Advanced Management Strategies

Q1 Write a descriptive note on the historical evolution of strategic management and business policy of India and the world.

Until the 1940s, strategy was seen as primarily a matter for the military. Military history is filled with stories about strategy. Almost from the beginning of recorded time, leaders contemplating battle have devised offensive and counter-offensive moves for the purpose of defeating an enemy. The word strategy derives from the Greek for generalship, strategia, and entered the English vocabulary in 1688 asstrategie. According to James’ 1810 Military Dictionary, it differs from tactics, which are immediate measures in face of an enemy. Strategy concerns something “done out of sight of an enemy.” Its origins can be traced back to Sun Tzu’s The Art of Warfrom 500 BC.

Over the years, the practice of strategy has evolved through five phases (each phase generally involved the perceived failure of the previous phase):Basic Financial Planning (Budgeting)

Long-range Planning (Extrapolation)

Strategic (Externally Oriented) Planning

Strategic Management

Complex Systems Strategy:

Complex Static Systems or Emergence

Complex Dynamic Systems or Strategic Balance

Basic Financial Planning (Budgeting):

James McKinsey   (1889-1937) , founder of the global management consultancy that bears his name, was a professor of cost accounting at the school of business at the University of Chicago. His most important publication, Budgetary Control (1922), is quoted as the start of the era of modern budgetary accounting.

Long-range Planning     (Extrapolation)

Long-range Planning was simply an extension of one year financial planning into five-year budgets and detailed operating plans. It involved little or no consideration of social or political factors, assuming that markets would be relatively stable. Gradually, it developed to encompass issues of growth and diversification.

Strategic (Externally Oriented) Planning

Strategic (Externally Oriented) Planning aimed to ensure that managers engaged in debate about strategic options before the budget was drawn up. Here the focus of strategy was in the business units (business strategy) rather than in the organization centre. The concept of business strategy started out as ‘business policy’, a term still in widespread use at business schools today. The word policy implies a ‘hands-off’, administrative, even intellectual approach rather than the implementation-focused approach that characterizes much of modern thinking on strategy. In the mid-1900s, business managers realized that external events were playing an increasingly important role in determining corporate performance. As a result, they began to look externally for significant drivers, such as economic forces, so that they could try to plan for discontinuities. This approach continued to find favor well into the 1970s.

Alfred Chandler (1918-) – Influential figure in both strategy and business structure-Strauss Professor of Business History at Harvard since 1971.

Wickham Skinner (1924-) Skinner argued for a clear manufacturing strategy to proceed in parallel with the marketing strategy.

Igor Ansoff (1918-) through his unstintingly serious, analytical and complex,Corporate Strategy, published in 1965, had a highly significant impact on the business world. It propelled consideration of strategy into a new dimension. It was Ansoff who introduced the term strategic management into the business vocabulary. He also brought the concept of ‘synergy’ to a wide audience for the first time. In Ansoff’s original creation it was simply summed up as the “2+2=5” effect. 

The Problem with Strategic Planning (Analysis): Managers have assumed that anything which could not be analyzed could not be managed. The belief in analysis is part of a search for a logical commercial regime, a system of management which will, under any circumstances, produce a successful result. There are two basic problems with the reliance on analysis. First, it is all technique. The second problem is more fundamental. This was all very well in the 1960s and for much of the 1970s. Security could be found. The business environment appeared to be reassuringly stable. Objectives could be set and strategies developed to meet them in the knowledge that the overriding objective would not change. Such an approach, identifying a target and developing strategies to achieve it, became known as Management by Objectives (MBO).

Under MBO, strategy formulation was seen as a conscious, rational process. MBO ensured that the plan was carried out. The overall process was heavily logical and, indeed, any other approach (such as an emotional one) was regarded as distinctly inappropriate. The thought process was backed with hard data. There was a belief that effective analysis produced a single, right answer; a clear plan was possible and, once it was made explicit, would need to be followed through exactly and precisely.

