Business Policy andStrategy

Resource Audit
Definition
Resource auat s a proCess that helps
Maluate their resOurces, capab1lities, and organizations identify and
ayamining an organization's internal and competenCies.
It involves
external environment to
Aetermine its strengthS, weaknesses, opportunities, and threats A
cesource audit can help organizations understand what
resourCes
they have, what resources they need, and how to USe their
resources effectivelv

Tvpes of Resorce Audit

tanoble auGit fOCUSeS on the physical assets of an organzation such as its property. plant, equipment.
nd inventory t Involves identty1ng and valuing these assets, as well as assesSing their cGngi o
Useful ife The goal of a tangble aud1t Is to ensure that the organization's physicat assets are tbeing
uthzec effectively and efficientiy

on the other hand. an ntang ble aud1t focuses on the non- physical assets of an organization, such as its
inteliectual property. human capital, brand value, and reputation It involves Identify1ng and vaBuing these
ntanQ:ble asse% Well as assessinQ heir contribution the orqanization's overall value and
competitive advant age The goal of an intang1ble £udit. is to ensure that. the orgarnZation's intang1bie
assets are bing prolected and leveraqed to create value
Both tangitle anC Intang1ble audits mporant for organ1zations to understand ther resource

caDablities and make informed decisions about their resource allocat1on A comprehensive resource audit
should inciude both tangible arnd intangible elements to ensure complete understand1ing of the
oroanzatior s reSOurces and capab1ities

Tvpes of Resource Audit

its
internal Resource Audit This audit assesses an organization's internal resources, including
intellectual property resources The
financal, physical, human, information, environmental, and
resource audit is to identify strengths, weaknesses, and opportunities
objective of an internal
helps organizations to better allocate resources.
for imorovement within the organization. It
comnpetitiveness.
improe efficiency and increase
organization's external resources. includ1ng its
External Resource Audit: This audit assesses an
environment. The objective of an external
market. competitors, and regulatory
industry. that may impac.t the organization's performance
resource audit is to sdentify external factors commpetitive pressures, and
to understand narket trends,
and strategy it helps organizations
strategy accordingly.
regulatory changes, and adjust their

Internal Resource Audit

organzation's
of audit ivolves asSes SIng an
TinanCiäl ResOurce Audit Ths type and nvestments
bu dqet, revenue, expenses,
Tanclal resOUrces ihcudung its
ssets of an organ2 ation,
ResOurce Audit This audit examnes Uhe phySIC al
yStcal
nfrastructure. and iventOry
Gluding buildngs. egupment,
wOrkforce,
Ths type of audit asseSses an orgZatiOn'S
anan ResoUrce AUdit
tranng. and developonent needs
iudng its skills c apabiiities, experience,
Organization'S nformation
Resource Audit This audit asSesseS an
rnmation Sottware, and hardware
InforrT)atiorn systems,
resources. i ucing data,
 External Resource Audit
organizatiOn's inpact
assesses an
audit waste management.
Audit: This resources,
Env1ronmental Resource use of natural
including its
environment, requlations.
the environmental organization's
compliance with examines an
and Audit: This audit and trade
Intellectual Property
Resource trademarks, copyrights,
patents,
intellectual property. including
secrets organizatiOn's strategic
This audit examines an base. and
Strategic Resource Audit share, customer
competitive position, market
resources, including its
brand reputation

Audit
Importance of Resource
to identify ther
resource audit helps organizations to better
Weaknesses: A enables the
identify Strengths and the resources
they have This
weaknesses in termS of weaknesses.
strengths and and address their
resources to maximize their strengths organizations can
allocate resource utilization,
identifying inefficiencies This can result n cost
Improve Efficiency By effectiveness in the use of
resources.
and
improve their efficiency
improved performance the most
savings and organizations to determine
Allocation: Resource audit enables objectives
Optimize Resource support their goals and
allocation of resources to
effective and efficient

Importance of Resource Audit

organ1Zations Can identify new
Through a resOUrce audit. new markets,
Identify New Opportunities include identifying
This
and developrnent
can
Opportunities for growth growth and innovation
be ieveraged to drive
technologies. or products that can weaknesses relative to
ther strengths and
Competitive Advantage By understand1rng competitive advantage
Enhance strateges to enhance their
competitors, organizations can deveiop d1fferentiate them from
their or capabilities that can
investing in new technologies
This can include
their competitors
capabrities,
to assess their
important tool for organizations
Overall. a resource audit is an allocatin to support ther goals and
resource
mprovement, and optim1ze their
1dentify areas for
objectives

