UNIT II

 Strategy formulation refers to the process of choosing the most appropriate course of action for the realization of organizational goals and objectives and thereby achieving the organizational vision.  The process of strategy formulation basically involves six main steps  Framing Mission & Vision.  Analysis of the Internal Environment  Analysis of External Environment  Gap Analysis  Framing Alternative Strategies.  Choice of Strategy

 Developing vision & mission  Identifying external opportunities and threats  Determining internal strengths & weakness.  Establishing long term objectives  Generating alternative strategies  Choosing particular strategies to pursue.  Deciding what new business to enter

 The vision statement answers the question “ What do we want to be”.  A vision has to be communicated to the members of the organization..  Communicating the strategic vision down the line to lower level managers and employees is almost as important as setting the organizations long term direction.  A view of an organizations future direction and business course  a guiding for what the organization is trying to do and to become. What do we want to become?

 Mission statement tries to provide answer to the question “ What is our business”.  Some companies develop only a mission statement which reflects the vision os the company.  It reflects the purpose of companies existance.  Should guide the actions of the organisation  Three essential components of Mission Statement:  Key market.  Contribution  Distinction

 First to select several articles about mission statements and ask all managers to read these as background information  Ask managers themselves to prepare a mission statement for the organization  Committee of top managers should then merge these statements into a single documents,  Than distribute this draft mission statement to all managers as a request for modifications  Finalize the modified statement in front of CEO.s

 Should not too lengthy; recommended is less than 200 words  Arouses positive feelings and emotions about an organization  Generates the impression that a firm is successful, has direction  Distinguish a given organization from all others  Widely understood throughout the organization  Identify the utility of a firm’s products to its consumers

 Do not offer me clothes. Offer me attractive looks.  Do not offer me shoes. Offer me comfort feet of walking.  Do not offer me a house. Offer me security, comfort, and place that is clean and happy.  Do not offer me books. Offer me hours of pleasure and benefit of knowledge.  Do not offer me records. Offer me leisure and sound of music.  Do not offer me things. Offer me ideas, emotions, ambience, feelings and benefits.

The environmental survey is necessary to:  Learn about events and trends in the environment and project the future position in each factor of environment.  To identify the favorable and unfavorable factors in the environment from the standpoint of the firm.  To figure out opportunities and threats hidden in environmental trends and events.  To assess the scope of various opportunities and shortlist ones which have the potential of becoming promising business  To formulate strategy in line with opportunities.

 Environment is inseparable part of Business  Environment is dynamic.  Business lacks control over environment.  Environment regulates the scope of Business.  Direct & long lasting impact.  Internal & external factors.  Environment is complex.  Environment is multi-faceted.  Environment & planning.  Opportunities & obstacles.

 Ensures survival & success.  Facilitates Planning.  Helps to grab opportunities.  Minimizes threats.  Builds Image.  Helps in innovation.  Ecological balance.  Facilitates alternative choice.  Optimum use of resources  Flexibility in operations  Helps to be active and alert  Helps to face competition

StrengthsWeaknesses Opportunities ! Threats SWOT Analysis For Organizational Success

Globus Inc. is a leading manufacturer of baby products. It has decided to venture into the market of cosmetics with the launch of a new brand of cosmetics ‘Glaze’ in the market. However, before Globus can actually make the final decision of venturing into a new market, it needs to find out the things that are working in its favor and the aspects that can lead to the failure of its new venture.

Globus Inc. is a leading manufacturer of baby products. It has decided to venture into the market of cosmetics with the launch of a new brand of cosmetics ‘Glaze’ in the market. However, before Globus can actually make the final decision of venturing into a new market, it needs to find out the things that are working in its favor and the aspects that can lead to the failure of its new venture. What do you think Globus should do to analyze this situation?

Globus can do a SWOT Analysis of its position in the market. Carrying out a SWOT Analysis will help Globus understand the company’s strengths, weaknesses, opportunities and threats. SWOT Analysis would help Globus understand its strengths that would be helpful in the new venture, its weaknesses that need to be overcome to be successful in launching the new products, the opportunities that it has at hand to succeed in the new venture and the threats that it perceives to the success in the new venture.

