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Strategic management is simply a set of managerial decisions and actions that determines the long-run performance of the organization. Today in this article, we have covered topics such as what is strategic management and its Nature, Scope, and Importance.

Strategic Management includes all types of environmental scanning (both external and internal), strategy formulation and long-term planning, strategy implementation, and evaluation and control.

The study of Strategic Management emphasizes the monitoring and evaluating of external opportunities and threats in light of the organization’s strengths and weaknesses.

What is Strategic Management?

Strategic Management is an emerging discipline and is a study of the functions and responsibilities of senior management or Top level management.

Definition of Strategic Mgmt

Strategic Management is defined in various ways by different authors that are as follows;

Strategic management is the art and science of formulating, implementing, and evaluating cross-functional decisions that enable the company to achieve its objectives. – Fred R David

Strategic management is defined as a set of managerial decisions and actions that results in the formulation of strategy and its implementation to achieve the objectives of the organization. – Channon

As this definition implies, strategic management focuses on integrating management, marketing, finance/accounting, production/operations, research and development, and computer information systems to achieve organizational success.

The term strategic mgmt in this text is used synonymously with the term strategic planning. The latter term is more often used in the business world whereas the former is often used in academia.

Sometimes the term strategic management is used to refer to strategy formulation, implementation, and evaluation with strategic planning referring only to strategy formulation.

The purpose of strategic management is to exploit and create new and different opportunities for tomorrow; long-range planning, in contrast, tries to optimize for tomorrow the trends of today.

Nature & Scope of Strategic Management

• Act as road map
• Better handling of corporate decisions
• Facilitates growth objectives and strategies
• Ensures the firm remains prepared
• Helps in best utilization of resources
• Serves as a hedge against uncertainty
• Helps to understand trends in advance
• Helps to avoid hazard response
• Provides the best possible fit
• Helps build competitive advantage and core competencies
• Draws from both intution and logic
• Prepares the firm to not face the future but even shape the future in its favour
• Seeks to influence the firms mega environments in its favour

Importance of Strategic Management

Here are the importance of strategic management:

• Establishing direction
• Aligning resources
• Achieving competitive advantage
• Managing risk
• Improving performance
• Encouraging innovation
• Enhancing communication
• Fostering accountability
• Adapting to change
• Promoting growth

Establishing Direction: Strategic Mgmt helps organizations to establish a clear direction and purpose for the organization. This includes developing a mission and vision statement, setting goals and objectives, and identifying key priorities.

Aligning Resources: Strategic Mgmt ensures that resources are allocated in a way that is consistent with the organization’s goals and objectives. This includes financial resources, human resources, and other assets.

Achieving Competitive Advantage: Strategic Mgmt helps organizations to identify and capitalize on their unique strengths, which can provide a competitive advantage over other organizations in the industry.

Managing Risk: Strategic Mgmt involves identifying potential risks and developing strategies to mitigate or avoid them. This helps organizations to minimize the impact of external factors on their operations.

Encouraging Innovation: Strategic Mgmt encourages organizations to be innovative and take risks in order to stay ahead of the competition. This includes developing new products, services, or processes.

Improving Performance: Strategic Mgmt helps organizations to improve their overall performance by establishing clear goals and objectives, aligning resources, and implementing effective strategies.

Enhancing Communication: Strategic Mgmt encourages communication and collaboration across all levels of the organization. This helps to ensure that everyone is working towards the same goals and objectives.

Fostering accountability: Strategic Mgmt helps to establish accountability for results and ensures that individuals and teams are responsible for achieving their objectives.

Adapting to Change: Strategic Mgmt helps organizations to adapt to changes in their environment, including changes in technology, customer preferences, and market conditions.

Promoting Growth: Strategic Mgmt helps organizations to identify opportunities for growth and to develop strategies to pursue them. This can include expanding into new markets, developing new products or services, or acquiring other companies.

Also Read: Steps in Planning Process

Types of Strategie in SM

There are three types of strategies on the basis of level.

1. Corporate Level Strategy
2. Business Level Strategy
3. Functional Level Strategy

Corporate-level strategy: This type of strategy focuses on the overall direction of the organization, including decisions about diversification, mergers and acquisitions, and resource allocation.

