BBA- 302 Business Policy & Strategy (I. P.University).

Unit I: Introduction Nature, Scope & Importance of the course of Business Policy ; Evolution of the course Forecasting , Long range planning, Strategic planning & Strategic management. Strategic Management Process Formulation phase vision, mission, environmental scanning, Objectives & Strategy ; Implementation phase Strategic activities, Evaluation & Control. Business is an important requirement in society for : Supply of goods & services. Creation of employment opportunities. Offer better quality of life & higher standard of living. Contribution to economic growth of a country, etc. As such society cannot do without business & business needs society as well. Therefore, Business may be summarized as : Business is an economic activity Business firm is an economic unit Business decision making is an economic process Nature & Scope : The business policy is based on the experience of corporate enterprises and the history of success & failure of business over time. Business policy is the outcome of top management decisions bearing on the future of the ongoing enterprise. A formal approach to such policy making requires conceptualization and systematic application of knowledge & skill. These include top management responsibilities of defining business mission & objectives, formulation of strategic alternatives, choice of strategy and its implementation. Business policy study enables development of skills required to identify, analyze & solve all the problems of the organization in totality irrespective of the nature of problem like marketing, finance, production or maintenance. Knowledge of strategies & policies set at higher levels of management and the underlying reasons thereof enable lower-level managers to interpret the same more accurately ensuring more effective implementation. Besides with the awareness of strategies, policies & values of top management, managers feel more confident in functioning with minimum communication gap.

In other words, Business Policy provides an integrated view of management broadly based on business mission & objectives, goals, ethics, social responsibility, knowledge & experience. This may be specified as the guidance, outlines, direction & rules framed and circulated by the management for information & adherence by the employees attached to the organization. This is dynamic & should be flexible depending on both internal & external environment. Importance : 1. It provides an integrated view of management based on knowledge & experience gained in various functional areas of management. 2. The complexities & the constraints of managing business in a competitive & dynamic environment are identified, analyzed & solved by understanding the complex inter-linkages operating within an organization and the external environment. 3. It provides a broader perspective in totality without considering boundaries of functional management i.e. adopt a generalist approach to problem solving. 4. With a transparent culture of business policy, the mangers function more efficiently, effectively & with higher level of confidence. Objectives : In Terms of Knowledge: 1. In business policy various concepts like strategy, policies, plans & programs are explained. 2. Knowledge of external & internal environment and how it affects the functioning of the organization. Information about the environment helps in determination of the mission, objectives & strategies of the firm. 3. To visualize implementation of strategy. The confidence level of problem solving & decision-making is elevated. 4. To survey the literature & keep up-dated about the latest development. In Terms of Skills: 1. The attainment of knowledge lead to development of skills for application.

2. The business policy enables to develop analytical ability to understand the situation in a given case and improve communication skills both oral & written. 3. The business policy leads to the skill of identifying the factors relevant in decision-making. The analysis of the strength & weaknesses of an organization, the threats & opportunities present in the environment helps in decision-making. In Terms of Attitude: 1. The attainment of knowledge & skills lead to improvement of attitude especially as a generalist. The generalist attitude helps to approach & assess a situation from all possible angles. 2. It is observed that in real life situation mangers have to work with incomplete information. A generalist is able to function with partial ignorance by using own judgment & intuition. A specialist may postpone or avoid a decision in absence of complete information. Thus generalist is a performer rather than a perfectionist. 3. Develop a creative & innovative attitude of a manager who looks for continuous improvement without being bound by precedents & stereotyped decisions. POLICIES : Implementation of strategy involves a wide range of policy decisions to be made relating to the functional areas. A carefully selected policy sharpens the strategy & guides specific decisions. Thus policies may be regarded as decisional guides to action that make the strategies work.. In a large organization there are many policy issues to be considered in each functional area in the context of multiple decision variables. The interrelated nature of policies becomes significant as decisional guides are required for managers at different levels in a number of depts. In other words policy may be defined as specific guides to managerial actions & decisions in the implementation of strategy. Significance of designing appropriate policies: By limiting discretion & clearly specifying the manner in which things are to be done, indirectly controls decision-making & actions of functional managers without direct intervention of top management. By promoting uniformity of handling similar activities facilitate coordination of operations & thus reduce frictions which might arise due to discrimination, favoritism, and handling of common functions in different ways.

