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Inter_P6A_FM_Mod2_Chapter_9_Unit_6_Financing_of_WC.pdf | FM | Study_Material | N/A | [Concept: Theory]
## 26. INTRODUCTION
After determining the amount of working capital required, the next step to be taken by the finance manager is to arrange the funds.
As discussed earlier, it is advisable that the finance manager bifurcate the working capital requirements between the permanent working capit... | [
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Inter_P6A_FM_Mod2_Chapter_9_Unit_6_Financing_of_WC.pdf | FM | Study_Material | N/A | [Concept: Theory]
## 27.1 Spontaneous Sources of Finance
- (a) Trade Credit: As outlined above trade credit is a spontaneous source of finance which is normally extended to the purchaser organization by the sellers or services providers. This source of financing working capital is more important since it c... | [
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Inter_P6A_FM_Mod2_Chapter_9_Unit_6_Financing_of_WC.pdf | FM | Study_Material | N/A | [Concept: Theory]
## 27.2 Inter-corporate Loans and Deposits
Sometimes, organizations having surplus funds invest for short-term period with other organizations. The rate of interest will be higher than the bank rate of interest and depends on the financial soundness of the borrower company. This source of finance r... | [
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Inter_P6A_FM_Mod2_Chapter_9_Unit_6_Financing_of_WC.pdf | FM | Study_Material | N/A | [Concept: Theory]
## 27.3 Commercial Papers
Commercial Paper (CP) is an unsecured promissory note issued by a firm to raise funds for a short period. This is an instrument that enables highly rated corporate borrowers for short-term borrowings and provides an additional financial instrument to investors with a freely... | [
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Inter_P6A_FM_Mod2_Chapter_9_Unit_6_Financing_of_WC.pdf | FM | Study_Material | N/A | [Concept: Theory]
## 27.4 Funds Generated from Operations
Funds generated from operations, during an accounting period, increase working capital by an equivalent amount. The two main components of funds generated from operations are profit and depreciation. Working capital will increase by the extent of funds gen... | [
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Inter_P6A_FM_Mod2_Chapter_9_Unit_6_Financing_of_WC.pdf | FM | Study_Material | N/A | [Concept: Theory]
## 27.6 Bills Discounting
Bill discounting is recognized as an important short-term Financial Instrument and it is widely used method of short-term financing. In a process of bill discounting, the supplier of goods draws a bill of exchange with direction to the buyer to pay a certain amount of money... | [
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Inter_P6A_FM_Mod2_Chapter_9_Unit_6_Financing_of_WC.pdf | FM | Study_Material | N/A | [Concept: Theory]
## 27.7 Bill Rediscounting Scheme
The Bill rediscounting Scheme was introduced by Reserve Bank of India with effect from 1 st November, 1970 in order to extend the use of the bill of exchange as an instrument for providing credit and the creation of a bill market in India with a facility for the red... | [
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Inter_P6A_FM_Mod2_Chapter_9_Unit_6_Financing_of_WC.pdf | FM | Study_Material | N/A | [Concept: Theory]
## 27.8 Factoring
Students may refer to the unit on Receivable Management wherein the concept of factoring has been discussed. Factoring is a method of financing whereby a firm
a
sells its trade debts at a discount to a financial institution. In other words, factoring is a continuous arrangement ... | [
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Inter_P6A_FM_Mod2_Chapter_9_Unit_6_Financing_of_WC.pdf | FM | Study_Material | N/A | [Concept: Theory]
## 28. WORKING CAPITAL FINANCE FROM BANKS
Banks in India today constitute the major suppliers of working capital credit to any business activity. Recently, some term lending financial institutions have also announced schemes for working capital financing. The two committees viz... | [
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Inter_P6A_FM_Mod2_Chapter_9_Unit_6_Financing_of_WC.pdf | FM | Study_Material | N/A | [Concept: Theory]
## Assessment of Working Capital
- Reserve Bank of India has withdrawn the prescription, in regard to assessment of working capital needs, based on the concept of Maximum Permissible Bank Finance (MPBF), in April 1997. Banks are now free to evolve, with the approval
a
of their Boards, methods for ... | [
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Inter_P6A_FM_Mod2_Chapter_9_Unit_6_Financing_of_WC.pdf | FM | Study_Material | N/A | [Concept: Theory]
## 29. FORMS OF BANK CREDIT
The bank credit will generally be in the following forms:
- Cash Credit: This facility will be given by the banker to the customers by giving certain amount of credit facility on continuous basis. The borrower will not be allowed to exceed the limits sanctioned by the b... | [
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Inter_P6A_FM_Mod2_Chapter_9_Unit_6_Financing_of_WC.pdf | FM | Study_Material | N/A | [Concept: Theory]
## FINANCIAL MANAGEMENT
- Line of Credit: Line of Credit is a commitment by a bank to lend a certain amount of funds on demand specifying the maximum amount.