Globus can do a SWOT Analysis of its position in the market. Carrying out a SWOT Analysis will help Globus understand the company’s strengths, weaknesses, opportunities and threats. SWOT Analysis would help Globus understand its strengths that would be helpful in the new venture, its weaknesses that need to be overcome to be successful in launching the new products, the opportunities that it has at hand to succeed in the new venture and the threats that it perceives to the success in the new venture. Hence, you can see that an organizational SWOT Analysis can be a very useful tool for a company’s development to succeed in any venture. Let us look at organizational SWOT Analysis in detail.

O SW T Opportunities are: Chances to make greater profits in the environment. External attractive factors that represent the reason for an organization to exist and develop. Condition of the environment that benefits the organization in planning and executing strategies that enable it to become more profitable. Organization should be careful and recognize the opportunities and grasp them whenever they arise. Opportunities may arise from market, competition, industry/government and technology.

O SW T STRENGTHS Characteristics of the business or a team that give it an advantage over others in the industry. Positive tangible and intangible attributes, internal to an organization. Beneficial aspects of the organization or the capabilities of an organization, which includes human competencies, process capabilities, financial resources, products and services, customer goodwill and brand loyalty. Examples – Godrej consumer Products

O S T WEAKNESS W Characteristics that place the firm at a disadvantage relative to others. Detract the organization from its ability to attain the core goal and influence its growth. Weaknesses are the factors which do not meet the standards we feel they should meet. However, sometimes weaknesses are controllable. They must be minimized and eliminated. Examples - Limited financial resources, Limited distribution, Higher costs, Out-of-date products / technology, Weak market image, Poor marketing skills, Limited management skills.

O S T W THREATS External elements in the environment that could cause trouble for the business - External factors, beyond an organization’s control, which could place the organization’s mission or operation at risk. Arise when conditions in external environment jeopardize the reliability and profitability of the organization’s business. Compound the vulnerability when they relate to the weaknesses. Threats are uncontrollable. When a threat comes, the stability and survival can be at stake. Examples – Godrej consumer Products

Mc Donald’s SWOT Analysis

WEAKNESSES Failing pizza test market thus limiting the ability to compete with pizza providers. High training costs due to high turnover. Minimal concentration on organic foods. Not much variation in seasonal products. Quality concerns due to franchised operations. Focus on burgers / fried foods not on healthier options for their customers. Ranks very high on the Fortune Magazine's most admired list Community oriented Global operations all over the world Cultural diversity in the foods Excellent location Assembly line operations. Use of top quality products STRENGTHS INTERNAL Marketing strategies that entice people from small children to adults. Lawsuits for offering unhealthy foods. Contamination risks that include the threat of e-coli containments. The vast amount of fast food restaurants that are open as competition. Focus on healthier dieting by consumers. Down turn in economy affecting the ability to eat that much. THREATS Opening more joint ventures. Being more responsive to healthier options. Advertising wifi services in the branches. Expanding on the advertising on being more socially responsible Expansions of business into newly developed parts of the world. Open products up to allergen free options such as peanut free. OPPORTUNITIES EXTERNAL

Forecasting Provides a variety of information critical to forecasted variables. Threats, for e.g., can impact a business's forecast. By understanding the company's advantages & disadvantages, forecasts will be more accurate. Decision Making Tool Provides well-rounded information that prompt well-informed decisions. Knowing the Competion Reviews a company's competitors & benchmarks against them to configure strategies that will put the company in a competitive advantage. Benefits of SWOT Analysis

Helps in setting of objectives for strategic planning Besides the broad benefits, here are few more benefits of conducting SWOT Analysis: Provides a framework for identifying & analyzing strengths, weaknesses, opportunities & threats Provides an impetus to analyze a situation & develop suitable strategies and tactics Basis for assessing core capabilities & competencies Evidence for, and cultural key to, change Provides a stimulus to participation in a group experience

Can be very subjective. Two people rarely come up with the same final version of a SWOT. Use it as a guide and not as a prescription. May cause organizations to view circumstances as very simple due to which certain key strategic contact may be overlooked. Categorizing aspects as strengths, weaknesses, opportunities & threats might be very subjective as there is great degree of uncertainty in market. To be effective, SWOT needs to be conducted regularly. The pace of change makes it difficult to anticipate developments. The data used in the analysis may be based on assumptions that subsequently prove to be unfounded [good and bad]. It lacks detailed structure, so key elements may get missed.

 Decide on the objective of your SWOT analysis.  Research your Business, Industry, Market.  List your Business Strengths  List your Business Weakness  List your potential opportunities  List your potential threats  Establish priorities from SWOT  Develop a strategy to address issues in the SWOT