 Consistent patterns of action reflecting the basic aspects of organizational behavior. With standard guides decisions can be taken expeditiously without reference to higher level of management By reducing uncertainties in repetitive decisions provide a foundation for efficient operation and efforts. Managers on the basis of prevailing policies can avoid hasty and rash decisions. Routine matters and ordinary problems are quickly disposed off due to predetermined answers to routine problems. Thus managers have more time to deal with non-routine and extraordinary problems. The exact nature of policies required for strategy implementation is different for different organizations but the major policy issues in industrial enterprises are examined for key functional areas as follows: Marketing has received increasingly greater attention in the competitive business world as old concept is replaced by new concept, which focuses on firms existing and potential customers and seeks to earn profit through customer satisfaction with an integrated marketing program. The decision variables, which are significant in marketing activities, can be categorized as follows: Product line and product mix policy Product life cycle Introduction-Growth, Maturity, Saturation, Decline. Number and variety of products. Offering a large variety. Concentrating on a few items. Optimal product mix. Product positioning strategy. Market segmentation. Customer to be served and channels of distributions Categorizing consumers to be served. Identification and location of consumers. Types of channels between Producers & Consumers (intermediaries, wholesalers & retailers). Pricing of products/ services Prices of competing products. Cost of production and distribution. Discriminatory prices for different customer goods. Prices for different items in product line. Scope of changing prices. Sales promotion and Marketing mix Publicity and Advertising.

Finance and Accounting : The financial policy issue relates to procurement and utilization of funds. The total volume of finance will be influenced by the kind of investment opportunities available as well as by conditions of the sources from which finance is arranged. Sources of finance and capital structure Shares-preference, equity, debentures. Public deposits. Short term finance- Trade credit, Bill discounting, Bank loans, Overdraft, Cash credit. Capital Structure, Debt equity ratio. Investment decision - Cost of Capital. NPV, IRR, Profitability index Financing decisions and Dividend policy Legal regulations Production and operations: Major issues in Production and Operation policies may include the following. Involvement in Production Process Choice of Production Process Technology to be used, Size and location of the plants, human resources, mechanization of operations. Production capacity finalisation Requirement and peak demands of the product. Provision for growth. Balanced facilities. Maintenance / Replacement of existing production facilities TQM Research and Development: In the preset day competitive world attention is focused on R & D activities to upgrade, update & and improve the existing system with latest innovations. This is with a view to increase efficiency, cost effective, replacement of obsolete technology, etc. Identify areas & foreign collaboration requirement Allocation of budget Realistic time frame Human Resource: This encompasses employer employee relations as well as industrial relations. This is crucial as it involves all the functional areas

 Recruitment, Promotion and Transfer Recruitment Policy, Sources of Recruitment, Promotion policy, Transfer policy. Training and Development Compensation and Supplementary benefits Level of pay with adequacy and justification Internal structure of compensation and alignment of pay for different category of jobs to ensure equitable pay rates. Industrial wage policy- Collective Bargaining. Recognition of relative efficiency of performance and incentive. Relation with Employee Unions Laws and Regulations Evolution of Business Policy & Strategy : Business Policy aroused from the use of planning techniques by managers. Starting from day to day planning in earlier times, managers till recently tried to anticipate the future by using control mechanisms like Capital Budgeting, Management by Objectives, etc. However, as these techniques were unable to predict the future scenario adequately, long range planning came into use. But soon long range planning was replaced by strategic planning & later by strategic management. Thus strategic management forms the theoretical framework for business policy. Strategy : Strategy is the direction & scope of an organization over the long term which achieves advantage for the organization through the available resources within a challenging environment to meet the needs of markets and to fulfill stakeholders expectations. Thus, Strategy of a business enterprise consists of what management decides about the future direction & scope of the business. It entails managerial choice among alternative action programs, commitment to specific product markets, competitive moves & business approaches to achieve enterprise objectives. In short it may be called the Game Plan of management. The strategic decisions involve matching of enterprise resources to the changing environment & determining future engagement of the enterprise to take advantages of the future market opportunities. Strategic issues are characterized by 1. Involvement of top management as it covers several areas of firms operations. 2. Require allocation of large quantities of company resources.

