 2.

2 Strategic management process

• Define the business
• Setting the goals and objectives
• Analyzing the business environment
• Formulate strategies
• Implement the strategy chosen
• Evaluate, monitor and control

 The strategic management process is a systematic approach that organizations use to plan
for and achieve their desired outcomes. The process

 Define the business: This involves clarifying the purpose and scope of the organization, and
identifying the products or services it offers.

 Setting the goals and objectives: This involves establishing specific, measurable, achievable,
relevant, and time-bound (SMART) goals that the organization aims to achieve.

 Analyzing the business environment: This involves conducting a thorough analysis of the
internal and external factors that may affect the organization, including its strengths,
weaknesses, opportunities, and threats (SWOT analysis).

 Formulate strategies: This involves developing a plan of action to achieve the organization's
goals and objectives, considering the business environment and the organization's resources
and capabilities.

 Implement the strategy chosen: This involves putting the chosen strategy into action,
including allocating resources and making any necessary changes to organizational structure
or processes.

 Evaluate, monitor and control: This involves regularly assessing the effectiveness of the
chosen strategy, and making adjustments as needed to ensure that the organization stays on
track to achieve its goals.

 2.5 Characteristics of Strategic management

• It’s a process
• It focuses on resource prioritization
• Its futuristic
• Bears top management’s point of view
• Focuses on strategy as a central theme
 • Focuses on creating a competitive advantage

 It's a process: Strategic management involves a series of steps or activities that are carried
out over time. These steps typically include defining the business, setting goals and
objectives, analyzing the business environment, formulating strategies, implementing the
chosen strategy, and evaluating and adjusting the strategy as needed.

 It focuses on resource prioritization: Strategic management involves making decisions about

how to allocate the organization's resources (such as time, money, and personnel) in a way
that will help the organization achieve its goals and objectives. This requires prioritizing
different activities and allocating resources accordingly.

 It's futuristic: Strategic management involves looking ahead to the future and considering
what the organization needs to do in order to achieve its desired outcomes. This requires
considering both short-term and long-term goals, and developing strategies that will help
the organization achieve them.

 It bears top management's point of view: Strategic management is typically the

responsibility of top management, such as the CEO or board of directors. As such, it is often
informed by the perspective and priorities of these leaders.

 It focuses on strategy as a central theme: The central theme of strategic management is

strategy – the plan of action that an organization follows to achieve its goals and objectives.
Strategic management involves considering what strategies will be most effective for the
organization, and how to implement and execute them.

 It focuses on creating a competitive advantage: Strategic management is often focused on

finding ways to differentiate the organization from its competitors and create a competitive
advantage. This might involve developing new products or services, entering new markets,
or finding more efficient ways to operate.

 2.7 Benefits of strategic management

• Enables goals and objectives to be met
• Enables proper resource allocation
• Enables planning with certainty
• Realistic goals and objectives setting
• Stimulates critical thinking about the future
• Exposes the organization to opportunities
• Gives the organization a competitive advantage
• Gives direction to the organization
• Enables proper flow of activities
• Enables threat identification
 Here is a brief explanation of each of the benefits of strategic management listed:

 It enables goals and objectives to be met: By setting specific, measurable goals and
developing a plan to achieve them, strategic management helps ensure that the
organization is working towards achieving its desired outcomes.

 It enables proper resource allocation: Strategic management involves making decisions

about how to allocate the organization's resources in a way that will help it achieve its goals.
This ensures that resources are being used effectively and efficiently.

 It enables planning with certainty: By considering both short-term and long-term goals, and
developing a plan to achieve them, strategic management helps organizations plan for the
future with greater certainty.

 It promotes realistic goal and objective setting: By requiring that goals and objectives be
specific, measurable, achievable, relevant, and time-bound (SMART), strategic management
helps ensure that they are realistic and attainable.

 It stimulates critical thinking about the future: By considering the internal and external
factors that may impact the organization in the future, strategic management encourages
critical thinking about the organization's future direction.

 It exposes the organization to opportunities: By conducting a thorough analysis of the

business environment, strategic management helps organizations identify opportunities that
they may not have considered otherwise.

 It gives the organization a competitive advantage: By developing unique strategies that

differentiate the organization from its competitors, strategic management can help the
organization gain a competitive advantage in the market.

 It gives direction to the organization: By setting clear goals and objectives, and developing a
plan to achieve them, strategic management provides direction and focus for the
organization.

 It enables proper flow of activities: By considering the various activities that need to be
carried out in order to achieve the organization's goals, and developing a plan to coordinate
 these activities, strategic management helps ensure that work is being carried out smoothly
and efficiently.

 It enables threat identification: By considering the internal and external factors that may
pose a threat to the organization, strategic management helps organizations identify
potential risks and develop plans to mitigate them.

 2.4 Strategy formulation

 Strategy formulation refers to the process of developing a plan of action that an organization
will follow in order to achieve its goals and objectives. This process typically involves several
steps, including:

 Defining the organization's mission, vision, and values: These provide a sense of purpose and
direction for the organization, and help guide the development of its strategies.

 Conducting a SWOT analysis: This involves analyzing the organization's internal strengths
and weaknesses, as well as external opportunities and threats. This helps inform the
development of strategies that take these factors into account.

 Setting specific, measurable, achievable, relevant, and time-bound (SMART) goals and
objectives: This helps ensure that the organization's strategies are focused and realistic.

 Identifying potential strategies: This involves considering a range of options for achieving the
organization's goals and objectives, taking into account the organization's resources and
capabilities as well as the business environment.

 Evaluating and selecting the best strategy: This involves weighing the potential pros and
cons of each potential strategy, and choosing the one that is most likely to achieve the
desired outcomes.

 Developing a plan for implementing the chosen strategy: This involves outlining the specific
actions that need to be taken in order to put the strategy into action, including allocating
resources and making any necessary changes to organizational structure or processes.

 2.6 Dimensions of a strategy

 Formulated by Henry Mintz berg
• Plan- Course of action to achieve a goal
• Ploy- Tactics to out-win your competitors
• Position- Means of locating an organization in an environment
• Pattern- Set of related steps
 • Perspective- Unifying the organization to a common thinking to achieve a
common goal
 Henry Mintzberg, a well-known management theorist, identified five dimensions of a
strategy. Here is a brief explanation of each:

 Plan: A plan is a course of action that is designed to achieve a specific goal. It outlines the
steps that need to be taken, and the resources that will be required, in order to achieve the
desired outcome.

 Ploy: A ploy is a tactic that is used to outmanoeuvre or outsmart competitors. It is a specific

action or strategy that is designed to give the organization a competitive advantage.

 Position: Position refers to the way in which an organization is located within its
environment. It involves considering factors such as the organization's location, target
market, and product or service offerings, in order to create a unique and desirable position
in the market.

 Pattern: A pattern is a set of related steps or actions that are taken in a particular order to
achieve a specific goal. It may involve repeating a certain sequence of activities, or following
a specific process.

 Perspective: Perspective refers to the way in which an organization approaches its goals and
objectives. It involves aligning the organization's values, vision, and mission, in order to
create a unified and cohesive approach to achieving a common goal.

 2.8 Levels of strategy

 Corporate level- Top management makes long-term decisions
 Functional level-Looks at how the organization deals with and enters the market. Deals with
firm growth. (Involves the tactical and operational depts)
 Business level- How the firm interacts with their competition.

There are typically three levels of strategy in an organization: corporate level, business level,
and functional level. Here is a brief explanation of each:

 Corporate level: Corporate level strategy is concerned with the overall direction of the
organization, and is typically developed by top management. It involves making long-term
decisions about the organization's goals, resources, and capabilities, and how they will be
used to achieve a competitive advantage in the market.
 Business level: Business level strategy is concerned with how the organization will compete
within a specific market or industry. It involves considering factors such as the organization's
target market, product or service offerings, and pricing strategy, in order to achieve a
competitive advantage.

 Functional level: Functional level strategy focuses on how specific departments or functions
within the organization will support the overall direction of the organization. It involves
making decisions about the allocation of resources and the allocation of tasks within each
department in order to support the business level strategy. This level of strategy is often
concerned with tactical and operational decision-making.

 3.16.1 Sources of competitive advantage

• Superior skills
• Superior resources
• Superior position
• Customer service
• Continuous innovation
• Superior technology
• Superior quality
• Government protected monopoly
• Patents and copyrights / accumulated brand equity

There are many sources of competitive advantage that organizations can tap into in order to
differentiate themselves from their competitors and achieve a competitive edge in the
market. Here is a brief explanation of each of the sources you listed:

 Superior skills: An organization that has employees with highly specialized skills or expertise
can use those skills to create a competitive advantage. For example, a company with highly
skilled engineers might be able to develop innovative products or processes that are difficult
for competitors to replicate.

 Superior resources: An organization that has access to valuable resources, such as financial
resources, natural resources, or physical assets, can use those resources to create a
competitive advantage. For example, a company with access to large amounts of capital
might be able to invest in new technologies or expand into new markets more quickly than
its competitors.

 Superior position: An organization that is strategically located or has a unique position in the
market can use that position to create a competitive advantage. For example, a company
that is the only provider of a certain product or service in a certain geographic region might
have a competitive advantage over competitors that are located further away.
 Customer service: An organization that provides exceptional customer service can create a
competitive advantage by differentiating itself from its competitors. For example, a
company that responds quickly to customer inquiries or complaints, or that goes above and
beyond to meet customer needs, might be more attractive to customers than competitors
that have less responsive customer service.