- Letter of Credit: It is an arrangement by which the issuing bank on the instructions of a customer or on its own behalf undertake... | [
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Inter_P6A_FM_Mod2_Chapter_9_Unit_6_Financing_of_WC.pdf | FM | Study_Material | N/A | [Concept: Theory]
## SUMMARY
- Working Capital Management involves managing the balance between firm's short-term assets and its short-term liabilities.
- From the value point of view, Working Capital can be defined as Gross Working Capital or Net Working Capital.
- From the point of view of time, th... | [
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Inter_P6A_FM_Mod2_Chapter_9_Unit_6_Financing_of_WC.pdf | FM | Study_Material | N/A | [Concept: Theory]
## MANAGEMENT OF WORKING CAPITAL
a
- Working Capital cycle indicates the length of time between a company's paying for materials, entering into stock and receiving the cash from sales of finished goods. It can be determined by adding the number of days required for each stage in the cyc... | [
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Inter_P6B_SM_Chapter_1_Introduction_to_Strategic_Management.pdf | SM | Study_Material | N/A | [Concept: Theory]
## After studying this chapter, you will be able to
- ♦ Identify strategic decisions and behaviours within a firm. And discuss the relevance thereof in the modern business world.
- ♦ Acknowledge and appreciate the limitations of strategic management. And accept that all decisions ... | [
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Inter_P6B_SM_Chapter_1_Introduction_to_Strategic_Management.pdf | SM | Study_Material | N/A | [Concept: Theory]
## 1.2 MEANING AND NATURE OF STRATEGIC MANAGEMENT
To understand the concept of strategic management, we need to have a basic understanding of the term management. The term 'management' is used in two senses, such as:
- (a) It is used with reference to a key group in an organisation in-c... | [
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Inter_P6B_SM_Chapter_1_Introduction_to_Strategic_Management.pdf | SM | Study_Material | N/A | [Concept: Theory]
## STRATEGIC MANAGEMENT
The strategic management process is the set of activities that firm managers undertake to put their firms in the best possible position to compete successfully in the marketplace. Strategic management is made up of several distinct activities: developing the firm's ... | [
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Inter_P6B_SM_Chapter_1_Introduction_to_Strategic_Management.pdf | SM | Study_Material | N/A | [Concept: Theory]
## 1.3 CONCEPT OF STRATEGY
In the context of business, the application of the term 'Strategy' relates to the ways, the business decides to respond to dynamic and often hostile external forces while pursuing their vision, mission and ultimate objectives.
The very incorporation of the idea of ... | [
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Inter_P6B_SM_Chapter_1_Introduction_to_Strategic_Management.pdf | SM | Study_Material | N/A | [Concept: Theory]
## STRATEGIC MANAGEMENT
- ♦ Reactions to unanticipated developments and fresh market conditions in the dynamic business environment.
In other words, a company uses both proactive and reactive strategies to cope up the uncertain business environment. Proactive strategy is planned strategy whereas rea... | [
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Inter_P6B_SM_Chapter_1_Introduction_to_Strategic_Management.pdf | SM | Study_Material | N/A | [Concept: Theory]
## Is this a Strategy?
A ketchup brand making a healthier ketchup with less sugar and preservatives to attract more customers by letting parents feel safe about their kid's consuming ketchup. Can this be called a strategy?
Yes, it is a business strategy to fight competition and to adapt with ch... | [
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Inter_P6B_SM_Chapter_1_Introduction_to_Strategic_Management.pdf | SM | Study_Material | N/A | [Concept: Theory]
## 1.4 STRATEGIC MANAGEMENT - IMPORTANCE AND LIMITATIONS
The importance of Strategic Management essentially lies in enabling an organisation to perform better than its competitors and its own past and present performance. That is, delivering superior returns to the investors, superior value to ... | [
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Inter_P6B_SM_Chapter_1_Introduction_to_Strategic_Management.pdf | SM | Study_Material | N/A | [Concept: Theory]
## STRATEGIC MANAGEMENT
suppliers, government and society. The overall objectives of strategic management are two-fold:
- ♦ To create competitive advantage (something unique and valued by the customer), so that the company can outperform the competitors in all aspects of organisational perf... | [
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Inter_P6B_SM_Chapter_1_Introduction_to_Strategic_Management.pdf | SM | Study_Material | N/A | [Concept: Theory]
## 1.4.1 Importance of Strategic Management
Formulation of strategies and their implementation have become essential for all organizations for their survival and growth in the present turbulent business environment. 'Survival of the fittest 'as propagated by Charles Darwin is the only princ... | [
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Inter_P6B_SM_Chapter_1_Introduction_to_Strategic_Management.pdf | SM | Study_Material | N/A | [Concept: Theory]
## STRATEGIC MANAGEMENT
- ♦ Strategic management serves as a corporate defence mechanism against mistakes and pitfalls. It helps organisations to avoid costly mistakes in product market choices or investments.