Business-level strategy: This type of strategy focuses on how the organization will compete in a particular industry or market segment. It involves decisions about pricing, marketing, and product development.

Functional-level strategy: This type of strategy focuses on how each functional area of the organization (such as marketing, finance, or operations) will contribute to the overall goals and objectives of the organization.

Few Other Startegies are as follows;

• Integrated Strategies (Vertical, Horizontal)
• Intensive Strategy (Market Penetration and Product Development)
• Diversification Strategies (Related, and Unrelated)
• Defensive Strategies (Joint Venture, Divestiture, Liquidation)
• Competitive Strategy
• Growth Strategy
• Innovation Strategy
• Turnaround Strategy
• Cost Leadership Strategy
• Differentiation Strategy
• Focus Strategy

Demand is influenced by various factors such as price, income, consumer preferences, availability of substitutes, and overall economic conditions. Here we have shared the factors of determinants of demand with examples.

In general, as the price of a product or service increases, the demand for it decreases, while as the price decreases, the demand increases. Similarly, as income increases, people tend to buy more goods and services, leading to an increase in demand.

► What is Demand?

Demand refers to the quantity of a particular good or service that consumers are willing and able to purchase at a given price and time. It represents the desire or need for a product or service that is backed by the ability and willingness to pay for it.

Demand is a crucial concept in economics and is influenced by various factors such as price, income, consumer preferences, availability of substitutes, and overall economic conditions.

As the price of a product or service increases, the demand for it tends to decrease, while as the price decreases, the demand tends to increase. Similarly, as income increases, people tend to buy more goods and services, leading to an increase in demand.

◉ Meaning of Demand

Demand refers to the amount of a product or service that consumers are willing and able to buy at a particular price and time.

It is a fundamental concept in economics and is influenced by various factors such as price, income, consumer preferences, availability of substitutes, and overall economic conditions.

When the price of a product or service is high, consumers may be less willing or able to purchase it, which can lead to a decrease in demand.

Conversely, when the price is low, consumers may be more willing or able to purchase it, leading to an increase in demand. Other factors, such as changes in income or consumer preferences, can also affect demand.

Understanding demand is essential for businesses to make informed decisions about pricing, production, and marketing. By analyzing demand, businesses can determine the optimal price to charge for their product or service, forecast sales and revenue, and make decisions about product development and promotion strategies.

◉ Definition of Demand

In economics, demand refers to the quantity of a particular good or service that consumers are willing and able to purchase at a given price and time. It represents the desire or needs for a product or service that is backed by the ability and willingness to pay for it.

Here are some definitions of demand by prominent authors:

“Demand for a commodity refers to the amount of it which will be bought per unit of time at any given price.” – Alfred Marshall

“Demand is the quantity of a commodity that will be purchased at a given price over a particular period of time.” – Benham

“Demand is the willingness and ability of consumers to buy a good or service at a given price in a given time period.” – Samuelson and Nordhaus

“Demand is a schedule of the quantities of a good that will be purchased at various prices, other things being held constant.” – Mankiw

“Demand refers to the willingness of buyers to purchase goods at different prices at a particular point in time, ceteris paribus.” – Lipsey and Steiner

◉ Law of Demand

• The law of demand helps marketers to analyze the Market demand present in their respective fields of business.
• Market demand refers to the total demand for a commodity by all consumers. It is the aggregate quantity demanded of a commodity by all the consumers in a market.

The law of demand states that, all other factors being equal, demand will be reduced as the price of a product is raised.

“When the price of any product increases then its demand will fall.

When its price decreases then its demand will increase in the market.”

It falls to the business owner to find the pricing sweet spot that will capture as much of a profit as possible without causing demand to retract. When the ultimate goal is to be profitable, a close and continual analysis of the supply and demand of every product line is essential to staying competitive in the market.

► Factors of Determinants of Demand

The demand for a commodity may change. It may increase or decrease due to changes in certain factors. These factors are called determinants of demand. These factors include;

1. Price of a commodity
2. Nature of commodity
3. Income and wealth of consumer
4. Taste and preferences of the consumer
5. Price of related goods (substitutes and complement goods)
6. Consumers’ expectations.
7. Advertisement etc…

Now let’s discuss all the factors of determinants of demand in a more detailed manner.

