BY: VINITHA EMILIA RAMYA G.K. SHAGUFTA FATHIMA PRIYANKA P.

SAKLECHA

It literally means the surroundings, external objects, influences or circumstances under which someone or something exists
Also it is the aggregate of all conditions, events and influences that surround and affect it.

Environment is complex Environment is dynamic Environment is multifaceted Environment has a far reaching impact

It includes all the factors outside the organization which provide opportunities or pose threats to the organization

The environment in which the an organization exists, therefore be described in terms of SWOT Analysis. It is a very popular strategic planning technique having applications in many areas including management.

S Strength Inherent capacity which an organization can use to gain strategic advantage W- Weakness Inherent limitation or constraint which creates strategic disadvantages

O Opportunity Favourable condition in the organizations environment which enables it to consolidate and strengthen its position T- Threat Unfavorable condition in the organizations environment which creates risk for, or causes damage to the organization

Simple to use Low cost Flexible and can be adapted to varying situations Leads to clarification of issues Development of goal oriented alternatives Useful as a starting point for strategic analysis
ADVANTGES DISADVANTAGES

EXTERNAL ENVIRONMENT

how the economy affects a business in terms of taxation, government spending, general demand, interest rates, exchange rates and European and global economic factors. Relate to changes in the wider economy. A growing economy provides greater opportunities for businesses to make profits, so businesses welcome rising living standards.

Political Factors Relate to ways in which changes in government and government policy can influence business. How changes in government policy might affect the business e.g. a decision to subsidise building new houses in an area could be good for a local brick works.

The important factors and influences operating in the political environment are: 1. The Political System and its Featurs like: Nature of the political system, ideological forces, political parties and the centres of power 2. The political structure, its stability and goals 3. Political Processes like: Elections, funding of elections and legislation with respect to economic and indutrial promotion and regulation 4. Political Philisophy, Governments role in business, its policies and interventions in economic and business development.

Consists of factors related to : Human relationships within the society The development Behavior of groups having a bearing on the business of an organisation.

Important Factors & influences are: 1. Demographic characteristics 2. Socio- Cultural concers Socio- Cultural attitides and values Family structure and the changes in it Role & Position of men, women, children, adloescents and aged in family and society Educational levels, awareness and consciousness of rights, work ethics

 The

way in which legislation in society affects the business. E.g. changes in employment laws on working hours. Relate to changes in laws and regulations. Businesses must be careful to keep within the law and to anticipate ways in which changes in laws will affect the way they must behave.

Shows how the rapid pace of change in production processes and product innovation affect a business. Provide opportunities for businesses to adopt new breakthroughs, innovations, and inventions to cut costs and develop new products.

 Factors

influencing are: Sources of technology like: company sources, external and foreign sources; cost of technology acqusition; collaboration in and transfer of technology Technological development, stages of development, change and rate of change of tech. and R&D

 Impact

of tech. on human beugns, the manmachine system and environmental effects Communication and infrastructural technoly in mgmt.

 ANALYSIS:

UB GROUP Environmental changes: Liberalisation era forced businessmen to think of core competencies Reckless diversifications made during preliberalisation era became liabilities

 ANALYSIS:

UB GROUP Strategic responses: Restructuring business Internationally to consolidate strength in brewing & distilling In India to focus on engineering, services, health care, brewing & distilling Hiving of non core business like pharmaceuticals

 ANALYSIS:

UB GROUP Consequences: With the excess baggage being shed, UBgroup looks slim & vibrant

 CONCLUSION
Firms

that are able to make appropriate adjustment to business environment changes reduce risk & uncertainty & gain competitive edge over others. Failure in making timely adjustment may erode profitability, competitiveness & market share.

 Every

organization has different types of resources. Interplay of these resources leads to the development of strengths or weakness. Organization capacity and ability to use its competencies gives a strategic advantage.