Steps of Resource Audit

and obiectives of
depend1ng on the spec1fiG COntxt
a resource audit can vary
conducting
The steps nvolved n be tollowed
sorme general steps that can
the audit. bur nere are e inciudec.
the resOurcs to
ldentsty the pur pose and sCope of the aud1t and
Define the sCope and objectives
and goals for the audit
in the audit Establ1sh clear otbyectives human resOUrces
physical assets.
Collect data Gather data on resources being audited, nclud1ng
the
other relevant nformat1on
sntellectual property. brand valye, and
tn the use and Tanagement
data collected to Identify strengths and weaknesses
Analyze the data Analyze the enhance value Creation and reduce nsks
to optirize resource utilization.
of resOurces Identify opportunities
recommendations based on the findngs
the analys1s and develop
Evaluate the results Evaluate the results of their rnportance and potentual impact the organ1zation's
Prroritize the recommendations based on
performance
 Steps of Resource Audit
7 Develop an action plan Develop an
action plan that includes specific steps to implement the
mmended changes, àlong with umelines,
respons1bilities and resource requirements
molement the action plan ImpleTIent the
eafp that the objectives are achieved. action pl£n montor progress, and
adjust as neCeSsary to
O Review and upgate Regularly reVIeW
and update the resource audit to
and useful to the organ1zation ensure that it reIains relevant
Ry foliowing theSe steps, an
organZatiOn ca1 conduct
Ldentfy strengthS, weaknesses, ad
a
Comprehen5Ive resOurce audit thhat helps to
and ultimately better oppportunities f ot
mprovernent. lead1ng to better resoUrCe alloC atio
orQanzational performancp

SWOT Analysis

AsUCCessful business is founded on a series of

owners make the mistake of thinking about these
sound decisions, so the way you analyze situations
and cho0se to react is essential. When trying to
sorts of things informally, but by taking the time to
put together aformalized SWOT analysis, you can
assess the lay of the land, few tools are more useful
than the SWOT analysis. It stands for strengths, come up with ways to better capitalize on your
company's strengths and improve or eliminate
weaknesses, opportunities, and threats; the SWOT
weaknesses."
analysis is a planning process that allows your While the business owner should certainly be
company to overcome challenges and determine involved in creating a SwOT analysis, it could be
what new leads to pursue. much more helpful to include other team members
in the process. Shawn Walsh, founder and CEO
of Paradigm Computer Consulting, said his
The primary objective of a SWOT analysis is to help
management team conducts a quarterly SWOT
organizations develop a full awareness of all the analysis together.
factors involved in a decision.
"It is impossible to accurately map out a small The collective knowledge removes blind spots
business's future without first evaluatingit from all that, if left undiscovered, could be detrimental to
angles, which includes an exhaustive look at all our business or our relationship with our clients,"
internal and external resources and threats," said Walsh said.

Bonnie Taylor, chief marketing strategist at CCS

Innovations. "A SWOT accomplishes this in four The elements of a SWOT
straightforward steps that even rookie business
owners can understandandembrace."
analysis

When should youuse SWOT? Strengths Weaknesses

LoW Salary and Beners Existing workioad too high
overhead No previous project planning
Quiok to rospond to markot 9xperionces
You could employ SWOT before you commit to any hangea Missing expertise in some
Light weight and lat hierarchy
Sort of company action, whether you're exploring
areas
rosuting qulcker decisian
making
new initiatives, revamping internal policies,
considering opportunities to pivot, or altering a
it's
plan midwaythrough its execution. Sometimes
wise to perform a general SWOT analysis just to
Opportunities Threats
" Business partners has little
check on the current landscape in which your
Neod to lncroase markot share
Could convert existing loyaity
products for new markets " Largar competitors get majority
business finds itself. Performing a SWOT analysis is of market share and more
famous brand nama
operations,
also a great way to improve business Çost of technology lnvostment
editor-in-chief A SWOT analysis focuses on the four elements
said Andrew Schrage, partner and
of Money Crashers. comprising the acronym, allowing companies to
identify the forces influencing a strategy, action or
"It allowed me to identify the key areas where my initiative. Knowing these positive and negative
organization was performing at a high level, as well elements can help companies more effectively
as areas that needed work," said Schrage, who communicate what parts of a plan need to be
expanded on his thoughts about business decision
business recognized.
iaking in a blog post. "Some small
 Funding (donations, legislature anddother
individuals
swoT analysis,
When drafting a into four columns to sOurces)
typically create atable split for
element side-by-side "Demographics
list each impacting weaknesses won't
comparison. Strengths and
opportunities and threats,
a partners
"Relationshipswithsupplierssand
typically match listed somewhat since
though they should correlate environmental and economic
they're tied together in some
way. Bily Bauer,
Leather, noted that
" Political,
managing director of Rovce
pairing external threats with internal
weaknesses regulations
serious issues faced by a
can highlight the most a simple, albeit
company. The SWOT analysis is
"Once you've identified your risks,
you can then comprehensive strategy tor identitying not onl
decide whether it is most appropriate to
eliminate plan but also th
company the weaknesses and threats of a
the internal weakness by assigning
resources to fix the problems,
or reduce the strengths and opportunities it makes p0ssible
threatened area
external threat byabandoning the
of business and meeting it after strengthening
However, a SWOT analysis is just one tool in the
your business," Bauer said. strategy toolbox. Additional analytic tools to
consider include PEST (political, economic, social
Internal factors
and technological), MOST (mission, objective.
The first two letters in the acronym, s (strengths)
and W (weaknesses), refer to internal factors,
strategies and tactics) and SCRS (strategy, current
which means the resources and experience readily state, requirements and solution) analyses.
available to you. Examples of areas typically
considered include: SWOT can also prompt businesses to examine and
execute strategies in a more balanced, in-depth
" Financial resources (funding, Sources of
income, investment opportunities) way.
" Physical resources (location, facilities,
equipment)
" Human resources
(employees,
volunteers, target audiences)
" Access to natural resources, trademarks,
patents and copyrights
" Current processes (employee programs,
department hierarchies, software
systems)