✔ Price of a Commodity

The price of a commodity is a key determinant of demand, meaning it has a significant impact on the quantity of a good or service that consumers are willing and able to purchase at a given point in time. In general, when the price of a commodity increases, the demand for that commodity decreases, and vice versa.

This inverse relationship between price and demand is known as the law of demand, which states that as the price of a good or service rises, the quantity demanded of that good or service will fall, ceteris paribus (i.e., assuming all other factors remain constant). Similarly, as the price of a good or service falls, the quantity demanded of that good or service will rise, ceteris paribus.

There are, of course, other factors that can also impact demand, including consumer preferences, income levels, availability of substitutes, and overall market conditions. However, the price of a commodity remains one of the most important determinants of demand, as it directly affects the cost of acquiring the good or service in question, and therefore plays a major role in consumers’ purchasing decisions.

✔ Nature of Commodity (determinants of demand)

The nature of a commodity is another important determinant of demand. The nature of a commodity refers to its characteristics, including its physical attributes, quality, and features, as well as the purpose it serves and the benefits it provides to consumers.

The nature of a commodity can impact demand in several ways. For example:

Unique or Specialized Products: If a commodity is unique or specialized, it may have a relatively inelastic demand, meaning that consumers are willing to pay a higher price for it, even if its price increases. This is because consumers may not be able to find a substitute product that meets their needs or preferences.

Necessity or Luxury Goods: If a commodity is considered a necessity (such as food or medicine), the demand for it may be relatively inelastic as well, as consumers will continue to purchase it regardless of its price. Conversely, if a commodity is considered a luxury (such as expensive jewelry or designer clothing), the demand for it may be more elastic, as consumers may be more willing to forego it if its price increases.

Perishable Goods: The nature of a commodity can also impact demand for perishable goods, such as fresh produce or dairy products. These goods have a limited shelf life, and as such, their demand may be more time-sensitive. For example, consumers may be willing to pay more for fresh produce that is in-season and readily available, but demand may drop off quickly once the produce starts to spoil or goes out of season.

Overall, the nature of a commodity plays an important role in determining its demand, as it directly impacts consumers’ preferences, willingness to pay, and the availability of substitute goods.

✔ Income and Wealth of Consumer

The income and wealth of consumers are important determinants of demand, as they directly impact consumers’ ability to purchase goods and services. Generally, as income and wealth increase, so does the demand for most goods and services. Conversely, as income and wealth decrease, demand for most goods and services also tends to decrease.

The relationship between income/wealth and demand can be expressed in two ways:

Normal Goods: For most goods, demand increases as income and wealth increase. These goods are known as normal goods. Examples of normal goods include luxury items, such as high-end clothing, jewelry, and cars.

Inferior Goods: For some goods, demand actually decreases as income and wealth increase. These goods are known as inferior goods. Examples of inferior goods include low-quality or generic brands of food and clothing.

The relationship between income/wealth and demand can also be affected by factors such as consumer preferences and the availability of substitute goods. For example, even if a consumer’s income increases, they may choose to purchase a lower-priced substitute good if it meets their needs or preferences.

Overall, the income and wealth of consumers are important determinants of demand, as they impact the purchasing power and buying habits of consumers. They also play a key role in shaping market trends and consumer behavior.

Also Read: What is Marketing?

✔ Taste and Preferences of the Consumer

Consumer tastes and preferences are one of the most important determinants of demand. These are the individual and subjective preferences that consumers have for certain goods and services, based on their personal tastes, values, beliefs, and lifestyles.

Consumer preferences can be influenced by a variety of factors, such as advertising, social media, cultural norms, personal experiences, and word-of-mouth recommendations. They can also be shaped by changes in fashion trends, technological advances, and environmental concerns.

Changes in consumer preferences can have a significant impact on demand. For example, if consumers become more health-conscious and start to prefer organic or locally sourced food, demand for these types of products will likely increase. Conversely, if consumers become less interested in a certain type of product or brand, demand for that product will likely decrease.