Henry Mintzberg’s book The Rise and Fall of Strategic Planning was first published in 1994. “The confusion of means and ends characterizes our age,” Henry Mintzberg observes and, today, the highways are likely to be gridlocked. When the highways are blocked managers are left to negotiate minor country roads to reach their objectives

Strategic Planning to Strategic Management

Strategic Planning to Strategic Management: Strategic planning was a plausible invention and received an enthusiastic reception from the business community. n a minority of firms, strategic planning restored their profitability and became an established part of the management process. However, a substantial majority encountered a phenomenon, which was named “paralysis by analysis”: strategic plans were made but remained unimplemented, and profits/growth continued to stagnate.

In 1972 Ansoff published the concept under the name of Strategic Management through a pioneering paper titled “The Concept of Strategic Management”, which was ultimately to earn him the title of the Father of strategic management. The paper asserted the importance of strategic planning as a major pillar of strategic management but added a second pillar – the capability of a firm to convert written plans into market reality. The third pillar- the skill in managing resistance to change – was to be added in the 1980s.

Between 1974 and 1979 Ansoff developed a theory which embraces not only business firms but other environment-serving organizations. The resulting book titled Strategic Management, was published in 1979.

The Key patterns in strategic management as practiced by the Indian companies in the 3 periods are as below:

Pre- liberalization Stage: Strategic management on government’s fringes

Subsuming enterprise objectives into the national planning framework Capabilities in generating and grabbing opportunities High diversification, non- competitive scales and weak technology capabilities Secretive and ‘one man’ strategic management process

The decade of the 1990’s : Transitional euphoria & reality check

Carried’ operation de-linked strategy’ mindset to the early 1990’s ‘Foreign complex’ governed strategy in older groups in the early 1990’s Strategy of focus through rationalization and operations improvement by majority of companies in the late 1990’s Strategy of growth through acquisitions, internationalization and product market expansion by some companies in the late

1990’s Experimentation with international consulting firms in strategic management process.

Post liberalization stage: Issues and agenda in 2000-2010

Acquire a ‘global maverick’ mindset and actively shed pre-liberalization thinking Synergize entrepreneurial flair with professional skills in strategic management Complete portfolio rationalization, but also expand boundaries through internationalization and entry into emerging sectors Mobilize increased resources and ensure adequate growth through existing businesses De-merge businesses as independent companies , for focus and improved market capitalization Actively promote development of technology capabilities Decentralize organizations and develop institutionalized control mechanisms

Q2 Describe some of the important characteristics of environment and demonstrate how a strategist can be understand it better by dividing into external and internal components and general and relevant environment.

In trying to understand the environment and its influence on business, managers face many problems, mainly because of the following characteristics of the business environment:

a) Environment is complex:

The environment is not made of any one simple constituent but consists of a number of factors, events, conditions and influences, arising from different sources.

It is difficult to guess the factors that constitute a given environment. Hence, environment is at the same time complex and somewhat easy to understand in parts, but difficult in totality.

b) Environment is dynamic:

The environment does not remain constant but keeps on changing, For instance, the environment changes with the competitor's products and strategies, govt, policies, customers' preferences, etc.

Hence, in order to survive and grow, it becomes very important for every organization to understand its impact and adapt itself with such changes.

c) Environment is multi-faceted:

Same element or influence of environment affects different firms in different ways.

This is frequently seen when the same development, say liberalization, is welcomed as an opportunity by one company while another company perceives it as a threat.

d) Environment has a far reaching impact:

The environment has a long term and lasting impact on organizations. The growth and profitability of an organization depend critically on the environment in which it exists.

 In order for a strategist to understand better, a SWOT analysis can be carried out for a product, place or person. It involves specifying the objective of the business venture or project and identifying the internal and external factors that are favorable and unfavorable to achieving that objective.

Strengths: characteristics of the business or project that give it an advantage over others

Weaknesses: are characteristics that place the team at a disadvantage relative to others

Opportunities: external elements that the project could exploit to its advantage

Threats: external elements in the environment that could cause trouble for the business or project

Identification of SWOTs is important because they can inform later steps in planning to achieve the objective.