- ♦ Strategic management helps to enhance the longevity of the business. ... | [
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Inter_P6B_SM_Chapter_1_Introduction_to_Strategic_Management.pdf | SM | Study_Material | N/A | [Concept: Theory]
## 1.4.2 Limitations of Strategic Management
The presence of strategic management cannot counter all hindrances and always achieve success. There are limitations too, attached to strategic management. Let us discuss them briefly:
- ♦ Environment is highly complex and turbulent. It is difficult to un... | [
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Inter_P6B_SM_Chapter_1_Introduction_to_Strategic_Management.pdf | SM | Study_Material | N/A | [Concept: Theory]
## STRATEGIC MANAGEMENT
Similarly in business if way too much time is spent on planning and formulating, then it might not be as fruitful.
- ♦ Strategic management is a costly process. Strategic management adds a lot of expenses to an organization. Expert strategic planners need to be en... | [
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Inter_P6B_SM_Chapter_1_Introduction_to_Strategic_Management.pdf | SM | Study_Material | N/A | [Concept: Theory]
## Why do businesses opt for strategic management even with its limitation?
Strategic Management is a time consuming and costly process, yet all organization's want to do indulge into it? Why?
Because even though it has its limitations, its importance outweighs its shortcomings. A b... | [
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Inter_P6B_SM_Chapter_1_Introduction_to_Strategic_Management.pdf | SM | Study_Material | N/A | [Concept: Theory]
## 1.5 STRATEGIC INTENT (VISION, MISSION, GOALS, OBJECTIVES AND VALUES)
Strategic Management is defined as a dynamic process of formulation, implementation, evaluation, and control of strategies to realise the organisation's strategic intent. Strategic intent refers to purposes of what the organisat... | [
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Inter_P6B_SM_Chapter_1_Introduction_to_Strategic_Management.pdf | SM | Study_Material | N/A | [Concept: Theory]
## STRATEGIC MANAGEMENT
Strategic intent is generally stated in broad terms but when stated in precise terms it is an expression of aims to be achieved operationally, i.e., goals and objectives.
1. Vision: Vision implies the blueprint of the company's future position. It describes where the... | [
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... |
Inter_P6B_SM_Chapter_1_Introduction_to_Strategic_Management.pdf | SM | Study_Material | N/A | [Concept: Theory]
## 1.5.1 Vision
Very early in the strategy making process, a company's senior managers must consider the issue of what directional path the company should take and what changes in the company's product-market-customer-technology focus would improve its current market posi... | [
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0.030959751456975937,... |
Inter_P6B_SM_Chapter_1_Introduction_to_Strategic_Management.pdf | SM | Study_Material | N/A | [Concept: Theory]
## STRATEGIC MANAGEMENT
organisational identity. A clearly articulated strategic vision communicates management's aspirations to stakeholders and helps steer the energies of company personnel in a common direction. For instance, Henry Ford's vision of a car in every garage had power because it captur... | [
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Inter_P6B_SM_Chapter_1_Introduction_to_Strategic_Management.pdf | SM | Study_Material | N/A | [Concept: Theory]
## Essentials of a strategic vision
- ♦ The entrepreneurial challenge in developing a strategic vision is to think creatively about how to prepare a company for the future.
- ♦ Forming a strategic vision is an exercise in intelligent entrepreneurship.
- ♦ A well-articulated strategic vision... | [
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Inter_P6B_SM_Chapter_1_Introduction_to_Strategic_Management.pdf | SM | Study_Material | N/A | [Concept: Theory]
## 1.5.2 Mission
A mission is an answer to the basic question 'what business are we in and what we do'. It has been observed that many firms fail to conceptualise and articulate the mission and business definition with the required clarity. Such firms are seen to fumble in the identification of oppor... | [
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Inter_P6B_SM_Chapter_1_Introduction_to_Strategic_Management.pdf | SM | Study_Material | N/A | [Concept: Theory]
## Why should an organisation have a mission?
- ♦ To ensure unanimity of purpose within the organisation.
- ♦ To develop a basis, or standard, for allocating organisational resources.
- ♦ To provide a basis for motivating the use of the organisation's resources.
- ♦ To establish a general tone or org... | [
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... |
Inter_P6B_SM_Chapter_1_Introduction_to_Strategic_Management.pdf | SM | Study_Material | N/A | [Concept: Theory]
## STRATEGIC MANAGEMENT
- ♦ One of the roles of a mission statement is to give the organisation its own special identity, business emphasis and path for development - one that typically sets it apart from other similarly positioned companies.
- ♦ A company's business is defined by what need... | [
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Inter_P6B_SM_Chapter_1_Introduction_to_Strategic_Management.pdf | SM | Study_Material | N/A | [Concept: Theory]
## What is our mission? And what business are we in?
The well-known management experts, Peter Drucker and Theodore Levitt were among the first to agitate this issue through their writings. They emphasised that as the first step in the business planning endeavour, every business firm must cla... | [
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Inter_P6B_SM_Chapter_1_Introduction_to_Strategic_Management.pdf | SM | Study_Material | N/A | [Concept: Theory]
## INTRODUCTION TO STRATEGIC MANAGEMENT
advanced countries like the US. It was only in subsequent years that captains of industry all over the world understood the significance of the seemingly simple questions raised by Drucker and Levitt.