External factors
External forces influence and affect every
company, organization and individual. Whether
these factors are connected directly or indirectly to
an opportunity or threat, it is important to take
note of and document each one. External factors
typically reference things you or your company do
not control, such as:

" Market trends (nevw products and

technology, shifts in audience needs)
" Economic trends (local, national and
international financial trends)
ETOP Analysis
the najor factors
A sumnary ETOP rmay only show
1provides an
Environmental Threat and for the sake of simplicity. The
exarnple of an ETOP prepared for
table
an established

Opportunity Profile (ETOP) cornpany, whichis in the Two Wheeler industry.

is in Motor Bike
The rmain business of the company
manufacturing for the dornestíc and exports
The Environmental factors are quite complex and it markets. This example relates to a hypothetical
realistic based n the
may be difficult for strategy managers to classify corpany but the illustratio is
current Indian business environment.
them into neat categories to interpret them as
Opportunity
oDDOrtunities and threats. Amatrix of comparison Table 1: Environmental Threat and
Profile (ETOP) for a Motor Bike company:
is drawn where one item or factor is compared with
other items after which the scores arrived at are Environmental Impact of each sector
Sectors
addedand ranked for each factor and total weight Customer preference
age score calculated for prioritizing each of the for motorbike,which
Social(t) are fashionable, easy
factors.
toride and durable.

Political(-) No significant factor.

This is achieved by brainstorming. And finally the
Growing affluence
strategy manger uses his judgment to place various among urban
Economic (t)
environmental issues inclear perspective to create consumers; Exports
the environmental threat and opportunity profile. potential high.

Although the technique of dividing various

Two Wheeler industry
environmental factors into specific sectors and
Regulatory (‘) a thrust areafor
evaluating themn as opportunities and threats is
exports.
suggested by some authors, it must be carefully
noted that each sector is not exclusive of the other. Industry growth rate is
10to 12 percent per
Each of the major factors pertaining to a particular year, For motorbike
sector of environment may be divided into sub Market ()
growth rate is 4o
sectors and their effects studied. The field force
percent, largely
analysis goes hand in glove with ETOP, as here also Unsaturated demand.
the contribution with regard to opportunities and
threats posed by the environment is also a Mostlyancillaries and
necessary part of study. associated companies
supplyparts and
ETOP Preparation: Supplier (1) components, REP
licenses for imported
The preparation of ETOP involves dividing the raw materials
environment into different sectors and then available.
analyzing the impact of each sector on the
organization. A comprehensive ETOP requires Technological up
subdividing each environmental sector into sub gradationof industry
Technological
factors and then the impact of each sub factor on
(‘)
in progress. Import of
the organization is described in the form of a machinery under OGL
statement. list possible.
 marnufacturing is
As shown in the table motorbike 3. Impact Studies:
to the many
an attactive proposition due
The Impact studies should be
opportunities operating in the environment. conducted
ompany- can capitalize on the burgeoning
various
the various opportunities and
Critical issues selected. It may include
{ocusing
threats and theon
demand by taking advantage of the
strengtsthusdy and
can also
probable effects on the company's of
gOvernment policies and concessions. It weaknesses, operating and remote
take advantage of the high exports potential
already exists.
that competitive position, accomplishment of
and vision etc. Efforts should be taken
to
environmentmission.
assessments more objective wherever possible make
manufacturer
Since the company is an established
of motorbike, it has a favorable supplier as
well as 4. Flexibility in Operations:
the
technological environment. But contrast There are number of uncertainties exist in
implications of this ETOP for a new manufacturer business situation andso a company can be greatl.
who is planning to enter this industry. benefited buy devising proactive and flexihl
strategies in their plans, structures, strategy etr
Though the market environment would still be The optimum level of flexibility should .
favorable, much would depend on the extent to maintained.

which the company is able to ensure the supplyof

raw materials and components, and have access to Some of the key elements for
the latest technology and have the facilities to use increasing the flexibility are as
it. The preparation of an ETOP provides a clear follows:
picture for organization to formulate strategies to
take advantage of the opportunities and counter (a) The strategy for flexibility must be stated to
enable managers adopt itduring uniquesituations.
the threats in its environment.