 Continuous innovation: An organization that is consistently innovating and introducing new

products or services can create a competitive advantage by staying ahead of its competitors.
For example, a company that is constantly introducing new and improved products might be
able to attract more customers and keep them loyal.

 Superior technology: An organization that has access to cutting-edge technology or that is

particularly skilled in using technology can create a competitive advantage. For example, a
company that is able to automate certain processes more efficiently than its competitors
might be able to produce products more cheaply, which could give it a price advantage.

 Superior quality: An organization that consistently produces high-quality products or

services can create a competitive advantage by building a reputation for reliability and
excellence. Customers may be willing to pay a premium for products or services that they
perceive as being of higher quality.

 Government-protected monopoly: An organization that has been granted a monopoly by the

government, such as a utility company, can use that monopoly to create a competitive
advantage by being the only provider of a certain product or service in a certain market.

 Patents and copyrights / accumulated brand equity: An organization that holds patents or
copyrights on its products or processes, or that has built up strong brand equity, can use
those assets to create a competitive advantage. For example, a company with a patent on a
new technology might be able to charge a premium for its products because competitors are
not able to legally offer similar products. Similarly, a company with strong brand recognition
might be able to attract more customers simply because of its reputation.

 4.1.1 Characteristics of a good vision

• Futuristic
• Clear and understood by all stakeholders
• Precise and concise
• Motivating to all stakeholders
• Brought to reality by the mission statement
A good vision statement should have the following characteristics:

 Futuristic: A good vision statement should look ahead to the future, and describe where the
organization hopes to be in the long term. It should be forward-thinking and ambitious, and
should provide a sense of direction for the organization.

 Clear and understood by all stakeholders: A good vision statement should be clear and easy
to understand, and should be communicated effectively to all stakeholders, including
employees, customers, and investors.

 Precise and concise: A good vision statement should be specific and to the point, and should
be able to be communicated in a short, memorable phrase or sentence.

 Motivating to all stakeholders: A good vision statement should be inspiring and motivating,
and should provide a sense of purpose and direction for all stakeholders. It should be
something that people can get behind and work towards achieving.

 Brought to reality by the mission statement: A good vision statement should be supported
by the organization's mission statement, which outlines the specific actions and goals that
the organization will pursue in order to achieve the vision. The mission statement should
provide a roadmap for how to turn the vision into a reality.

4.1.2 Benefits of a good vision

• Gives the organization direction
• Increases production
• It inspires the organization
• Unifies the organization
• Guides the thinking and action of the employees
• Helps attract appropriate talent
• Facilitates collaboration with and among stakeholders

A good vision statement can have many benefits for an organization, including:

 Gives the organization direction: A good vision statement provides a clear and compelling
direction for the organization, and helps guide decision-making and goal-setting. It helps
ensure that everyone in the organization is working towards a common goal.

 Increases production: A good vision statement can help increase productivity by providing a
sense of purpose and motivation for employees. When people are working towards a shared
 goal that they believe in, they are more likely to be engaged and motivated to perform at
their best.

 It inspires the organization: A good vision statement should be inspiring and motivating, and
should provide a sense of purpose and direction for the organization. It should be something
that people can get behind and work towards achieving.

 Unifies the organization: A good vision statement helps unify the organization by providing a
common goal and direction for all stakeholders. It helps ensure that everyone in the
organization is working towards the same outcomes.

 Guides the thinking and action of the employees: A good vision statement should provide a
clear direction for employees, and should guide their thinking and actions as they work
towards achieving the organization's goals.

 Helps attract appropriate talent: A good vision statement can help attract the right talent to
the organization by providing a clear and compelling reason for people to join. When people
understand the organization's vision and mission, and believe in them, they are more likely
to be motivated to join the organization.

 Facilitates collaboration with and among stakeholders: A good vision statement can help
facilitate collaboration among stakeholders by providing a common goal and direction for
the organization. When everyone is working towards the same outcomes, it is easier to find
areas of common interest and work together towards a shared goal.

 4.2.1 Characteristics of a good mission statement

• Should be unique
• Not too broad or too narrow
• Motivates the stakeholders
• In-line with the vision
• Should clearly define the firm’s business in its environment
• Should positively sell the company clients
• Unifying and promotes teamwork

A good mission statement should have the following characteristics:

 Should be unique: A good mission statement should be unique to the organization, and
should set it apart from its competitors. It should be a clear and concise statement of the
organization's purpose and values, and should be something that is meaningful and relevant
to the organization.

 Not too broad or too narrow: A good mission statement should be specific enough to
provide direction and guidance to the organization, but not so specific that it limits the
organization's flexibility or ability to adapt to changing circumstances.

 Motivates the stakeholders: A good mission statement should be inspiring and motivating,
and should provide a sense of purpose and direction for all stakeholders. It should be
something that people can get behind and work towards achieving.

 In-line with the vision: A good mission statement should be aligned with the organization's
vision statement, and should provide a roadmap for how to turn the vision into a reality.

 Should clearly define the firm's business in its environment: A good mission statement
should clearly define the organization's business and its role in the market. It should provide
a clear and concise description of what the organization does and why it is important.

 Should positively sell the company to clients: A good mission statement should be
compelling and persuasive, and should be able to effectively sell the organization to
potential clients or customers. It should clearly communicate the value that the organization
brings to the market.

 Unifying and promotes teamwork: A good mission statement should help unify the
organization and promote teamwork by providing a common goal and direction for all
stakeholders. It should encourage collaboration and help build a sense of community within
the organization.

4.2.2 Benefits of a mission statement

• Communicates the firm’s uniqueness and perspective to its customers
• It builds the firm’s corporate image
• It provides strategic direction as regards the firms present, and future
customers, markets and competitiveness.
• It guides the consistent formulation of objectives
• Acts as a rallying point so as to maintain a competitive sense of direction.
 A good mission statement can have many benefits for an organization, including:
 Communicates the firm's uniqueness and perspective to its customers: A good mission
statement helps communicate the organization's unique value proposition and perspective
to its customers. It helps explain why the organization exists and what it stands for, and
helps differentiate it from its competitors.

 It builds the firm's corporate image: A good mission statement can help build the
organization's corporate image by clearly communicating its values and purpose. It can help
shape the way that the organization is perceived by its stakeholders, and help create a
strong and positive reputation.

 It provides strategic direction: A good mission statement should provide strategic direction
for the organization, and should help guide decision-making and goal-setting. It should
outline the organization's goals and objectives, and provide a roadmap for how to achieve
them.

 It guides the consistent formulation of objectives: A good mission statement should provide
guidance for the formulation of specific, measurable, achievable, relevant, and time-bound
(SMART) objectives. It should help ensure that the organization's goals and objectives are
aligned with its overall mission and vision.

 Acts as a rallying point: A good mission statement should be a rallying point for the
organization, and should help maintain a competitive sense of direction. It should provide a
common goal and purpose for all stakeholders, and help build a sense of community within
the organization.

 4.3.1 Characteristics of good objectives

• Clearly understood by all stakeholders
• In line with the mission statement
• Especially operational objectives should be SMART
• Should be relevant to the firm’s internal and external environment
• Set through and managed by MBO
• Are hierarchical, measurable, relevant and consistent.
 Good objectives should have the following characteristics:

 Clearly understood by all stakeholders: Good objectives should be clear and easy to
understand, and should be communicated effectively to all stakeholders. This helps ensure
that everyone in the organization is working towards the same goals, and helps avoid
misunderstandings or confusion.
 In line with the mission statement: Good objectives should be aligned with the
organization's mission statement, and should support the overall direction and goals of the
organization. They should be specific, measurable, achievable, relevant, and time-bound
(SMART), and should provide a roadmap for how to achieve the organization's goals.

 Especially operational objectives should be SMART: Operational objectives, which are

concerned with the day-to-day activities of the organization, should be particularly SMART.
This helps ensure that they are specific, measurable, achievable, relevant, and time-bound,
and that they provide a clear and actionable plan for achieving the organization's goals.

 Should be relevant to the firm's internal and external environment: Good objectives should
take into account the organization's internal and external environment, and should be
relevant to the challenges and opportunities that the organization faces. They should be
flexible enough to allow for the organization to adapt to changing circumstances, but should
also be specific enough to provide direction and guidance.

 Set through and managed by MBO: Good objectives should be set through and managed by
the process of management by objectives (MBO). This involves setting specific, measurable,
achievable, relevant, and time-bound goals, and establishing a plan for achieving them.

 Are hierarchical, measurable, relevant and consistent: Good objectives should be

hierarchical, meaning that they should be organized in a logical order, with higher-level goals
supporting lower-level goals. They should also be measurable, so that progress towards
achieving them can be tracked and evaluated. They should be relevant to the organization's
overall mission and goals
 4.3.2 Benefits of having good objectives
• Organizational members become goal focused
• They inspire the entire organizations mindset towards the achievement of
desired end results.
 Having good objectives can have many benefits for an organization, including:

 Organizational members become goal focused: Good objectives help focus the attention of
organizational members on specific goals and outcomes, and help ensure that everyone is
working towards the same objectives. This can help improve productivity and efficiency, and
help ensure that the organization is making progress towards its goals.

 They inspire the entire organization's mindset towards the achievement of desired end
results: Good objectives can be inspiring and motivating, and can help shape the
organization's mindset towards achieving desired outcomes. They provide a sense of
purpose and direction, and can help create a culture of excellence within the organization.
 Other benefits of having good objectives include:

 Improved decision-making: Good objectives provide a clear and actionable plan for achieving
the organization's goals, and can help guide decision-making and goal-setting. This can help
ensure that the organization is making informed and strategic decisions that are aligned with
its overall mission and vision.

