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STRATEGIC MANAGEMENT AND

BUSINESS POLICY
BBA-VI SEMESTER
UNIT-II
Syllabus of Unit II
 Responsibilities and tasks of top management: objective of
business characteristics, Classification ,types of objectives and
their overall hierarchy
 Setting of objectives ,key areas involved
Roles & Responsibilities of Management
Top level managers work at the top of organization and guide strategy and
planning:
1) Top level managers consist of board of Directors,Presidents,Vice-presidents
CEO, General Managers and senior Managers.
2) They develop goals, strategic plans, company policies and make decisions
about the direction of the business.
3) Top managers need to have more conceptual skills than technical skills.
They understand how competition, politics and social trends affect
organizational effectiveness.
4) Responsible for controlling and overseeing the entire organization.
5) They do not direct the day to day activities of the firm but develop
goals, strategic plans, Company policies and make decisions.
6) Perform various top administrative functions.
7) Perform Managerial Skills- Conceptual skills, Interpersonal Skills, Technical
Skills
8) They prepare long term plan of the organization
9)Maximum authority and Responsibility of Organization
10)Spend more time in planning /thinking /Decision Making and organizing
11)Other basic functions-
planning,organising,staffing,directing,controlling,Motivation and
Communication.
12) Important Roles performed by a Top Management-
Interpersonal Roles, Informational Roles and Decisional Roles.
Role of a manager
• Manager perform different roles. Formal authority give rise to three
informational roles:-
I) Interpersonal Role
 Figurehead Role-
 Leader Role
 Liaison Role

ii)Informational Role
 Monitor role
 Disseminator Role
 Spokesman Role
iii)Decisional Role
 Entrepreneurial Role
 Disturbance Handler Role
 Resource Allocator Role
 Negotiator Role
Objectives
• Objectives may be defined as “ those ends which the organization seeks to
achieve by its existence and operations.”
• Objectives make the goals operational. Objectives form the basis for the
functioning of an organization.
• Objectives may be Tangible or Intangible.Tangiable objectives include
achievement of materially quantifiable targets or goals.Intangiable
objectives include factors like brand or company image ,employee morale
etc.
• Objectives should not be static, they should be dynamic. That is ,changes
in the environment or changes in the organizational strengths and
weaknesses may call for modifications to objectives.
• Following are the examples of objectives;
- To improve the communication system to hold regular staff meeting and
publish a newsletter
- To cross the 20,000 crore mark in turnover of soaps.
- To make available the employment to 100 people every year
Characteristics of Objectives
1.Objectives should be understandable-because objectives play an important
role in strategic management and are put to use in a variety of ways, they
should be understandable to those who have to achieve them.
2.Objectives should be Concrete and Specific –To say that “our company
plans to achieve a 12% increase its sales” is certainly better than stating that
“our company seeks to increase its sales”.
3.Objectives should be related to a Time Frame-If the first statement given
above is restated as “our company plans to increase its sales by 12 %by the
end of 2 Years", it enhances the specificity of the objective.
4.Objectives should be Measurable and Controllable
5.Objectives should be Challenging-Objectives that are too high or too low
are both demotivating and ,therefore should be set as challenging but not
unrealistic levels.
Factors affecting Objectives
• According to Glueek,who asserts that objectives are formulated by the top
managers in a firm, the choice of objectives are affected by three factors,
namely,
1. Forces in the Environment-There are number of environmental factors
which influence business decisions. For Example, an external factor like
the government policy may affect the objectives of a Company.
2. Internal Forces- Formulation of objectives is affected also by the
internal factors or the realities of the enterprise’s resources and
internal power relationships .Enterprise’s resources are undoubtedly a
factor which decides the objectives.
3. The value system of the Top Executives-The value system of the top
executives affect the formulation of objectives. For Example, the Article
of Association of TATA Iron and Steel Company(TISCO) was amended at
the initiative of the powers that be to incorporate the provision
regarding the company’s social and moral responsibilities to the
customers ,employees,shareholders,society and the local community.
Classification of Objectives

