Identification of Business Objectives and Purpose:: Q1. What Are The Four Steps of Strategic Management Process?

Q1. What are the four steps of strategic management process?
The strategic management process covers the following four steps, which are: 1. Identification
of business objectives and purposes 2. Formulation of strategies 3. Implementation of
strategies and 4. Evaluation of strategies!
1. Identification of Business Objectives and Purpose:
The corporate objectives signify the final end results which are to be attained over a period of
time. A strategy is a means to achieve the objectives. Generally, the words purpose and mission
are used interchangeably. However these terms have different meanings in management.
Corporate purpose gives a clear picture of what the company is about and what is wants to
achieve in future. It is a statement of the principal line of business which it wants to pursue.
Corporate mission explains the scope of business in terms of products and markets. Objectives
on the other hand define the direction to achieve the mission.
For example, the mission of Fertilizer Company may be mentioned as to fight world hunger and
the objectives may be mentioned as to increase the agricultural productivity through
development, efficient production of improved fertilizers, generate profits to finance Research
and development (R & D) and to ensure satisfactory returns on investment.
2. Formulation of Strategies:
In strategy formulation, a firm must be aware of its strength, weaknesses, opportunities and
threats. SWOT analysis focus attention on these four variables viz, strengths, weaknesses,
opportunities and threats. The first two are internal whereas the last two are external to an
organisation.
(a) Strength
(b) Weaknesses
(c) Opportunities
(d) Threats
3. Implementation:
This involves a number of administrative and operational decisions.
The following are the three important components of strategy:
(a) Resource implementation
(b) Organisational implementation
(c) Functional policy implementation
4. Evaluation of Strategies:
The last phase of strategic management is evaluation and control. In business, conditions often
change resulting in the need of evaluation of existing strategies and planning the new ones to
take advantage of changing conditions.
According to Arthur Sharplin “The purpose of strategic evaluation is to monitor and evaluate
progress towards organisation’s objectives and to guide or correct the process or change the
strategic plan to better accord with current conditions and purposes.”
Q2. Why does the environment matter? Explain.
Q3.Mention merits and demerits of cost leadership.
Ans. The advantages of cost leadership are as follows:
1. It provides better profits for the team and organization.

Cost leadership styles are focused on creating low-cost operations within their market and
industry. By reducing development and production costs, it becomes possible for higher profit
margins to appear. When competitive pricing is available, with greater margins than what other
companies are able to achieve, then you gain more business because you’re offering a stronger
value proposition to your customers.
2. It can increase a team’s market share.
Not only do teams employing cost leadership styles achieve a higher profit margin, they are
able to achieve an improved market share over time as well. Customers who are conscious
about their budget balance the need for cost with the need for value. If your goods or services
are at the lowest costs, but with an acceptable value, then your items will be considered for
purchase first. Over time, these leaders can induce more business, even out of a mature
market.
3. It improves the sustainability of the business.
When costs are lower for a business, then there are fewer financial threats that could put the
organization out of business. This sustainability becomes a tremendous advantage when
economic circumstances take a turn for the worst. When a price or trade war happens, or there
is a downturn in the local economy, it is the companies with the lowest cost of doing business
that will have the greatest chance at survival.
4. It creates more capital that can be used for growth.
Cost leadership styles also promote the availability of more capital resources. Even though the
retail cost of goods or services are low, the higher margins make it possible to retain capital
from each transaction. Over time, this creates a nest egg of resources that can be used for
multiple purposes. Many organizations which feature low-cost leadership will use the additional
capital to either further their investments or fund new growth.
5. It reduces competition from the marketplace.
Companies that are able to implement their cost leadership styles successfully give themselves
a future advantage as well. Because they are able to offer a superior pricing model to their
consumers, new competition in the market is limited because competitors may struggle to
achieve the same price. Unless competitors are willing to undercut the company employing cost
leadership, it becomes almost impossible to survive. That allows for market domination over
time.
List of the Disadvantages of Cost Leadership Styles
1. It can cause financial cuts in critical areas that harm the business.
It is a worthy goal to maintain a low-cost position. Many leaders following this style will find
ways where money can be saved from the current budget. There is also a danger here that
some cost leaders may look to reduce costs in critical areas of the company, like in their
customer service division. Although the price is nice for the consumer, the customers who
incorporate the value of customer service into their value calculations will stay away from this
company.
2. It reduces product innovation.
One of the first cuts that always tends to happen with the cost leadership styles is in research
and development. To many of these leaders, R&D seems like an extraneous cost. The outcome
of cutting funding here is that there are fewer new products or services reaching the market.
There are fewer chances at innovation. Instead, this leadership style encourages the same
products to be sold at lower prices only.
3. It reduces the importance of consumer feedback.
When leaders are focused primarily on the price of the goods or services being offered, then it
becomes easy to ignore how the market shifts over time. Customers are always evolving their
preferences and taste for certain items. If the sole focus is to maintain a service or product and
just reduce its cost, you’ll find that some customers will pay more to go with a competitive
product because it is better able to meet their needs.
4. It encourages a lower quality product to be offered to the market.
Being able to cut costs is not an easy process. Once leaders find the obvious items that can be
cut, the real work of cost leadership begins. It may require a lower quality set of ingredients or
raw materials to create a higher profit margin. There may need to be a change to the
advertising or marketing budget, which could reduce the number of new customers obtained.
Some companies may even choose to pay their workers less if labor costs are one of their
primary expenses.
5. It cannot be applied to every product or service.
The goal of cost leadership is to cut production costs, while still producing an acceptable
product, that meets the basic needs of the consumer. An acceptable product is different than
an exemplary product. For an elite brand, such as Apple, a process that involves cost leadership
is almost certain to backfire. There is an expected standard in the product that must be met for
consumers to engage with the brand. Almost all forms of cost leadership involve some type of
quality reduction.
Q4. What are the characteristics of strategic management decisions?