 Improved communication: Good objectives help communicate the organization's goals and
objectives to all stakeholders, and help ensure that everyone is working towards the same
outcomes. This can help improve communication and collaboration within the organization.

 Improved accountability: Good objectives help ensure that organizational members are
accountable for achieving specific goals and outcomes. This can help improve the
organization's overall performance, and help ensure that the organization is meeting its
commitments.

 Improved performance: Good objectives can help improve the organization's overall
performance by providing a clear and actionable plan for achieving the organization's goals.
They can help focus the organization's efforts and resources, and help ensure that the
organization is making progress towards its objectives.
 4.3.3 Considerations in setting the right mission/ objectives
• Past company history
• Values/ briefs of top management
• The relevant opportunities and threats
• The relevant strengths and weaknesses
• The companies core competence
 There are several considerations that organizations should take into account when setting
their mission and objectives, including:

 Past company history: It is important to consider the organization's past history when setting
its mission and objectives, as this can help provide context and perspective on where the
organization has been, and what it has accomplished. This can help inform the organization's
direction and goals going forward.

 Values/briefs of top management: The values and priorities of the organization's top
management should be taken into account when setting the mission and objectives. This
helps ensure that the organization's goals and objectives are aligned with the leadership's
vision and priorities.
 The relevant opportunities and threats: The organization's external environment should be
taken into account when setting its mission and objectives, including opportunities and
threats that might impact the organization. For example, if there is a new market
opportunity that the organization could pursue, this could be reflected in the organization's
mission and objectives.

 The relevant strengths and weaknesses: The organization's internal strengths and
weaknesses should also be taken into account when setting its mission and objectives. For
example, if the organization has a particular strength or expertise, it could be reflected in
the organization's goals and objectives.

 The company's core competence: The organization's core competence, or unique

capabilities, should be considered when setting its mission and objectives. This helps ensure
that the organization is leveraging its strengths and expertise in order to

 4.3.6 Steps involved in MBO

• Central goal setting
• Individual departmental and operational goal/ objective setting
• Agree on how to meet these objectives
• Allow autonomy in achieving the goals and objectives
• Always explain how their performance relates to the accomplishments of the
overall company objectives.
• Conduct a performance appraisal
• Reward performers and train non performers
 The steps involved in management by objectives (MBO) include:

 Central goal setting: This involves setting the overall goals and objectives for the
organization, which should be aligned with the organization's mission and vision. These goals
should be specific, measurable, achievable, relevant, and time-bound (SMART).

 Individual departmental and operational goal/objective setting: Once the overall goals have
been set, individual departments and operational units should set their own specific goals
and objectives that align with and support the overall goals.

 Agree on how to meet these objectives: Once the goals and objectives have been set, it is
important to agree on a plan for how to achieve them. This might involve setting specific
targets or milestones, and establishing a timeline for achieving the goals.
 Allow autonomy in achieving the goals and objectives: It is important to give employees the
autonomy and responsibility to achieve the goals and objectives, and to provide them with
the resources and support they need to do so.

 Always explain how their performance relates to the accomplishments of the overall
company objectives: It is important to communicate to employees how their performance
aligns with the overall goals and objectives of the organization, and how it contributes to the
organization's success.

 Conduct a performance appraisal: It is important to regularly assess and evaluate the

performance of employees, and to provide feedback on their progress towards achieving the
goals and objectives.

 Reward performers and train non performers: Employees who are meeting or exceeding the
goals and objectives should be recognized and rewarded for their performance, while those
who are not meeting the goals should be provided with additional training or support to
help them improve.
 Merits of MBO
 There are several merits of management by objectives (MBO), including:

 Improved performance: MBO can help improve the performance of an organization by

setting specific, measurable, achievable, relevant, and time-bound (SMART) goals and
objectives, and by providing a clear and actionable plan for achieving them. This can help
focus the organization's efforts and resources, and help ensure that the organization is
making progress towards its objectives.

 Improved communication: MBO can help improve communication within an organization by

clearly communicating the goals and objectives to all stakeholders, and by providing regular
feedback on progress towards achieving them. This can help ensure that everyone in the
organization is working towards the same outcomes, and can help improve collaboration
and teamwork.

 Improved accountability: MBO helps ensure that all stakeholders are accountable for
achieving specific goals and objectives, and for meeting the expectations set for them. This
can help improve the overall performance of the organization, and help ensure that the
organization is meeting its commitments.

 Improved decision-making: MBO can help improve decision-making within an organization

by providing a clear and actionable plan for achieving the organization's goals. This can help
 guide decision-making and goal-setting, and can help ensure that the organization is making
informed and strategic decisions that are aligned with its overall mission and vision.

 Improved motivation and engagement: MBO can help motivate and engage employees by
providing a sense of purpose and direction, and by recognizing and rewarding their
performance. This can help improve morale and retention, and can help create a culture of
excellence within the organization.

 There are also some demerits of management by objectives (MBO), including:

 Time-consuming: MBO can be time-consuming, as it involves setting specific goals and

objectives, and regularly assessing and evaluating progress towards achieving them. This can
be particularly challenging for organizations with large numbers of employees, or for
organizations that operate in fast-paced or rapidly changing environments.

 Inflexible: MBO can be inflexible, as it involves setting specific goals and objectives that may
not be easily adaptable to changing circumstances. This can make it difficult for
organizations to respond quickly to changing market conditions or other external factors.

 May not reflect the organization's broader goals: MBO can be focused on the achievement
of specific goals and objectives, and may not always take into account the organization's
broader goals or values. This can lead to a narrow focus on achieving specific targets, and
may not always result in the most strategic or long-term outcomes for the organization.

 May not align with employee goals: MBO can be focused on the achievement of
organizational goals, and may not always align with the goals or priorities of individual
employees. This can lead to a lack of engagement or motivation, and may not always result
in the most productive or efficient outcomes.

 May result in negative consequences: MBO can sometimes result in negative consequences,
such as employees focusing on achieving specific goals to the exclusion of other important
considerations, or engaging in unethical or questionable behaviors in order to achieve their
targets. This can damage the organization's reputation or relationships, and may have long-
term negative consequences.
 4.5 Areas for setting goals and objectives in an organization
• Profitability
• Customer orientation
• Productivity
• Internal structuring
• Competitiveness
 • Physical and financial resources
• Employee development
 There are several areas where organizations might set goals and objectives, including:

 Profitability: One of the main areas where organizations might set goals and objectives is
profitability. This could involve setting specific targets for revenue, profit, or return on
investment, and establishing a plan for achieving these targets.

 Customer orientation: Another important area for setting goals and objectives is customer
orientation. This could involve setting goals around customer satisfaction, customer loyalty,
or customer acquisition, and establishing a plan for achieving these goals.

 Productivity: Organizations may also set goals and objectives around productivity, which
could involve setting targets for output, efficiency, or quality, and establishing a plan for
achieving these targets.

 Internal structuring: Organizations may also set goals and objectives related to their internal
structure, which could involve setting targets for organizational design, processes, or
systems, and establishing a plan for achieving these targets.

 Competitiveness: Organizations may also set goals and objectives related to

competitiveness, which could involve setting targets for market share, brand recognition, or
product differentiation, and establishing a plan for achieving these targets.

 Physical and financial resources: Organizations may also set goals and objectives related to
their physical and financial resources, which could involve setting targets for resource
acquisition, allocation, or utilization, and establishing a plan for achieving these targets.

 Employee development: Finally, organizations may set goals and objectives related to
employee development, which could involve setting targets for training, retention, or
advancement, and establishing a plan for achieving these targets.

 5.1.1.1 Political
• Government policies
• Political stability
• Foreign trade policies
• Tax policy
• Labor law
• Trade restrictions
 Political factors can have a significant impact on businesses, and can include:

 Government policies: Government policies, including regulatory policies and laws, can have
a major impact on businesses. For example, changes to tax policies or labor laws can
significantly affect businesses' operating costs and practices.

 Political stability: Political stability can also be a significant factor for businesses, as
instability can create uncertainty and risk, which can make it difficult for businesses to plan
and operate effectively.

 Foreign trade policies: Foreign trade policies, including tariffs, trade agreements, and
import/export regulations, can also have a major impact on businesses. Changes to these
policies can affect businesses' access to international markets, and can have significant
implications for their cost structures and profitability.

 Tax policy: Tax policy can also have a major impact on businesses, as changes to tax rates or
policies can affect businesses' operating costs and profitability.

 Labor law: Labor laws, including those related to minimum wage, overtime, and employee
benefits, can also affect businesses' operating costs and practices.

 Trade restrictions: Trade restrictions, such as tariffs or import/export quotas, can also affect
businesses by limiting their access to certain markets or products, or by increasing the costs
of doing business in those markets.
 5.1.1.2 Economic
• Economic cycle
• Exchange rates
• Interest rates
• Demand and supply
• Level of competition
• Inflation rates
• Disposable income
• Unemployment rates
 Economic factors can have a significant impact on businesses, and can include:

 Economic cycle: The overall state of the economy can have a major impact on businesses.
For example, during an economic downturn, businesses may experience reduced demand
for their products or services, which can affect their profitability.
 Exchange rates: Changes in exchange rates can also affect businesses, as they can affect the
cost of importing or exporting goods, and can impact the competitiveness of businesses
operating in international markets.