Organizational environment consists of both external and internal factors. Environment must be scanned so as to determine development and forecasts of factors that will influence organizational success. Environmental scanning refers to possession and utilization of information about occasions, patterns, trends, and relationships within an organization’s internal and external environment. It helps the managers to decide the future path of the organization. Scanning must identify the threats and opportunities existing in the environment. While strategy formulation, an organization must take advantage of the opportunities and minimize the threats. A threat for one organization may be an opportunity for another.

Internal analysis of the environment is the first step of environment scanning. Organizations should observe the internal organizational environment. This includes employee interaction with other employees, employee interaction with management, manager interaction with other managers, and management interaction with shareholders, access to natural resources, brand awareness, organizational structure, main staff, operational potential, etc.

Also, discussions, interviews, and surveys can be used to assess the internal environment. Analysis of internal environment helps in identifying strengths and weaknesses of an organization.

As business becomes more competitive, and there are rapid changes in the external environment, information from external environment adds crucial elements to the effectiveness of long-term plans. As environment is dynamic, it becomes essential to identify competitors’ moves and actions. Organizations have also to update the core competencies and internal environment as per external environment. Environmental factors are infinite, hence, organization should be agile and vigile to accept and adjust to the environmental changes. For instance - Monitoring might indicate that an original forecast of the prices of the raw materials that are involved in the product are no more credible, which could imply the requirement for more focused scanning, forecasting and analysis to create a more trustworthy prediction about the input costs. In a similar manner, there can be changes in factors such as competitor’s activities, technology, market tastes and preferences.

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

immediate / industry environment national environment broader socio-economic environment / macro-environment

Examining the industry environment needs an appraisal of the competitive structure of the organization’s industry, including the competitive position of a particular organization and it’s main rivals. Also, an assessment of the nature, stage, dynamics and history of the industry is essential. It also implies evaluating the effect of globalization on competition within the industry. Analyzing the national environment needs an appraisal of whether the national framework helps in achieving competitive advantage in the globalized environment. Analysis of macro-environment includes exploring macro-economic, social, government, legal, technological and international factors that may influence the environment. The analysis of organization’s external environment reveals opportunities and threats for an organization.

Strategic managers must not only recognize the present state of the environment and their industry but also be able to predict its future positions.

Q3 Select a high-profile industry such as the IT or entertainment industry. Identify the major competitors and analyse these reports to identify the types of corporate-level strategies being used by these firms.

Business strategies change with time and they should. After all whole business environment keeps changing all the time. This is more evident in the field of technology. True that the Indian software companies are primarily service oriented. However, their ways of servicing the client have been changing in the past. Now this industry is witnessing the era of cloud computing and mobile computing. More clients are relying on services such as Infrastructure-as-a-Service and Software-as-a-Service (SaaS). Before going more into the current business environment and strategies, let us first peep into the history.

In the past, there was a stark difference between the growth strategies followed by these companies.

Acquisition strategy: Companies look for acquisition for various reasons like achieving greater economy of scale, increasing market share, gaining taxation advantage, creating synergies between operations of two entities or for vertical integration. Sometime it is also done for diversification or to expand the business houses footprint. However, in case of an IT company, the acquisition works a little differently. The acquiring company gets very little tangible assets in the process of acquisition. Rather it gets a foothold in the form of an expanded client base or an entry into a new geographical market. The most important asset that the company acquires is the people asset.

Till recently, IT bellwethers like Infosys and Tata Consultancy Services (TCS) mostly refrained from acquisitions. Lack of right-fit acquisition targets at attractive valuations was the rationale cited by their respective managements.