The corporate mission is an expression of the gr... | [
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Inter_P6B_SM_Chapter_1_Introduction_to_Strategic_Management.pdf | SM | Study_Material | N/A | [Concept: Theory]
## What business are we in?
| Company | Production-oriented answer | Marketing-oriented answer |
|-----------------|---------------------------------------|-------------------------------------------------------------|
| Indian Oil | We produc... | [
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Inter_P6B_SM_Chapter_1_Introduction_to_Strategic_Management.pdf | SM | Study_Material | N/A | [Concept: Theory]
## 1.5.3 Goals and Objectives
Business organisation translates their vision and mission into goals and objectives. As such the term objectives are synonymous with goals, however, some authors make an attempt to distinguish the two. Goals are open-ended attributes that denote the future sta... | [
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... |
Inter_P6B_SM_Chapter_1_Introduction_to_Strategic_Management.pdf | SM | Study_Material | N/A | [Concept: Theory]
## STRATEGIC MANAGEMENT
and translate the goals to both long term and short-term perspective. However, this distinction is not made by several theorists on the subject. Accordingly, we will also use the term interchangeably.
Objectives are organisation's performance targets - the results and outcome... | [
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Inter_P6B_SM_Chapter_1_Introduction_to_Strategic_Management.pdf | SM | Study_Material | N/A | [Concept: Theory]
## INTRODUCTION TO STRATEGIC MANAGEMENT
A need for both short-term and long-term objectives: As a rule, a company's set of financial and strategic objectives ought to include both short-term and long-term performance targets. Having quarterly or annual objectives focuses attention on delivering immed... | [
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Inter_P6B_SM_Chapter_1_Introduction_to_Strategic_Management.pdf | SM | Study_Material | N/A | [Concept: Theory]
## 1.5.4 VALUES
'Business, as I have seen it, places one great demand on you: it needs you to selfimpose a framework of ethics, values, fairness and objectivity on yourself at all times.' - Ratan N Tata, 2006 (Source: TATA Group Website)
A few common examples of values are - Integri... | [
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Inter_P6B_SM_Chapter_1_Introduction_to_Strategic_Management.pdf | SM | Study_Material | N/A | [Concept: Theory]
## INTRODUCTION TO STRATEGIC MANAGEMENT
The above graphic represents the interconnection of Intent, Vision, Mission, Goals and Values; Values remain the center/core of Vision, Mission, Goals and putting all them to action. Vision is followed by Mission, followed by Goals and finally execu... | [
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Inter_P6B_SM_Chapter_1_Introduction_to_Strategic_Management.pdf | SM | Study_Material | N/A | [Concept: Theory]
## Values of HDFC Bank
HDFC Bank is committed to maintaining the highest level of ethical standards, professional integrity, corporate governance and regulatory compliance. HDFC Bank's business philosophy is based on five core values: Operational Excellence, Customer Focus, Product Leadership, People... | [
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Inter_P6B_SM_Chapter_1_Introduction_to_Strategic_Management.pdf | SM | Study_Material | N/A | [Concept: Theory]
## Intent vs Values - Which is a broader concept?
Sandeep, a human resource manager thinks that Intent is a bigger concept than Values. Is he right?
Sandeep is not right, as Values and Intent are two different concepts. Intent is the purpose of doing business while values are the principles that gui... | [
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Inter_P6B_SM_Chapter_1_Introduction_to_Strategic_Management.pdf | SM | Study_Material | N/A | [Concept: Theory]
## 1.6 STRATEGIC LEVELS IN ORGANISATIONS
A typical large organization is a multi-divisional organisation that competes in several different businesses. It has separate self-contained divisions to manage each of these businesses. For example , Patanjali has healthcare, FMCG, Organi... | [
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Inter_P6B_SM_Chapter_1_Introduction_to_Strategic_Management.pdf | SM | Study_Material | N/A | [Concept: Theory]
## Generally, there are three main levels of management:
- ♦ Corporate level
- ♦ Business level
- ♦ Functional level
General managers are found at the first two of these levels, but their strategic roles differ depending on their sphere of responsibility.
Figure: Levels of strategic management
<!-... | [
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Inter_P6B_SM_Chapter_1_Introduction_to_Strategic_Management.pdf | SM | Study_Material | N/A | [Concept: Theory]
## STRATEGIC MANAGEMENT
concerned with strategies that span individual businesses, business-level managers are concerned with strategies that are specific to a particular business.
Functional-level managers are responsible for the specific business functions or operations (human resources, purchasin... | [
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Inter_P6B_SM_Chapter_1_Introduction_to_Strategic_Management.pdf | SM | Study_Material | N/A | [Concept: Theory]
## Which is better - Top Down Approach or Bottom-Up Approach?
Do you know the concepts of Top-Down and Bottom-Up approach of decision making?