3. Have significant impact on long-term prosperity of the firm or future oriented. 4. Have major multi-functional consequences viz. customer mix, competitive emphasis, organizational structure, etc. 5. Consider factors in the firms external environment as business firms exist in open system. Levels of Strategy: Strategies may exist in 3 levels in an organization Corporate, Business & Operating.
Corporate level The Board of Directors & the Chief Executive

Officer are the primary groups involved in this level of strategy making. They are responsible for the financial performance of the corporation as a whole as well as for achieving non-financial goals like corporate image, social responsibility, etc. Business level composed principally of business & corporate managers. These managers translate the direction & intent generated at the corporate level into concrete, functional objectives and strategies for individual business units. Functional level the third level is composed principally of managers of product, geographic & functional areas and their responsibilities are in the execution or implementation of companys strategic plans. While Corporate or Business level are concerned on doing the right things the Functional level put stress on doing the things right.

Forecasting : A forecast is an estimate of an event which will happen in future. The event may be demand of a product, rainfall, population, etc. The forecast value is not a deterministic quantity as it is only an estimate based on past data related to a particular event. As such proper care should be taken in estimation. Importance - The responsibility of managers will be ensuring the firms capacity for survival & growth. Anticipating & adapting to environmental changes that provide new opportunities for growth &

profitability can do this. For example U.S. auto giants incurred huge losses as they failed to forecast rapidly increasing fuel prices, uncertain supplies of crude oil, etc. in 1973. On the contrary the Japanese anticipated the future need for fuel efficiency, quality & service through careful market research & environmental forecasting and gained additional market share. Accurate forecasting of changing elements in the environment is an essential part of strategic management. Responsibility for environmental forecasting generally lies with top management, although executives may assist in obtaining forecast data. Environmental forecasting starts with identification of factors external to the firm that might provide critical opportunities or pose threats in the future. Both qualitative & quantitative strategic forecasting techniques are used for projection. Techniques - To aid in the search for future opportunities & constraints, the following steps are outlined:-1. Select those environmental variables that are critical to the

firm. Management experts have argued that most important cause of the turbulent business environment is the change in population structure & dynamics that in turn affects other major changes in the economic, social & political environment. Limits of money, time & skill in forecasting prevent a firm from predicting many variables in the environment. 2. Select the sources of significant environmental information. Appropriate & reliable sources of environmental information should be identified like business magazines, media, govt. publications, in-house data, experience, etc. 3. Evaluate forecasting approaches or techniques. The choice of techniques depend on many parameters like nature & importance of forecast decision, accuracy required, time available, cost aspects, etc. A combination of qualitative & quantitative techniques suiting the requirements may be used. Different forecast techniques are Economic - general economic conditions, disposable personal income, consumer price index, wage rates, productivity, etc. Social - identify trends & underlying attitudes. Political - govt. rules, regulation & approach, budget, tax rates, etc.