Stategic Adv Organizational Capability

Competencies

Synergistic Effects Strengths & Weakness Organizational Resources Organizational Behaviour

According to Barney: A firm is a bundle of resources-Tangible and Intangible. Includes-Assets, capabilites, org processes, info, knowledge etc. Classified as physical, human and org resources. Physical-technology, plant and equipement, geographical location, access to raw materials. Human resources-training, experience, intelligence, relationships Org resources- formal systems, structures as well as informal relations.

1.Valuable 2.Rare 3.Costly to intimate 4.Nonsubstituble Cost and availability of resources-most imp factors for success.

 Important

forces and influences that affect organizational behaviour: 1. Quality of leadership 2. Mgmt philosophy 3. Shared values and culture 4. Quality of work environment 5. Org climate 6. Org politics

 Org

resources and behaviour do not exist in isolation Strength is an inherent capability which an org can use to gain strategic advantage. Weakness is an inherent limitation which creates a strategic disadvantage for an org.

 It

is an idea that the whole is greater or lesser than the sum of its parts. Synergistic efficiency may occur when the product, pricing, distribution and promotion aspects support each other resulting in a higher level of marketing synergy. A Marketing inefficiency reduces productions efficiency leads to dysergy.

 They

are special qualities possessed by an organization that make them withstand and pressures of competition in the marketplace. Distinctive Competence Core Competence

 It

is the inherent capacity or potential of an organization to use its strength and overcome its weakness in order to exploit the opportunities and face the threats in its external environment. Strategists are interested in Organizational capability because: 1. To know what capacity exists within the org to exploit the opportunities or face threats. 2. To what potential should be developed within org so that opportunities can be exploited and threats can be faced in future.

 Strategic

strengths and weakness existing in different functional areas within an organization, which are of crucial importance to strategy formulation and implementation. Capability factors in Six functional areas: Finance Marketing Operations Personnel Info General Mgmt

Factors that relate to the Availability or sources of funds-Capital structure, borrowings, reserves and surplus, relationship with lenders, bank etc Usages of funds- Capital investment, current assets, loans etc Management of funds- Financial, accounting and budgeting systems, tax reduction and control etc. all allied aspects that have a bearing on an organisations capacity and ability to implement its strategies.

Factors relating to price, promotion and distribution of products or services and all allied aspects that have a bearing on an organisations capacity and ability to implement its strategies. Product related factors-Variety, packaging. Place related factors-Distribution, transportation and logistics. Price related factors-Pricing policies, objectives Promotion related factors-Its tools, sales promotion. Integrative and systemic factors-marketing mix, Co. image, marketing mgmt info system.

 Relates

to the production of products or services, use of material resources and all allied aspects that have a bearing on an organisations capacity and ability to implement its strategies. Factors related to the production system-capacity, location, layout. Factors related to operations & control system-Material supply, inventory, quality control. Factors related to the R & D systemPersonnel facilities, product development, patent rights.

It relates to the existence and use of human resources and skills and all allied aspects that have a bearing on an organisations capacity and ability to implement its strategies. Factors related to personnel system-Systems for manpower planning, selection, dvlpmt, appraisal Factors related to org. and employee characteristics- Corporate image, quality of managers, staff, working conditions. Factors related to industrial relations- Unionmgmt relationship, collective bargaining, employee satisfaction and morale.

Factors that relate to the design and management of the flow of info from outside into and within an organisation for the purpose of decision making and all allied aspects that have a bearing on an organisations capacity and ability to implement its strategies. Factors related to acquisition and retention of info-sources, quantity, quality, retention capacity Factors related to processing and synthesis of info- database mgmt, computer systems, software capability. Factors related to assimilate and dissemination-Speed, scope, width and depth of coverage of info and willingness to accept the info. Integrative, systemic and supportive factorsavailability of IT infrastructure, its relevant and compatibility to org needs, availability of

It relates to the integration, coordination and direction of the functional capabilities towards common goals and all allied aspects that have a bearing on an organisations capacity and ability to implement its strategies. Factors related to general mgmt systemsStrategic mgmt system, processes, strategy formulation and implementation, corporate planning system, rewards and incentive system for top managers. Factors related to general managersOrientation, values, norms, personal goals, competence, capacity for work, track record. Factors related to external relationshipInfluence and rapport with govt, PR, public image as corporate citizens Factors related to org climate- Org culture, nature of org structure and controls, intro, acceptance and mgmt of change.