A top-down approach to decision making is when decisions are made solely by leadership at the top i.e. corporate level of management, while the bottom-up appr... | [
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Inter_P6B_SM_Chapter_1_Introduction_to_Strategic_Management.pdf | SM | Study_Material | N/A | [Concept: Theory]
## 1.6.1 Network of relationship between the three levels
The corporate level decides what the business wants to achieve, while the business level draws ideas and plan to execute the same, which eventually flow down to functional level to execute and achieve results. But there are multi... | [
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Inter_P6B_SM_Chapter_1_Introduction_to_Strategic_Management.pdf | SM | Study_Material | N/A | [Concept: Theory]
## SUMMARY
All firms have a strategy, even if it is informal, unstructured, and sporadic. All organizations are heading somewhere, but unfortunately some organizations do not know where they are going. Increased competition and agile business landscape accents the need for ... | [
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Inter_P6B_SM_Chapter_2_Strategic_Analysis_External_Environment.pdf | SM | Study_Material | N/A | [Concept: Theory]
## After studying this chapter, you will be able to:
- ♦ Examine the criticality of the business environment in strategic analysis.
- ♦ Describe various elements of the domestic macro environment of business.
- ♦ Utilise PESTLE Analysis as a tool for environmental analysis.
- ♦ Situate a busi... | [
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Inter_P6B_SM_Chapter_2_Strategic_Analysis_External_Environment.pdf | SM | Study_Material | N/A | [Concept: Theory]
## 2.1 INTRODUCTION
There are different kinds of business activities that take place in an organisational setting, and a cursory look into their world reflects a wide variety of organisations ranging from small local businesses to international or multinational corporations' level. Generally, organ... | [
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Inter_P6B_SM_Chapter_2_Strategic_Analysis_External_Environment.pdf | SM | Study_Material | N/A | [Concept: Theory]
## 2.2 STRA GIC ANALYSIS
Strategy formulation is not a task in which managers can get by with intuition, opinions, instincts, and creative thinking. Judgments about what strategies to pursue need to flow directly from analysis of a firm's external environment and its internal r... | [
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Inter_P6B_SM_Chapter_2_Strategic_Analysis_External_Environment.pdf | SM | Study_Material | N/A | [Concept: Theory]
## 2.2.1 Issues to consider for Strategic Analysis
Strategy evolves over a period of time: Each strategic decision must balance the different factors that impact and constrain strategy. A key element of strategic analysis is the probable outcomes of everyday decisions. A current strategy i... | [
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Inter_P6B_SM_Chapter_2_Strategic_Analysis_External_Environment.pdf | SM | Study_Material | N/A | [Concept: Theory]
## STRATEGIC ANALYSIS: EXTERNAL ENVIRONMENT
Figure: Framework of Strategic Analysis
<!-- image -->
It is evident that industries differ widely in their economic characteristics, competitive situations, and future profit prospects. The economic character of industries varies according t... | [
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Inter_P6B_SM_Chapter_2_Strategic_Analysis_External_Environment.pdf | SM | Study_Material | N/A | [Concept: Theory]
## 2.3 STRATEGY AND BUSINESS ENVIRONMENT
To accomplish the goals and objectives of a business, business strategist creates strategies and formulate policies considering both internal and external factors. A framework for adjusting to the demands of an unpredictable environment and an uncertain future... | [
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Inter_P6B_SM_Chapter_2_Strategic_Analysis_External_Environment.pdf | SM | Study_Material | N/A | [Concept: Theory]
## 2.3.1 Micro and Macro Environment
The environment in which an organization exists can be described in terms of the opportunities and threats operating in the external environment apart from the strengths and weaknesses existing in the internal environment. Business strategists should al... | [
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... |
Inter_P6B_SM_Chapter_2_Strategic_Analysis_External_Environment.pdf | SM | Study_Material | N/A | [Concept: Theory]
## 2.3.2 Elements of Macro Environment
Macro environment has broader dimensions as it consists of economic, sociocultural, technological, political and legal factors. The classification of the relevant environment into components or sectors helps an organization to cope with its complexity,... | [
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... |
Inter_P6B_SM_Chapter_2_Strategic_Analysis_External_Environment.pdf | SM | Study_Material | N/A | [Concept: Theory]
## Demographic Environment
Demographics are the characteristics of a population that have been classified and explained according to certain criteria, such age, gender, and income, in order to understand the features of a specific group. Demographical analysis considers factors such as race,... | [
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Inter_P6B_SM_Chapter_2_Strategic_Analysis_External_Environment.pdf | SM | Study_Material | N/A | [Concept: Theory]
## Socio-Cultural Environment
A general factor that influences almost all enterprises in a similar manner. It represents a complex group of factors such as social traditions, values and beliefs, level and standards of literacy, the ethical standards and state of society, the extent of soc... | [
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Inter_P6B_SM_Chapter_2_Strategic_Analysis_External_Environment.pdf | SM | Study_Material | N/A | [Concept: Theory]
## Economic Environment
Economic conditions have a direct bearing over the business strategies. The economic environment refers to the overall economic situation around the business and include conditions at the regional, national and global levels. It encompasses conditions in the markets ... | [