Technological knowledge of technological development helps strategic managers prepare their firms to benefit from change. 4. Integrate forecast results into strategic management process. The techniques selected and the forecasts made are then integrated into strategic management process. Dealing with the uncertainity of future is a major function of strategic management. Apart from systematic information gathering coupled with ability to utilize a variety of forecasting approaches, a high level of intuitive insight is essential to integrate risks & opportunities in formulating strategy. Synthesis of External Factors : A host of external & often uncontrollable factors influence a firms choice of direction & action. The external factors may be political, economic, social, technological & industry factors. It presents opportunities, threats & constraints for the firm. Designing corporate strategies that will enable a firm to effectively interact with dynamic external factors is multi-faced, complex & dependent on intuitive assessments. However synthesis of external factors can provide a valuable planning based on the following : Environmental data should be collected for a meaningful range of factors. The personal perceptions of strategic managers should be combined with data from public sources. Impact studies should be undertaken to convert the data into relevant information for determining overall consequences of implementing the available alternative strategies. Flexibility should be incorporated in the strategy to allow for unexpected variations from the environmental forecasts. The synthesis of external factors shall help a firm to anticipate future business scenario to improve its performance & profitability. Strategic Planning & Management : Strategic planning refers to the formulation of unified, comprehensive & integrated plan aimed at relating the strategic advantages of the firm to the challenges of the environment. Strategic planning contributes positively to the performance of the enterprises. Thus companys which have undertaken strategic planning not only outperformed the non-planners on return on equity, earning per share,

etc. but also significantly outperformed their own past results as well. This focuses on problems of the total enterprise & not just functional problems of marketing, finance or personnel areas. The advantages of systematic approach to Strategic planning & management include : Provide necessary guidance to entire organization about what is expected to be achieved & how. Making managers more alert to new opportunities & potential threats. Unifying organizational efforts leading to greater harmony. Creating a more proactive management posture. Strategic planning is a necessary though not sufficient condition for success. Achievements of corporate enterprises are effected by multiple factors like adequate resources, competent managers, specialist services, product market conditions, etc. Basic Concept of Strategic Management : Different authors have forwarded a number of definitions of Strategic Management i.e. formulating & managing strategy Strategy consists of the combination of competitive moves & business approaches that managers employ to satisfy customers, compete successfully & achieve organizational objectives. Determination of the mission & long-term objectives of an organization and the policies necessary for achieving the mission & objectives within a timeframe. Pattern of an organizations responses to its environment over time. Set of decisions & actions resulting in formulation & implementation of strategies designed to achieve the objective of an organization or route to the destination. The complexity & sophistication of business decision-making requires strategic management. Strategies evolve as problems & opportunities are identified, resolved & exploited. The environment includes competitors, scarce resources, government agencies monitoring adherence to ever-growing number of regulations, satisfaction of customers, etc. Besides economic conditions, social changes, political priorities, technological development, etc. must be anticipated, monitored, assessed & incorporated in top-level decision-making.

Strategy Environment organization

C-ustomer focus O-rganizational pride M-utual respect & trust I-nitiative & speed T-otal quality Benefits of Strategic Management: As the strategic management process stimulates future thinking, the strategic managers will be prepared to respond to uncertain environments. It provides an organization with consistency of action without allowing to drift in different directions. It involves different levels of management to encourage commitment on the part of participating managers & reduces resistance to proposed changes. The benefits may be summarized as follows : Improved financial performance in terms of profit & growth. Encouraging & rewarding employees enhance problem prevention capability. Improved quality of strategic decisions through group interaction. Greater employee motivation leading to better understanding of priorities & operation thereby reducing gaps & overlaps in activities. Thus increases employees productivity. Minimum resistance to change. PHASES IN STRATEGIC MANAGEMENT PROCESS: There are 5 essential phases in the strategic management process. Each phase of the strategic management process consists of number of elements that are discrete & identifiable activities performed in logical & sequential manner.

 Establishment of strategic intent: 1. Creating & communicating a vision. 2. Designing a mission statement. 3. Defining the business. 4. Setting objectives. Formulation of strategies: 1. Performing environmental appraisal. 2. Doing organizational appraisal. 3. Considering corporate & business level strategies. 4. Undertaking strategic analysis. 5. Exercising strategic choice. 6. Preparing strategic plan. Selection or choice of strategies: 1. Best alternative matching organizational requirements subject to resources available. Implementation of strategies: 1. Designing structures & systems. 2. Managing functional & behavioural implementation. 3. Operationalising strategies. Performing strategic evaluation & control: 1. Performing strategic evaluation. 2. Exercising strategic control. 3. Reformulating strategies. [ Refer Exhibit 2.5 in Page 42 of Azhar Kazmi. ]

Limitations of Strategic Management : Complex & dynamic environment poses difficulty for effective strategic management. Ignorance of the employees about strategies conceived due to lack of transparency in the organization. Lack of involvement of employees in strategic management being busy in routine activities. Time consuming process.