The strategic managers should keep focus on the (b) Strategies must be reviewed and changed if
required.
following dimensions:
(c) Exceptions to decided strategies must be
1. Issue Selection: handled beforehand. This would enable managers
to violate strategies when it is necessary.
Focus on issues, which have been selected, should (d) Flexibility may be quite costly for an
not be missed since there is a likelihood of arriving organization in terms of changes and compressed
at incorrect priorities. Some of the impotent issues plans; however, it is equally important for
may be those related tomarket share,competitive companies to meet urgent challenges.
pricing, cUstomer preferences, technological
changes, economic policies, competitive trends,
etc.

2. Accuracy of Data:
Data should be collected from good sources
otherwise the entire process of environmental
scanning may go waste, The relevance,
importance, manageability, variability and low cost
of data are some of the important factors, Which
must be kept in focus.
RISDESs
Polcy

Policies re basically formulated by the two

or the h. Formulating
mmgenent
general
management for
of a s tratcgy taking nto
uiing,directing andfacilitating the thinking and dCCount the opportunity and availability
proceSsof the various of res 0urceS.
cting
functional executives, 3. Developnent of operating plans for the
the best contribution towards the
onporateobjectives and goals. Policy can either is pursuit of the chosen strategy and
ormalorinformal,which can be applied, policies.

nposed.
impliedor 6.Creation of organizational relationships,
organizational climate, and an

originates from the top atmosphere for the proper

management for the
eress
t purpose of guiding themselves and their implementation of policy.
sibordinates to make use of their operational tools 7.Evaluating the performance and the
effectively as possible. It also enables to set progress, and
as
objectives for the whole organization in general 8. Periodic re-evaluation of positions in the
andforthevarious functionall areas in particular. light of developments within the
organization and its environment.

Itis
the corporate policy that creates a sense of
To sum up it can observe that the overall
mission and purpose in the executive value performance of the company depends on the
judgment, and in their managerial operations, pragmatic policies, and the top management iS
because a directt and purposeful preparation to face mainly responsible for the policy formulation.
challenges, opportunities and threats of the
the Business policies cover such a wide variety of
day-to-day business acttivities, is provided by the SubjeCts and are so broad-based that every
time.
business policy from time to possible matter that affects the interests of any
one in the organization, the commnunity and the
According to Edmund, the associates' business government are included in them.
nolic is concerned with the top management In fact, business policies cover all the functional
areas of business- production, marketing,
function of:
personnel and finance. These functional areas are
1. Shaping high-level, long-rangecorporate generally covered by the term as "major policies"
objectives and strategic that will be and 'minor policies"
matched, to both company capacities and
Parameters of Policy:
to external realities in a world marked by
rapid technological, economical, social 1. Policy should be identifiable and clear,
either in words or in practice.
and political change. 2. Objectives of the policy should be fully
2. Casting up an effective well-matched set identified and well defined.
of general policies for the pursuit of that 3. Policy should not be conflicting with
strategy. other functional and divisional policies of
3. Guiding the organization in accordance the company.

with that strategy. 4. The policy should be capable enough to

fully exploit the opportunities.
Ine mission of the top management is influenced 5. Policy should be characterized by fairness
y the policy at various levels and phases. They and honesty with organizational
are: philosophy, objectives, goals and
strategy.

1. and economic 6. Policy should be appropriate to the

Perception of industry desired level of contributionto society.
trends that affect the prospects of the 7. Policy should be acceptable to all
economy.
2. Clearly needs,
concerned; i.e., it should be appropriate
understanding the to the personal values and aspirations of
strengths, the kev managers.
opportunities, threats,
8.Policy should constitute a clear stimulus
weakness and problems.
3.Selecting the best opportunity to organizational effort and
OPportunities from an array of them, this commitment.
can Cope with the capacity of the 9.Policy should always be realistic.
company.
 NTRODUCTION:PORTER'S 5 FORCE ANALYSIS

Porter'sFive Forces isa model that ident1fies and analyzes frve

competitiveforces that shape every industry and helps deterrnine an
industry's weaknesses and strengths Five Forces analysis is
frequenthy used| to identify an industry's structure to determine
corporatestrategY.