On the other hand, Wipro followed the much talked about 'string of pearls' acquisition strategy, which is a fairly aggressive acquisition strategy. This was to make acquisitions to plug gaps in its client offerings and ramp up quickly in these areas. Wipro integrated the acquisitions of small companies such as mPower, New Logic, cMango, Saraware, Enabler, Quantech and Infocrossing during 2006-2008. However, the acquisition strategy changed to 'move the meter as a whole' by the new management. Recently, Wipro has acquired the IT related Oil & Gas business of Science Applications International Corp (SAIC). This acquisition is very strategic to the company. It is expected to enhance Wipro's domain capabilities in the upstream area and make it an end-to-end service provider in the Oil & Gas space.

As far as Infosys is concerned, the company has been and is still sitting on a huge cash pile . The management has stated that it is on the lookout for proper acquisition targets. But they have not really made any big ticket acquisitions as of now. The reason - the management has set very stringent criteria. While this is good to some extent as the company has not made any wasteful or value destructive acquisitions, however, it has also lost out on some attractive opportunities which its peers have capitalized upon. Recently,

Infosys has said that it is eyeing opportunities in the emerging healthcare space. But then again from a shareholders perspective one does not know when this acquisition would happen.

Focus on India: Infosys has always focused on the high margin business. For this, it has concentrated on the business from the developed markets such as the North America and the Europe. And, it has definitely worked well for the company till now. But in the process Infosys has ended up ignoring the emerging market opportunities particularly those from India. On the other hand, Wipro has been catering to domestic market as well. And during the time of slowdown in the developed economies, this focus on India has worked in the favor of Wipro and has helped it in growing its business.

Of late, though Infosys has started focusing on Indian market. But till now its name has not really featured in the big ticket contracts awarded by the Indian government or domestic companies. Its portion of revenues from India still remains quite low.

Present Situation: In the beginning of year 2011, Wipro decided to dismantle its traditional Joint-CEO model. The management has identified four industries as the core momentum verticals. On the other hand, Infosys has completed 30 years of its journey. It is now in the third phase of its growth. The management has set out new visions for the next 30 years.

Q4 Which types of regionalisation strategies are adopted by firms? Explain and state your opinion on whether Indian companies should adopt regionalisation strategies.

Harvard Business School professor Pankaj Ghemawat says that the most successful companies employ five types of regional strategies in addition to--or even instead of--global ones:

1. home base, 2. portfolio, 3. hub, 4. platform, and 5. mandate.6. Networks

Box 1-Home Base: This is also the box in which nearly 90 percent of the Fortune Global 500 still reside, in terms of the revenue based definition introduced above. Focusing on selling to one region is favored in a number of circumstances, including:

A particularly profitable regional or home market (although this is likely to attract entrants from other regions) A need for deep local knowledge that reduces efficient breadth A high sensitivity to regional free-trade arrangements and regional preferences Other factors that effectively collapse the distance within regions relative to the distance between them (e.g. regional

monetary unions or energy grids)

Box 2 – the regional portfolio – comprises strategies that involve more extensive operation outside a single region. Apart from that, however, they offer little room for regional considerations to influence what happens on the ground locally.A more active alternative for adding value at the regional level was originally articulated by Kenichi Ohmae in his notion of “triad” strategy. This involves building regional bases or hubs that provide a variety of shared resources or services to the local (country) operations. The logic is that these hubs may – because of lumpiness, or increasing returns to scale, or externalities – be hard for any one country to justify, but still be worth investing in from a cross-border perspective.

Box 3 & 4- Regional hubs, as we have seen, spread fixed costs across the countries within a region. Platforming is typically emphasized for back-end activities that deliver scale and scope benefits if coordinated across regions. The goal is not to reduce the amount of product variety on offer, but instead to deliver variety more cost effectively by building local customization atop common platforms explicitly engineered for such adaptability.

Box 5- Regional mandates can also be described as interregional mandates, because they involve awarding broader mandates to certain regions to supply particular products or to perform particular organizational roles in order to tap economies of specialization as well as scale. Suzuki, for instance, sources its small cars from its Indian subsidiary, Maruti Suzuki.

Box 6- To achieve complementarities across different regions, while avoiding excessive inflexibility, regional networks rely on integration as well as specialization through division of labor among resources located in different regions. Although academics have discussed networking extensively, most companies merely aspire to such integration.