Strategic Management Process : Vision is defined as a mental perception of the kind of environment that an organization aspires to create within a broad time frame. Vision Statement Examples --U.S. Geological Survey : The Vision is to be a world leader in the natural sciences through our scientific excellence and responsiveness to societys needs. Vision Statement Examples U.S. Poultry & Egg Association A national organization which represents its members in all aspects of poultry and eggs on both a national and international level Mission Organizations relate their existence to satisfy need of the society. Mission is a statement which defines the role that an organization plays in a society. Thus, a companys mission is a long term view of what the organization is striving to become in future covering the basic thrusts like the products, business & markets. The identification of a mission is the basis of awareness of a sense of purpose, the competitive environment,& the degree to which the firms mission fits its capabilities and the opportunities the environment offers. The mission statement contain 3 broad elements Definition of companys business. Statement of major goals of the company. Statement of corporate philosophy. It should be precise, clear, feasible, motivating, indicate major components of strategy, indicate how objectives to be achieved, distinctive, etc. Mission Statement Examples -- California Energy Commission It is the California Energy Commissions mission to assess, advocate, and act through public/private partnerships to improve energy systems that promote a strong economy and healthy environment. Mission Statement Examples -- The Bellevue Hospital The Bellevue Hospital, with respect, compassion, integrity, and courage, honors the individuality and confidentiality of our patients, employees, and community, and is progressive in anticipating and providing future health care services.
Environmental Scanning

The future of an organization is closely related to the happening in the environment.

The process by which organizations monitor their relevant environment to identify opportunities & threats affecting their business is known as environment scanning. The environment scanning comprises information processing, & forecasting of social, economic, political, technological, market conditions and even international conditions. This provides a broader perspective to the corporate planners in formulating plans & strategies. Internal environment Within an organization imparts strength or cause weaknesses. External environment Outside the organization provide opportunity or pose threats. Market Technology supplier Economic Regulatory Political Socio-cultural International. Features of external environment:
1. Concept:

Surroundings & external objects. Influences & circumstances under which anything exists. As the environment affects the organization it is of crucial importance to understand it. conditions & influences arising from different sources. These are not in isolation but interact with each other & consider total view of the environment rather than viewing the trends in piecemeal.

2. Characteristics: Complex consists of number of factors, events,

3. Dynamic: Constantly changing. 4. Multi-faced: Depends on perception of the observer. 5. Far reaching effect: Existence, growth & profitability of an

organization depends critically on the environment.

[ Refer Comprehensive Model of Strategic Management Process]

UNIT II : Environmental Analysis : Need, Characteristics & Categorization of Environmental Factors ; Approaches to the Environmental Scanning Process Structural Analysis of Competitive Environment ; ETOP a diagnosis Tool.

Need Already explained in last section Characteristics & Categorization of Environmental Factors : The broad environment factors are:

Political factors; Stability of political conditions, possibility of any unrest, law & order scenario, etc. and may have regional, national or international implications. Social factors: Population density, inter-state migration, rural-urban mobility, growth of educational opportunities, change in life style, marriage age of men & women, values, attitude & culture of people, consumer behaviour, etc.