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Inter_P6B_SM_Chapter_2_Strategic_Analysis_External_Environment.pdf | SM | Study_Material | N/A | [Concept: Theory]
## Political-Legal Environment
Political-legal environment takes into account elements like the general level of political development, the degree to which business and economic issues have been politicised, the degree of political morality, the state of law and order, political stability, ... | [
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Inter_P6B_SM_Chapter_2_Strategic_Analysis_External_Environment.pdf | SM | Study_Material | N/A | [Concept: Theory]
## Technological Environment
A highly important factor in the present times is technology. Technology has changed the way people communicate and do things. Technology has also changed the ways of how businesses operate now. Technology and business are linked and are interdependent on one a... | [
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Inter_P6B_SM_Chapter_2_Strategic_Analysis_External_Environment.pdf | SM | Study_Material | N/A | [Concept: Theory]
## 2.3.3 PESTLE- A tool to Analyse Macro Environment
The term PESTLE is often used to describe a framework for analysis of macro environmental factors. PESTEL analysis is frequently used to assess the business environment in which a firm operates. Political, economic, social, and technol... | [
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Inter_P6B_SM_Chapter_2_Strategic_Analysis_External_Environment.pdf | SM | Study_Material | N/A | [Concept: Theory]
## The Key Factors
- ♦ Political factors are how and to what extent the government intervenes in the economy and the activities of business firms. Political factors may also influence goods and services which the government wants to provide or be provided and those that the government does no... | [
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Inter_P6B_SM_Chapter_2_Strategic_Analysis_External_Environment.pdf | SM | Study_Material | N/A | [Concept: Theory]
## 2.3.4 Internationalization of Business
Internationalization has emerged as the dominant commercial trend over the last couple of decades. It enables a business to enter new markets in search of greater earnings and less expensive resources. Additionally, expanding internationally enable a b... | [
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Inter_P6B_SM_Chapter_2_Strategic_Analysis_External_Environment.pdf | SM | Study_Material | N/A | [Concept: Theory]
## Characteristics of a global business
To be specific, a global business has three characteristics:
- ♦ It is a conglomerate of multiple units (located in different parts of the globe) but all linked by common ownership.
- ♦ Multiple units draw on a common pool of resources, such as money, credit, ... | [
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Inter_P6B_SM_Chapter_2_Strategic_Analysis_External_Environment.pdf | SM | Study_Material | N/A | [Concept: Theory]
## Developing internationally
International development is expensive and challenging. Moving on in a thorough and structured manner is thus the ideal approach to adopt. The steps in international strategic planning are as follows:
- ♦ Evaluate global opportunities and threats and ... | [
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Inter_P6B_SM_Chapter_2_Strategic_Analysis_External_Environment.pdf | SM | Study_Material | N/A | [Concept: Theory]
## Why do businesses go global?
Technological developments and evolving political views are two important factors in the rapid rise of multinational organisations. Because of technological advances, the process of internationalisation is now simpler than it was previously. Worldwide communication mak... | [
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Inter_P6B_SM_Chapter_2_Strategic_Analysis_External_Environment.pdf | SM | Study_Material | N/A | [Concept: Theory]
## 2.3.5 International Environment
The social, cultural, demographic, environmental, political, governmental, legal, technological factors that an international organisation faces are nearly limitless, and the number and complexity of these factors increase manifold as the number of products p... | [
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Inter_P6B_SM_Chapter_2_Strategic_Analysis_External_Environment.pdf | SM | Study_Material | N/A | [Concept: Theory]
## 2.4 UNDERSTANDING PRODUCT AND INDUSTRY
Businesses sell products. A product can be either a good or a service. It might be physical good or a service, an experience. Business products have certain characteristics as follows:
- ♦ Products are either tangible or intangible. A tangible prod... | [
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Inter_P6B_SM_Chapter_2_Strategic_Analysis_External_Environment.pdf | SM | Study_Material | N/A | [Concept: Theory]
## 2.4.1 Product Life Cycle
An important concept in strategic choice is that of product life cycle (PLC). It is a useful concept for guiding strategic choice. Essentially, PLC is an S-shaped curve which exhibits the relationship of sales with respect of time for a product that passes thr... | [
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Inter_P6B_SM_Chapter_2_Strategic_Analysis_External_Environment.pdf | SM | Study_Material | N/A | [Concept: Theory]
## 2.4.2 Value Chain Analysis
With each transaction, successful businesses produce value for their consumers in the form of satisfaction and profits for themselves and their shareholders. Companies that generate more value are more likely to profit than those that generate less... | [
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Inter_P6B_SM_Chapter_2_Strategic_Analysis_External_Environment.pdf | SM | Study_Material | N/A | [Concept: Theory]
## STRATEGIC ANALYSIS: EXTERNAL ENVIRONMENT
are valued by the final consumer/user. In other words, it is these competences to perform particular activities and the ability to manage linkages between activities which are the source of competitive advantage for organizations. Porter argued that an unde... | [