Porter's
model can be applied to a n y nof the econorny to
understandthe level of competition within the industry and enhance a
Company'slong-term profitability The Five Forces model is named
Harvard Business School professor, Michael E. Porter.
after

Porter's Five Forces Analysis

Tbreat of New Entry
" Erormaes of Kale "Cptal requreDenb
" Prpnetar prtx
Aboute cos atages
"Band keat,
.5urrhng cost Eatt attrn Bargaining Power
Bargaining Power of Customers
of Suppliers Bre concestrbon
Rlvairy Among Brer vohuoe
Buyer rwtchmg oost
Existing Competitorn "Buyer nmabon
Abdaty to ntearate
"dostry grosth Coocentntog and balarc backward
Sup sompkaty
Lafonatsonal comph Sueishate erchrta
Diventy of coape1petitors |Ance kotal purchases
Corporste stakes Prodaxthence
" Procuct daffereoces
"Boand detty " Eut baner " Brad debty
npact od quabty
performance
Pure proft
Threat of Substitutes
of ruttute
"Relatre pnce peroma
" Swtchmy cota
lo bsbtute
" Buyer propecaty

Fre Press 1985)

Ah tarrNewlat
ctacdE Parta Courtse
MlbaN. K ASSYSIAt

COMPETITION IN THE INDUSTRY

and
to the number of competitors
refers
The first of the Five Forces largerthe number
of
The
their ability to undercut a company. products and
with the number of equivalent
competitors, along
lesser the power of a company
Servicesthey offer, the
company's itp iho if they
are
and buyers seek out a
Suppliers
able to lower
offer a better deal orcompany
prices. Conversely, when
powerto charge
has greater
higher sales and
compet
higher
itive rivalry is low, a
set theterms of
deals to achieve
prices and
MS profi
ARORA ÁSSItsS.I:
POTENTIAL OF NEW ENTRANTS IN THE INDUSTRY

A
company's power is also affected by the force of new entrants in..
its market. The less time and money it costs for a competitor to enter
a company's market and be an effective competitor,the more an
established company's position could be significantly weakened.
An industry with strong barriers to entry is ideal for existing companiee
within that industry since the company would be able to charge higher
prices and negotiate better terms.

POWER OF SUPPLIERS

The next factor in the Porter model addresses how

easily ujpsle can drive up
the cost of inputs. It is affected by the number of
suppliers of key inputs of a good
or service. how unique these inputs are, and how
much it Would c0st a company
to switchto another supplier. The fewer
suppliers to an industry. the more a
company would depend on asupplier.
As a result, the supplier has more power and
can drive up input costs and push
for other advantages in trade. On the other
hand, when there are many suppliers
or low switching costs between rival
suppliers, a company can keep its input costs
lower and enhance its profits.

POWER OF CUSTOMER

s The abilitythat customers have to

drive prices lower or their level of
power is one of the Five Forces. It is
affected by how many buyers or
customers acompany has, how significant each customer is, and how
much it would cOst a company to find new
customers or markets for
itsoutput.
BAsmaller and more powerful cltent ase means that each
customer
has more power to negotiate for lower prices and better deals. A
company that has many, smaller, independent customers will have an
easier time charging higher prices to increase profitability.
,4USKA! AkRAA5515T4l PAOFESSCR.
THREATSOF SUBSTITUTEs
The last of the Five Forces focuses on substitutes. Substitute goods or
services that can be used in place of a company's products or services
pose a threat.
Companies that produce goods or services for which there are no
close substitutes will have more power to increase prices and lock in
favorable terms.
When close substitutes are available, customers will have the option
toforgo buying a company's product, anda company's power can be
Keakened.

ADVANTAGES
Helps to Estimate the Competitlon In the Industry
entrants,. the threat of substitution, supplier bargaining
Porter's five forces help to measure the threat of new industry.
up to provide the competitive rivalry of the
power. and buyer bargaining power. All of these will sum adjust the corporate
competition of the industry to
This will support the company to understand the current
Strategy accordingly.
Showcase where the Strengths and Threats Exist
the supplier and buyer forces with risk of new entrants
Porter's five forces provide the output of understanding
management to find out where does the company 's
and substitute products. This will enable the senior
Management will be able to take precautionary actions for
strengths place in and where does the threat exist.
the threats while enhancing the strengthS more.
Display Opportunitles to Expand the Business
in the industry. This will help the company to
Porter's five forces provide the power of suppliers and buyers
integration to acquire SupplierS and buyers to reduce their
make decisions on whether to proceed with verticle
conduct the forward integration to acquire their
power and expand the business. Simply the business can
integration to acquire their supplier side of the value
consumer side of the value chain, and/or backward
from the five forces.
MGa CCRIdng te, the information provided

ADVANTAGES
ldentfy whlch Entitles Holding the Power
are suppliers, buyers (consumersS),
There are three entities to which Porter's Five Forces are related. Those
hold more power and less power.
and competitors. This analysis willprovide insights into which are entities
handle these entities.
This will enable the companies to make decisions on the best strategies to
Asslst to Understand the Corporate Rlsk
consumers, and power
Porter's five forces will provide valuable insights into the power of suppliers. power of
company to understand the corporate risk of the business.
of competitors. Allof this information will help the
and make responses to those risks.