• 1. Primary Objectives: These are the objectives for which a company has
been started. Every business aims to earn more and more profits out of its
working. Primary objectives are related to the company and not to
individuals. Earning of profits out of providing goods and services to the
customers is the primary objective of a company. The goods and services
are provided as per the requirements of customers. Earning profits
through customer satisfaction helps in earning goodwill. The production of
goods and services as per determined targets will be achieved through
individual goals of employees in the organization.
• 2. Secondary Objectives: These objectives help in achieving primary
objectives. The targets are identified and efforts are made to increase
efficiency and economy in the performance of work. The goals dealing
with analysis, advice and interpretation provide support to goals directed
by primary objectives. The primary goal of earning profits through
providing goods and services will be achieved if there is a plan to add new
products in the market at regular intervals. The goal of adding new
products will be a secondary goal which will help in achieving the primary
objective.
.
• 3 Individual Objectives:
These are the goals which individual members in an organization try to
achieve on daily, weekly, monthly or yearly basis. These objectives are
achievable as subordinate to primary and secondary goals. Most of the
individual objects are economic, psychological or non-financial rewards
which an individual tries to achieve by using resources of time, skill and
effort. An individual tries to satisfy his needs and desires by working in an
organization. In order to motivate individuals for raising their
performance, organizations offer varied incentives.

4. Social Objectives:
These are the goals of an organization towards society. These include the
obligations required by the community, government agencies etc. These
also include goals intended to further social, physical and cultural
improvement of the society. Social obligations of business has become
essential these days. Business has to produce goods and services by taking
into consideration health requirements of people. There are expectations
that business should also spend a part of its profits for the welfare of
community.
Within the organization there are three levels of objectives

• Strategic Goals: "Broad statements of where the organization wants to be


in the future are called strategic goals” Strategic business objectives are
goals deemed most important to the current and future health of a
business. Objectives are prioritized by an organization through a thorough
analysis of business practices such as a SWOT analysis. Though
prioritization of strategic objectives is unique to each business, common
objectives exist. Six of the most common areas to focus strategic business
goals are in the areas of market share, financial resources, physical
resources, productivity, innovation and action planning.
• Tactical objectives- "The results that major divisions and departments
within the organization intend to achieve are defined as tactical
objectives". The main tactical objective for many businesses is survival.
Essential features are as follows-Focused on short term, set –up by line
management, relatively low risk, limited resources invested, relatively easy
to change at minor financial cost, realistic and achievable.
• A tactical objective is often an intermediate step to achieving an
operational objective, and as such requires decision making and problem
solving skills applied during the execution of the tactical plan as part of the
operational plan.
• Operational objectives-"The specific results expected from departments,
work groups, and individuals are the operational objectives".
• Operational objectives differ from strategic objectives in that they
focus more on “how” than “what.” For example, a business might decide it
needs to improve profits by improving its margins, rather than increasing
sales. It would pursue this strategic goal using operational objectives
targeted at reducing overhead or manufacturing costs, changing the way
the business operates in those areas. Operational objectives in the human
resources department help meet strategic goals such as improved
recruiting, retention and labor cost management.
Importance of Objectives
• Justify the Organization
• Provide Direction
• Basis for Management by Objectives
• Help Strategic Planning/Management
• Help Co-ordination
• Provide standards for assessment and control
• Help Decentralization
Hierarchy of Objectives
• Objectives form a hierarchy ranging from the broad aim to specific
individual objectives. At the top of it the main goals of the
organization are set. The organization has to see its responsibilities
towards society and then towards herself. The organization is
required to contribute to the welfare of society by providing good
quality products at reasonable cost. The main purpose of the
business is to provide a specific level of services or a proper type of
goods. The overall objectives of the organization are specified at
the top level management.
• The objectives of the key areas are also determined at the higher
level management.
• The next in hierarchy comes the objectives of divisions and
departments and units and these are decided at middle level
management comprising Vice-president or functional managers.
The objectives of individuals are decided at the bottom of the
hierarchy.
• The junior level management sets performance standards of
individuals.
• The hierarchy of objectives is shown in the diagram:
Top Down and Bottom up Approach:
• There is some controversy whether the objectives should be fixed at top
down or bottom up. In the top down approach upper level managers set
objectives for the subordinates while in the bottom up approach
subordinates initiate the setting of objectives of their positions and
present them to their superiors. The top down approach are of the view
that overall objectives of the organization should be set at Chief Executive
Officer level of top level of management. It will provide a proper
synchronization of objectives of different areas and individuals.
• On the other hand the supporters of bottom up approach argue that top
management needs to have information from lower levels in the form of
objectives. Since subordinates fix their own goals they will be motivated
and committed to their performance. It may not be advisable to rely
entirely on one approach. Both the approaches should be used wisely for
better results. In a practical situation such decisions are linked to factors
such as the size of the organization, the organization culture, leadership
style of the executive and the urgency of the plan.
SMART OBJECTIVES
SMART Illustrates the 5 characteristics of an efficient objective; it stands for
Specific-Measurable-Attainable-Relevant-Timely.