 Interest rates: Interest rates can also have a significant impact on businesses, as they can
affect the cost of borrowing, and can impact businesses' ability to invest in growth or
expansion.

 Demand and supply: Changes in demand and supply can also affect businesses, as they can
impact the prices businesses are able to charge for their products or services, and can affect
the profitability of the business.

 Level of competition: The level of competition in a market can also have a significant impact
on businesses, as it can affect the prices businesses are able to charge, and can impact the
profitability of the business.

 Inflation rates: Inflation rates can also affect businesses, as they can impact the cost of
goods and services, and can affect the purchasing power of consumers.

 Disposable income: Disposable income, or the amount of money that consumers have
available to spend after taxes, can also affect businesses, as it can impact the demand for
their products or services.

 Unemployment rates: Unemployment rates can also affect businesses, as high

unemployment can lead to reduced consumer spending, which can impact the demand for
businesses' products or services.
 5.1.1.3 Social- cultural
• Cultural beliefs
• Income distribution
• Changes in lifestyle
• Fashion trends
• Standards of living
• Education levels
• Language
 Social and cultural factors can have a significant impact on businesses, and can include:

 Cultural beliefs: Cultural beliefs and values can affect businesses in a number of ways,
including influencing consumer behavior, attitudes towards certain products or services, and
the acceptability of certain marketing messages or practices.
 Income distribution: The distribution of income within a society can also affect businesses,
as it can impact consumer spending patterns and the demand for certain products or
services.

 Changes in lifestyle: Changes in lifestyle, such as increasing mobility or the increasing use of
technology, can also affect businesses, as they can impact consumer behavior and the
demand for certain products or services.

 Fashion trends: Fashion trends can also have a significant impact on businesses, particularly
in industries such as clothing or accessories, as they can affect consumer demand and the
popularity of certain products.

 Standards of living: Standards of living can also affect businesses, as they can impact
consumer spending patterns and the demand for certain products or services.

 Education levels: Education levels can also affect businesses, as they can impact consumer
behavior and the demand for certain products or services.

 Language: Language can also be a significant factor for businesses, particularly in multi-
lingual societies or in international markets, as it can affect the effectiveness of marketing
messages and the ability of businesses to communicate with consumers.
 5.1.1.4 Technological
• Cost of technology
• Access to internet
• Technology incentives
• Level of innovation
• Automation
• Research and development activity
• Technological changes
 Technological factors can have a significant impact on businesses, and can include:

 Cost of technology: The cost of technology, including the initial investment in equipment or
software, as well as ongoing maintenance and upgrade costs, can have a major impact on
businesses.

 Access to internet: Access to the internet can also be a significant factor for businesses, as it
can affect their ability to communicate with customers, access information, and participate
in online markets.
 Technology incentives: Government incentives or subsidies for the adoption of certain
technologies can also affect businesses, as they can impact the cost and feasibility of
adopting certain technologies.

 Level of innovation: The level of innovation within an industry or market can also have a
significant impact on businesses, as it can affect the competitiveness of different firms and
the demand for certain products or services.

 Automation: The level of automation in an industry or business can also affect the cost and
efficiency of operations, as well as the types of skills and knowledge required by employees.

 Research and development activity: The level of research and development activity within
an industry or market can also have a significant impact on businesses, as it can affect the
competitiveness of different firms and the demand for certain products or services.

 Technological changes: Changes in technology can also have a significant impact on

businesses, as they can affect the competitiveness of different firms and the demand for
certain products or services.
 5.1.1.5 Ecological
• Climate
• Weather
• Environmental policies
• Climate change
• Pressures from NGO’s
 Ecological factors can have a significant impact on businesses, and can include:

 Climate: The climate in which a business operates can have a significant impact on its
operations and the demand for certain products or services. For example, businesses in
colder climates may have a higher demand for heating or insulation products, while
businesses in hotter climates may have a higher demand for air conditioning or cooling
products.

 Weather: Changes in weather patterns can also have a significant impact on businesses, as
they can affect the demand for certain products or services, and can impact the ability of
businesses to operate or transport goods.
 Environmental policies: Government policies or regulations related to the environment can
also have a major impact on businesses, as they can affect the costs and feasibility of certain
operations or the use of certain materials or products.

 Climate change: Climate change can also have a significant impact on businesses, as it can
affect the demand for certain products or services, and can impact the ability of businesses
to operate in certain areas or industries.

 Pressures from NGO's: Pressure from non-governmental organizations (NGO's) or other

stakeholders can also affect businesses, as it can impact the public image of the business and
the demand for certain products or services.

 5.1.1.6 Legal
• Discrimination laws
• Consumer protection laws
• Employment laws
• Antitrust laws
• Copyright and patent laws
• Health and safety laws
 Legal factors can have a significant impact on businesses, and can include:

 Discrimination laws: Discrimination laws, which prohibit discrimination based on factors

such as race, gender, age, or disability, can affect businesses by imposing certain hiring,
promotion, or employment practices, or by prohibiting certain types of advertising or
marketing.

 Consumer protection laws: Consumer protection laws, which aim to protect consumers from
fraud or deceptive business practices, can also affect businesses by imposing certain
requirements or limitations on their operations.

 Employment laws: Employment laws, including those related to minimum wage, overtime,
and employee benefits, can also affect businesses' operating costs and practices.

 Antitrust laws: Antitrust laws, which aim to prevent monopolies or anti-competitive

practices, can also have a significant impact on businesses, as they can affect the way
businesses operate and compete in certain markets.
 Copyright and patent laws: Copyright and patent laws, which protect intellectual property,
can also have a significant impact on businesses, as they can affect the way businesses
operate and compete in certain markets.

 Health and safety laws: Health and safety laws, which aim to protect workers and consumers
from hazardous conditions or products, can also affect businesses by imposing certain
requirements or limitations on their operations.

 5.1.2 Industrial analysis:

 This involves the use of Michael Porter’s five competitive forces. These include:
 Threat of new entrants.
• Economies of scale
• Capital requirements,
• Switching costs
• Government policies
• Expected retaliation
• Distribution channels access
• Product Differentiation
 The threat of new entrants is one of the five competitive forces in Porter's model of
industrial analysis. This force refers to the ease with which new firms can enter a market and
begin competing with existing firms. Factors that can affect the threat of new entrants
include:

 Economies of scale: Economies of scale refer to the cost advantages that firms can achieve
through large-scale production. If existing firms in an industry have significant economies of
scale, it can be more difficult for new firms to enter the market and compete effectively.

 Capital requirements: The capital requirements needed to enter a market can also affect the
threat of new entrants. If the costs of starting a business in a particular industry are very
high, it may be more difficult for new firms to enter the market.

 Switching costs: Switching costs refer to the costs that customers incur when they switch
from one product or service to another. If the switching costs for customers in an industry
are high, it can be more difficult for new firms to enter the market and attract customers.

 Government policies: Government policies and regulations can also affect the threat of new
entrants. For example, certain industries may be heavily regulated, which can make it more
difficult for new firms to enter the market.
 Expected retaliation: Expected retaliation refers to the likelihood that existing firms in an
industry will take action to prevent or deter new firms from entering the market. If existing
firms are expected to retaliate aggressively against new entrants, it may be more difficult for
new firms to enter the market.

 Distribution channels access: Access to distribution channels, such as retail stores or online
platforms, can also affect the threat of new entrants. If existing firms in an industry have
established relationships with key distribution channels, it can be more difficult for new
firms to enter the market.

 Product differentiation: Product differentiation refers to the extent to which products or

services in an industry are perceived as being different from one another. If existing firms in
an industry have strong product differentiation, it can be more difficult for new firms to
enter the market and differentiate their products.
 Customers.
• Bargaining power
• Number of customers
• Buying volumes
• Buyer information
• Price sensitivity
• Customers’ ability to use substitutes
• Backward integration
• Switching costs
• Impact on quality
• Brand identity
 The bargaining power of customers is another of the five competitive forces in Porter's
model of industrial analysis. This force refers to the ability of customers to negotiate lower
prices or better terms with firms in an industry. Factors that can affect the bargaining power
of customers include:

 Number of customers: The number of customers in an industry can affect the bargaining
power of individual customers. If there are many customers in an industry, individual
customers may have less bargaining power, as firms may be less reliant on any one customer
for their business.

 Buying volumes: The volumes of products or services that customers purchase can also
affect their bargaining power. If customers purchase large volumes of products or services,
they may have more bargaining power, as firms may be more reliant on their business.

 Buyer information: The level of information that customers have about prices, products, or
services in an industry can also affect their bargaining power. If customers are well-
informed, they may be able to negotiate more favorable terms with firms.
 Price sensitivity: The price sensitivity of customers can also affect their bargaining power. If
customers are sensitive to price changes, they may be more willing to negotiate lower prices
or switch to alternative products or services.

 Customers' ability to use substitutes: The availability of substitute products or services can
also affect the bargaining power of customers. If there are many substitutes available,
customers may have more bargaining power, as they have more options for sourcing their
products or services.

 Backward integration: The extent to which customers in an industry are vertically integrated,
meaning that they produce their own raw materials or components, can also affect their
bargaining power. If customers are vertically integrated, they may have more bargaining
power, as they are less reliant on other firms for their raw materials or components.

 Switching costs: The switching costs for customers can also affect their bargaining power. If
the costs of switching to alternative products or services are high, customers may have less
bargaining power, as they are less likely to switch to alternative options.