Helpful In Maklng Corporate Strategy and Vislon

The corporate strategy helps the company to make strategic decisions by looking across all aspects of the
business to determine how best possible to create the most value. Porter's five forces will provide valuable
Information for this to make the corporate strategy more accurate by considering the impact of the external
forces.
DISADVANTAGES

Limtation on the Compositlon

Porter sfive forces only concentrate onthe power of suppliers, power of consumers. substitution, and
business strategies that impact the company a
Competition. But other technological factors and threats for all
an example. technological evolvement is one of the biggest companies across
,
all industries.As Also.
Considered. external forces such as government policies. taxation policies. cross-border business ris
environmental impect etc are not considered. This can be a major aspect of the growth or else the downfa

of the company
Limltation on the Compositlon
of suppliers. power of consumers.
substitution a4
Porter s five forces only concentrate on the power the company are nct
strategies that impact
compettion, But other technological factors and business threats for all companies ae.
the biggest
consiOered As an example. technological evolvement is one of cross-border bueinaes
government policies. taxation policies.
all industries Also. external forces such as
aspect of the growth or else the downu
envronmentalimpact. etc are not considered. This can bea major
of the company

DISADVANTAGES

Can Be Used as Starting Point for the Analysis

be beneficial or else
Porter s frve forces is a simple tool that contains five external factors which can
drawbacK for a cCompany. This can be used only as atool for the starting point of a deep investigat1on. This
framework provides the initial understanding of the company's competitive position in an industry. This
framework can not alone provide an in-detail investigation of the company.
Not Applicable for AllIndustrles Unlversally
Porter s five forces practically can not be used for some industries. As an example. not-for-profit companies
R&D will not have much
can not use this method for the analysis. Also. companies conducting activities like
benef from this
Not Consider Business Risk Factors
External business risk factors like foreign exchange instabilities, natural catastrophes, methods of financing
legal constraits. fast technological evolutions, fluctuations in interest rates, etc not considered for this
frarmework. These are major factors in determining the business rsk of the company.
 Resources have
lst
been a strategic important in diStyategic' adueutege protile,
organizationallanalysis. they can be; Group alsoalluded to this with their assumption
that market growth was related to life cycle and
Available resources: They are developed resources
matrix. The
intovarious functions of the orgaization. They are was used as the one axis on their
physical, human, financial and intellectual
competitive position /market evolution matrix was
developed in the late 1970s by Charles W. Hofer
resources.

whreshold resources: They are needed to stay in and Dan Schendel.

bciness. Their need tends to rise with time.

This method takes into account the key factors

unigue resources: They are valuable, rare, no
eubstitutable and costly to imitate.
affecting organizational functioning. Information
oesources development assessment is used to
judge: regarding the key factors is generally collected
after a series of meetings discussions and surveys.
Need to change current resources to reach
threshold levelfor staying in business. Answers in each functional area are being closely
. Requirements of unique resources to examined with aview to rate the key factors. The
sustain strategic resources.
Combination of unique resources and
relative impact of each factor (favorable or
core competencies. It is used to again unfavorable) on a particular result is also examined
strategic advantage. This is the desired using mathematical models.
combination.
. Combination of unique resources and
threshold competencies. Unique Hofer and Schendel have developed this technique
to make a comparative analysis of a firm's own
resources are freed up to invest in
resources deployment position and focus of efforts
functional activities that provide core
with those of competitors. First the technique
competencies.
Combination of threshold resources and
requires the preparation of amatrix of functional
competitors. More resources are areas with common features. For e.g. focus of
core
deployed in functional activities that financial outlay, physical resources, organizational
provide core competitors. systems andtechnological capability.
Combination of threshold resources and
threshold competencies. Environmental
Second a matrix is prepared showing deployment
changes have made the resources base
redundant. Such resources are disposed
of resources and focus of effort over a period of
of. This is the worst scenario. time. This profile shows how key functional areas
strategic stand in relation to each other andas compared to
The principal purpose of analysis for
planning is to identify the major opportunities
and the competitors with regard to deployment of
future and to
threatS a business unit faces in the resources and the focus of efforts in each
identify the skills around which it can develop a
exploit the functional area.
strategic intelligence plan to

opportunities and negotiate around the threats.

