Strategic Management Unit 1

8/12/2019 Strategic Management Unit 1

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UNIT- I

1.1

Introduction1.2 Strategic Management

1.3 Business Policy

1.4 Corporate Strategy

1.5 Basic Concept of Strategic Management

1.6 Mission, Vision, Objectives

1.7 Impact of Globalization

1.8 Basic Model of Strategic Management

1.9 Strategy Decision Making

1.10 Impact of Internet & E- Commerce

1.11 Role of Strategic Management in Marketing, Finance, HR and Global

Competitiveness


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Importance of Strategic Management

Strategic management provides the framework for all the major business decisions of anenterprise such as decisions on businesses, products and markets, manufacturing facilities,

investments and organizational structure.

In a successful corporation, strategic planning works as the pathfinder to various business

opportunities; simultaneously, it also serves as a corporate defence mechanism, helping the firm

avoid costly mistakes in product market choices or investments. Strategic management has the

ultimate burden of providing a business organization with certain core competencies and

competitive advantages in its fight for survival and growth.

It seeks to prepare the corporation to face the future and even shape the future in its favour. Its

ultimate burden is influencing the environmental forces in its favour, working into the environs

and shaping it, instead of getting carried away by its turbulence or uncertainties.


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Importance of a Business Policy:

A. From the view point of course itself:

1. Business pol icy seeks to integrate knowledge and experience gained in various functional

areas of management It enables the learner to understand-and make sense of the complex

interaction that takes place between different functional areas.

2. Business policy deals wit h the constraints and complexities of the real life business.

3. Business policy offers a very broad perspective to its learners.

4. Business policy makes the study and practice of management more meaningful a done can

view business decision making in its proper perspective.

B. For the understanding of Business Environment:

1. Regardless of the level of management Business Policy creates an understanding of how

policies are formulated. This helps in creating an appreciation of complexities of the

environment that the senior management faces in the policy formulation.

2. By gaining an understanding of the business environment managers become

more receptive to the ideas and suggestions of the senior management Such an attitude on the

part of the managers makes the task of policy implementation simpler.

3. By being able to relate the environmental changes to policy changes within the organization,mangers feel themselves to be a part of a greater design. This helps in reducing their feelings

of isolation.

C For understanding the organization:

1. Business policy presents a basic frame work for understanding strategic decision making

while a person is at the middle level of the management.

2. Business policy brings to the organization and to its managers the benefit of years of

distilled experience in strategic decision making.

3. An understanding of Business policy may lead to an improvement in job performance.

D. For personal Development:

1. It is beneficial for an executive to understand the impact of policy shifts on the status of

ones department and on the position be occupies.


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2. Business policy enables the executives to avail an opportunity or avoid a risk with regard to

career planning and development

3. Business policy offers a unique perspective to executives to understand the senior

management viewpoint

4. An interesting by-product of business policy course is the theoretical framework, provided in

the form of strategic management model. This model provides powerful insights in dealing

with policy-making at the macro level as well as at an individual level through self-analysis.

Purpose of Business policy:

The purpose of business policy is three fold:

1. To integrate the knowledge gained in various functional areas of management

2. To adopt a generalist approach to problem-solving and3. To understand the complex inter-linkages operating within an organization through the use of

systems approach to decision making and relating them to changes taking place in the

external environment

Objectives of Business Policy:

A. In terms of knowledge:

1. The learner has to understand the various concepts like strategy, polices, plans and

programmes etc.

2. Knowledge about the environment (external & internal) and how it affects the functioning of

an organization is vital in understanding business policy. Through the tools of analysis and

diagnosis a learner can understand the environment in which the firm operates.

3. Information about the environment helps in the determination of the mission, objective and

strategies of a firm.

4. Through the knowledge gained in business policy, the learner is able to visualize how the

implementation of strategies can take place.

5. To survey the literature and learn about the searches taking place in the field of Business

Policy is also an important knowledge objective.

B. In terms of skills:

1. The attainment of knowledge should lead to the development of skills so as to apply what is

learnt.


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2. The study of business policy should enable a student to develop analytical ability and use it

to understand the situation in a given case or incident

3. Business policy study should lead to the sills of identifying factors relevant in decision-

making. The analysis of strengths and weakness of an organization the threats and

opportunities present in the environment and the suggestion of appropriate strategies and

policies from the core content of general management decision making.

