CHAPTER 10

LESSON 33:
FRAMEWORK FOR STRATEGY
FUNCTIONAL IMPLEMENTATION
IMPLEMENTATION
(CONTINUED)
STRATEGIC MANAGEMENT

Learning Objectiive various factors, which affect the internal operations of the
On completion of this chapter you should be able to: organisation, and these factors should be taken into account
• You should be able to understand the nature of while appraising the organization’s capabilities in these areas.
organizations and the ways in which they convert inputs to 1. Allocations and Use of Resources. The degree of an
produce goods and services. organization’s success or failure depends on the degree of
• You should be able to understand that the purpose of the effective allocation and use of resources. Resources do not
purchasing, marketing, finance and production functions. mean only money, building, and plant but also the scarce
• You should be able to understand the objectives of different resources of management talent, capability, and technical
business functions within overall organizational plan. skills. An organisation making wellbalanced allocation and
use of its resources is in a better position to face challenges
Functional Approach from the environment. The allocation and use of resources
Functional approach of organisational analysis takes into can be balanced by taking into account the need for various
account various functional areas and evaluates these for’ activities contributing to the objectives, their criticality, and
identifying strengths and weaknesses. The major functional resource requirements.
areas are production/operations, marketing, finance and
2. Rationalization of Resources. Another important aspect of
accounting, and human resources. Each of these major areas is
using resources is their rationalization. This problem is more
divided into sub areas, for example, marketing Is divided into
important in the context of multiunit organizations. For
sales promotion, physical distribution, sales volume,’ and so
example, a multiunit organisation may have many plants and
on. Similar is the case with other functional areas. Besides these
offices with duplication of various efforts. The extent to
functional areas, organization’s general management factors are
which the duplication is avoided, the company becomes
also taken into, consideration. Thus, in functional approach of
strong as cost of duplication is a burden on the
organisational analysis, following factors are evaluated to
organisation.
identify strengths and weaknesses:
3. Locational Pattern. Though vocational pattern is affected by a
• Production/operations,
large number of factors, both economic and noneconomic, it
• Marketing, affects the operational efficiency of the organisation. Such
• Finance, locational pattern can be analysed both for plants as well as
• Human resources, and for administrative offices. The extent to which organization’s
plants and offices are located at favourable places, it stands to
• General management.
benefits and that is a strength for it. For example, opening
In the discussion that follows, various features of these factors,
of plants in backward areas may offer various advantages
indicating strengths and weaknesses have been presented. While
because of incentives from the government, but opening of
using these features in respect of various factors, two points
administrative offices may not offer the similar advantages.
should be taken into consideration:
This is the reason why many companies go for backward
1. These features provide a normative and suggestive list; in areas for establishing production facilities but open offices in
actual practice, these factors may vary depending on the welldeveloped areas, for example, Fort area in Mumbai or
nature of organizations. Chowranghee area in Kolkata.
2. Since organisational analysis is meant to relate strategy to 4. Production Capacities and its Use. The use of production
environment, it is always future oriented. Therefore, these capacity affects the profitability of the organisation. High use
factors should not be evaluated on static basis but on of production capacity is strength but a low use of this is a
dynamic basis in the context of environment. In fact, in weakness because the organization’s cost of production in
many cases, the present strengths may turn to be weaknesses this case may be very high.
because of environmental changes. Various factors have been
5. Cost Structure. The cost structure of the product affects the
presented, here, in a sequence for the sake of convenience in
organization’s profitability. If the cost of product is high, it
analysis and not in order of their importance.
is a weakness. Moreover, the extent to which cost cannot be
Production/Operations controlled is also weakness of the organisation. Thus, low
Production / Operations processes are the mediating factors for cost with high level of controllability is a strength and high
converting raw materials into finished products. There are cost with low. level of controllability is weakness.
6. CostVolumeProfit Relationship. While cost structure gives
the general idea of high or low cost, costvolumeprofit

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 relationship suggests the profitability of the organisation at