 Impact on quality: The impact that customers have on the quality of products or services in
an industry can also affect their bargaining power. If customers are an important factor in
the quality of products or services, they may have more bargaining power.

 Brand identity: The brand identity of firms in an industry can also affect the bargaining
power of customers. If customers are loyal to certain brands, they may have less bargaining
power, as they may be less likely to switch to alternative products or services.
 Substitutes
• buyer propensity to substitutes
• switching costs
• relative price performance of the substitute
 The threat of substitutes is another of the five competitive forces in Porter's model of
industrial analysis. This force refers to the availability of alternative products or services that
can be used in place of the products or services offered by firms in an industry. Factors that
can affect the threat of substitutes include:

 Buyer propensity to substitutes: The willingness of buyers to switch to substitute products or

services can affect the threat of substitutes. If buyers are willing to switch to substitute
products or services, the threat of substitutes will be higher.
 Switching costs: The switching costs for buyers can also affect the threat of substitutes. If the
costs of switching to substitute products or services are high, the threat of substitutes will be
lower.

 Relative price performance of the substitute: The relative price performance of substitute
products or services compared to the products or services offered by firms in an industry can
also affect the threat of substitutes. If substitute products or services are significantly
cheaper or of higher quality, the threat of substitutes will be higher.
 Suppliers.
• Bargaining power
• switching costs
• number
• ability to meet demand
• forward integration
• Importance to the supplier
• Knowledge of the product value to buyer (Brand, quality)
 The bargaining power of suppliers is another of the five competitive forces in Porter's model
of industrial analysis. This force refers to the ability of suppliers to negotiate higher prices or
more favorable terms with firms in an industry. Factors that can affect the bargaining power
of suppliers include:

 Switching costs: The switching costs for firms to switch between suppliers can affect the
bargaining power of suppliers. If the costs of switching to alternative suppliers are high,
suppliers will have more bargaining power.

 Number: The number of suppliers in an industry can also affect the bargaining power of
individual suppliers. If there are many suppliers in an industry, individual suppliers may have
less bargaining power, as firms may be less reliant on any one supplier for their business.

 Ability to meet demand: The ability of suppliers to meet the demand for their products or
services can also affect their bargaining power. If suppliers are able to meet the demand for
their products or services, they may have more bargaining power.

 Forward integration: The extent to which suppliers in an industry are vertically integrated,
meaning that they have the ability to sell their products or services directly to end
customers, can also affect their bargaining power. If suppliers are vertically integrated, they
may have more bargaining power, as they are less reliant on other firms to sell their
products or services.
 Importance to the supplier: The importance of a particular firm's business to a supplier can
also affect the supplier's bargaining power. If a firm is a significant customer for a supplier,
the supplier may have more bargaining power.

 Knowledge of the product value to buyer: The knowledge of the value of the products or
services that a supplier provides to buyers can also affect the supplier's bargaining power. If
a supplier has a deep understanding of the value of their products or services to buyers, they
may be able to negotiate more favorable terms with buyers. This can be particularly relevant
in cases where the products or services are branded or are of a high quality.
 Rivalry
• Number of competitors
• mutual dependency
• industry growth rate
• exit barriers
• Concentration of competitors
• Cost structure
• Diversification by competitors
• Differentiation and switching costs
• Capacity utilization and expansion pattern
• Strategic stakes
• Exit barriers
 The intensity of rivalry among existing competitors is another of the five competitive forces
in Porter's model of industrial analysis. This force refers to the competitive pressure that
firms in an industry face from each other. Factors that can affect the intensity of rivalry
among existing competitors include:

 Number of competitors: The number of competitors in an industry can affect the intensity of
rivalry. If there are many competitors in an industry, the intensity of rivalry may be higher, as
firms may be more likely to compete aggressively for market share.

 Mutual dependency: The extent to which competitors in an industry are mutually dependent
on each other can also affect the intensity of rivalry. If competitors are mutually dependent
on each other, the intensity of rivalry may be lower, as firms may be more likely to
cooperate with each other.

 Industry growth rate: The growth rate of an industry can also affect the intensity of rivalry. If
the industry is growing quickly, the intensity of rivalry may be higher, as firms may be more
likely to compete aggressively for market share.

 Exit barriers: The barriers to exit for firms in an industry can also affect the intensity of
rivalry. If the barriers to exit are high, the intensity of rivalry may be lower, as firms may be
less likely to exit the industry.
 Concentration of competitors: The concentration of competitors in an industry can also
affect the intensity of rivalry. If there are a few dominant competitors in an industry, the
intensity of rivalry may be lower, as these dominant firms may be less reliant on other firms
for their business.

 Cost structure: The cost structure of an industry can also affect the intensity of rivalry. If the
cost structure is high, the intensity of rivalry may be higher, as firms may be more likely to
compete aggressively to recoup their costs.

 Diversification by competitors: The extent to which competitors in an industry are diversified

can also affect the intensity of rivalry. If competitors are diversified, they may be less reliant
on any one product or service, which can lower the intensity of rivalry.

 Differentiation and switching costs: The differentiation of products or services in an industry

and the switching costs for customers can also affect the intensity of rivalry. If products or
services are highly differentiated and the switching costs for customers are high, the
intensity of rivalry may be lower, as firms may be less reliant on any one customer for their
business.

 Capacity utilization and expansion pattern: The capacity utilization and expansion pattern of
firms in an industry can also affect the intensity of rivalry. If firms are operating at high
capacity utilization and are aggressively expanding, the intensity of rivalry may be higher.

 Strategic stakes: The strategic stakes for firms in an industry can also affect the intensity of
rivalry. If the stakes are high, the intensity of rivalry may be higher, as firms may be more
likely to compete aggressively to capture market share.

 5.1.3 Limitations of Michael Porter’s analysis

• Limited availability of information. (High levels of secrecy)
• The available information may not be up to date, relevant or accurate
 Here are five additional limitations of Michael Porter's analysis:

 The model is only applicable to certain industries: Porter's model is most applicable to
industries that are characterized by intense competition, such as manufacturing industries. It
may be less applicable to industries with other types of competitive dynamics, such as
monopolies or oligopolies.
 The model does not account for all external factors: Porter's model only considers five
external factors (political, economic, social-cultural, technological, and ecological). It does
not account for other external factors that may impact an industry, such as natural disasters
or unexpected technological innovations.

 The model does not consider internal factors: Porter's model only considers external factors
and does not take into account internal factors such as a firm's organizational structure,
culture, or management practices.

 The model does not account for change: Porter's model assumes that the external factors
that affect an industry remain relatively stable over time. However, these factors can change
rapidly, which can impact the competitiveness of an industry.

 The model is subjective: The assessment of the five competitive forces is subjective and can
vary depending on the perspective of the analyst. This can lead to different conclusions
about the competitiveness of an industry.
 The model does not consider the impact of globalization: Porter's model assumes that an
industry operates within a single country or region. However, in today's globalized world,
industries often operate across borders and may be impacted by factors such as global
supply chains, international trade agreements, and cultural differences. This can affect the
competitiveness of an industry in ways that are not captured by Porter's model.
 5.2.1 COSSMMIC-
• Customers
• Organizations
• Suppliers
• Shareholders
• Market
• Media
• Intermediaries
• Competitors
 COSSMMIC is a model that can be used to identify and analyze the stakeholders of an
organization. The acronym stands for Customers, Organizations, Suppliers, Shareholders,
Market, Media, Intermediaries, and Competitors. Each of these groups can have an impact
on an organization and its operations, and it is important for organizations to consider the
interests and needs of all of these stakeholders when making strategic decisions.

 Customers: Customers are the primary stakeholders of an organization, as they are the ones
who purchase the products or services that the organization offers. It is important for
organizations to consider the needs and expectations of their customers when making
strategic decisions.
 Organizations: Organizations may also be stakeholders in other organizations. For example,
a company may have a joint venture with another company, or a company may be a supplier
to another company. It is important for organizations to consider the interests of other
organizations that they work with when making strategic decisions.

 Suppliers: Suppliers provide the raw materials, components, or other goods and services
that an organization needs to operate. It is important for organizations to consider the
needs and expectations of their suppliers when making strategic decisions.

 Shareholders: Shareholders are the owners of an organization and are typically interested in
the financial performance of the company. It is important for organizations to consider the
interests of their shareholders when making strategic decisions.

 Market: The market refers to the environment in which an organization operates. This
includes factors such as the competitive landscape, consumer demand, and economic
conditions. It is important for organizations to consider the state of the market when making
strategic decisions.

 Media: The media can have a significant impact on an organization's reputation and public
image. It is important for organizations to consider the media when making strategic
decisions, as the media can affect how the organization is perceived by its stakeholders.

 Intermediaries: Intermediaries are intermediaries between an organization and its

stakeholders. This includes groups such as distributors, wholesalers, and retailers that play a
role in getting the organization's products or services to the final customer. It is important
for organizations to consider the needs and expectations of their intermediaries when
making strategic decisions.

 Competitors: Competitors are other organizations that offer similar products or services as
the organization in question. It is important for organizations to consider the actions and
strategies of their competitors when making strategic decisions, as competitors can have a
significant impact on the organization's success.

 In summary, COSSMMIC is a model that helps organizations identify and consider the needs
and expectations of all of their stakeholders when making strategic decisions. By considering
the interests of each of these groups, organizations can make decisions that are more likely
to be successful and sustainable in the long term.