4. Increases the mental ability of learners and enables learners to link theory with practice.

5. Case analysis as a part of business policy study, leads to the development of oral as well as

written communication skills.

C. In terms of attitude:

1. Development of generalist attitudes enables the learner to approach and assess a situation

from all possible angles.2. Dealing in a comprehensive manner, a generalist is able to function under conditions of

partial ignorance by using his judgement and infusion.

3. To possess a liberal attitude and be receptive to new ideas, information and suggestions is

important for a general manager to act like a professional manager.

4. An important attitude is to go beyond and think when faced with a problematic situation

developing a creative and innovative attitude is the hall mark of a general manager.


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1.4 Corporate Strategy To understand Corporate Strategy before this we have

to understand the concept of Strategy 1.1. Concept of Strategy

Strategy is the determination of the long-term goals and objectives of an enterprise and the

adoption of the courses of action and the allocation of resources necessary for carrying out these

goals. Strategy is managements game plan for strengthening the organizations position,

pleasing customers, and achieving performance targets.

Types of strategy

Strategy can be formulated on three different levels:

Corporate Level

Business Unit Level

Functional or Departmental Level.

CORPORATE STRATEGY

BUSINESS STRATEGY

FUNCTIONAL STRATEGY


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Corporate Level Strategy

Corporate level strategy fundamentally is concerned with the selection of businesses in which the

company should compete and with the development and coordination of that portfolio of

businesses.

Corporate level strategy is concerned with:

Reach - defining the issues that are corporate responsibilities; these might include

identifying the overall goals of the corporation, the types of businesses in which the

corporation should be involved, and the way in which businesses will be integrated and

managed.

Competitive Contact - defining where in the corporation competition is to be localized.

Take the case of insurance: In the mid-1990's, Aetna as a corporation was clearlyidentified with its commercial and property casualty insurance products. The

conglomerate Textron was not. For Textron, competition in the insurance markets took

place specifically at the business unit level, through its subsidiary, Paul Revere. (Textron

divested itself of The Paul Revere Corporation in 1997.)

Managing Activities and Business Interrelationships - Corporate strategy seeks to

develop synergies by sharing and coordinating staff and other resources across business

units, investing financial resources across business units, and using business units to

complement other corporate business activities. Igor Ansoff introduced the concept of

synergy to corporate strategy.

Management Practices - Corporations decide how business units are to be governed:

through direct corporate intervention (centralization) or through more or less autonomous

government (decentralization) that relies on persuasion and rewards.

Corporations are responsible for creating value through their businesses. They do so by

managing their portfolio of businesses, ensuring that the businesses are successful over the long-

term, developing business units, and sometimes ensuring that each business is compatible with

others in the portfolio.


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1 STRATEGIC DECISIONS AT DIFFERENT LEVELS

Dimensions Levels

CORPORATE BUSINESS FUNCTIONAL

Type Of Decision Conceptual Mixed Operational

Impact Significant Major Insignificant

Risk Involved High Medium Low

Profit Potential High Medium Low

Time Horizon Long Medium Low

Flexibility High Medium Low

Adaptability Insignificant Medium Significant


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1.5 Basic Concept of Strategic Management

Strategic management is defined as the art and science of formulating, implementing, andevaluating cross-functional decisions that enable the organization to achieve its objectives."

Generally, strategic management is not only related to a single specialization but covers cross-

functional or overall organization. Strategic management is a comprehensive area that covers almost all the functional areas

of the organization. It is an umbrella concept of management that comprises all such

functional areas as marketing, finance & account, human resource, and production &

operation into a top level management discipline. Therefore, strategic management has an

importance in the organizational success and failure than any specific functional areas. Strategic management deals with organizational level and top level issues whereas

functional or operational level management deals with the specific areas of the business. Top-level managers such as Chairman, Managing Director, and corporate level planners

involve more in strategic management process. Strategic management relates to setting vision, mission, objectives, and strategies that can

be the guideline to design functional strategies in other functional areas

Therefore, it is top-level management that paves the way for other functional oroperational management in an organization

Definition:

The determination of the basic long -term goals & objectives of an enterprise and the adoption

of the course of action and the allocation of resources necessary for carrying out these goals. -

Chandler


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1.6 Vision, Mission and Purpose

1. Vision StatementVision statement provides direction and inspiration for organizational goal setting.

Vision is where you see your self at the end of the horizon OR milestone therein. It is a single

statement dream OR aspiration. Typically a vision has the flavors of 'Being Most admired',

'Among the top league', 'Being known for innovation', 'being largest and greatest' and so on.