Economic factors: Existing state of economy, rate of growth of GNP & per capita income, rates of saving & investment, volume of imports & exports of different items, balance of payments & foreign exchange reserves, agricultural & industrial production trends, distribution of income & wealth, expansion of infrastructure facilities, rate of inflation, etc. Legal /Regulatory factors: Enforced by govt. towards regulation of market economy like Industrial licensing, import restrictions, differential tax pattern, FEMA, MRTP, etc. However after revision of industrial policy & structural reforms announced by govt. in1991 lot of regulatory measures are withdrawn to expedite the rate of economic growth and generate competitive environment. Technological factors: In future improvement of technology & the scope of technical collaboration with foreign enterprises are likely to improve efficiency and competitiveness in industrial units of India in addition to introduction of new products. Environmental scanning for changing technology is crucial as it may offer new opportunities or threaten very existence of firms. The analysis should aim at identifying sectors susceptible to technological change & forecasting changes likely to affect processes & operations, supply of raw materials, sources of energy, product life cycle, etc.

Business factors: Product markets in different industries may be characterized by monopoly, oligopoly, competitive conditions, etc. and the price is governed by market structure. Introduction of new products which may affect the life cycle of the other products & their market demand are vital factors that is considered by planners as a part of environmental scanning. The supply of critical inputs in industry is of great significance for environmental scanning. The reliability of the sources of supply of essential ingredients & the costs involved depend upon the number of suppliers & their control over the market. The power of supplier to raise prices are greater where there are no acceptable substitutes or the buyer is not an important customer.

Approaches to Environmental Scanning Process Sources of Information The various sources of information for collecting data on environment could be classified in different ways viz. formal or informal, written or verbal, external or internal depending on the source of origin and so on. Some of the important sources of information are as follows: Documentary or secondary sources of information, like different types of publication. These could be newspapers, magazines, journals, books, newsletters, govt. publications, annual reports, internet, etc. Mass media such as radio, television, etc. Internal sources like company files & documents, M.I.S., databases and so on. External Agencies like customers, suppliers, trade associations, govt. agencies, marketing intermediaries and so on. Formal studies conducted by employees, market research agencies, consultants, educational/research institutions, etc. Spying & surveillance through ex-employees of competitors, industrial espionage agencies, planting moles in rival companies, etc. It is important to scan the environment before planning exercise is carried out. Managers must systematically analyze the environment as environmental factors influence the strategy. Industry Analysis : An industry is defined as a group of companies offering similar or close substitute products or services viz. Soap industry, Tea industry, etc. The

similar or substitutes are products or services that satisfy same basic customer needs. Michael E Porter has made great contribution to industry analysis which are relevant to the formulation of competitive strategies. A model consisting of five forces have been put forward :Model of Forces driving Industry competition

Threats of New Entrants. Rivalry among Competitors

----------_______ Bargaining Power of Customers

_______

Industry Competition

Threats of Substitute Product

_______

Bargaining Power of Suppliers

Of Suppliers

The threat of new entrants Any industry that is profitable attract new

entrants. New entrants to an industry bring new capacity & the desire to gain market share. The chances that new entrants enter into an industry depend on the entry barriers and the expected reactions from existing firms e.g. an existing firm with large stake in an industry may lower prices temporarily creating a difficult situation for the new entrants. The entry barriers imply that there are substantial costs involved in entering a new industry. Higher the entry barriers in an industry the new entrants are less likely to enter that industry. So higher entry barriers are significant demotivators for new entrants and keep potential entrants away from an industry. The entry barriers may be summarized as follows o Economics of Scale in production & sale of products to have

cost advantage. o High Capital Requirements may prevent new entrants from making investments. o Product Differentiation Brand identification force entrants to spend heavily to overcome customer loyalty.