 5.2.2 Five M’s

 • Materials
• Money
• Machines
• Market
• Man
 The five M's is a model that can be used to identify and analyze the key resources and inputs
that an organization needs in order to operate effectively. The acronym stands for Materials,
Money, Machines, Market, and Man.

 Materials: Materials refer to the raw materials, components, or other goods that an
organization needs to produce its products or services. This can include things like raw
materials for manufacturing, office supplies, or ingredients for food production.

 Money: Money refers to the financial resources that an organization needs to operate. This
includes things like revenue, profits, and investments.

 Machines: Machines refer to the equipment, machinery, or other technology that an

organization uses to produce its products or services. This can include things like
manufacturing equipment, computer systems, or transportation vehicles.

 Market: The market refers to the environment in which an organization operates. This
includes factors such as the competitive landscape, consumer demand, and economic
conditions.

 Man: Man refers to the human resources of an organization, including employees,

management, and other personnel. It is important for organizations to have a skilled and
motivated workforce in order to operate effectively.
 5.2.3 Financial Performance analysis
• Bases on financial ratios to determine improvement and deterioration
• Combines leverage, liquidity, activity and profitability ratios so as to establish
the firm’s standing.
 Financial performance analysis is the process of evaluating an organization's financial
performance over time, using financial ratios and other metrics. Financial ratios are
numerical values calculated using data from an organization's financial statements, such as
the balance sheet, income statement, and cash flow statement. These ratios can be used to
measure various aspects of an organization's financial performance, including its liquidity,
leverage, activity, and profitability.

 There are many different financial ratios that can be used in financial performance analysis,
and which ratios are most relevant will depend on the specific industry and business
context. Some common ratios used in financial performance analysis include:
 Liquidity ratios: These ratios measure an organization's ability to pay its short-term debts
and obligations, and include measures such as the current ratio and the quick ratio.

 Leverage ratios: These ratios measure an organization's financial leverage, or the extent to
which it is using debt to finance its operations. Leverage ratios include measures such as the
debt-to-equity ratio and the debt-to-assets ratio.

 Activity ratios: These ratios measure an organization's efficiency and effectiveness in

managing its assets and operations, and include measures such as the inventory turnover
ratio and the accounts receivable turnover ratio.

 Profitability ratios: These ratios measure an organization's profitability, or the amount of

profit it generates relative to its revenue, expenses, or other financial factors. Profitability
ratios include measures such as the net profit margin and the return on assets ratio.

 By analyzing financial ratios over time, organizations can identify trends and patterns in their
financial performance, and use this information to inform their strategic decision-making.
For example, if an organization is experiencing declining liquidity ratios, it may need to take
steps to improve its cash flow and reduce its debt levels. On the other hand, if an
organization is experiencing improving profitability ratios, it may be well-positioned to invest
in growth opportunities or increase its dividends to shareholders.

 5.2.3.1 Limitations of financial ratio analysis

• Based on past records that disregard the present
• Different organizations use different accounting standards and procedures
• Bases on quantitative data ignoring qualitative data
• Source documents may not be accurate
 Financial ratio analysis does have some limitations that should be considered when using it
to evaluate an organization's financial performance. Some of the main limitations of
financial ratio analysis include:

 Reliance on past data: Financial ratio analysis is based on data from an organization's past
financial statements, which may not accurately reflect its current financial situation. This can
make it difficult to use financial ratios to predict future performance or to make timely
strategic decisions.

 Differences in accounting standards: Different organizations may use different accounting

standards and procedures, which can make it difficult to compare the financial ratios of
 different organizations. This can be especially problematic when comparing companies
across different industries or countries.

 Lack of qualitative data: Financial ratio analysis is based on quantitative data, and does not
take into account qualitative factors that may have an impact on an organization's financial
performance. For example, an organization's leadership, culture, or brand reputation may
not be reflected in its financial ratios, but could still have a significant impact on its
performance.

 Accuracy of source documents: Financial ratio analysis relies on accurate and complete
financial statements, which may not always be the case. If an organization's financial
statements are incomplete or inaccurate, the resulting financial ratios will not be reliable
indicators of the organization's financial performance.

 Limited scope: Financial ratio analysis only looks at financial data, and does not take into
account non-financial factors that may be important for an organization's performance. For
example, an organization's market share, brand reputation, or customer satisfaction may
not be reflected in its financial ratios, but could still have a significant impact on its
performance.

 Ratios are relative: Financial ratios are calculated using data from an organization's financial
statements, and are therefore relative to that organization. This means that the same
financial ratio may have different meanings for different organizations, depending on their
size, industry, or other factors. For example, a high debt-to-equity ratio may be considered a
sign of financial risk for one organization, but may be normal or even desirable for another
organization in a different industry.

 It is important to consider these and other limitations when using financial ratio analysis to
evaluate an organization's financial performance. While financial ratios can be a useful tool,
they should be used in conjunction with other information, such as market trends, industry
benchmarks, and qualitative data, to get a complete picture of an organization's financial
health and strategic position.
 5.2.4.1 Marketing department
• Identifies, anticipates and satisfies the customer’s needs and expectations
• Determines and expands the market share and loyal customer base
• Ensures the efficiency and effectiveness of market information systems
• Conducts market research and development
• Brands the products and builds the corporate image
• Ensures effective promotion
• Determines appropriate pricing strategies
 The marketing department plays a crucial role in helping an organization identify, anticipate,
and satisfy the needs and expectations of its customers. Some specific responsibilities of the
marketing department may include:

 Identifying customer needs and preferences: The marketing department is responsible for
understanding the needs and preferences of the organization's target customers, and for
developing products, services, and marketing messages that meet those needs. This may
involve conducting market research, analyzing customer data, or gathering feedback from
customers.

 Expanding the market share and loyal customer base: The marketing department is
responsible for developing strategies to increase the organization's market share and to
build a loyal customer base. This may involve launching new products or services, developing
new marketing campaigns, or identifying new market segments to target.

 Ensuring the efficiency and effectiveness of market information systems: The marketing
department is responsible for developing and maintaining systems to collect, analyze, and
disseminate market information. This may include tracking sales data, conducting market
research, or monitoring trends and developments in the industry.

 Conducting market research and development: The marketing department is responsible for
identifying new opportunities for growth and innovation, and for developing and testing
new products, services, or marketing strategies. This may involve working with other
departments, such as research and development, to identify and evaluate new ideas.

 Branding the products and building the corporate image: The marketing department is
responsible for developing and maintaining the organization's brand identity and corporate
image. This may involve creating marketing materials, such as logos, slogans, and advertising
campaigns, to promote the organization's products and services.

 Ensuring effective promotion: The marketing department is responsible for developing and
implementing marketing campaigns to promote the organization's products and services.
This may involve creating marketing materials, such as advertisements, brochures, or social
media posts, and deciding how and where to distribute those materials to reach the target
audience.

 Determining appropriate pricing strategies: The marketing department is responsible for

determining the appropriate pricing strategies for the organization's products and services.
This may involve analyzing market data, considering the cost of production, and evaluating
the prices of competitors.
 5.2.4.2 Finance and accounting department
• Ensures financial soundness
• Determines financial ratios (strengths and weaknesses)
• Determines financial planning capabilities and in-capabilities
• They avoid taxes without evading
• Raise additional capital
• Make financial reports/ statements
• Maintain good relationships with stockholders/ shareholders
 The finance and accounting department plays a key role in ensuring the financial soundness
of an organization. Some specific responsibilities of the finance and accounting department
may include:

 Determining financial ratios: The finance and accounting department is responsible for
calculating various financial ratios, such as the debt-to-equity ratio, return on investment, or
gross margin, to help management assess the organization's financial strength and
weaknesses.

 Determining financial planning capabilities and in-capabilities: The finance and accounting
department is responsible for analyzing the organization's financial data to determine its
capabilities and limitations when it comes to financial planning. This may involve evaluating
the organization's cash flow, debt levels, and other factors to determine its ability to invest
in new projects, pay dividends, or take on additional debt.

 Avoiding taxes without evading: The finance and accounting department is responsible for
ensuring that the organization complies with all relevant tax laws and regulations, while also
seeking ways to minimize the organization's tax burden within those laws.

 Raising additional capital: The finance and accounting department may be responsible for
identifying and securing additional sources of capital, such as loans, investments, or equity
financing, to support the organization's growth or operations.

 Making financial reports/statements: The finance and accounting department is responsible

for preparing financial reports and statements for management, shareholders, and other
stakeholders. These reports may include the balance sheet, income statement, cash flow
statement, and other documents that provide information on the organization's financial
performance and position.

 Maintaining good relationships with shareholders: The finance and accounting department
may also be responsible for maintaining good relationships with the organization's
shareholders, by providing them with timely and accurate financial information and
 responding to their questions and concerns. This may involve communicating with
shareholders through earnings calls, annual reports, or other means.

 5.2.4.3 Human resource department

• They get the right workers at the right time with the right skills
• They promote organizational values and culture
• They train staff to ensure competence.
• They motivate staff to achieve organizational goals
• Keep/ maintain a low labor turn over
• Ensure work productivity and make sure it surpasses that of competitors
• They ensure HR strategic fit
 The human resource (HR) department plays a key role in managing the organization's
workforce and ensuring that the organization has the right people with the right skills to
achieve its goals. Some specific responsibilities of the HR department may include:

 Getting the right workers at the right time with the right skills: The HR department is
responsible for recruiting, hiring, and onboarding new employees to ensure that the
organization has the right mix of talent and skills to meet its needs. This may involve
developing job descriptions, posting job openings, conducting interviews, and verifying
references.