Typically 'most profitable', 'Cheapest' etc. dont figure in vision statement. Unlike goals, vision is

not SMART. It does not have mathematics OR timelines attached to it.

Vision is a symbol, and a cause to which we want to bond the stakeholders, (mostly employees

and sometime share-holders). As they say, the people work best, when they are working for a

cause, than for a goal. Vision provides them that cause.

Vision is long-term statement and typically generic & grand . Therefore a vision statement

does not change unless the company is getting into a totally different kind of business.

Vision should never carry the 'how' part. For example ' To be the most admired brand in

Aviation Industry' is a fine vision statement, which can be spoiled by extending it to' To be the

most admired brand in the Aviation Industry by providing world-class in-flight services'. The

reason for not including 'how' that how is may keep on changing with time.

Challenges related to Vision Statement:

Putting-up a vision is not a challenge. The problem is to make employees engaged with it. Many

a time, terms like vision, mission and strategy become more a subject of scorn than being looked


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up-to. This is primarily because leaders may not be able to make a connect between the

vision/mission and peoples every day work. Too often, employees see a gap between the vision,

mission and their goals & priorities. Even if there is a valid/tactical reason for this mis-match, it

is not explained.

Horizon of Vision:

Vision should be the horizon of 5-10 years. If it is less than that, it becomes tactical. If it is of a

horizon of 20+ years (say), it becomes difficult for the strategy to relate to the vision.

Features of a good vision statement:

Easy to read and understand.

Compact and Crisp to leave something to peoples imagination. Gives the destination and not the road-map.

Is meaningful and not too open ended and far-fetched.

Excite people and make them get goose-bumps.

Provides a motivating force, even in hard times.

Is perceived as achievable and at the same time is challenging and compelling, stretching

us beyond what is comfortable.

Vision is a dream/aspiration, fine-tuned to reality:

The Entire process starting from Vision down to the business objectives, is highly iterative. The

question is from where should we start. We strongly recommend that vision and mission

statement should be made first without being colored by constraints, capabilities and

environment. This can said akin to the vision of arm ed forces, thats 'Safe and Secure country

from external threats'. This vision is a non-negotiable and it drives the organization to find ways

and means to achieve their vision, by overcoming constraints on capabilities and resources.

Vision should be a stake in the ground, a position, a dream, which should be prudent, but should

be non-negotiable barring few rare circumstances.


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TOYOTA

Vision

-Toyota aims to achieve long-term, stable growth economy, the local communities it serves, and

its stakeholders.

Mission

-Toyota seeks to create a more prosperous society through automotive manufacturing.

IBM

Vision

Solutions for a small planet

Mission

At IBM, we strive to lead in the invention, development and manufacture of the industry's mostadvanced information technologies, including computer systems, software, storage systems and

microelectronics.

We translate these advanced technologies into value for our customers through our professional

solutions, services and consulting businesses worldwide.

Business, Objectives And Goals

A business (also known as enterprise or firm) is an organization engaged in the trade

of goods, services, or both to consumers. Businesses are predominant in capitalist economies, in

which most of them are privately owned and administered to earn profit to increase the wealth of

their owners. Businesses may also be not-for-profit or state-owned. A business owned by

multiple individuals may be referred to as a company, although that term also has a more precise

meaning.

Goals: It is where the business wants to go in the future, its aim. It is a statement of purpose, e.g.

we want to grow the business into Europe.


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Objectives: Objectives give the business a clearly defined target. Plans can then be made to

achieve these targets. This can motivate the employees. It also enables the business to measure

the progress towards to its stated aims.

1.3 The Difference between goals and objectives

Goals are broad; objectives are narrow. Goals are general intentions; objectives are precise. Goals are intangible; objectives are tangible. Goals are abstract; objectives are concrete. Goals can't be validated as is; objectives can be validated.

