Look at organizations that offer similar services and products for the same clients to determine how products and
services need to differ from those of competitors.

How does the organization do its work? Example

a. What strategies will be employed to provide the right products and a. Increasing opportunities for experience sharing;
services to clients/beneficiaries? documenting processes, tools, lessons learned
b. Can the strategies be implemented, given the context and available b. SBCCAf.Net can implement these strategies through
resources? internet, email and in-person meetings

Step 6: Write the Mission Statement

Compose a smaller team—one or two people who are good writers—to pull together the deliberations into a one or two sentence mission
statement. Articulate the “who,” “what,” “why” and “how” of the organization in a way that makes it stand out as unique among
competitors.

Difference Between Vision and Mission

Purpose
The purpose is very important in the process of envisioning. An organization’s purpose is the primary and basic reason for its existence.

Example

How to create a Purpose Statement?

Mission versus Purpose

 Mission Statement Purpose Statement
Outlines the company’s primary purpose and objectives. It defines Communicates the bigger impact or contribution it aims to
what the company does, its customers, and how they serve them. The make to society, communities, or the whole world. More
mission statement concentrates on the company’s daily operations and than making business, it explains the reason for the
priorities. company’s existence.
Outlines the company’s primary purpose and objectives. It defines Usually focuses on the organization’s long-term aspirations
what the company does, its customers, and how they serve them. The and the positive change it wants to create. It inspires and
mission statement concentrates on the company’s daily operations and motivates employees, customers, investors, communities,
priorities. and other stakeholders.
Outlines specific goals or outcomes the organization wants to Emphasizes values, principles, and ideals that guide the
accomplish in the short to medium term. organization’s long-term actions and decisions.

Business Definition
Business definition refers to the description of products, services, activities, functions, and markets in which an organization deals.

Four important questions need to be answered to define a business:

What are the products, services, or markets in which an organization operates?
Who are the target customers?
Which activities and functions are performed to satisfy the customers?
What are the resources and capabilities utilized to satisfy the customers?

Abell’s Three-Dimensional Model of Business Definition

“A business may be defined by three dimensions – consumer groups describe the categories of customers, or whom the business satisfies;
customer functions describe customer needs, or what is being satisfied; technologies describe the way the firm satisfies customer needs.”
-Abell

Vital Aspects in Defining Business

1. Concept of Product/Service:
- What products or services will the business offer?
- What needs do they fulfill for customers?
- How do they differ from existing offerings?

2. Customer Segment:
- Market Segmentation: Identify specific customer groups with shared needs.
- Market Targeting: Select target customer segments to focus on.
- Market Positioning: Define how the business will be perceived by target customers.

3. Value Creation:
- How will the business create value for customers?
- What unique benefits will it offer?
- How will it differentiate itself from competitors?

Goals
Organizational goals refer to the ideal situations to be achieved in an undefined time-duration in future
“An organization falling short of its tartest might set up a task force to develop new policies for achieving a higher level of goal
attainment.” -Robey

Features of Goals

1. Specific
- Clearly and concisely defined
- Avoids vague or general statements
- Provides a clear direction and focus
- Leaves no room for misinterpretation
- Example: Instead of "Improve customer service," a specific goal would be "Reduce customer complaints by 20% within the next 6
months."

2. Measurable
- Quantifiable, allowing progress to be tracked
- Includes specific numbers, percentages, or amounts
- Enables evaluation of success
- Allows for adjustments and corrections
- Example: "Increase sales revenue by 15% within the next quarter" is measurable, whereas "Increase sales" is not.

3. Achievable
- Realistic and attainable, considering available resources and constraints
- Takes into account limitations and challenges
- Encourages motivation and commitment
- Avoids setting unrealistic or demotivating targets
- Example: Setting a goal to "Double sales within the next month" might be unrealistic, whereas "Increase sales by 5% within the next
quarter" is more achievable.

4. Relevant
- Aligns with the organization's mission, vision, and values
- Supports overall strategic objectives
- Ensures goals are purposeful and meaningful
- Avoids conflicting or distracting goals
- Example: If an organization's mission is to "Improve community health," a relevant goal would be "Reduce smoking rates among youth
by 10% within the next year."

