1.

1 PRINCIPLES OF MANAGEMENT

1. Management is said to have universal application. How do you justify the Universality of
Management? Give examples to illustrate your arguments.
2. “The importance of strategic planning is now fully realized by the Indian corporate sector than
before”- Discuss

Introduction

Strategic planning is important to an organization because it provides a sense of direction and outlines
measurable goals. Strategic planning is a tool that is useful for guiding day-to-day decisions and also for
evaluating progress and changing approaches when moving forward. In order to make the most of
strategic planning, the company should give careful thought to the strategic objectives it outlines, and
then back up these goals with realistic, thoroughly researched, quantifiable benchmarks for evaluating
results

Strategic planning means planning for making and implementing strategies to achieve organisational
goals. It starts by asking oneself simple questions like : What are we doing, should we continue to do it
or change our product line or the way of working, what is the impact of social, political, technological
and other environmental factors on our operations, are we prepared to accept these changes etc.

Strategic planning helps in knowing where we are and where we want to go so that environmental
threats and opportunities can be exploited, given the strengths and weaknesses of the organisation.
Strategic planning is “a thorough self-examination regarding the goals and means of their
accomplishment so that the enterprise is given both direction and cohesion.”

It is “a process through which managers formulate and implement strategies geared to optimising
strategic goal achievement, given available environmental and internal conditions.” Strategic planning is
planning for long periods of time for effective and efficient attainment of organisational goals. Strategic
planning is based on extensive environmental scanning. It is a projection into environmental threats and
opportunities and an effort to match them with organisational strengths and weaknesses.

Strategic planning is done to comprehend, anticipate and absorb environmental vagaries. It is a

Features of Strategic Planning:

The following are the salient features of strategic planning:

It answers questions like where we are and where we want to go, what we are and what we want to be.

2. Time horizon:

It aims at long-term planning, keeping in view the environmental opportunities. It helps organisations
analyse their strengths and weaknesses and adapt to the environment. Managers should be farsighted
to make strategic planning meaningful.

3. Pervasive process:

It is done for all organisations, at all levels; nevertheless, it involves top executives more than middle or
lower-level managers since top executives envision the future through scientific techniques of
forecasting.

4. Focus of attention:

It focuses organisation’s strengths and resources on important and high-priority activities rather than
routine and day-to-day activities. It reallocates resources from non-priority to priority sectors.

5. Continuous process:

Strategic planning is a continuous process that enables organisations to adapt to the changing, dynamic
environment.

6. Co-ordination:
It coordinates organisation’s internal environment with the external environment, financial resources
with non-financial resources and short-term plans with long- term plans.

IMPORTANCE

Strategic planning is a collection of business management activities used to articulate the direction of an
organization. An effective strategic plan outlines what needs to be done and how to know if the action
taken were successful. It is a systematic attempt designed to produce fundamental decisions and steps
that guide and shape what a company does, why it does it, and who it serves. Strategic planning
streamlines business goals and steers them towards a company’s direction in response to a changing
environment. Other objectives of a strategic plan include:

• To plug all employees into the system and provide accountability standards for all persons, allocated
resources, and organization purpose programs.

• To provide leadership, effective staffing, continuity, and a sense of direction for the organization.

• Define the overall mission of a company and focus on its business goals.

• Increase the awareness of the surrounding environment and observe its needs.

• Meeting facilitation – a good strategic management plan analyses the processes involved in an
organization’s meeting and provides strategies on how to get the best out of them.

• To help the business look into its future and assume a proactive stance, thereby giving the
organization a chance for survival.

A well-orchestrated strategic plan should guide effective decision-making, set the right priorities, and
make a clear path for the achievement of organizational goals. A company can choose to facilitate its
strategies or hire a firm that specializes in the provision of strategic planning services to oversee its
strategy.

The Mission

Strategic planning starts with defining a company mission. A mission is important to an organization
because it synthesizes and distills the overarching idea linking its practical strategies, enabling
management and employees to align the specifics of their actions and decisions with a clearly defined
vision and direction. Define your strategic mission in a way that is broad enough to guide both
management and employees, and narrow enough to focus their efforts. "To help humanity," is too
broad a mission, even for a nonprofit. "To feed the hungry by connecting home gardeners with food
banks," is a mission that is both general and actionable.

Setting Goals
The nuts and bolts of the strategic planning process are expressed in measurable goals. Measurable
goals set specific, concrete objectives expressed in terms of quantities and timelines. Measurable goals
are important to an organization because they enable managers and employees to evaluate progress
and pace developments. "To grow substantially during the next few years" is not a measurable goal, but
"To increase sales by 30 percent during the upcoming year" provides a concrete objective to be achieved
in a specific time frame.

Evaluating Progress

Strategic objectives are of necessity based on the best information you have at the time and your most
realistic assessments of what your company can achieve. Organizations also benefit from building a
stage into the strategic planning process that involves evaluating goals and progress after an elapsed
period of time in light of the company's success in achieving these goals and developments that have
arisen in the interim. For example, if you plan to grow your hardware store business 20 percent during a
specific year, but a formidable competitor opens a superstore down the road, you'll probably redefine
your objectives and evaluate progress in terms of preserving market share.