Hofer and Schendel felt that the major weakness
With the General Electric business screen was that
didn't effectively depict the positions of new
ousinesses that are just starting to grow in new
Industries. They suggested in 1975 that changes in
basic competitive positions are easier to
dccomplish at certain stages in the evolution of
Consulting
an industry than others. The Boston
The matrix can be shown thus: The matrix gives
datapertaining to resources deployment in various
functional areas over a period of time. It also shows
how the focus of efforts has changed within a time
frame. Strategies can draw their own conclusions
based on past experience. current trends and
future expectations. Theycan find out whether the
firm is able to strengthen the areas of advantage or
dissipate its energies over a period of time. While
drawing comparisons it is advisable to compare
firms, which are in the same phrase of product life
cycle

Strategic Advantage Profile

Every firm has strategic advantages and
disadvantages. For example, large firms have
financial strength but they tend to move slowly,
compared to smaller firrms, and often cannot react
to changes quickly. No firm is equally strong in all
its functions. In other words, every firm has
Strengths as well as weaknesses.

Strategists must be aware of the strategic

advantages or strengths of the firm to be able to
choose the best opportunity for the firm. On the
other hand they must regularly analyse their
strategic disadvantages or weaknesses in order to
face environmental threats effectivelv

The Hofer-Schencel Matrix

Ewolutian

Matket
Decline
Mauity
af
Stage

Sirong orerage Weak DLopOut

Belative Competitise Positign
 Environmental Scanning Internal & External Analysis of
Environment
Organizational environment consists of both external and internal factors.
Environment must be scanned so as to determine development and forecasts of
factors that will influence organizational success. Environmental scanning refers to
possession and utilization of information about occasions, patterns, trends, and
relationships within an organization's internal and external environment. It helps
the managers to decide the future path of the organization. Scanning must identify the
threats and opportunities existing in the environment. While strategy formulation, an
organization must take advantage of the opportunities and minimize the threats. A
threat for one organization may be an opportunity for another.
Internal analysis of the environment is the first step of environment scanning.
Organizations should observe the internal organizational environment. This includes
employee interaction with other employees, employee interaction with management,
manager interaction with other managers, and management interaction with
shareholders, access to natural resources, brand awareness, organizational structure,
amain 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 fronm 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
factorsare infinite, hence, organization should be agile andvigile to accept and adjust
to theenvironmental 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 analysisto 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 appraisalof the competitivestructure

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 anappraisal of whether thenational 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
an organization. threats for

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

Steps in Strategy Formulation Process

Strategy formulation refers to the process of choosing the most
action for the realization of organizational goals and appropriate course of
the organizational vision. The process of strategy objectives and thereby achieving
formulation
six main steps. Though these steps do not follow a rigid basically involves
chronological
they are very rational and can be easily followed in this order. order, however
1. Setting Organizations' objectives -The key
statement is to set the long-term objectives of the component of any strategy
organization. It is
strategy is generally a medium for realization of organizational known that
Objectives stress the state of beingthere whereas Strategy stressesobjectives.
upon the
process of reaching there. Strategy includes both the fixation of objectives as
well the medium to be used to realize those objectives.
term which believes in the manner of deployment of
Thus, strategy is a wider
the objectives. resources so as to achieve

While fixing the organizational objectives, it is essential that the

influence the selection of objectives must be analyzed before thefactors whichof
objectives. Once the objectives and the factors influencing strategicselection
have been determined, it is easy to take decisions
strategic decisions.
2. Evaluating the Organizational Environment - The next step is to
the general economic and evaluate
industrial environment in which the organization
operates. This includes a review of the organizations
essential to conduct a qualitative and quantitative competitive position. It is
review
existing product line. The purpose of such a review is of an organizations
factors important for competitive success in the to make sure that the
that the management can identify their own market can be discovered so
as their competitors' strengths and strengths and weaknesses as well
weaknesses.
After identifying its strengths and
track of competitors' moves and weaknesses,
actions
an organization must keep a
so as to discover
opportunities of threats to its market or supply sources. probable
3. Setting Quantitative Targets - In this step, an
the
quantitative target values for organization must practically fix
idea behind this is to compare withsome of the organizational objectives. The
long term customers, so as to
contribution that might be made by various product
evaluate the
departments. zones or operating
4. Aiming in context with the
made by each department divisional plans -In this step, the
or division or product categorycontributions
organization is identified and accordingly strategic planning is donewithin
for
the
Sub-unit. This requires acareful analysis of each
macroeconomic trends.
 5. Performance Analysis -Performance analysis includes discovering and
analyzing the gap between the planned or desired performance. A critcal
evaluaton of the organizations past performance, present condition and tne
desired tuture conditions must be done by the organization. This critical
evaluation identifies the dearee of gap that persists between the actual reality
and the long-term aspirations of the organization. An attempt is made by the
organ1zation to estimate its probable future condition if the current trends
persist.
best
6. Choice of Strategy- This is the ultimate step in Strategy Formulation. Thegoals,
cOurse of action is actually chosen after considering organizationalexternal
organ1zational strengths, potential and limitations as well as the
opportunities.