1.6 Basic Model of Strategic Management or Strategic Planning

Process

In today's highly competitive business environment, budget-oriented planning or forecast-based

planning methods are insufficient for a large corporation to survive and prosper. The firm must

engage in strategic planning that clearly defines objectives and assesses both the internal and

external situation to formulate strategy, implement the strategy, evaluate the progress, and make

adjustments as necessary to stay on track.


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2 The process of Strategic Management (MODEL) is cyclical. The elements within it interact

among themselves. Figures 2.1 and 2.2 present the process for single SBU firm and multiple

SBU firm. The process has to be adjusted for multiple SBUs firm because there it is

conducted at corporate level as well as SBUs levels as these firms insert SBU strategy

between corporate strategy and functional strategy. Initially, the process of strategy was

discussed in terms of four phases which are

Identification phase

Development phase

Implementation phase

Monitoring phase

The process of strategy does not have the same steps as stated by different authors. According to

C.K. Prahalad, the process comprises of 5 steps:

Strategic Intent

Environmental Analysis

Evaluation of strategic alternatives and choice.

Strategy Implementation

Strategy Evaluation and Control


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For our understanding, the process has been given in terms of the following steps:

Strategic Intent

Environmental & Organizational Analysis

Identification of Strategic Alternatives

Choice of Strategy

Implementation of Strategy

Evaluation & Control

A simplified view of the strategic planning process is shown by the following diagram:

1. STRATEGIC INTENT

Setting of organizational vision, mission and objectives is the starting point of strategy

formulation. The organizations strive for achieving the end results which are vision, mission,

purpose, objective, goals, targets etc. The hierarchy of strategic intent lays the foundation

for the strategic management of any organization. The strategic intent makes clear what an

organization stands for. It is reflected through vision, mission, business definition and objectives.

Vision serves the purpose of stating what an organization wishes to achieve in long run. The

process of assigning a part of a mission to a particular department and then further sub dividing

the assignment among sections and individuals creates a hierarchy of objectives. The objectivesof the sub unit contribute to the objectives of the larger unit of which it is a part. From strategy

formulation point of view, an organization must define why it exists, how it justifies that

existence, and when it justifies th e reasons for that existence. The answer of these questions

lies in the organizations mission, business definition, objectives & foals. These terms become

the base for strategic decisions and actions.


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The next feature involved in business definition is differentiation i.e. how an organization

differentiates itself from others so that the business concentrates on achieving superiors

performance in the market. Differentiation can be on several bases like quality, price, delivery,

service or any other factor which the concerned market segment values.

For example, an organization can charge comparatively lower price as compared to its

competitors in the same product quality segment, then price is not the differentiating factor. As

against this, if the organization is charging a much lower price in the same product group

excluding quality, price becomes a differentiating factor. For example, in synthetic detergent

market, HLL and Nirma provide for such a differentiation.

Objectives and Goals

Once the organization mission has been determined, its objective, desired future positions that it

wishes to reach, should be identified. Organizational objectives are defined as ends which the

organization seeks to achieve by its existence and operation. Objectives represent desired results

which the organization wishes to attain. They indicate the specific sphere of aims, activities and

accomplishments. An organization can have objectives in terms of profitability and productivity.

Objectives provide a direction to the organization and all the divisions work towards the

attainment of the set objectives. Objectives and goals are the terms which are used

interchangeably.

It is necessary for the organization to assess the process identifying the objectives of each

functional area. After accomplishment of these objectives, the overall objectives of the

organization are achieved. Organizations mission becomes the cornerstone for strategy.

Objectives are other factors which determine the strategy. By choosing its objectives, an

organization commits itself for these.

2. ENVIRONMENTAL AND ORGANISATIONAL ANALYSIS


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Every organization operates within an environment. This environment may be internal or

external. For conducting an environmental analysis, the strategic intent has to be very clear. This

clarity in definition of mission and objectives helps in the detailed analysis of the environment.

Environmental analysis, also known as environmental scanning or appraisal, is the process

through which an organization monitors and comprehends various environmental factors and

determines the opportunities and threats that are provided by these factors. There are two aspects

involved in environmental analysis :

Monitoring the environment i.e. environmental search and

Identifying opportunities and threats based on environmental monitoring i.e. environmental

diagnosis.