o Cost Disadvantages may arise from proprietary technology,

access to best raw material sources, assets purchased earlier at lower prices, favorable location, government subsidies, etc. o Access to Distribution Channels can be monopolized by the existing firms on the basis of their long term relationship with distributors. o Switching Costs from the existing products or services to a new one may discourage venturing. o Government Policies control through licensing, pollution standards, safety regulations, etc. o The rivalry among competitors in competition one player gains at the expense of the other. The desire to be the market leader leads to rivalry amongst competitors. The extent of the rivalry among competitors in an industry affects the competition within that industry viz. when the rivalry is weak there is likely to be lesser competition. The factors constituting the force of competitive rivalry within an industry are - competitive structure, demand conditions & exit barriers that determine the business strategies a firm is likely to adopt. 1. Competitive Structure refers to the number of competitors, their size & their diversity. Different types of competitive structures have different implications for the existing firms & new entrants. In some industries the competitors may adopt a policy of live & let live while in others there may be cut-throat competition leading to under-pricing or other steps. 2. Demand Conditions refer to the nature of customer demand existing in an industry. A high or growing demand tends to moderate competitions as each firm has enough for itself & need not grab from others. Stagnant or declining demand lead to competitive strategies to snatch market share from others. 3. Exit Barriers restrict & prevent the firms in an industry from leaving even though the returns are low. The exit barriers may be economic or emotional factors, which prevent companies from closing the business. Economic factors can be high investment committed to plant & equipment that have no alternative use and high costs of exit like retrenchment costs. Emotional factors can be sentimental attachments to business.
The bargaining power of customers constitute the ability to force a

reduction of prices of products or services, demand a higher quality or

better service or seek more value of their purchases. High bargaining powers constitute a negative feature for existing firms or new entrants of an industry. A low bargaining power enables a firm to pass on cost increases to buyers or make the buyers accept a lower quality product or service at a higher price. The bargaining powers of buyers are high under following circumstances 1. Buyers are few in number. 2. Buyers place large orders. 3. Alternative suppliers are available at a favorable price. 4. Switching costs from one supplier to other is low. 5. Ability to create own supply source.
The bargaining power of suppliers - constitute the ability to force an

increase in prices of the products & services or make the buyer accept lower quality of products or services. High bargaining powers constitute a negative feature for existing firms or new entrants of an industry. The bargaining powers of suppliers are high under following conditions 1. Suppliers are few in number & Buyers are many. 2. The products or services are not easily available. 3. Switching costs from one buyer to other is low. 4. Buyer is not important to the supplier who purchases small quantity. 5. The suppliers have the ability to use their own supplies for production of end products or service.
The threat of substitute products or services - Substitute products or

services are apparently different but satisfy the same set of customer needs viz. tube lights or bulbs, alternative modes of transportation or communication, etc. The availability of close substitutes constitute a negative competitive force as level of price charged cannot exceed that of substitutes. Competitive Environment : about the strategies rivals are deploying, their latest moves, their resource strengths & weaknesses are essential to anticipate their future course of action. In other words, successful strategies put serious effort in gathering competitive intelligence about competitors

strategies, monitoring their actions, sizing their strengths & weaknesses and their anticipated moves. Thus it can help a company determine whether it needs to defend against specific moves taken by rivals. Gathering competitive information is essential & should not be considered as espionage. This can be collected through newspapers, magazines, govt. agencies, databases, internet, customers, suppliers, competitors & former employees. The company that consistently has more & better information about its competitors is better positioned to prevail other things being equal. Managers who fail to study competitors closely are blindfolded by surprise actions of rivals. ETOP Study : (Environmental Threat & Opportunity Profile) The identification of environmental issues is helpful in structuring environmental appraisal so that strategists have ideas of where the environmental opportunities& threats lie. There are many techniques available to structure the environmental appraisal. One such technique suggested by Glueck, is that of preparing an ETOP for an organization. The preparation of ETOP involves dividing the environment into different sectors and then analyzing the impact of each sector on the organization. The ETOP provides the strategists a clear picture of the sectors which have favourable impact on the organization. By means of an ETOP the firm can see where it stands with respect to its environment. ETOP Study for a Bicycle Company
Environmental Nature of Sector Impact Impact of each Sector

_____________________________________________________________ ______
Market Industry growth rate is 7 to 8 % per year. Sports cycle growth rate is 30%. Unsaturated demand. Technological up gradation of industry in progress. Import of machinery simple.

Technological

Economic

Growing affluence among urban consumers. Export Potential promising.

Regulatory Political International

Bicycle industry of Exports No significant factor. Emerging threats due to cheap imports from China.

( Ref. 125-126 Business Policy & Strategic Management Azhar Kazmi