5. Time-bound
- Has a specific deadline or time frame for completion
- Creates a sense of urgency and focus
- Enables prioritization and resource allocation
- Allows for tracking progress and evaluating success
- Example: "Launch a new product within the next 9 months" is time-bound, whereas "Launch a new product someday" is not.
Types of Goals

1. Strategic Goals
- Long-term, high-level objectives that align with an organization's mission and vision
- Focus on overall direction and scope
- Typically set by top management or leadership
- Examples:
- Increase market share by 20% within the next 3 years
- Expand into new international markets by 2025
- Achieve industry leadership in innovation and R&D

2. Tactical Goals
- Mid-term objectives that support strategic goals
- Focus on specific processes or departments
- Typically set by middle management or department heads
- Examples:
- Implement a new customer relationship management (CRM) system within the next 12 months
- Reduce production costs by 15% within the next 6 months
- Launch a new marketing campaign targeting a specific demographic

3. Operational Goals
- Short-term, specific objectives that support tactical goals
- Focus on daily operations and tasks
- Typically set by front line managers or team leaders
- Examples:
- Increase daily production output by 10% within the next quarter
- Reduce customer complaint response time to under 2 hours
- Achieve a 95% order fulfillment rate within the next 3 months

Objectives
Strategic objectives are broader goals that companies can use to direct business growth, connecting the company's values in their
vision statement to actionable steps and plans.

“Objectives may be defined as the targets people seek to achieve over various time periods.” - Robert L Trewatha and M Gene
Features of Objectives

1. Multiple Objectives
- Organizations often have multiple objectives to achieve different goals
- Objectives may be related to various aspects, such as financial performance, customer satisfaction, or employee development
- Multiple objectives help ensure a comprehensive approach to achieving overall goals

2. Priority-Based
- Objectives are ranked in order of importance and urgency
- Prioritization helps focus resources and efforts on the most critical objectives
- Clear priorities enable effective decision-making and allocation of resources

3. Based on Time Period

- Objectives are often set for specific timeframes, such as quarterly, annually, or long-term
- Time-bound objectives create a sense of urgency and focus
- Regular review and updating of objectives ensure they remain relevant and achievable

4. Flexibility
- Objectives should be adaptable to changing circumstances and environments
- Flexibility allows for adjustments in response to new information, challenges, or opportunities
- Objectives should be able to pivot when necessary to ensure continued progress

5. Precise and Measurable

- Objectives should be clear, concise, and quantifiable
- Measurable objectives enable tracking of progress and evaluation of success
- Precise objectives reduce ambiguity and ensure everyone is working towards the same outcome

6. Connectivity among Objectives

- Objectives should be aligned and interconnected
- Connectivity ensures that achieving one objective contributes to the success of others
- A cohesive set of objectives promotes a unified approach to achieving overall goals

Process of Setting Objectives

Step 1: Categorize the Objectives

- Group objectives into categories, such as:
- Financial objectives (e.g., revenue growth, cost reduction)
- Customer objectives (e.g., satisfaction, retention)
- Operational objectives (e.g., efficiency, productivity)
 - Employee objectives (e.g., development, engagement)
- This helps ensure a comprehensive set of objectives
Step 2: Review the Areas to Cover
- Identify key areas that require objectives, such as:
- Sales and marketing
- Product development
- Customer service
- Supply chain management
- Consider internal and external factors, such as market trends and customer needs

Step 3: Balance the Objectives

- Ensure objectives are balanced across categories and areas, avoiding:
- Overemphasis on a single area (e.g., solely focusing on financial objectives)
- Conflicting objectives (e.g., increasing sales while reducing customer service)
- Balance short-term and long-term objectives

Step 4: Review the Formulated Objectives

- Evaluate formulated objectives against criteria, such as:
- Specificity
- Measurability
- Achievability
- Relevance
- Time-boundness (SMART criteria)
- Refine objectives as needed to ensure clarity, feasibility, and alignment with overall goals

Goals Vs Objectives

Corporate Governance
Corporate Governance refers to the way in which companies are governed and to what purpose. It identifies who has power and
accountability, and who makes decisions.