Ans. The characteristics of strategic management deicions are as follows:
 Long-term direction of the business is a crucial part of strategic decisions. Strategic

decisions usually emerge from the perspective views about the organization and society,
including regulatory environment, prospects of different business, industry structure,
competitive environment, etc.
 Strategic decisions have major resource propositions for a business. These decisions
could be focused on possessing new resources, organizing others or reallocating others.
 The decisions are influenced by the value system, which includes business ethics and
philosophy.
 The long run direction and value orientation influence the definition of the scope of the
activities of the business. The business/businesses this company should be in is key
decision in strategic management. The issue of scope of activity is prime to strategic
decisions as it concerns the way in which those responsible for managing the organisation
conceive its boundaries.
 Strategy is the means to achieve the end, i.e., the mission and goals.
 They are long term in general and related to the scope of the business of the
organization may mean major resource commitments, including reallocation of present
resources.
 They involve a change of major type because a company operates in ever-changing
environment.
 Strategic decisions attempt to develop a sustainable organization environment fit. The
quintessence of strategic management is the efficient use of organizational resources or
strengths to take advantage of the environmental opportunities and to combat the
environmental threats.
 Strategic decisions focus on achieving a sustainable competitive edge of the firm.
 Strategic decisions are likely to affect operational and administrative decision.
 Strategic decisions are complex in nature because they encompasses mission, long-term
direction, scope of the organization, and establishment of organization environment fit.
 Due to the long-term future perspective of the strategic decisions, they might involve
significant uncertainty as future can hardly be forecasted exactly.
 A strategy is usually comprehensive and highly integrated.
 Strategic decisions aren’t the same as administrative and operational decisions.
Administrative decisions are routine decisions that assist or rather facilitate strategic
decisions or operational decisions. Operational decisions are technical decisions which help
execution of strategic decisions. To cut back cost is a strategic decision which can be
attained through operational decision of decreasing the number of employees and how we
carry out these reductions is going to be administrative decision.
Q5. Briefly explain about the role of boards of directors.
The duties and responsibilities of the board of directors are as follows
1. Trusteeship: The board of directors act as trustees to the property and welfare of the
company. Hence, the board must use the company’s property for the long-run gain of the
company, but not for their personal use.
2. Formulation of Mission, Objection and Policies: Board of directors must see the long run
view and have long run perspective of the company. The board formulates, reviews and
reformulates the company’s mission, objectives and policies which forms the basis for strategy
formulation and implementation.
3. Designing Organizational Structure: The board designs the structure of the organization
based on the objectives, policies, environmental factors, degree of competition, role of quality,
expectations of employees etc.
4. Selection of Top Executives: The board should assume the responsibility of screening and
selecting the top executives who can formulate and implement the strategies. Chief executives
are key personnel in the process of strategy implementation.
5. Financial Sanctions: The important financial decisions like sanctioning of finances to various
projects, reserves, distribution of profit to shareholders and repayment of loans and advances
etc., are taken by the board. Further, the board reviews the financial performance of the
company from time to time and reformulates the financial policies.
6. Feed forward and Feedback: The board has to obtain information from the external
environmental factors and feed that information forward to various key points in the company
in order to prevent possible hurdles and mistakes in the process of achieving organizational
goals. Further, the board also obtains the information from internal sources of the organization,
and feeds it forward to prevent possible failures in decision-making by the top level executives.
The board also feeds the information back to the executives regarding their failures in decision-
making with a view to avoid the recurrence of such mistakes. Thus, feedback of information
helps the board to check and control the activities as board has the ultimate responsibility for
the success of the company.
7. Link between the Company and External Environment: The board acts a vital and
continuous link between the company and external environment like government, other
companies, social and economic institutions etc.

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Q1. What are the four steps of strategic management process?

1. Identification of Business Objectives and Purpose:

on the other hand define the direction to achieve the mission.

the objectives may be mentioned as to increase the agricultural productivity through

development, efficient production of improved fertilizers, generate profits to finance Research

and development (R & D) and to ensure satisfactory returns on investment.

This involves a number of administrative and operational decisions.

The following are the three important components of strategy:

(a) Resource implementation

(b) Organisational implementation

(c) Functional policy implementation

take advantage of changing conditions.

strategic plan to better accord with current conditions and purposes.”

Q2. Why does the environment matter? Explain.

Q3.Mention merits and demerits of cost leadership.

Ans. The advantages of cost leadership are as follows:

1. It provides better profits for the team and organization.

Q4. What are the characteristics of strategic management decisions?

 Long-term direction of the business is a crucial part of strategic decisions. Strategic

Q5. Briefly explain about the role of boards of directors.

The duties and responsibilities of the board of directors are as follows

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