The impact of consumer preferences on demand can also vary depending on the type of product or service. For example, preferences may have a greater impact on demand for luxury goods, where consumers may be more likely to make purchasing decisions based on their personal tastes and preferences. However, preferences may have less of an impact on demand for essential goods and services, such as groceries or healthcare, where consumers are more likely to make purchasing decisions based on practical considerations such as price and availability.

Overall, consumer preferences are a key determinant of demand, as they influence consumer behavior and purchasing decisions. As such, businesses need to be aware of changes in consumer preferences and adapt their products and marketing strategies accordingly to meet consumer demand.

✔ Price of Related Goods (Substitutes and Complement Goods)

The price of related goods is another important determinant of demand. There are two types of related goods that can affect demand:

Substitute Goods: Substitute goods are goods that can be used in place of each other to satisfy a particular need or want. For example, coffee and tea are substitutes, as they can both be used to satisfy the consumer’s desire for a hot beverage. If the price of a substitute good increases, consumers may shift their demand to the other substitute good, causing demand for the original good to decrease. Conversely, if the price of a substitute good decreases, demand for the original good may also decrease.

Complementary Goods: Complementary goods are goods that are typically used together to satisfy a particular need or want. For example, gasoline and cars are complementary goods, as cars require gasoline to operate. If the price of a complementary good increase, demand for the original good may decrease, as consumers may be less likely to purchase the original good if it becomes more expensive to use. Conversely, if the price of a complementary good decreases, demand for the original good may increase.

The relationship between the price of related goods and demand is known as the cross-price elasticity of demand. If the cross-price elasticity of demand is positive, the goods are substitutes, and if it is negative, the goods are complements.

Overall, the price of related goods is an important determinant of demand, as it can influence consumers’ purchasing decisions and shift demand from one good to another. Businesses need to be aware of the prices of substitute and complementary goods and adjust their pricing and marketing strategies accordingly to remain competitive and meet consumer demand.

✔ Consumers’ Expectations (determinants of demand)

Consumers’ expectations of future economic conditions, prices, and trends can also be important determinants of demand. If consumers expect prices to increase in the future, they may increase their demand for a particular good or service in the present, in order to take advantage of lower prices. Conversely, if consumers expect prices to decrease in the future, they may decrease their demand for a particular good or service in the present, in order to wait for lower prices.

Similarly, if consumers expect their income to increase in the future, they may be more likely to increase their demand for luxury goods and services. On the other hand, if consumers expect their income to decrease in the future, they may be more likely to decrease their demand for luxury goods and services.

Expectations can also be influenced by a variety of factors, such as news reports, economic data, and government policies. For example, if consumers expect a recession or economic downturn, they may decrease their demand for non-essential goods and services, in order to save money and prepare for potential financial difficulties.

Overall, consumers’ expectations can have a significant impact on demand, as they influence consumer behavior and purchasing decisions. As such, businesses need to be aware of changing consumer expectations and adjust their marketing strategies and pricing accordingly to meet consumer demand.

✔ Advertisement (determinants of demand)

Advertisement is another determinant of demand, as it can influence consumer behavior and purchasing decisions. Advertising is the process of promoting and publicizing a product or service through various media channels, such as television, radio, print, and online.

Effective advertising can increase demand for a product or service by creating awareness, generating interest, and persuading consumers to make a purchase. Advertisements can also create a brand image and establish brand loyalty among consumers, which can lead to repeat purchases and positive word-of-mouth recommendations.

Advertising can also influence consumer preferences and tastes, as it can introduce consumers to new products and services or highlight the benefits of existing products and services. For example, an advertisement for a new smartphone may highlight its advanced features, leading consumers to prioritize those features when choosing a new phone.

However, the impact of advertising on demand can vary depending on the product or service being advertised, as well as the target audience. Some products and services may be more easily influenced by advertising, while others may be less so.

Overall, advertising can be a powerful determinant of demand, as it can influence consumer behavior and purchasing decisions. As such, businesses need to carefully plan and execute their advertising strategies to effectively reach and persuade their target audience, in order to increase demand for their products and services.

Inventory management is considered a complex task for both big and small business organizations. It becomes very difficult to manage, control, and valuation of inventory. To solve this problem businesses adopt different methods and techniques of inventory management.

Inventory management techniques use a variety of data to keep track of the inventory or goods as they move through the production or supply chain process.