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Inter_P6B_SM_Chapter_2_Strategic_Analysis_External_Environment.pdf | SM | Study_Material | N/A | [Concept: Theory]
## 2.5 INDUSTRY ENVIRONMENT ANALYSIS
A combination of ideas and methodologies may be utilised to create a clear picture of key industry traits, competition intensity, industry change drivers, rival firms' market positions and tactics, competitive success, and profit forecasts. Indu... | [
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Inter_P6B_SM_Chapter_2_Strategic_Analysis_External_Environment.pdf | SM | Study_Material | N/A | [Concept: Theory]
## 2.5.1 Porter's Five Forces Model
Every business operates in the competitive environment. Competitive state of an industry applies a strong influence on how firms develop their strategies. Porter's Five Forces analysis is a simple but efficient way for determining the key sources of competition in... | [
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Inter_P6B_SM_Chapter_2_Strategic_Analysis_External_Environment.pdf | SM | Study_Material | N/A | [Concept: Theory]
## I. The Threat of New Entrants
New entrants can reduce industry profitability because they add new production capacity leading to an increase supply of the product even at a lower price and can substantially erode existing firm's market share position. New entrants are always a powerful so... | [
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Inter_P6B_SM_Chapter_2_Strategic_Analysis_External_Environment.pdf | SM | Study_Material | N/A | [Concept: Theory]
## II. Bargaining Power of Buyers
This is another force that influences the competitive condition of the industry. This force will become heavier depending on the possibilities of the buyers forming groups or cartels. Mostly, this is a phenomenon seen in industrial products. Quite often, users of ... | [
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Inter_P6B_SM_Chapter_2_Strategic_Analysis_External_Environment.pdf | SM | Study_Material | N/A | [Concept: Theory]
## III. Bargaining Power of Suppliers
Quite often suppliers, too, exercise considerable bargaining power over companies. The more specialised the offering from the supplier, greater is his clout. And, if the suppliers are also limited in number, they stand a still better chance to exhibit the... | [
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Inter_P6B_SM_Chapter_2_Strategic_Analysis_External_Environment.pdf | SM | Study_Material | N/A | [Concept: Theory]
## IV. The Nature of Rivalry in the Industry
The rivalry among existing players is quite obvious. This is what is normally understood as competition. For any player, the competitors influence strategic decisions at different strategic levels. The impact is evident more at functional level in the pric... | [
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Inter_P6B_SM_Chapter_2_Strategic_Analysis_External_Environment.pdf | SM | Study_Material | N/A | [Concept: Theory]
## V. Threat of Substitutes
Substitute products are a latent source of competition in an industry. In many cases they become a major constituent of competition. Substitute products offering a price advantage and/or performance improvement to the consumer can drastically alter the competitive chara... | [
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Inter_P6B_SM_Chapter_2_Strategic_Analysis_External_Environment.pdf | SM | Study_Material | N/A | [Concept: Theory]
## 2.5.2 Attractiveness of Industry
The industry analysis culminates into identification of various issues and draw conclusions about the relative attractiveness or unattractiveness of the industry, both near-term and long-term. Strategists assess the industry outlook carefully, decidi... | [
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Inter_P6B_SM_Chapter_2_Strategic_Analysis_External_Environment.pdf | SM | Study_Material | N/A | [Concept: Theory]
## 2.5.3 Experience Curve
Experience curve akin to a learning curve which explains the efficiency increase gained by workers through repetitive productive work. Experience curve is based on the commonly observed phenomenon that unit costs decline as a firm accumulates experience ... | [
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Inter_P6B_SM_Chapter_2_Strategic_Analysis_External_Environment.pdf | SM | Study_Material | N/A | [Concept: Theory]
## 2.5.4 Value Creation
The concept of value creation was introduced primarily for providing products and services to the customers with more worth. Value is measured by a product's features, quality, availability, durability, performance and by its services for which customers are willin... | [
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Inter_P6B_SM_Chapter_2_Strategic_Analysis_External_Environment.pdf | SM | Study_Material | N/A | [Concept: Theory]
## 2.6 MARKET AND CUSTOMER
A market is a place for interested parties, buyers and sellers, where items and services can be exchanged for a price. The market might be physical, such as a departmental store where people engage in person. They may also be virtual, such as an onlin... | [
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Inter_P6B_SM_Chapter_2_Strategic_Analysis_External_Environment.pdf | SM | Study_Material | N/A | [Concept: Theory]
## 2.6.1 Customer
A customer is a person or business that buys products or services from another organisation. Customers are important because they provide revenue and organisations cannot exist without them. All businesses vie for customers, either by aggressively marketing their products or by low... | [
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0.... |
Inter_P6B_SM_Chapter_2_Strategic_Analysis_External_Environment.pdf | SM | Study_Material | N/A | [Concept: Theory]
## 2.6.2 Customer Analysis
Customer analysis is an essential marketing component of any strategic business plan. It identifies target clients, determines their wants, and then defines how the product meets those needs. Thus, it involves the examination and evaluation of consumer needs, desires, and ... | [