There is a widely held perception that internationalization is the dominant theme in today’s world , which could be otherwise regionalization in dominant term. In which case the Indian firms should simply not be solely concerned with global operations but instead focus on regional expansion too. Unfortunately for India, South East Asia Free Trade Agreement (SAFTA) , though signed in 2004, is not yet a reality & political problems with India’s neighbors and domestic problems within them, makes it difficult to establish firm economic business relations with them.

The regionalization strategies of Indian Business firms are likely to become more popular in the near future . China & India have significantly enhanced increased economic relations. Several Indian businesses currently operate in Sri Lanka like Apollo Hospitals, Bajaj, Godrej,Indian Oil Corporation Jet Airways, Taj Hotel & Sahara Air. In Bangladesh, the Tata group is in the process of making a US $ 3 billion investment to build a steel plant, coal mine, a power plant and a fertilizer factory. Reliance industry may acquire the petrochemical business of ICI-Pakistan. Dabur India too may soon set up a manufacturing joint venture with a Pakistani firm.

The obvious advantages of regionalization lie in the geographic proximity, cultural homogeneity and ease of movement and transportation of goods and people. Besides these, cost savings from regional standardization, pooling of resources, better understanding of local market conditions and the presence of complementarities among various aspects of business may also result. Often, the economic and industrial advantages of regionalization usually spill over into the political arena and the reverse also happens when political understanding leads to greater economic and industrial cooperation among geographically contiguous nations.

Q5 Describe the different ways in which digitalisation can help organisations in achieving cost leadership, differentiation and focus.

There are several patterns of e-business emerging that are the strategic options available for digitalization

1. The e-Channel Pattern Transaction enhancement information provision - e.g. Home Depot DIY info e-Channel compression reduce redundant steps e.g. airline reservation Online trading - e.g. E*Trade e-Channel innovation creating new channels to serve customers e.g. E-Stamp, ePoste.ca

2. The Click-and-Brick Pattern Leveraging ᾿Brick and Mortar῀ capabilities on the Internet e.g, Walmart.com, Canadian Tire, Chapters.ca Leveraging online capabilities to enhance Brick and Mortar channels

Amazon.com & Toys ᾿R῀ Us, Webvan

3. The e-Portal PatternIntermediary offering an aggregated set of services Super portals - Yahoo, MSN, Amazon.com, etc. Auction Portals - eBay, uBid, etc. Mega transaction portals - Travelocity, Expedia

4. The e-Market Maker Pattern Exchanges Virtual Distributors

Vertical Net, hsupply.com Lead generation

Photonics Online Catalog aggregators

Plastics Net Auctions Reverse Auctions

FreeMarkets

5. The Pure-E ᾿Digital Products Pattern Digital goods delivered and consumed electronically.

Music, video, news, etc.e.g. MP3.com

There are two methods for acquiring technology. It involves make or buy decision. In-house R&D capability is one method and tapping the R&D capabilities of competitors, suppliers and other organizations through contracts is another choice available for companies.Strategic R&D alliance involves

Joint programmes to develop new technology Joint ventures establishing a separate company to take a new product to market. Minority investments in innovative firms.

It will be appropriate for companies to buy technology which is commonly available from others but make technology themselves which is rare, to remain competitive. Outsourcing of technology will be suitable under the following conditions.

The technology is of low significance to competitive advantage The supplier has proprietary technology The supplier’s technology is easy to adopt with the present system The technology development needs expertise The technology development needs new resources and new people

Technology competence:

In the case of technology outsourcing, the companies should have a minimal R&D capability in order to judge the value of technology developed by others.

The internet economy is an economy is based on electronic goods and services produced by the electronic business and traded through electronic commerce. The Internet Economy refers to conducting business through markets whose infrastructure is based on the internet and world-wide web. An internet economy differs from a traditional economy in a number of ways, including communication, market segmentation, distribution costs and price.