After reading this article you will learn about different methods of inventory management such as ABC analysis, Just in Time (JIT) method, Minimum Requirement Planning (MRP), Economic Order Quantity (EOQ), LIFO & FIFO method, and Batch Tracking.

Techniques of Inventory Management

There are many methods and techniques of inventory management adopted by the business which depends on business needs, size, and stock. Some important inventory management techniques are given below.

1. ABC Analysis
2. Just in Time (JIT) method
3. Minimum Requirement Planning (MRP)
4. Economic Order Quantity (EOQ)
5. LIFO & FIFO method
6. Batch Tracking

Now let’s discuss all these inventory management techniques in detail.

1. ABC Analysis (Method of Inventory Management)

ABC analysis method is one of the very important inventory management methods used by organizations to manage and distribute inventory effectively and efficiently. This method is also known as selective inventory control (SIC).

ABC analysis method of inventory management divided inventory into three categories i.e. A, B, and C in descending value. The items in the A category have the highest value and are most important, B category items are of lower value than A, and C category items have the lowest value which means it is least important.

This method is significant to identify the top category of inventory items that generate a high percentage of yearly consumption. It helps the managers to optimize the inventory levels and achieve efficient use of stock management resources.

The items that fall under the A category are fast-moving inventory items which means they required frequent reorders on the other hand items under C are slow-moving and need not be re-ordered with the same frequency as item A or item B.

Advantages of the ABC Method

• It helps businesses to focus on important and frequently used items which have large amounts of capital invested in them.
• It helps in keeping track of all the inventory.
• It ensures optimum levels of stocks are maintained at all times.
• It helps to cut down storage expenses.
• There is a provision to have enough C-category stocks to be maintained without compromising on the more important items.

Disadvantages of the ABC Analysis

• It is very difficult to analyze the correct and accurate requirements of A, B, and C inventory.
• It primarily focuses on high-value items as compared to low-value items.
• This method required proper standardization in place for materials in the store which increase the operational cost of business.
• It requires a good system of coding of materials already in operation for this analysis to work.
• This method is mostly preferred by big organizations.

2. Just-in-Time Management (JIT)

The JIT method originated in Japan around the 1960s and 1970s by Toyota Motor. This method helps the business enterprise to improve its competitiveness by saving significant amounts of money and minimizing wastage by keeping only the inventory they need to produce and sell products.

This approach drastically improves production efficiency and product quality by reducing storage, maintenance, and insurance costs of excess inventory.

3. Materials Requirement Planning (MRP)

This is one of the most used inventory management methods. This method is designed to ensure adequate inventory levels at the required times which depend on the sales forecast of products or services.

The business organization must require accurate sales records to plan or calculate the accurate requirement of inventory needed for production and this requirement is communicated to materials suppliers in a timely manner so they ensure inventory acquisition.

Advantages of the MRP method

• It sure to timely availability of materials and components when needed in the production process.

• It minimizes customer lead times to improve customer satisfaction.
• It reduced inventory costs.
• It minimizes the risk of stock-outs which not only improves customer satisfaction but also increase sales and revenue.
• It improves the manufacturing efficiency of the organization.
• It ensures accurate production planning and scheduling to optimize the use of labor, equipment, and raw material.
• It improves labor productivity and the wastage of raw materials.
• It decreases production costs and makes product pricing more competitive.

4. Economic Order Quantity (EOQ) Technique

This model of inventory management is used to calculate the right amount of inventory that should be ordered in each batch order so it not only reduces the total costs of inventory but also focuses on the organization not having excessive inventory while assuming constant consumer demand. This method also covers costs of inventory holding and inventory setup costs.

The EOQ model seeks to ensure that the right amount of inventory is ordered per batch so a company does not have to make orders too frequently and there is not an excess of inventory sitting on hand. It assumes that there is a trade-off between inventory holding costs and inventory setup costs, and total inventory costs are minimized when both setup costs and holding costs are minimized.