STRATEGIC MANAGEMENT
various levels of production. If the relationship is
such that it gives break even at high level of Strengths and weaknesses in production/operations
production with low margin of safety, it is weakness
for the organisation, On the other hand, if break Strengths Weaknesses
even point is low with high margin of safety, it is 1. Well-balanced allocation and use 1. Defective allocation and use
strength for the organisation.
of resources of resources
7. Operation Procedures. Efficient and effective
operation procedures like production design, 2. Favourable locational pattern of 2. Unfavorable locational
scheduling, output, and quality control affect the plants and offices pattern of plants and offices
internal efficiency of the organisation. As such, these
are the strengths for the organisation, and opposite 3. Adequate use of production 3. Inadequate use of
of these will be weakness because these will affect capacity production capacity
organisational efficiency adversely.
4. Low cost of production 4. High cost of production
8. Raw Materials Availability. The extent to which the
raw materials are critical and scarce and are supplied 5. Low break-even point 5. High break-even point
from very limited sources; the organisational 6. Efficient and effective procedures 6. Ineffective procedures
functioning is adversely affected. In such a case, the
organisation does not have any control or has very 7. Abundant and multi sources of 7. Scarce and limited sources of
limited control over the supply of raw materials. raw materials supply raw materials supply
Hence, its dependence on the limited sources of
8. Effective inventory control 8. Ineffective inventory control
supply of raw materials is a weakness. If the
company is procuring its materials from system system
welldiversified sources and the materials are easily 9. Adequate and effective research 9. Inadequate and ineffective
available indigenously, its dependence is less, which is
a strength for it. and development research and development
9. Inventory Control System. An efficient inventory 10. Holding of well-established 10. No patent right
control system, which pinpoints on the various patent right
aspects of materials, provides strength to the
organisation because it can control and regulate the
procurement of materials in such a way that its cost
is minimum and there is no unnecessary hindrance in the Marketing
production. A defective and nonexistent inventory control Marketing factors are of prime importance for a business
system is a weakness. organisation as it relates itself to its environment through
marketing functions. The managers should appraise the
10.Research and Development. Research and development is an
organisation in the light of various marketing factors taking
important area where management should concentrate
into account how these factors are contributing or not contrib-
because of two reasons. First technical collaboration with any
uting to the achievement of organisational objectives and how
foreign organisation lasts up to five years with an extension
long they will continue to do so if the same position continues.
of three years in exceptional cases. The government
Prominent marketing factors taken for evaluation are as follows.
stipulates that local organizations, should develop its R&D
during this period. Second, there are special tax benefits on 1. Competitive Competence
the expenditure of R&D and products developed out of the Business organizations have to operate in a competitive field,
organization’s R&D efforts. In order to take the advantages, except in the case of protective markets where markets are not
the organisation must take R&D activities and ,must evaluate defined by individual company or market factors but by
as how these are contributing to the organisational product nonmarket factors. The organization’s competitive competence
development. R&D activities can be evaluated in terms of can be appraised on the basis of trends in market shares for
amount spent on them, number of products developed, or which the information can be made available from various
number of patents registered by inside R&D. A high score outside sources as well as through the organization’s own
on these items is strength of the organisation. marketing research department. Apart from market shares,
11.Patent Rights. Organizations holding certain patent rights many other factors also go in determining the competitive
under which they can use some wellestablished brand names competence as described below.
have certain advantages because they have not to incur any 2. Product Mix.
extra expenditure for promoting the brand. Product mix decides the various sources of revenue to the
On the basis of the above discussion, the major strengths and organisation. This is true not only for a diversified organisation
weaknesses In the field of production/operations can be but even for a single class. If the revenue is coming from a
identified as depicted in Table below

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 single product or from very limited number of
STRATEGIC MANAGEMENT