 It

is the outcome of organizational capabilities. They are the results of organizational activities leading to rewards. In contrast, strategic disadvantages are penalties in the form of financial loss, market share. Strategic adv can be measurable in absolute terms using the parameters in which they are expressed.

 Competitive

adv is a special case of strategic adv where there is one or more identified rivals against whom rewards or penalties could be measured. It should be measured and compared with respect to other rivals in an industry.

 VRIO

Framework

Valuable:

the organizational capabilities possessed by the firm that help it to generate revenues by capitalizing on opportunities and to reduce costs by neutralizing threats.

 Rare

- the organizational capabilities that are possessed by the firm exclusively or just by a few other firms in the industry.
- the organizational capabilities that are possessed by the firm that are impossible, very difficult or not worthwhile to duplicate or substituted by the competitors.

Inimitable

 Organized

for usage - the organizational capabilities that are possessed by the firm that can be used by the appropriate in the organizational structure, business processes, control systems and reward systems that are present in the firm.

 Value

Chain Analysis Allows the firm to understand the parts of its operations that create value and those that do not. A template that firms use to: Understand their cost position. Identify multiple means that might be used to facilitate implementation of a chosen business-level strategy.

 Value

Chain Analysis (contd)

Primary activities involved with: A products physical creation A products sale and distribution to buyers The products service after the sale Support Activities Provide the assistance necessary for the primary activities to take place.

 Value

Chain Shows how a product moves from the raw-material stage to the final customer. To be a source of competitive advantage, a resource or capability must allow the firm: To perform an activity in a manner that is superior to the way competitors perform it, or To perform a value-creating activity that competitors cannot complete

 Financial

Analysis - Technique such as the financial ratio analysis assesses the liquidity, profitability, leverage and activity aspects of any organization.
if financial ratio analysis is used with due care, can it realistically serve the purpose of organizational appraisal.

Only

 All

numbers can be expressed in terms of a common monetary unit such as rupees, pounds, or dollars.

Quantification

of intangibles such as goodwill or employee morale may be possible, but it is not desirable to do so in monetary terms. Non-Financial analysis can help an organization in appraisal.

 The

quantitative analysis has to be tempered with a qualitative analysis. Such an analysis is based on informed opinion, judgments, intuitions. The strength and weakness of the company cannot be expressed in quantitative terms. A systematic analysis may use the survey approach.

 Historical

Analysis- one way to compare performance and identify strengths and weakness is to start with the historical analysis of ones own organisation over a period of time.

 The

industry to which it belongs is the most obvious choice for comparison with regard to wide range of parameters.
than comparing oneself with all the firms in an industry, it would be more instructive to consider the firms that follow similar strategies.

Rather

 Industry

norms provide good ides to firms regarding the areas in which they excel or need improvements. This can help them in location their areas of strengths and weaknesses.

 Performance
Process Strategic Internal Competitive Functional Generic

 Key

Factor Rating- A comprehensive method, which can be used in association with a financial analysis is that of key factor ratings. Capability factors Financial Capability factors
Sources of funds Usage of funds Management of funds

 Marketing

Capability factors
Product related Price related Promotion related Integrative and systematic

Operations

Capability factors

Production system Operations and control system R&D system

 Personnel

Capability factors
Personnel systems Organizational and employee characteristics Industrial relations

Information

management Capability factors

Acquisition and retention of information Retrieval and usage of information Processing and usage of information Transmission and dissemination of information

 General

management Capability factors

General management system External relations Organizational climate

 This

is considered as a set of measures that tell the results of actions already taken. And it complements the financial activities Operational measures that are the drivers of future financial performance.