EOQ= √H×S×D

• Where, √ = Square​​
• H= Holding costs of inventory (per year, per unit)
• S= Setup costs (per order, generally including shipping and handling)
• D = Demand rate (quantity sold per year)

Advantages of the EOQ method

• It helps companies to purchase the ideal order quantity in order to minimize inventory costs.
• It helps companies in ordering, storing, and use of inventories.
• It improves customer satisfaction by ensuring the availability of products on time.
• It optimized order schedules in such a way that it cut down excessive costs of real estate, utility, security, insurance, and other related costs.
• It aids in ordering inventory that matches demand, so fewer products are stored.

Disadvantages of the EOQ method

• It does not consider all factors affecting the inventory management of business such as competition, demand variability, and seasonality of the product.
• The poor availability of data makes EOQ calculating less meaningful and challenging.
• The EOQ formula is based on assumption that there is constant demand which is wrong.
• This method may lead to shortages of inventory in the business.

5. LIFO & FIFO – Inventory Management Technique

The LIFO (Last in, first out) and FIFO (first in, first out)  one of the oldest and most basic methods of inventory management. Business enterprises use the principle of first in, first out to value inventory.

FIFO assumes that the first goods the business manufactures or purchases should become the first goods sold. This method is very useful for perishable products like food, vegetable, and beverage or product subject to obsolescence like tech products and designer fashion items.

Whereas, In the LIFO (Last in, first out) method of inventory management assume that the last goods the business manufactures or purchases should become the first goods sold. It uses the current prices to calculate the cost of goods sold. This method of inventory management is better for nonperishable goods.

6. Batch Tracking (Inventory Management Technique)

In simple words, batch tracking is a kind of traceability system that enables businesses to group together a set of inventory items that share similar properties in a batch. Inventory batches comprise a specific number of items received on a particular date, for a definite cost.

Basically, batch tracking optimizes the way inventory is managed throughout the distribution chain, as it helps to trace your products from start to finish – the complete production and distribution process, till it reaches the end consumer.

Batch tracking offers better visibility and makes it possible to track the expiry date of products and trace defective units back to the specific batch it belonged to.

Advantage of the Batch Tracking Method

• It ensures faster trackability of inventory by providing a specific number to inventory.
• It reduces the cost of inventory management by minimizing wastage.
• It helps businesses to exercise more control over the quantity and quality of inventory by enabling them to not only track batch movement but also track product development from start to finish.
• It ensures higher efficiency and quality control.
• It is important for both B2C and B2B businesses.

Disadvantages of the Batch Tracking Method

• The batch tracking method is costly it requires computers, software, and trained operators.
• It scope is only limited to the management of physical inventory.
• It plays no role in purchasing and analyzing the demand for inventory.

The approaches of Industrial Relations help in understanding the nature which ensures cordial relationships between workers and employers and also provides a proper mechanism to manage industrial disputes and conflicts.

Industrial relation is an integral part of human resource management that studies the formal relationship of the workers with the administration and the employers in an industrial setup.

The concept of industrial relations is perceived differently by different scholars and experts and every scholar has given their own views in the context of industrial relations. These views formulate different approaches to industrial relations.

According to experts, there is not a single approach that provides a complete understanding of industrial relations, rather all approaches of Industrial Relations collectively provide a complete understanding of the complexity and diversity among the various actors and players in Industrial Relations.

► Approaches of Industrial Relations

The important approaches to industrial relations are as follows:-

1. Unitary Approach
2. Pluralistic Approach
3. Marxist Approach
4. Systems Approach
5. Sociology Approach
6. Gandhian Approach
7. Psychological Approach
8. V.V Giri Approach
9. Human Relations Approach

The above mention approaches to industrial relations are explained in detail one by one below.

✔ 1. Unitary Approach

In this approach, the management is considered the main authority for decision making and it is also responsible for ensuring peace and harmony in the organization.

This theory believes that workplace conflict is temporary in nature, and is a result of improper management in the organization.

The unitary approach discourages conflict in the form of strikes which is not only regarded as necessary but destructive.

The unitary approach of industrial relations strongly upholds the concept of mutual cooperation, individual treatment, teamwork, and shared goals.

The advocates of the unitary approach emphasize direct negotiations with employees and they are not in the favour of intervention of government, tribunals, and unions in the resolution of disputes.