Environmental analysis is an exercise in which total view of environment is taken. The

environment is divided into different components to find out their nature, function and

relationship for searching opportunities and threats and determining where they come from,

ultimately the analysis of these components is aggregated to have a total view of the

environment. Some elements indicate opportunities while others may indicate threats.

A large part of the process of environmental analysis seeks to explore the unknown terrain, the

dimensions of future. The analysis emphasizes on what could happen and not necessarily what

will happen. The factors which comprise firms environment are of two types

factors which influence environment directly including suppliers, customers and

competitors, and

factors which influence the firm indirectly including social, technological, political, legal,

economic factors etc.

The environmental analysis plays a very important role in the process of strategy formulation.

The environment has to be analysed to determine what factors in the environment present

opportunities for greater accomplishment of organizational objectives and what factors present

threats. Environmental analysis provides time to anticipate the opportunities and plan to meet the

challenges. It also warns the organization about the threats. The analysis provides for


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According to Glueck, there are basically four grand strategic alternatives:

Stability

Expansion

Retrenchment

Combination

These are together known as stability strategies/ basic strategies.

Stability In this, the company does not go beyond what it is doing now. The company serves

with same product, in same market and with the existing technology. This is possible when

environment is relatively stable. Modernization, improved customer service and specialfacility may be adopted in stability.

Expansion This is adopted when environment demands increase in pace of activity.

Company broadens its customer groups, customer functions and the technology. These may be

broadened either singly or jointly. This kind of a strategy has a substantial impact on internal

functioning of the organization.

Retrenchment If the organization is going for this strategy, them it has to reduce its scope in

terms of customer group, customer function or alternative technology. It involves partial or total

withdrawal from three things. For example L & T getting out of the cement business. The

objective varies from company to company.

Combination When all the three strategies are taken together, this is known as combination

strategy. This kind of strategy is possible for organizations with large number of portfolios.

Apart from these four grand strategies, different commonly used strategies are given below:

Modernization In this , technology is used as the strategic tool to increase production and

productivity or reduce cost. Through modernization, the company aims to gain competitive and

strategic strength.

Integration The company starts producing new products and services of its own either

creating facility or killing others. Integration can either be forward or background in terms of


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SWOT Analysis

Industry Analysis

Competitive Analysis

Corporate Portfolio Analysis

When the company is in more than one business, it can select more than one strategic alternative

depending upon demand of the situation prevailing in the different portfolios. It is necessary to

analysis the position of different business of the business house which is done by corporate

portfolio analysis. This analysis can be done by using any of the seven technologies given below:

Experience curve PLC concept

BCG Matrix

GE nine cell Matrix

Space Diagram

Hofers product market evaluation matrix

Directional Policy Matrix

In the experience curve technique, technology the experience of the strategist enables him to

decide which businesses to enter or quit.

Depending upon the stage of the product life cycle of the business, one can make a strategic

choice for different portfolio.

Boston consultancy developed a matrix called BCG Matrix which is helpful to make strategic

choice. In this, the products are positioned based on various external and internal factors to know

the continuity, growth and discontinuing product. The factors given are specific in nature and

attempt has been made to quantify them.


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The GE Nine Cell Matrix is a matrix in which nine positions are defined in terms of business

strength factors and industry attractiveness factors. The business strength factors include market

share, profit margin, ability to compete, market knowledge, competitive position, technology,

and management caliber and the industry attractiveness factor include market size, growth rate,

profit, competition, economics of scales, technology and other environmental factors. Nine cells

are divided into three zones and depicted by different colours i.e. green, yellow and red. Each

zone of matrix presents a specific type of strategy or set of strategies.

The strategic position and action evaluation (SPACE) is an extension of two dimensional

portfolio analysis which helps an organization to hammer out an appropriate strategic posture. It

involves consideration of dimensions like organizations competitive advantage, organizations

financial strength, environmental stability etc. Various SPACE factors are measured in terms ofdegrees, often quantified from 0 to 5 with 0 in indication most unfavourable and 5 indicating

most favourable. On basis of four dimensions organization can choose its strategy.

Hofer and Schendel suggested the product market evaluation matrix. They constructed a 15 cell

matrix taking competitive position and stages of product / market evolution dimensions.