products for a diversified company, this may be its

Strengths and weaknesses In marketing
weakness.
Strengths Weaknesses
3. Product Life Cycle
Product life cycle is an attempt to recognize distinct 1. Favourable company image 1. Poor company image
stages in the sales history of the product. Corre-
2. Diversified product-mix 2. Single or limited product
sponding to these stages are the various marketing
opportunities and threats. Normally every product 3. High market share 3. Low market share
and brand has to pass through a life cycle: introduc- 4. Growing or maturing stage of 4. Declining product life cycle
tion stage. growth stage, maturity stage, and
declining stage. Products at declining stage are the product life cycle
weak point for the organisation and adequate 5. Effective and efficient 5. Ineffective distribution channel
precaution must be taken.
distribution channel
4. Marketing Research
Marketing research offers the information for 6. Efficient and motivated sales 6. Inefficient sales force With
taking various marketing decisions in the light of force with contacts with large limited contact with customers
the environmental demand. The efficient and
number of customers
effective marketing research system is strength for
the organisation because it will enable to relate the 7. Efficient promotional efforts 7. Lack of promotional efforts
organisation with its environment through suitable
and proper product positioning
strategy.
8. Efficient marketing research 8. Defective or no marketing
5. Channel of Distribution
An effective channel of distribution is strength of and feedback system Research
the organisation because it not only distributes the 9. Pricing commensurate with 9. Pricing unrelated to product
products at the points where these are needed but
also provides the feedback regarding the changes in product and market features and market features
the market forces. However, a centralized distribu- 10. Review and updating of 10. Stagnant marketing strategy.
tion channel may be a weak point because it may
weaken the organization’s position at the time of marketing strategy.
emergency.
6. Sales Force Finance
An effective and efficient sales force closed with key customers is Finance area deals primarily with raising, administering, and
a strength for the organisation because it may withstand any distributing financial resources to various activities so that a
threat posed by the environment. However, sales force concen- proper balance is maintained and the organisation achieves its
trating sales efforts to a few customers may be weakness. objectives. Since the objective achievement is often expressed in
7. Pricing monetary terms, the areas of finance and accounting have
Pricing is a factor, which affects both sales as well as revenue to assumed added importance. The extent to which the
the organisation, particularly in pricesensitive markets. Though organisation has effective financial management and accounting
there can be different pricing strategies in different markets and system, it is strong. The strengths and weaknesses in the areas
at different product life stages, these must match with the of finance and accounting can be ascertained in the following
product and market. ways.
8. Promotional Efforts 1. Capital Cost
Various promotional efforts affect the positioning of the The various sources through which the organisation raises its
products in the market. They also affect the brand images as financial funds determine the capital cost. A proper balancing of
well as the general image of the organisation. Effective various sources of financing ensures that the overall cost of
promotional efforts are strength for the organisation and their capital for the organisation is low. While determining the
absence a weakness. sources for funds, various factors can be taken Into account,
On the basis of the analysis of various factors of marketing, such as debt/equity norm, capital market position, profitability
strengths and weaknesses in this area are presented in Table of organisation, and various conditions attached with funds. A
below low capital cost is a strength and high capital cost is weakness.
2. Capital Structure
Capital structure of an organisation determines the scope for
flexibility in raising additional capital needed, maintaining
financial leverage, and maintaining minimum capital cost. An
effective capital structure is strength which provides for greater

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flexibility for raising funds and appropriating various sources of

STRATEGIC MANAGEMENT
funds so as to take advantages of trading on equity.
3. Financial Planning Strengths and weaknesses in finance
Financial planning is the determination, in advance,
of the quantum of capital requirement and its Strengths Weaknesses
forms. Thus, it determines what types of assets will 1. Low capital cost 1. High capital cost
be required to run the business and how much
capital will be required for this, time when the capital 2. Sound capital structure 2. Defective and rigid capital
is required, and from where the necessary capital will structure
be available. If the organisation plans all these
things well in advance, it stands to benefit and thus, 3. Sound financial planning and 3. Bad financial planning
it is its strength.
proper capitalization either over or under-
4. Tax Benefits
Tax benefits are partly the result of efficient financial
capitalization
planning and partly the result of environmental 4. Advantages of tax 4. High incidence of taxes
variables, particularly government policy. If the
organisation is planning its investment pattern
concessions
properly, it takes the advantages of tax benefits 5. Widely distributed 5. Shareholding in a few
under the provisions of Sections 32A. 801, 80HH,
35 (2ia), and 35(28a). Advantages under these shareholding hands
provisions may reduce the tax liability of the 6. Cordial relations with 6. Lack of cordial relations
organisation to a very low level or even zero level,
consequently improving its liquidity. Similar shareholders and financiers with shareholders and
advantages may accrue in indirect taxes also. financiers
5. Pattern of Shareholding 7. Efficient and effective 7. Lack of proper accounting
The pattern of shareholding decides the type of
threats the organisation may fare regarding its take accounting systems and systems and procedures
over by another company or group. If the procedures
shareholding is widely distributed, the company and
its present management can run things smoothly
and can think in longterm perspective. Thus, wider
shareholding provides strength to the organisation but Human Resources
concentration of shareholding even in the hands of financial In organisational analysis, often, human resources are not given
institutions may be a weakness. adequate importance because of the perception that these
6. Relationship with Shareholders and Financiers resources do not contribute to organisational success. This
The type of relationship between the company and its share- perception was valid in preliberalized era, when most of the
holders and financiers determines the type of risk that the organizations were operating in protected markets. However,
company can take. If such relationship is cordial, the company postliberalization, the competitive scenario has changed from
can go for smooth working even in case of adversity and can sellers’ market to buyers’ market in which organizations are
undertake major policy changes. The role of shareholders and using human resources as a means for developing competitive
financiers is quite important in formulating and implementing advantage. In this context, Ghoshal has observed as follows:
these policies because such actions can be taken only after their A growing number of managers in India and abroad have
approval. begun to, recognize that the fundamental basis of competition
7. Accounting Procedures has begun to change. The scarce resource, and the primary
Efficient accounting procedures and systems for costing, source of competitive advantage, is no longer physical or
budgeting, profit planning, and auditing not only determine financial capital, but human capital. As large assetbased compa-
that there is no misappropriation of funds but also provide nies like TISCO see the market value of pygmies like Infosys
feedback for further course of action. They provide information soar past theirs, the notion of competing through people has
at the points where it is needed and the time when it is needed. been transformed from a fashionable and politically correct
Absence of such systems provides inefficiency in the statement to a serious cause for concern
organisation and it cannot know the way in which it is progress- Similar view has been expressed by leading organizations of the
ing. country. For example, Y.C. Deveshwar, Chairman of ITC
On the basis of above discussion, the major strengths and Limited has viewed that “the secret of creating a winning
weaknesses in the area of finance are presented in Table corporation lies in the appreciation of potential value of human
capital and in the ability of the distributed leadership within the
company to nurture and mobilize such talent. In fact, one