Impact of the Internet and E-commerce

1. Impact on external industry environment

2. Changes character of the market and competitive environment

3. Creates new driving forces and key success factors

4. Breeds formation of new strategic groups

5. Impact on internal company environment

6. Having, or not having, an e-commerce capability tilts the scales

7. toward valuable resource strengths or threatening weaknesses

8. Creatively reconfiguring the value chain will affect a firm‟s competitiveness rivals.

Characteristics of Internet Market Structure:

Internet is composed of

1. Integrated network of user’s connected computers

2. Banks of servers and high speed computers

3. Digital switches and routers

4. Telecommunications equipment and lines

Strategy-shaping characteristics of the E-Commerce Environment

Internet makes it feasible for companies everywhere to compete in global markets.

Competition in an industry is greatly intensified by new e-commerce. Strategic initiatives of existing rivals and by entry of new, enterprising e-commerce rivals. Entry barriers into e-commerce world are relatively low On-line buyers gain bargaining power Internet makes it feasible for firms to reach

Overview of E-Commerce Business Models:

Major groups of internet and e-commerce firms comprising the supply side include

1. Makers of specialized communications components and equipment2. Providers of communications services3. Suppliers of computer components and hardware4. Developers of specialized software5. E-Commerce enterprises

Key Success Factors: Competing in the E-Commerce Environment:

Employ an innovative business model Develop capability to quickly adjust business model and strategy to respond to changing conditions Focus on a limited number of competencies and perform a relatively specialized number of value chain activities Stay on the cutting edge of technology Use innovative marketing techniques that are efficient in reaching the targeted audience and effective in stimulating

purchases Engineer an electronic value chain that enables differentiation or lower costs or better value for the money.

Q6 Critically comment on the use of corporate portfolio analysis for examining the objective factors involved in exercising a strategic choice.

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

Portfolio analysis is an analytical tool which views a corporation as a basket or portfolio of products or business units to be managed for the best possible returns.

When an organization has a number of products in its portfolio, it is quite likely that they will be in different stages of development. Some will be relatively new and some much older. Many organizations will not wish to risk having all their products at the same stage of development. It is useful to have some products with limited growth but producing profits steadily, and some products with real growth potential but may still be in the introductory stage. Indeed, the products that are earning steadily may be used to fund the development of those that will provide the growth and profits in the future.

So the key strategy is to produce a balanced portfolio of products, some with low risk but dull growth and some with high risk but great potential for growth and profits. This is what we call as portfolio analysis.

The aim of portfolio analysis is to analyze its current business portfolio and decide which businesses should receive more or less investment to develop growth strategies, for adding new businesses to the portfolio to decide which business should not longer be retained

Balancing the portfolio –

Balancing the portfolio means that the different products or businesses in the portfolio have to be balanced with respect to four basic aspects –

1. Profitability2. Cash flow3. Growth4. Risk

This analysis can be done by any of the following technologies –

Experience curve PLC concept BCG matrix GE nine cell matrix Space diagram Hofer’s product market evaluation matrix Directional Policy matrix

This matrix was developed in 1970s by the General Electric Company with the assistance of the consulting firm, McKinsey & Co, USA. This is also called GE multifactor portfolio matrix.

The GE matrix has been developed to overcome the obvious limitations of BCG matrix. This matrix consists of nine cells (3X3) based on two key variables:

1. business strength2. industry attractiveness

The horizontal axis represents business strength and the vertical axis represent industry attractiveness

The business strength is measured by considering such factors as:

relative market share profit margins ability to compete on price and quality knowledge of customer and market competitive strengths and weaknesses technological capacity caliber of management

Industry attractiveness is measured considering such factors as :

market size and growth rate industry profit margin competitive intensity economies of scale technology social, environmental, legal and human aspects

The industry product-lines or business units are plotted as circles. The area of each circle is proportionate to industry sales. The pie within the circles represents the market share of the product line or business unit.

The nine cells of the GE matrix represent various degrees of industry attractiveness (high, medium or low) and business strength (strong, average and weak). After plotting each product line or business unit on the nine cell matrix, strategic choices are made depending on their position in the matrix.