The directional policy matrix was developed by shell chemicals, U.K. It used two dimensions

business sector prospects and companys competitive capabilities to cho ose strategies. Each

dimension is further divided into unattractive, average and attractive (for business sector

prospects) and weak, average and strong (for companys competitive capabilities. Each quadrant

shows a different strategy which the organization may adopt.

Competitor Analysis

In this analysis, we try to assess what the competitor has and what he does not have. We

explore everything with respect to the competitor. In competitor analysis, focus is on external

environment as one of the components of external environment is the competitor. The difference

between SWOT analysis and competitor analysis is that in competitor analysis we are concerned

with only one component of the environment i.e. competitor while in SWOT analysis we take

about all the factors of the environment.


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Industry Analysis

In industry analysis, all the competitors belonging to the particular industry with which the

organization is associated are looked at. All the members of the industry are considered as a

whole. In competitive analysis, only the major competitors are assessed while in industry

analysis all the competitors belonging to the industry are looked at.

The strategic choice is a decision making process which looks into the following steps:

Focusing on strategic alternatives

Evaluating strategic alternatives Considering decision factors objective factors and subjective factors.

Finally, making the strategic choice.

5. IMPLEMENTATION OF STRATEGY

After the evaluation of the alternatives, the choice of strategy is made. This choice now needs to

be implemented i.e. strategy is now put into action. This step of strategy process is the

implementation step. This includes the activation of the strategic alternatives chosen. Strategy

making and strategy implementation are two different things. Strategy making requires person

with vision while strategy implementation requires a person with administrative ability. If the

strategy made is not implemented properly then the objectives would be lost. Strategy

implementation is as good as starting a new business. The stage requires looking at the problems

and eliminating them. In strategy implementation, one has to pass through different steps:

Project Implementation

Procedural Implementation

Resource Allocation

Structural Implementation


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The structural implementation of strategy involves designing of the organization structure and

interlinking various units and sub units of the organization. It involves issues like

How the work of the organization will be divided

How will the work be assigned among various positions, groups, department, divisions,etc.

The coordination among these for achievement of organizational objectives.

There are basically two aspects

Differentiation and

Integration

Differentiation refers to, the differences in cognitive and emotional orientations amongmanagers in different functional departments.

Integration refers to, the quality of the state of collaboration that are required to achieve unity of

efforts in the organization.

The organization has to emphasize on both aspects and therefore, it must design organization

structure and provide syste ms for integration and coordination among organizations parts and

members.

Functional implementation deals with the development of policies and plans in different areas of

functions which an organization undertakes. The major functions of the organization include

Production

Marketing

Finance

Personnel

Each and every function makes its own policies and plans in tune with the whole organizations

strategy and then implements to fulfill the objectives. For example, the production function may

involve decisions relating to size and location of plants, technology to be used, cost factor,


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production capacity, quality of the product, research and development etc. Similarly marketing

function may include the decisions relating to type of products, price of products, product

distribution and product promotion.

The financial function deals with decisions like sources of funds, usage of funds and

management of earnings. Likewise, the major consideration in personnel policies include

recruitment of right personnel, development of personnel, motivation system, retaining

personnel, personnel mobility, industrial relations etc.

Behavioral implementation deals with those aspects of strategy implementation that have impact

on behavior of people in the organizations. Since human resources form an integral part of the

organization their activities and behavior need to be directed in a certain way. Any departuremay lead to the failure of strategy. The five issues in this context relevant to strategy

implementation are:

Leadership

Organization Culture

Values and Ethics

Corporate Governance, and

Organizational Politics

EVALUATION AND CONTROL

This is the last step of the strategy making process. This is an ongoing process and evaluation

and control have to be done for future course of action as well. To get successful results and to

achieve organizational objectives, there has to be continuous monitoring of the implementation

of strategy. The evaluation and control of strategy may result in various actions that the

organization may have to take for successful well being, such actions may involve any kinds of

corrective measures concerned with any of the steps involved in the whole process be it choice

for setting mission or objectives. The process of strategy formulation is considered as a dynamic

process wherein corrective actions are taken and change is brought in any of the factors affecting

strategy.


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Evaluation of strategy is done by the top managers to determine whether their strategic choice is

implemented in a manner that it is meeting the organizations objectives. Evaluation emphasizes

measurement of results of a strategic action. On the other hand, control emphasizes on taking

necessary action in the light of gap that exists between intended results and actual results in the

strategic action.