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 billionaire of Silicon Valley, USA has commented, “my employ- 3. Industrial Relations
STRATEGIC MANAGEMENT

ees are my most important assets. When they go home in the Industrial relations is a basic element for the success of the
evening, my net worth drops to zero.” The importance of organisation particularly in the age of frequent industrial
analyzing human resources is as follows: relations problems. Better industrial relations is strength for the
1. Human resources handle all physical and financial resources organisation. The state of industrial relations can be measured
in an organisation. Without their efforts, these nonhuman taking into account the breakdown in work because of em-
resources remain idle. In this context, Likert observes that ployee agitation or noncooperation, number of industrial
“all the activities of any enterprise are initiated and disputes, number of grievances from the employees, employee
determined by the persons who make up that institution: absenteeism and turnover, and their willingness to accept
plants, offices, computers, automated equipments, and all change in the organisation.
else that a modem firin uses are unproductive except the
human efforts.
2. Human resources are the source of creative
energy. In today’s dynamic world, creativity is
Strengths and weaknesses In human resources area
vital to every organisation. Creative thinking is
the process of bringing a problem before one’s Strengths Weaknesses
mind clearly by imagining, visualizing, 1. Highly skilled personnel 1. Low skilled personnel
supposing, musing, contemplating, or the like,
and then originating an idea, concept, 2. High learnability 2. Low learnability
realization, or picture along new or 3. Favourable attitudes to change 3. Unfavorable attitudes to change
unconventional lines. People in the
organisation are the only source of such 4. High motivation and morale 4. Low motivation and morale
creativity. They can produce unlimited ideas. 5. High personnel retention 5. High personnel turnover
There is no apparent limit to what people can
accomplish when they are motivated to use 6. Low personnel absenteeism 6. High personnel absenteeism
their potential to create new and better ideas. 7. Effective industrial relations 7. Ineffective industrial relations
No other resource in the organisation can do
that.
On the basis of the above discussion, major strengths and
Human resources can be used as a means for developing
weaknesses in the area of human resources are presented in
competitive advantage which may be in the form of lower cost
Table below
of production, development of products for special needs,
unique means for marketing the products, developing means General Management
for raising funds at lower cost, etc. Since human resources do all Various factors discussed above are, no doubt, important but
these, they can be geared to achieve all these. they cannot work well without the support of suitable leader-
In analyzing human resources, following factors are taken into ship and various management practices. These are the
consideration: integrating force of an organisation. Therefore, strategists
should analyze these factors to identify strengths and weak-
1. Quality of Personnel nesses. Following factors are relevant in this category:
Quality of personnel employed by an organisation is a key
determinant of its success. The quality of personnel includes 1. Leadership
their knowledge, skills, attitudes, and motivation to work. If all Leadership is the process of winning enthusiastic support of
these characteristics are favourable, these are strengths as these personnel in an organisation. It is one of the major determi-
can be used as a means for translating physical and financial nants of organisational success. Good leadership characterizes
resources into outputs in a better way. most of the organizations, which have achieved high success,,
and they place emphasis on transformational leadership as
2. Personnel Turnover and Absenteeism against transactional leadership. A transformational leader
Personnel turnover, particularly at managerial and technical inspires his followers through high vision and energy. A
levels, is a big problem for organizations in today’s context. In transactional leader determines what subordinates need to do to
knowledgebased industries like information technology, achieve objectives, classifies those requirements, and helps the
consultancy, etc., this problem is even more acute. Since subordinates become confident that they can reach objectives.
organizations build their strategies around the personnel
available at present or available in future, retention of personnel 2. Top Management Constitution and Philosophy
is a significant issue. To the extent, an organisation is able to Top management contributes the lifeblood for the total
retain its key personnel, it has strength. Coupled with personnel organisation. Its constitution and philosophy are strong
turnover is personnel absenteeism. Those organizations, which determinants of organisational success. Organisation character-
are able to manage personnel turnover and absenteeism, have ized by ageold and traditional management is less likely to
strengths. succeed in the environment of growing competition. Enterpris-
ing approach of top management is also an important factor
determining the growth of the organisation. Thus,