Spotlight Strategy

GE matrix is also called “Stoplight” strategy matrix because the three zones are like green, yellow and red of traffic lights.

1. Green indicates invest/expand – if the product falls in green zone, the business strength is strong and industry is at least medium in attractiveness, the strategic decision should be to expand, to invest and to grow.

2. Yellow indicates select/earn – if the product falls in yellow zone, the business strength is low but industry attractiveness is high, it needs caution and managerial discretion for making the strategic choice

3. Red indicates harvest/divest – if the product falls in the red zone, the business strength is average or weak and attractiveness is also low or medium, the appropriate strategy should be divestment.

Portfolio analysis helps you decide which of these products and services should be emphasized and which should be phased out, based on objective criteria. Portfolio analysis consists of subjecting each of the association's products and services through a progression of finer screens.During a time of cutbacks and scarce resources, it is essential to screen out programs and services that are not essential to most members. Those that appeal to a more limited segment can be funded by those desiring the product or service rather than by dues.

Advantages and Disadvantages of Portfolio Analysis

Portfolio analysis offers the following advantages:1. It encourages management to evaluate each of the organization's businesses individually and to set objectives and

allocate resources for each.2.It stimulates the use of externally oriented data to supplement management's intuitive judgment.3.It raises the issue of cash flow availability for use in expansion and growth.

Portfolio analysis does, however, have some limitations.1.It is not easy to define product/market segments.2.It provides an illusion of scientific rigor when some subjective judgments are involved.

Considering both its advantages and disadvantages, portfolio analysis should be regarded as a disciplined and organized way of thinking about asset allocation. It is only a subjective tool, however, and is not a substitute for the ultimate professional judgment of the responsible decision-makers.

Q7 Describe the manner in which an organisation can align its resource allocation with its strategies.

The alignment activity begins with the review, clarification and enrichment of corporate strategy. This produces a specific set of goals, concisely expressed strategic actions (each having a key verb) and time-certain start and end dates. Where possible, the goals will be broken to the next level of detail and connected with the organization work teams that they will affect.

The next step in alignment is the identification and categorization of ongoing corporate change projects. Existing corporate initiatives are than segmented in terms of their objectives and outcomes and then they are assigned to one or more corporate goals. This groups initiatives first into those that do and do not seem to support corporate goals, and then into those that are in conflict with one another. The initiatives can then be attuned to eliminate repetition and conflicts.

Next, all currently planned change projects are associated to an initiative. Where necessary, the projects are reviewed and their outcomes noted, in terms of the activities of the business and the strategic objectives that are impacted.

These projects are compiled from each corporate division/department, but consideration may be limited to scheduled projects and those currently in process. An analysis of the outcomes of each project allows obvious redundancy and conflict to be reviewed for consistency with strategy and strategic goals. This aligns change activity with strategy and identifies redundant and conflicting work – both of which may be expensive and damaging.

Fig: Organization Alignment

Also at this time, the process map can be used to review and classify process activities into core operational work and support work. Within these categories, activities are identified as essential work, value-added work and non-essential work. Along with this assessment, the key performance indicators or those capabilities or competencies which provide a competitive advantage are defined and related to the process activities. This provides a gauge for measuring where effort and resources should be allocated.

When the process map alignment activities are concluded, the organization structure can be reviewed. Using the organization chart and the process map together, the ability of the organization to support the corporate strategy can be determined and alignment adjustments can then be made to both process and organization structure. For example, those activities which are not affected or are minimally affected by the changes necessary to support a corporate goal should be carefully evaluated to determine if they can be streamlined or outsourced.

Moreover, those activities of the business which are not part of the value-added core or the essential support activities should be scrutinized. The organization structure may also be reviewed at this time to make certain that it makes the most sense in term of supporting the corporate goals and providing the maximum support of the enterprise’s processes.

Q 8 Discuss the need for stakeholder relationship management. Also describe the technique of stakeholders’ analysis.