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-0.00027219392359256744... |
Inter_P6B_SM_Chapter_2_Strategic_Analysis_External_Environment.pdf | SM | Study_Material | N/A | [Concept: Theory]
## 2.6.3 Customer Behaviour
Customer behaviour moves beyond the identification of customers to explain how they purchase products. It examines elements like shopping frequency, product preferences, and the perception of your marketing, sales, and service offerings. Understanding th... | [
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-... |
Inter_P6B_SM_Chapter_2_Strategic_Analysis_External_Environment.pdf | SM | Study_Material | N/A | [Concept: Theory]
## STRATEGIC ANALYSIS: EXTERNAL ENVIRONMENT
Figure: Process of consumer behaviour
<!-- image -->
- ♦ Decision Making: A rational consumer, as decision maker would seek information about potential decisions and carefully integrate this with the existing knowledge about the product... | [
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-0.00587976211681962,
... |
Inter_P6B_SM_Chapter_2_Strategic_Analysis_External_Environment.pdf | SM | Study_Material | N/A | [Concept: Theory]
## 2.7 COMPETITIVE STRATEGY
Competition is a fundamental attribute of economic systems and business, and it is frequently connected with small and large organisations. Businesses compete with each other for the same set of resources and customers. Within a industry, competition is frequentl... | [
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0.001796900061890483,
... |
Inter_P6B_SM_Chapter_2_Strategic_Analysis_External_Environment.pdf | SM | Study_Material | N/A | [Concept: Theory]
## 2.7.1 COMPETITIVE LANDSCAPE
Competitive landscape is a business analysis which identifies competitors, either direct or indirect. Competitive landscape is about identifying and understanding the competitors and at the same time, it permits the comprehension of their vision, mission, core values, n... | [
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0.00... |
Inter_P6B_SM_Chapter_2_Strategic_Analysis_External_Environment.pdf | SM | Study_Material | N/A | [Concept: Theory]
## Steps to understand the Competitive Landscape
- i. Identify the competitor: The first step to understand the competitive landscape is to identify the competitors in the firm's industry and have actual data about their respective market share.
This answers the question:
- Who are the co... | [
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0.00... |
Inter_P6B_SM_Chapter_2_Strategic_Analysis_External_Environment.pdf | SM | Study_Material | N/A | [Concept: Theory]
## 2.7.2 Key factors for competitive success
An industry's Key Success Factors (KSFs) are those things that most affect industry members' ability to prosper in the marketplace - the particular strategy elements, product attributes, resources, competencies, competitive capabilities, and business outco... | [
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-0.04062... |
Inter_P6B_SM_Chapter_2_Strategic_Analysis_External_Environment.pdf | SM | Study_Material | N/A | [Concept: Theory]
## SUMMARY
In this chapter, we learnt about the concept of strategic analysis, which is an important tool to appreciate and assess environment of business as it largely defines how an organisation conducts its operations. We have also discussed in detail the environmental i... | [
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-0.... |
Inter_P6B_SM_Chapter_3_Strategic_Analysis_Internal_Environment.pdf | SM | Study_Material | N/A | [Concept: Theory]
## After studying this chapter, you will be able to:
- ♦ Understand the importance of the internal environment in strategic analysis.
- ♦ Explain the stakeholder view of the firm.
- ♦ Identify and explain the strategic drivers.
- ♦ Examine the role of firm-level resources and competencies in s... | [
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0.011851092800498009,
-... |
Inter_P6B_SM_Chapter_3_Strategic_Analysis_Internal_Environment.pdf | SM | Study_Material | N/A | [Concept: Theory]
## 3.1 INTRODUCTION
Strategic Analysis is equally important when it comes to internal environment assessment.
Internal environment refers to the sum total of people - individuals and groups, stakeholders, processes- input-throughput-output, physical infrastructure- space, equipment and p... | [
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-0.018171781674027443,
-... |
Inter_P6B_SM_Chapter_3_Strategic_Analysis_Internal_Environment.pdf | SM | Study_Material | N/A | [Concept: Theory]
## 3.2 UNDERSTANDING KEY STAKEHOLDERS
Who are Stakeholders and how do we identify them?
A firm may be viewed as a coalition of stakeholders- all those individuals and entities that have a stake in its success and can impact it as well. They may be the employees, shareholders, investors,... | [
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0.022577369585633278,
0... |
Inter_P6B_SM_Chapter_3_Strategic_Analysis_Internal_Environment.pdf | SM | Study_Material | N/A | [Concept: Theory]
## 3.2.1 Mendelow's Matrix
The Mendelow Stakeholder matrix (also known as the Stakeholder Analysis matrix and the Power-Interest matrix) is a simple framework to help manage key stakeholders.
Managing a project is extremely complicated as it involves managing the competing inter... | [
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0.024205630645155907,
... |
Inter_P6B_SM_Chapter_3_Strategic_Analysis_Internal_Environment.pdf | SM | Study_Material | N/A | [Concept: Theory]
## Developing a Grid of Stakeholders
Mendelow's Matrix is based on Power and Interest. It suggests identifying which stakeholders are incredibly important. Metrics to define the importance being High Power and High Interest which management would need to manage closely, while investing a lot of time ... | [
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... |
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