The Strategic Planning Process

The process of strategic planning can be as important to an organization as the results. Strategic
planning can be an especially valuable process when it includes employees in all departments and at all
levels of responsibility thinking about how their activities and responsibilities fit into the larger picture,
and about their potential contributions.

BENEFITS OF STRATEGIC PLANNING

1. It allows organizations to be proactive rather than reactive

A strategic plan allows organizations to foresee their future and to prepare accordingly. Through
strategic planning, companies can anticipate certain unfavourable scenarios before they happen and
take necessary precautions to avoid them. With a strong strategic plan, organizations can be proactive
rather than merely reacting to situations as they arise. Being proactive allows organizations to keep up
with the ever-changing trends in the market and always stay one step ahead of the competition.

2. It sets up a sense of direction

A strategic plan helps to define the direction in which an organization must travel, and aids in
establishing realistic objectives and goals that are in line with the vision and mission charted out for it. A
strategic plan offers a much-needed foundation from which an organization can grow, evaluate its
success, compensate its employees and establish boundaries for efficient decision-making.

3. It increases operational efficiency

A strategic plan provides management the roadmap to align the organization’s functional activities to
achieve set goals. It guides management discussions and decision making in determining resource and
budget requirements to accomplish set objectives — thus increasing operational efficiency.

4. It helps to increase market share and profitability

Through a dedicated strategic plan, organizations can get valuable insights on market trends, consumer
segments, as well as product and service offerings which may affect their success. An approach that is
targeted and well-strategized to turn all sales and marketing efforts into the best possible outcomes can
help to increase profitability and market share.

5. It can make a business more durable

Business is a tumultuous concept. A business may be booming one year and in debt the next. With
constantly changing industries and world markets, organizations that lack a strong foundation, focus and
foresight will have trouble riding the next wave. According to reports, one of every three companies that
are leaders in their industry might not be there in the next five years… but the odds are in favour of
those that have a strong strategic plan

6. Competitive advantage

In the world of globalisation, firms which have competitive advantage (capacity to deal with competitive
forces) have better sales and financial performance. This is possible if they foresee the future. Future
can be predicted through strategic planning. It enables managers to anticipate problems before they
arise and solve them before they become worse.

7. Minimise risk:

Strategic planning provides information to assess risk and frame strategies to minimise risk and invest in
safe business opportunities. Chances of making mistakes and choosing wrong objectives and strategies,
thus, get reduced.

Risk is inherent in every business and failure to anticipate risk through strategic planning is almost sure
to lead the business to failure unless otherwise proved by chance. Lack of strategy, framing wrong
strategies or ineffective implementation of strategy cannot be afforded by business enterprises
operating in the dynamic, changing and risky environment.

5. Beneficial for companies with long gestation gap:

The time gap between investment decisions and income generation from those investments is called
gestation period. During this period, changes in technological or political forces can affect
implementation of decisions and plans may, therefore, fail. Strategic planning discounts future and
enables managers to face the threats and opportunities. Huge capital investments in projects is followed
by expected financial returns.
LIMITATIONS OF STRATEGIC PLANNING

1. Lack of knowledge:

Strategic planning requires lot of knowledge, training and experience. Managers should have high
conceptual skills and abilities to make strategic plans. If they do not have the knowledge and skill to
prepare strategic plans, the desired results will not be achieved. It will also result in huge financial losses
for the organisation. This limitation can be overcome by training managers to make strategic plans.

2. Interdependence of units:

If business units at different levels (corporate level, business level and functional level) are not
coordinated, it can create problems for effective implementation of strategic plans.

3. Managerial perception:

In order to avoid developing risky objectives and strategies which they will not be able to achieve,
managers may land up framing sub-optimal goals and plans. Sometimes, short-term commitments also
defer making long-term strategies.

4. Financial considerations:

Strategic planning requires huge amount of time, money and energy. Managers may be constrained by
these considerations in making effective strategic plans. These limitations are by and large, conceptual
and can be overcome through rational, systematic and scientific planning. Researchers have proved that
companies which make strategic plans outperform those which do not do so.
3. Explain about the personal challenges involved in becoming a manager and a leader in today's
turbulent environment.

4. Without effective management the resources will remain as resources cannot be converted into
productive utilities - Do you agree? Give reasons.
1.2 ACCOUNTING FOR MANAGERS

1. Enumerate the ratios that measure a firm’s overall effectiveness and specify the related formula.

2. “Depreciation is a process of allocation and not of valuation.” Comment.

3. It is said that only cash cost are relevant for capital budgeting decision. However, depreciation which
is a non-cash cost is a prominent part of cash flow analysis for such an investment decision. How do you
explain this paradox?

4. It is said, “cost accounting is a system of foresight and not post-mortem examination; it turns losses
into profit, speeds up activities and eliminates wastes”. Discuss in detail this statement.