Effective management of relationships with stakeholders is crucial to resolving issues facing organizations. By using their influence, stakeholders hold the key to the environment in which your organization operates and the subsequent financial and operating performance of the organization. Thus the effective management of stakeholder relations is growing as a key focus of PR and organizational activity.

A stakeholder is any person, group or organization who can place a claim on an organization’s attention, resources or output, or is affected by that output. They have a stake in the organization, something at risk, and therefore something to gain or lose as a result of corporate activity.

The aim of stakeholder relations management is to influence stakeholder attitudes, decisions, and actions for mutual benefit. The stakeholders need to gain from the relationship or they may not be sufficiently motivated to cooperate.

The first main steps in stakeholder relations management are to identify and prioritize stakeholders. We then use stakeholder planning to build the support that helps you succeed.

Stakeholder Relationship Management

The benefits of using a stakeholder-based approach are:

You can use the viewpoints of the main stakeholders to help shape your projects at an early stage. Not only does this make it more likely that they will support you, their input can also improve the quality of your project.

Gaining support from powerful stakeholders can help you to win more resources. This makes it more likely that your projects will be successful.

By communicating with stakeholders early and often, you can ensure that they know what you are doing and fully understand the benefits of your project. This means they can support you actively when necessary.

You can anticipate what people's reaction to your project may be, and build into your plan the actions that will win people's support.

First steps

1. Identify your stakeholders

List the people, groups or organizations who are affected by your project, who have influence or power over it, or have an interest in its successful or unsuccessful conclusion.

Stakeholders can be assessed systematically according to criteria such as influence, impact and alignment. For example, these questions can help assess their relevance:

To what extent will your strategy affect each group, positively or negatively?

How far does the strategy align with their existing beliefs about your organization’s values and purpose?

How far do they share your organization’s values and purpose in this area?

How robust is the existing relationship with them?

What information do they need from you?

How do they want to receive it?

Who influences their opinions about this issue, and who influences their opinions of you? Are some of these people therefore potential stakeholder as well? Who else might be influenced by their opinions and should they also be considered stakeholders?

What potential do they have to influence the business directly or indirectly (via other stakeholders), positively or negatively?

If they are not likely to be positive, what will get their support?

If you can’t get their support, how will you manage their opposition?

How likely will actions towards one stakeholder group influence the attitudes of other stakeholder groups?

What are the consequences of this?

A very good way of finding the answers to these questions is to talk to your stakeholders directly – tactfully of course! People are often quite open about their views, and so asking them is often the first step in building a successful relationship with them.

2. Prioritize your stakeholders

You may now have a long list of people and organizations that are affected by your work. Some of these may have the power either to block or advance your activities. Some may be interested in what you are doing, others may not care. Having identified your main stakeholders, you need to decide which of them are the most important. With limited resources, you should only deal actively with the most important ones.

Matrix to assess strategic value of stakeholders

1. Consider the issue, develop a list of criteria that are important to resolve the issue.

2. Assign a weight to each criterion according to its importance to resolving the issue.

3. Draw up a matrix showing the criteria and evaluating the relative importance of each stakeholder by their score on those key criteria.

The following diagram shows how the importance of stakeholders can be assessed according to the criteria you decide upon.

Example:

Criteria          

1. Access to key decision makers       X  

2. Access to the media     X    

3. Access to key information   X      

4. Able to influence stakeholders       X  

5. Sufficiently motivated to be active     X    

  1 2 3 4 5

  Slight, if any Moderate Definite

      Weight     

In the example above, the stakeholder would have a score of 16. The score for that stakeholder could be compared against the score of other stakeholder to decide who are the higher priority for active relationship management.

The complex communication that may be necessary for managing stakeholder relationships within an organization or around its activities requires planning, monitoring and also leadership. The team must apply analysis, skills and experience to succeed in communicating to engage stakeholders.

Managing stakeholder relationships is difficult and takes more time than expected, but the costs of not engaging stakeholders, particularly senior management stakeholders are significantly higher.