GUIDELINES FOR IDEAL OBJECTIVES-


Objectives, to be successful, should posses certain qualities and there are
therefore, some important factors to be considered while formulating the
objectives. The following guidelines are taken into account while formulating the
objectives:
 Involve all those employees responsible for carrying it out-gain a feeling of
belongingness and importance. Top Management should allow their
subordinates to participate in the process, encourage them to express their
views and ideas.

 All objectives within an organization should support the overall objectives-


The organizational overall objectives should be the basis for the objectives of
different departments like finance, human resources,marketing,production
and research & development.
 Objectives should have some “reach”-Normally, most people put their
effort to achieve the objectives when there is a reasonable challenge.
People are motivated when a feeling of accomplishment can be
given.Therefore,objectives formulated should provide some amount of
challenge for accomplishment them.

 Objectives should be realistic-Objective should provide not only


challenging job but also be realistic from the view point of both internal
and external environment opportunities and threats or hindrances.

 Objectives should be contemporary(occurring in the present) as well as


innovative-The manager should keep the objectives up-to –date. The
manager should review the objectives periodically based on the changes
in the organizational priorities and changes in external environment and
make revisions ,if necessary.
 The number of objectives for each manager should not be too many-Too
many factors cause confusion and neglect and too few permit waste and
inefficiency. More number of objectives really diminishes the efficiency of
major objectives and unduly emphasize minor objectives.

 Objectives should be ranked according to their relative priority-If the


number of objectives are more than two, they should be ranked according
to their relative priority. This practice gives clear guidelines to the
manager and avoids confusion.
PROCESS OF FORMULATING OBJECTIVES-
The process of setting objectives is not a simple procedure. The main problem
encountered in practice is to establish realistic targets which are capable of being
attained and yet represent a high level of efficiency. If the set objective are too
high for workers and managers, they may become frustrated at never being able to
achieve them; if too low they are meaningless and serve no useful
purpose.Hence,it is important to Set Objectives very carefully.

Step 1 Environmental Analysis- The first step should reflect on the results of
environmental analysis. Environmental analysis should provide managers with
adequate information and data for reflection. The data and information from all
levels of environment –general,specific,operating and internal-should be collected.

Step 2 Vision and Mission-Environmental analysis serves as a foundation for the


development and formulation of vision and mission. Managers should understand
the information and data derived from the environment, its analysis and better
equip(prepare) themselves to have a visionary reflections. This reflection helps
them to formulate and write the organizational vision.
Vision and Mission statement reflect the organization's relationship to its
environment. This helps the organization to increase its long-run profitability. It
also helps the organization to identify its core values and the direction to fulfill the
Vision.

Step 3 Organizational Objectives-Organizational vision and mission serve as the


basis for development of appropriate organizational objectives. Managers view
that objectives should be consistent with the organizational vision and mission.

Step 4 Specific Targets-After the objectives are formulated by the top


management of the Organisation , they should be translated into specific targets
by the middle and lower level management.These specific targets help for the
effective achievement of objectives at different levels.
Difference between Objectives &
Policies
Basis of Objectives Policies
Difference
1.Types of Single use plans Standing Plans
Plans
2.Time Limit Time Frame within which Policies have no such time limits
they are to be achieved.
3. Basis to Objectives are basic and Policies are not that basic to the
existence critical to the very existence existence of an organisation.It is
of an organization. possible for an organization to
function without policies.
4.Purpose Objectives are meant to be Policies are meant to be
achieved. observed as guidelines.
5.Place In the machinery of Policies occupy a lower place
organizational plans than objectives.
,objectives occupy a higher
place than policies.