 Promoting organizational values and culture: The HR department is responsible for

promoting the organization's values and culture to its employees and helping to create a
positive and supportive work environment. This may involve developing employee
engagement initiatives, promoting diversity and inclusion, or providing opportunities for
professional development and growth.

 Training staff to ensure competence: The HR department is responsible for providing

employees with the training and development they need to be competent and effective in
their roles. This may involve providing in-house training, arranging for outside training, or
providing opportunities for employees to attend conferences or workshops.

 Motivating staff to achieve organizational goals: The HR department is responsible for

developing and implementing strategies to motivate and engage employees and help them
achieve the organization's goals. This may involve implementing employee reward and
recognition programs, offering opportunities for career advancement, or providing support
and resources to help employees succeed in their roles.

 Keeping/maintaining a low labor turn over: The HR department is responsible for helping to
retain talented employees and minimize employee turnover. This may involve developing
 retention strategies, addressing employee concerns or issues, and offering competitive
benefits and other incentives.

 Ensuring work productivity and making sure it surpasses that of competitors: The HR
department is responsible for developing strategies to increase employee productivity and
ensure that the organization's productivity levels are higher than those of its competitors.
This may involve implementing new technologies or processes, setting clear goals and
expectations for employees, or providing support and resources to help employees be more
effective in their roles.

 Ensuring HR strategic fit: The HR department is responsible for ensuring that the
organization's HR policies and practices are aligned with its overall business strategy. This
may involve developing and implementing HR policies and programs that support the
organization's goals and objectives, such as talent management, succession planning, or
employee development.
 5.2.4.4 Operations department
• They process raw materials and ideas into finished goods and services to be sold
to customers
• Should produce high quality goods at lower costs compared to rivals
• Ensure efficiency and effectiveness of the production process
• Produce the right capacity to meet the customers demands
• They ensure plant maintenance
• They ensure the most efficient layout of the plant for effective production
• Conduct inventory control
• Flexibility in the operations and production process
 The operations department is responsible for managing the production and delivery of
goods and services within the organization. Some specific responsibilities of the operations
department may include:

 Processing raw materials and ideas into finished goods and services: The operations
department is responsible for turning raw materials and ideas into finished goods and
services that are ready to be sold to customers. This may involve designing and
implementing production processes, managing the flow of materials, and ensuring that
products meet quality standards.

 Producing high-quality goods at lower costs compared to rivals: The operations department
is responsible for developing and implementing strategies to produce high-quality goods and
services at the lowest possible cost. This may involve identifying and addressing
inefficiencies in the production process, optimizing the use of resources, and adopting new
technologies or processes to improve efficiency.
 Ensuring efficiency and effectiveness of the production process: The operations department
is responsible for ensuring that the production process is as efficient and effective as
possible. This may involve developing and implementing processes to reduce waste and
improve quality, identifying and addressing bottlenecks or other issues that impact
production, and continuously seeking ways to improve efficiency.

 Producing the right capacity to meet customer demand: The operations department is
responsible for ensuring that the organization has the capacity to meet customer demand
for its products and services. This may involve forecasting demand, managing inventory
levels, and adjusting production levels as needed to meet changing demand.

 Ensuring plant maintenance: The operations department is responsible for maintaining the
equipment and facilities used in the production process to ensure that they are in good
working order. This may involve developing and implementing a maintenance schedule,
conducting inspections and repairs, and identifying and addressing potential issues before
they become problems.

 Ensuring the most efficient layout of the plant for effective production: The operations
department is responsible for designing and organizing the layout of the production facility
to ensure that it is efficient and effective. This may involve considering factors such as the
flow of materials, the placement of equipment and machinery, and the proximity of
different work areas to one another.

 Conducting inventory control: The operations department is responsible for managing

inventory levels to ensure that there are sufficient materials and products on hand to meet
customer demand. This may involve forecasting demand, monitoring inventory levels, and
reordering materials as needed to avoid shortages or excesses.

 Flexibility in the operations and production process: The operations department is

responsible for developing and implementing strategies to make the production process
more flexible and adaptable to changing customer demand or market conditions. This may
involve implementing processes that allow for quick changes to production levels or
introducing new technologies or processes that enable the organization to respond more
quickly to changing market conditions.
 5.2.4.5 Procurement and supplies department
• Securing the right products at the right time, quality, quantity, price, place and
from the right sources
• Control the supply chain
• Ensure low procurement costs
• Ensure accuracy of procurement documents
• Ensure the adequate use of e-procurement systems
• Maintain good relationships with suppliers
 • Ensure timely delivery of goods
• Ensure high quality of goods
• Negotiate favorable terms with suppliers
• Manage the inventory and storage of goods
• Ensure compliance with procurement regulations and laws
• Conduct market research to identify new and potential suppliers
• Develop and implement strategies for sourcing and procurement
• Manage the procurement budget and resources efficiently
• Analyze and report on procurement performance

 5.2.4.6 Research and development

 The research and development (R&D) department is responsible for conducting research
and creating new ideas and technologies that can be used to improve the products and
services of the organization. Some of the key responsibilities of the R&D department
include:

• Conducting market research to identify new opportunities and trends

• Developing new products, technologies, and processes that meet the needs and
preferences of customers
• Improving existing products and processes through innovation and
experimentation
• Collaborating with other departments, such as engineering and marketing, to
ensure that new ideas are feasible and aligned with the overall strategy of the
organization
• Prototyping and testing new products and technologies to ensure they meet
quality standards and perform as expected
• Managing the R&D budget and resources efficiently
• Reporting on R&D performance and progress to management and other
stakeholders
• Maintaining knowledge of industry trends and best practices in R&D
• Collaborating with external partners, such as universities, research institutions,
and other organizations, to share knowledge and resources.

 5.2.4.7 Top Management department

• Make strategic decisions
• Make long-term goals and objectives
• Develop and implement the overall strategy of the organization
• Provide leadership and direction to the organization
• Ensure that the organization has the resources and capabilities to achieve its
goals and objectives
• Communicate the vision and mission of the organization to employees and
stakeholders
• Monitor and assess the performance of the organization and make necessary
adjustments
 • Make important decisions on issues such as mergers, acquisitions, and
partnerships
• Represent the organization to external stakeholders, such as investors,
customers, and regulatory bodies
• Manage the resources and budget of the organization effectively
• Ensure compliance with laws, regulations, and ethical standards
• Foster a positive organizational culture and work environment
• Manage and develop the leadership team and succession planning
• Communicate effectively with employees and stakeholders.
 5.2.4.8 IT/ information systems department
 The IT/information systems (IS) department is responsible for managing and maintaining the
organization's information technology (IT) infrastructure and systems. Some of the key
responsibilities of the IT/IS department include:

• Designing, implementing, and maintaining the organization's IT infrastructure,

including networks, servers, and systems
• Ensuring the security, reliability, and performance of the IT systems
• Managing and maintaining the organization's data, including storage, backup,
and recovery
• Providing technical support and troubleshooting for IT-related issues
• Managing the IT budget and resources efficiently
• Developing and implementing IT policies and procedures
• Ensuring compliance with laws, regulations, and industry standards related to IT
and data privacy
• Collaborating with other departments to identify and address IT needs and
opportunities
• Evaluating and recommending new technologies and solutions to improve the
organization's IT capabilities
• Managing and developing the IT/IS team and succession planning
• Staying up-to-date with trends and best practices in the field of IT and
information systems.
 5.2.5 Value Chain Analysis
• This looks at what the current and potential customers value the most. There
are two major kinds of value chain activities. These are primary and supportive.
 Primary value chain activities
• Inbound logistics
• Production and operation
• Out-bound logistics
• Marketing and sales
• After sales services

 Supportive value chain activities

• Company infrastructure
• HR management
• Procurement
 • Value adding technology
• These activities are those that support the primary activities, but do not directly
create value for the customer. They are important for the smooth operation of
the organization and the primary activities.

• Value chain analysis can help organizations identify areas where they can create
value for customers, and create a competitive advantage. By analyzing each
activity in the value chain, organizations can identify opportunities to reduce
costs, improve efficiency, or differentiate their products or services in a way that
is valuable to customers.

• For example, if a company is able to streamline its inbound logistics process and
reduce the cost of acquiring raw materials, it can lower the price of its products
without sacrificing quality. This can be a valuable selling point for customers
who are price-sensitive. On the other hand, if a company focuses on improving
the quality of its after-sales service, it can differentiate itself from competitors
and build customer loyalty.

• Overall, value chain analysis is a useful tool for identifying opportunities to

create value for customers and gain a competitive advantage in the market.
 5.2.6 Strategic Gap Analysis
• This is the process of forecasting future gaps in performance.
• In strategic gap analysis, an organization compares its current performance with
its desired future performance, and identifies the gap between the two. This can
be done at the corporate level, business level, or functional level.

• For example, an organization may set a goal of increasing its market share by 5%
over the next year. If its current market share is 20%, it will need to increase its
sales by 25% to reach its goal. This represents a strategic gap that the
organization needs to close in order to achieve its goal.

• To close the gap, the organization can identify the strategies and actions that it
needs to take. For example, it may need to invest in marketing and sales efforts,
expand into new markets, or develop new products or services.

• Strategic gap analysis is a useful tool for identifying areas where an organization
needs to improve in order to achieve its goals and objectives. It helps
organizations to focus their efforts and resources on the most important areas,
and to track their progress over time.
 5.2.9 Portfolio Analysis
 Portfolio analysis is a tool used to evaluate and manage an organization's portfolio of
products, services, or business units. It helps organizations to understand how each part of
their portfolio contributes to the overall performance of the organization, and to make
informed decisions about how to allocate resources and prioritize investments.