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futureoriented top management having enterprising profes-

STRATEGIC MANAGEMENT
As discussed earlier, the organisation has to work in environ-
sional approach is strength of the organisation. ment where large number of factors exists. These factors affect
3. Organisational Image and Prestige the organisational operations by offering facilities and con-
Organisational image and prestige affect the organisational straints to it. The extent to which the organisation builds
working by providing it various facilities and constraintsbetter relationships with the factors offering such facilities and
image and prestige providing facilities and low image and constraints, including government and other regulatory bodies,
prestige providing constraints. The measurement of corporate Its success or failure is determined. If its relationship with the
image and prestige, however, is quite difficult because of the various external forces is good, it stands to affect these forces
absence of any quantitative criteria. For this purpose, various favourably making use of most facilities and avoiding con-
indicators can be taken into account, such as appraisal of straints, hence strength for the organisation.
organisational working by third parties, willingness of financial
institutions to advance loans, customers’ loyalty towards the
products offered by the company, level
of satisfaction to suppliers and creditors Strengths and weaknesses in general management
of the company, importance attached to
the statements by the company, etc. A Strengths Weaknesses
favourable reaction on these factors is an 1. Transformational leadership 1. Transactional leadership
indicator of better company image and
prestige which is a strength for the 2. Future-oriented top management 2. Present-oriented top management
company. 3. High organisational image and prestige 3. Low organisational image and
4. Organisational Climate prestige
Organisational climate is the internal set
4. Sound organisational climate based on 4. Low organisational climate based on
of attributes specific to an organisation
that may be induced from the way the mutual trust and respect authoritarian culture and mutual
organisation deals with its members. suspicion
Thus, organisationmembers relation-
ship is built upon the basis of how the 5. Sound and suitable management 5. Ineffective management practices
former treats the latter. Organisational practices
climate can be measured by taking into
account how its members react to 6. Suitable organisation structure 6. Lack of well-defined or ill-defined
various actions, how willingly they consistent with external and internal organisation structure
cooperate with it in achieving its
demands
objectives, and how satisfied they are
with the organisation. A sound 7. Well-maintained external relationships 7. Lack of external relationships
organisational climate based on mutual
trust and confidence and human
consideration is strength for the organisation. Based on the above discussion, major strengths and weaknesses
in the area of general management can be summarized as given
5. Management Practices in Table below
The extent to which the organisation follows various manage-
ment practices affects its success. High scores on managerial Notes
practices in respect to strategic planning, objective control and
evaluation system, management information system, and
manpower planning and succession plan are strengths of the
organisation.
6. Organisation Structure
Organisation structure is network of internal relationship
through which individuals interact among themselves in the
context of organisational matters. A suitable organisation
structure is strength for the organisation. The suitability of
organisation structure is not universal phenomenon but is
determined by the organization’s environment, technology, size,
and people. Thus, a suitable organisation structure is one,
which meets the demands of all these factors.
7. Organisational External Relationships

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