Strategy Implementation - Meaning and Steps in Implementing

a Strategy
of chosen strategy into
Strategy implementation is the translation
Strategy
organizational actionso as to achieve strategic goals and objectives. develop,
implementation is alsodefined as the manner in which an organization should
culture to follow
utilize, and amalgamate organizationalstructure.control systems,and performance.
strategies that lead to competitive advantage and a better
Organizational structure allocates special value developing tasks and roles to the
be correlated so as maximize
employees and states how these tasks and roles can
competitive advantage. But,
efficiency, quality, and customer satisfaction-the pillars of
organizational structure is not sufficient in itself to motivate the employees.
system equips
An organizational control system is also required. This controlas feedback on
managers with motivational incentives for employees as well
refers to the
employees and organizational performance. Organizational culture organizational
specialized collection of values, attitudes, norms and beliefs shared by
members and groups.
Following are the main steps in implementing a strategy:
successfully.
/ Developing an organization having potential of carrying out strategy
activities.
V Disbursement of abundant resources to strategy-essential

V Creating strategy-encouraging policies.

/Employing best policies and programs for constant improvement.

V Linking reward structure to accomplishment of results.

/Making use of strategic leadership.
Excellentlyformulated strategies willfail if they are not properly implemented. Also, it
is essential to note that strategy implementation is not possible unless there is stability
between strategy andeach organizational dimension such as organizational structure,
reward structure, resource-allocation process, etc.
 and employees in an
poses a threat to many managers
Strategy implementation relationships are predicted and achieved. and New groups
concer
organization. New power values, attitudes, beliefs
are formed whose managers
(formal as wellas informal) change in power and status roles, the
the
may not be known. Withconfrontation behaviour.
employees may employ
Evaluation Process and its Significance
Strategy because it throws liaht on
as significant as strategy formulation
Strategy Evaluation is
of the comprehensive plans in achieving the desired
the efficiency and effectiveness assess the appropriateness of the Current strategy in
results. The managers can alsosocio-economic, political and technological innovations
todays dynamic world with management.
strategic
StrategicEvaluation is the final phase of
capacity to cO-ordinate the task
The significance of strategy evaluation lies in its
departments etc, through control of
performed by managers, groups,significant because of various factors such as -
performance. Strategic Evaluation is
developing inputs for new strategic planning, the urge for feedback, appraisal and
validity of
reward, development of the strategic management process, judging the
strategic choice etc.

The process of Strategy Evaluation consists of following steps

1. Fixing benchmark of performance -While fixing the benchmark, strategists
encounter questions such as - what benchmarks to set, how to set them and
how to express them. In order to determine the benchmarkperformance to be
set, it is essential to discover the special requirements for performingthe main
task. The performance indicator that best identify and express the special
requirements might then be determined to be used for evaluation. The
organization can Use both quantitative and qualitative criteria for
comprehensive assessment of performance. Quantitative criteria includes
determination of net profit, ROl, earning per share, cost of production, rate of
employee turnover etc. Among the Qualitative factors are subjective evaluation
of factorssuch as - skills and competencies, risk taking potential, flexibility etc.
2. Measurement of performance -The standard performance is a bench mark
with which the actual performance is to be compared. The reporting and
communication system help in measuring the performance. If appropriate
means are available for measuring the performance and if the standards are
set in the right manner, strategy evaluation becomes easier. But various
factors
such as managers contribution are difficult to measure. Similarly divisional
performance is sometimes difficult to measure as compared to indiVIdual
performance. Thus, variable objectives must be created against whicn
measurement of performance can be done. The
at right time else evaluation will not meet its measurement must be done
purpose. For measuring tne
performnance, financial statements like -balance sheet,
must be prepared on an annual basis. profit and loss accounl
3. Analyzing Variance - While
it with standard measuring the actual performance and comparing
performance there
The strategists must mentionthe may beofvariances which must be analyzed.
degree tolerance limits between which the
variance between actual and standard
positive deviation indicates a better performance mav be accepted. Ihe
performance but it is quite unusual
 exceeding the target always. The negative deviation is an issue of concem
because it indicates a shortfallin performance. Thus in this case the strategist
must discover the causes of deviation and must take corrective acvon
overcome it.
4. Taking Corrective Action -Once the deviation in performance is identitied.
is essential to plan fora corrective action. If the performance is consistently less
than the desired performance, the strategists must carry adetailed analysis or
that the
ne Tactors responsible for such performance. If the strategists discover
organizational potential does not match with the performance requirements,
then the standards must be lowered. Another rare and drastic corrective action
IS reformulating the strategy which requires going back to the process or
Strategic management, reframing of plans according to new resource allocation
trend and consequent means going to the beginning point of strategic
management process.