“Corporate governance is defined as the system by which companies are directed and controlled.” -Cadbury Committee

Significance of Corporate Governance

Good corporate governance has assumed greater importance and urgency in India give the following reasons:
Changing Ownership Structure: The corporate landscape has witnessed a notable shift in ownership structures, particularly in large
private-sector corporations. The traditional model of concentrated ownership by a few individuals or families has given way to a more
diverse ownership base. This evolution has been driven by factors, such as the threat of hostile takeovers and the emergence of
institutional investors. As a result, corporate governance has gained heightened significance in ensuring accountability, transparency,
and protection of the rights of all shareholders. It plays a crucial role in preventing undue influence, promoting fair decision-making,
and safeguarding the interests of minority shareholders.

Social Responsibility: Corporate governance serves as a driving force in fostering social responsibility among companies. Integrating
ethical practices and considering the interests of various stakeholders, including customers, lenders, suppliers, and the local
community, helps organizations contribute positively to society. Effective corporate governance ensures that directors act in the best
interests of the company while considering the broader impact of their decisions. It provides a framework for responsible management
and distribution of resources, ultimately enhancing value for all stakeholders and facilitating sustainable development.

Scams: Instances of corporate fraud have eroded public confidence and underscored the need for robust corporate governance
practices. Scandals, such as the Harshad Mehta case and CRB Capital fraud have inflicted substantial losses on small investors and
highlighted the importance of transparency, accountability, and risk management. By implementing effective governance mechanisms,
including independent audits, internal controls, and board oversight, companies can detect and prevent fraudulent activities. Strong
corporate governance acts as a safeguard, protecting the interests of shareholders, upholding ethical standards, and maintaining the trust
of the investing public.

Corporate Oligarchy: In India, the promotion of shareholder activism and democracy remains an ongoing challenge. Corporate
governance practices need to address the issue of concentrated power and promote transparency, accountability, and shareholder
participation. Encouraging diverse representation on boards, allowing proxies to speak at meetings, and fostering shareholder
associations are vital steps toward countering corporate oligarchy. Effective corporate governance ensures a level playing field,
promotes equitable decision-making, and helps establish a culture of inclusivity and fairness within organizations.

Globalization: The integration of Indian companies into global markets and the pursuit of international listings have underscored the
importance of robust corporate governance practices. Strong governance frameworks are vital for establishing trust among global
investors, complying with international regulations, and fostering transparency and accountability. By adhering to global governance
standards, companies can enhance their competitiveness, attract capital, and ensure the confidence of international stakeholders.
Effective corporate governance facilitates strategic decision-making, risk management, and integrity in financial reporting, enabling
companies to thrive in a globalized business environment.

Constituents of Corporate Governance

Mechanisms of Corporate Governance
Internal Corporate Governance Controls
1. Monitoring by the Board of Directors
- Oversees management's performance and decision-making
- Ensures alignment with company's goals and objectives
- Provides guidance and strategic direction

2. Remuneration
- Incentivizes executives to act in the company's best interests
- Ties compensation to performance and long-term value creation
- Aligns interests of executives with those of shareholders

3. Audit Committees
- Oversees financial reporting and internal controls
- Ensures accuracy and transparency of financial statements
- Provides independent review of company's financial practices

External Corporate Governance

1. Debt Covenants
- Restricts company's ability to take on excessive debt
- Ensures financial discipline and responsible borrowing practices
- Protects interests of creditors and bondholders

2. Government Regulations
- Establishes minimum standards for corporate governance
- Protects shareholders, employees, and other stakeholders
- Ensures compliance with laws and regulations

3. External Labor Market

- Influences executive compensation and talent acquisition
- Provides market feedback on company's performance and reputation
- Encourages companies to adopt best practices

4. Competition
- Encourages companies to innovate and improve performance
- Provides market discipline and incentives for efficiency
- Promotes allocation of resources to highest-value activities

5. External Auditor
- Provides independent review of company's financial statements
- Ensures accuracy and transparency of financial reporting
- Identifies areas for improvement in internal controls and governance practices