 There are several methods for conducting portfolio analysis, including:

 The Boston Consulting Group (BCG) matrix, which classifies products or business units into
four categories based on their market growth rate and market share: stars, cash cows, dogs,
and question marks.

 The General Electric (GE) McKinsey matrix, which classifies products or business units into
nine categories based on their market attractiveness and internal competitiveness.

 The Ansoff matrix, which helps organizations to identify the most appropriate strategies for
growth by analyzing the relationship between their current and potential products and
markets.

 The Porter's five forces model, which analyzes the competitive forces in an industry and
helps organizations to identify the most attractive opportunities for growth.

 By understanding the strengths and weaknesses of each part of their portfolio, organizations
can make informed decisions about how to allocate resources and prioritize investments in
order to achieve their strategic goals.

 Factors/ determinants of market attractiveness

• Market growth and size
• Industry profitability
• Seasonality
• Porter’s five forces
• Capital requirements
• Technology
• Economies of scale
• Emerging opportunities and weaknesses
• Competition
• Market dynamics
• Regulations
• Customer characteristics
• Supplier characteristics
• Distribution channels
• Political and economic factors
• Social and cultural factors
• Environmental factors
• Legal factors
• Demographic factors
• Geographic factors
• Access to resources
• Access to distribution channels
• Access to customers
• Access to information
• Access to technology
• Access to capital
• Access to intellectual property
• Access to skilled labor
• Access to raw materials
• Access to infrastructure
• Access to regulatory approvals
• Access to licenses
• Access to permits
• Access to concessions
• Access to patents
• Access to copyrights
• Access to trademarks
• Access to trade secrets
• Access to proprietary technology
• Access to proprietary processes
• Access to proprietary designs
• Access to proprietary formulas
• Access to proprietary recipes
• Access to proprietary methods
• Access to proprietary systems
• Access to proprietary equipment
• Access to proprietary software
• Access to proprietary data
• Access to proprietary databases
• Access to proprietary algorithms
• Access to proprietary models
• Access to proprietary insights
• Access to proprietary knowledge
• Access to proprietary wisdom
• Access to proprietary experience
• Access to proprietary expertise
• Access to proprietary best practices
• Access to proprietary benchmarks
• Access to proprietary standards
• Access to proprietary protocols
• Access to proprietary guidelines
 • Access to proprietary policies
• Access to proprietary procedures
• Access to proprietary instructions
• Access to proprietary checklists
• Access to proprietary templates
• Access to proprietary processes
• Access to proprietary systems
• Access to proprietary platforms
• Access to proprietary networks
• Access to proprietary technologies
• Access to proprietary applications
• Access to proprietary solutions
• Access to proprietary services
• Access to proprietary products
• Access to proprietary offerings
• Access to proprietary packages
• Access to proprietary bundles
• Access to proprietary suites
• Access to proprietary collections
• Access to proprietary portfolios
• Access to proprietary lines
• Access to proprietary ranges
• Access to proprietary sets
• Access to proprietary series
• Access to proprietary assortments
• Access to proprietary mixes
• Access to proprietary combos
• Access to proprietary bundles
• Access to proprietary groups
• Access to proprietary clusters
• Access to proprietary categories

 Determinants of competitive strength

• Market share
• Production capacity
• Company image
• Profit margins
• Strength of research and development
• Market and customer knowledge
• Brand recognition
• Quality of products or services
• Distribution network
• Supply chain management
• Marketing and sales capabilities
• Financial resources
• Human resources
• Technology and innovation
 • Operational efficiency
• Government regulations
• Access to raw materials or resources
• Intellectual property
• Corporate reputation
• Corporate social responsibility initiatives
• Relationships with suppliers, partners, and customers
• The competitive advantage of the company (such as cost advantage,
differentiation, or unique capabilities)

 6.5.4 Kotler’s approach

 Looks at the players and their behavior in the market. These positions include:
 6.5.4.1 Business Leaders
 6.5.4.2 Business challengers
 6.5.4.3 Business followers
 6.5.4.4 Nicher positions

 Business Leaders: These are companies that have a strong market position and are able to
set the direction of the market. They often have a larger market share and a strong brand
presence.

 Business Challengers: These are companies that are looking to challenge the market leaders
and try to gain market share. They may be smaller and more agile, allowing them to be more
flexible in their approach.

 Business Followers: These are companies that tend to follow the market leaders and do not
take as many risks. They may be content with their current market share and not feel the
need to challenge the leaders.

 Nicher Positions: These are companies that focus on a specific niche within the market and
do not try to compete with the larger players. They may have a unique product or service
that allows them to differentiate themselves from the competition.
 7.1 Importance of strategic implementation
 Strategic implementation is the process of executing the chosen strategic plan. It is the
translation of the plan into action so that it can be realized. It is important for several
reasons:

 Achieving the desired outcomes: Strategic implementation helps to ensure that the
objectives and goals of the strategic plan are achieved. Without proper implementation, the
plan may not yield the desired results.
 Resource allocation: Implementation helps to ensure that the necessary resources are
allocated to the various activities and initiatives outlined in the strategic plan.

 Coordination: Strategic implementation helps to coordinate the efforts of different

departments and teams within the organization to work towards the common goal.

 Performance measurement: Implementation allows for the monitoring and evaluation of

progress towards the goals and objectives of the strategic plan. This helps to identify any
challenges or obstacles that may need to be addressed.

 Competitive advantage: Effective implementation can give an organization a competitive

advantage by allowing it to effectively execute its strategies and achieve its goals.

 8.4 Monitoring evaluation and control techniques

 There are several techniques that can be used to monitor, evaluate, and control the
implementation of strategic plans. These include:

 Key performance indicators (KPIs): These are specific metrics that are used to measure the
progress and success of an organization in achieving its strategic goals. Examples of KPIs
include financial performance metrics, customer satisfaction scores, and employee
engagement levels.

 Balanced scorecard: This is a management tool that is used to measure the performance of
an organization across four perspectives: financial, customer, internal processes, and
learning and growth.

 SWOT analysis: This is a technique that is used to identify an organization's strengths,

weaknesses, opportunities, and threats. It can be used to help evaluate the effectiveness of
a strategic plan and identify areas that need improvement.

 Benchmarking: This involves comparing the performance of an organization to that of its

peers or industry leaders in order to identify best practices and areas for improvement.

 Six Sigma: This is a methodology that is used to identify and eliminate defects in business
processes. It can be used to help improve the efficiency and effectiveness of an
organization's operations.
 8.5 Characteristics of an effective monitoring and evaluation system
 An effective monitoring and evaluation system should have the following characteristics:

 Clear goals and objectives: The system should be aligned with the organization's overall
goals and objectives, so that it can measure the progress towards these targets.

 Relevant indicators: The system should use appropriate indicators to measure progress, such
as financial performance, customer satisfaction, and employee engagement.

 Timely feedback: The system should provide regular feedback on progress, so that any
necessary adjustments can be made in a timely manner.

 Flexibility: The system should be flexible enough to adapt to changing circumstances and
needs.

 Participation: The system should involve all relevant stakeholders in the monitoring and
evaluation process, to ensure that it is comprehensive and representative.

 Integration: The system should be integrated with other organizational systems and
processes, such as budgeting and planning, to ensure that it is aligned with the
organization's overall strategy.

 Transparency: The system should be transparent, with clear communication and reporting of
the results to all stakeholders.

 Continuous improvement: The system should be designed to encourage continuous

improvement and learning, so that the organization can continuously adapt and improve.
 8.6 Importance of effective feedback for control
 Helps to identify problems and discrepancies in the implementation process.
 Allows for timely adjustments to be made to correct any deviations from the plan.
 Increases the chances of meeting the set goals and objectives.
 Improves the overall efficiency of the implementation process.
 Enhances communication and collaboration among stakeholders.
 Increases accountability and transparency in the implementation process.
 Facilitates the continuous improvement of the implementation process.

 8.7 Requirements for effective control

 There are several requirements for effective control in an organization:

 Clearly defined goals and objectives: In order for control to be effective, it is important that
there are clear and well-defined goals and objectives that the organization is working
towards. This allows for specific and measurable targets that can be used to assess progress
and identify areas for improvement.

 Performance standards: In order to effectively control operations, it is necessary to have

performance standards in place that allow for the measurement of progress towards the
defined goals and objectives. These standards should be based on industry best practices
and should be regularly reviewed and updated as necessary.

 Accurate and timely information: Control is only effective if it is based on accurate and up-
to-date information. This means that the organization should have systems in place to
collect and report on key performance indicators (KPIs) in a timely manner.

 Clear responsibilities and accountability: In order for control to be effective, it is important

that there is clear accountability for the achievement of goals and objectives. This means
that roles and responsibilities should be clearly defined and communicated to all employees.

 Strong communication channels: Effective control relies on strong communication channels

within the organization. This means that there should be regular and open communication
between management and employees, as well as between different departments and
teams.

 Regular review and assessment: Control should not be a one-time exercise, but rather an
ongoing process that involves regular review and assessment of performance. This allows for
the identification of any issues or problems and the development of plans to address them.

 Continuous improvement: Effective control should be focused on continuous improvement,

with a focus on identifying and addressing any problems or issues that may arise. This means
that the organization should be willing to make changes and adapt to new challenges as they
arise.