When evaluation and control is carried out efficiently, it contributes in three basic areas:

Measurement of organizational process.

Feedback for future actions, and

Linking performance and rewards.

The board of directors, the chief executive and other managers all play a very important role in

strategy evaluation and control. Control can be of three types:

Control of inputs that are required in an action, known as feed forward control

Control at different stages of action process, known as concurrent control

Past action control based on feedback from completed action known as feedback control

Control is exercised by mangers in the form of four steps:

Setting performance standards

Measuring actual performance

Analyzing variance

Taking corrective actions

After evaluation and control, the strategy process continues in an efficient manner. The

effectiveness could be assessed only when the strategy helps in the fulfillment of organizational

objectives.


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1.12 Impact of Internet & E- Commerce

The impact of e-commerce on business activity

Selling through websites is the fastest growing method of trading worldwide. There are two main

forms of e-commerce:

Business to business (B2B ) trading where companies trade and exchange information

using the World Wide Web.

Business to consumer (B2C) trading where companies deal directly

with customers through web pages, and ordering is carried out online.

There are many different types of products and services that are traded on line including books,

CDs, cars, holidays, and insurance. In response to e-tailing and e-trading, most businesses have

now set up their own websites.

Trading online

Trading online enables businesses to reach much wider audiences while cutting the costs of

traditional retailing methods. For example, an e-tailer does not have to spend so much on an

expensive High Street presence.

Impact of Internet and E-Commerce on Strategy

There is a positive relationship between e-commerce and firm strategy. Companies that

incorporate e-commerce with strategy will implement firm strategy effectively.

Matching e-commerce with internal and external situation

The choice of e-commerce model is one of many strategic decisions that organizations make

when conducting business activities in the e-commerce environment. Current literature on both

strategic decision making and the development of e-commerce models does not adequately

address. In developing the framework, organizations need to have a good understanding on the
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types of models available for adoption. While there is no single unique classification system for

the types of e-commerce models available. For example, B2B e-commerce models are generally

classified into four generic categories: merchant models; manufacturer models; the buy-side

model; and brokerage models.

Each of these models has different functional characteristics resulting in different models being

more applicable or suitable to particular industries, markets or situations. In addition, the focus

of these models varies from buyer centric (such as the buy-side model) to supplier centric (such

as the manufacturer model) with some being neutral (such as the mega-exchange model). Based

on these four categories, a recent study has identified 10 specific e-commerce models as being

used for conducting B2B e-commerce in the agribusiness industry.

In addition to the complexity of the models, many factors are known to influence the strategicdecision making process of organizations, which are also likely to impact on the choice of e-

commerce models. The choice of e-commerce model is a strategic decision as the model chosen

will form the framework for the organisation to pursue its business activities in the e-commerce

environment and will also affect an organisations overall strategic direction.

E-commerce is generally less complex than any IT solution, so a firm must start with normal IT

initiatives before creating e-commerce tasks (John A. Rodgers, David C. Yen and David C.

Chou, 2002). E-commerce includes two basic types, business to consumer (B2C) and business to

business (B2B), that are two separate concepts. The former refers primarily to the buying and

selling activities over the Internet, including such transactions as placing orders, making

payments, and tracking delivery of orders on the Internet. So, the focus of B2C is typically on the

customer side as well. All other stakeholders of the organization, including employees and

suppliers, are generally not the main concern for B2C. It relies on client-to-server or port-to-port

data flow (Moltzen, E, 2000). B2B generally refers to the use of the web and Internet-related

technology to connect the extended organization, including such entities as suppliers, employees,

and regulatory authorities.

In general, expectations of B2B are high and in most cases justified. However, B2B is not just an

application program and thus not a plug and play solution. B2B is a contingency approach,

meaning that there is no one best way for the B2B transformation. Each case needs separate


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evaluation. It takes a conscious, thorough and extensive internal and external analysis of the

organization, clear and appropriate goals, a deliberate strategic concept and change management

at its best, to turn an organization into an successful e-company and hence to be able to leverage

the opportunities of e-commerce in an optimal way. Therefore, we propose that e-commerce

matched with internal and external situation would be a great benefit to the implementation of

strategy.


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Strategic Management Unit 1

Documents