Issues of Corporate Governance

 The canvas of Corporate Governance is very large. However, there are some important issues that should not be lost sight of. These are –
Conflict of Interest: Conflict of interest arises when a person/entity promotes his/her/its interest at the cost of that of the company. While
law requires that conflict of interest should be avoided, identification and removal of conflict is not always easily.
Asymmetry of information: Asymmetry of information should be reduced to the extent possible, among the community of stakeholders.
Asymmetry can lead to persons with faster or better access to information taking undue advantage thereof, resulting in unjust enrichment of
some persons.
Separation between ownership and management: Ownership and management are two different functions, and should not ideally reside in
the same set of individuals. Further, if these roles are separated, owners should not enter into the territory of management.
Independence of the Board: For the Board to function effectively, it should be independent, in spirit. Failing this, the Board would end up
rubbers tamping management proposals. True independence is a state of mind. An independent Board is necessary to objectively hold
management accountable.
Checks and balances: Proper checks and balances, commensurate with the size of the corporate should be in place.
Compliance with law and regulations: A good corporate should comply with laws and regulations. Failure to do so will invite severe negative
consequences, including, but not limited to, legal proceedings.
Disclosure and transparency: All material issues/ events related to a company should be disclosed in a time bound manner to the
stakeholders of the company. Sometimes companies do not make true and complete disclosures, and are not transparent about some
important affairs of the company.
Minority shareholders and other stakeholders: A ‘controlling shareholder’ has significant powers and influence within a company.
He/she/they may, at times, misuse this power, at the cost of minority shareholders and other stakeholders. While promoting the long-term
interests of the company, it should be ensured that the interest of any shareholder, controlling or minority, are not oppressed.
Accountability: The management is accountable to the Board, and the Board in turn is accountable to the shareholders of a company. If
either of them thinks of himself/herself as the owner, it will go against the grain of accountability.
Code of conduct or ethics: While profit-maximisation is an important goal of any company, companies should adopt ethical practices,
which will promote reputation as well as the business prospects of the company.

Corporate Social Responsibility

Corporate social responsibility (CSR) is a management concept that describes how a company contributes to the well-being of communities
and society through environmental and social measures

“Corporate Social responsibility means devising corporate strategies and building a business with the society’s needs in mind.” -Cannon

Objectives of Corporate Social Responsibility

CSR plays a crucial role in a company's brand perception; attractiveness to customers, employees, and investors; talent retention; and overall
business success. A company can implement four types of CSR efforts: environmental initiatives, charity work, ethical labor practices and
volunteer projects.
1. Brand Value
A quick look at the top 10 brands in the world would suggest that responsibility is at the core of their operations. A well-managed CSR
program can help increase brand equity, awareness and resonate with strong values.
2. Increased Sales
Customer Matters Companies that lead with a purpose are perceived positively by the customers. According to a study, 88% of the people
surveyed would buy products from a responsible company. 85% of the people said that they would support the company in their community.
3. Employee Retention and Engagement
There was a time when people looked at their jobs from the bread and butter perspective alone. Today, employees look for a higher purpose
other than their monthly salary.
4. Cost Savings
In the past, operating sustainably came at a huge cost to the company. Cost savings as one of the factors in the importance of CSR would be
surprising a few years ago. Responsible companies have found new technologies that have reduced the operating costs.
5. Poverty Alleviation
India is home to almost 1.4 billion people and the top 1% of its population owns 73% of the wealth. In spite of the plethora of welfare
programs, the gap between the haves and have-nots is one of the steepest in the world.
6. Risk Management
It is no longer a debate that social and environmental risk affect businesses in a big way. In the long term, these factors affect the growth
strategies and are completely out of its control.

Types of Corporate Social Responsibility

Here are the most common types of CSR and some examples of each practice:

1. Economic Responsibility
For a legal entity to exhibit economic responsibility, it must operate in a manner that prioritizes financial sustainability while actively
contributing to the economic well-being of other businesses and their community.
Economic responsibility often includes:

 Donating to charitable organizations in the area

 Sourcing products and services from local businesses
 Contributing to economic development initiatives

2. Environmental Responsibility
With climate change now an evergreen topic on the minds of shareholders and consumers alike, companies must do their part to use
natural resources in a sustainable manner. Environmental responsibility minimizes the negative impact of their business operations on
the planet by reducing carbon emissions and waste, using renewable sources of energy, and adopting a more conservationist mindset.
It’s one of the fundamental elements of environmental, social, and corporate governance (ESG). Companies can demonstrate
environmental responsibility by:

Reducing their energy usage by setting their lights and HVAC systems on timers, using LEDs instead of traditional light bulbs,
and installing solar panels
Installing recycling and compost bins at the workplace
Placing firm limits on the amount of packing and using eco-friendly materials

3. Ethical Responsibility
Corporate ethical responsibility refers to a company’s obligation to conduct business in a morally sound and principled manner. It involves
adhering to ethical standards in decision-making, operations, and interactions with stakeholders, including employees, customers, suppliers,
and the community.
Examples of ethical responsibility include:
 Treating employees fairly and providing a work environment that is physically and emotionally safe
 Honoring confidentiality agreements to protect private information
 Maintaining oversight over suppliers and partners to verify they adhere to contractor agreements and other guidelines
 Following all rules and regulations related to your business
 Ensuring that business practices are conducted with honesty and an appropriate level of transparency

4. Philanthropic Responsibility
Philanthropic responsibility occurs when an organization gives back to the community via charity drives, volunteer services, and
other community initiatives. Supporting these initiatives can instigate positive change in regard to education, health care, or social
welfare. Companies can show commitment to philanthropic responsibility by:

 Creating a foundation or corporate trust

 Supporting community events and proposals
 Endorsing employee volunteer programs
Arguments for and against CSR

The arguments for Social Responsibility are as follows:

1. Justification for Existence and Growth:
Business uses the resources of society and is a creation of society, so it is expected to satisfy human needs by providing goods and
services. Profit earning should be looked at as an outcome of service to the people. If the image of the business is good, it enjoys the
support of society, and it can prosper and grow only when it fulfils its social responsibility.

2. Long-term Interest of Firms:

A firm can be profitable and prosperous only when it thinks of being profitable in the long run. A firm and its image stand to gain
maximum profits in the long run when it has its highest goal as Service to Society. A business has to fulfil social responsibility
towards various groups of society, like workers, consumers, shareholders, government officials, etc.
3. Avoidance of Government Regulations:
If a business does not want intervention from the government, then it must fulfil social responsibility. The government can restrict the
freedom and flexibility of a business, and enact and force them to assume social responsibility, so businesses should voluntarily fulfil
their obligations to society.
4. Maintenance of Society:
If the people related to the business feel that they are not getting their dues from the business, then they may resort to anti-social
activities. This can distort the image of the business and can be very harmful, so businesses must fulfil their social responsibility.
5. Availability of Resources with Businesses:
The problems of society can be effectively solved with the help of valuable financial and human resources of the businesses. For
example, managerial talent and capital resources, and years of experience in organising business activities can help society to tackle
its problems better, given the huge financial and human resources at its disposal.
6. Converting Problems into Opportunities:
Businesses can convert problems into opportunities by taking risks. It takes risk as the reward of profit bearing. It not only solves
social problems but also provides opportunities for growth. For example, the problem of regional disparity can be solved by setting up
industries in backward regions, and it can benefit the business as it gets various tax benefits.
7. Better Environment for Doing Business:
There are little chances for the success of a business when society is confronted with diverse and complicated problems. Thus, in order
to have a better environment for doing business, the business should meet its social responsibilities.
8. Holding Business Responsible for Social Problems:
As business uses capital, physical and human resources of the society and a lot of social problems like environmental pollution, unsafe
workplace, corruption, etc., arise due to the activities of a business. So it becomes the moral responsibility of the business to help
society in solving problems and serving society.

The arguments against Social Responsibility are as follows:

1. Violation of Profit Maximisation Objective: It is considered that social responsibility is against the objective of profit
maximisation. But business is an economic activity and its main goal is to earn and maximise profit.
2. Burden on Consumers: Huge financial investment, which has no proper return, is required to fulfil social responsibilities, like in
the case of pollution control and environmental protection. The burden of such costs is usually passed on to consumers in the form of
higher prices. It is unfair to pass the burden on consumers in the name of social responsibility.
3. Lack of Social Skills: There is a difference between the way in which how business problems and social problems are solved. A
person might be good at managing a business but may not have the required skills to solve complex social problems. Therefore, social
problems should be solved by specialised agencies.
4. Lack of Broad Public Support: Businesses do not get the support of people as the public does not like the involvement or
interference of businesses in social programmes.