The Important aim of the unitary approach is as follows:

• It promotes a productive, effective and harmonious working environment in the organization
• It helps in developing a trustworthy, open, fair, and transparent work culture
• It restricts the interference of the tribunals’ court and government associations in industrial disputes.
• It initiates direct negotiation between the management and the employees.

✔ 2. Pluralistic Approach

The pluralistic approach assumes that the organization is consist of individuals who form distinct groups with their own set of aims, objectives, leadership styles, and value
propositions and this kind of multi-distinct groups are responsible for the continuous scope for conflict.

As per this approach, the legitimacy of the management’s authority is not automatically accepted, and stability and peace in industrial relations as the product of concessions and compromises between management and unions.

It considers the workplace conflict between management and workers as rationally beneficial and inevitable and conflict is viewed as necessary for innovation and growth.

The trade unions are considered legitimate representatives of employee interests and workers join the trade unions to protect their interests and influence the decision-making of the management.

A pluralist approach to industrial relations supports the intervention of the government or state in order to protect the interest of employees through laws and industrial tribunals which provide orderly processes for the resolution of conflict.

✔ 3. Marxist Approach

The Marxist approach is also known as the ‘Radical Perspective’, and as the name suggests it is based on the ideas of Karl Marx.

The core of the Marxist approach is based on the idea that the economic activities of production and manufacturing are major controlled by capitalists whose only objective is to maximize their profit and exploit the workers.

Marxists also regard conflict between employers and employees or those who own the means of production and those who have only their labor to offer as inevitable and it is a result of the unfair treatment done by capitalist society to workers.

The Marxists always support that class conflict because it is required to initiate social change which bridges the gap between the economically settled owners of factors
of production and the economically dependent worker class.

This approach supports the formation of trade unions as they saw as an effective force that protects the workers from exploitation by capitalists and also considered as a weapon to bring about a revolutionary social change.

Marxists’ approach is against the intervention of state intervention through legislation and the creation of industrial tribunals. They believe that state intervention always favors management’s interest rather than supporting the workers.

✔ 4. Systems Approach

In his book Industrial Relations Systems, John T. Dunlop gave the systems theory of industrial relations in the year 1958.

According to John. T. Dunlop that every human being belongs to a continuous but independent social system culture that is responsible for shaping his or her actions, behavior, and role.

The system approach of industrial relations was based on a joint function of all the different variables:

1. Actors: The term actors here refers to the individuals or parties involved in the process of developing sound industrial relations. This variable is denoted by ‘A’.
2. Contexts: The term contexts here refers to the condition or situation in which the actors perform the given tasks. It includes the industry markets (M), technologies (T), and the power distribution in the organization and labor unions(P).
3. Ideology: The similar ideas, mentality, or beliefs shared by the actors help to blend the system. It is denoted by (I).

John Dunlop’s Systems Approach Formula based on different variables are

✔ 5. Sociological Approach

The sociological approach to industrial relations considers industry as an inseparable part of society.

A society is consist of different people who have many differences in their family background, attitudes, skills, education level, perception, personality, interests, likes, and dislikes, and these differences not only affect management vision, mission objective, employee attitude, and perception but are also responsible for workplace conflict.

Where industry also affects society in both economic and social ways. Industries play a key role in determining social mobility, urbanization, transport problem, family structure and size, status symbols, and customs.

According to the sociological approach, society impacts various work environment factors that are economic, technical, and political factors of an enterprise and these determine what kind of relationship is shared by the employer, employees, institutions, and government bodies.

Also Read :Scope of Industrial Relations

✔ 6. Gandhian Approach

As the name suggests this approach was proposed by Mahatma Gandhi or Mohandas Karamchand Gandhi.

The Gandhian approach to industrial relations perceived that every Industrial organization is a joint venture of employees and employers and the employees should be treated as associates or co-partners in the business.

Gandhi Ji was not against strikes instead, he was a supportive attitude toward strikes.

According to theory opinion, strikes should be carried out in a completely violence-free manner and it should be treated as the last option the workers adopt, after the failure of all the constitutional and peaceful ways of resolving conflicts and negotiating with the employer.

Gandhian’s approach is focused on increasing production and gains from production should be shared with the employees whom it has been possible.

Gandhi Ji also emphasized that industrial disputes between the employer and employees should be resolved healthily through interactions, arbitration, and bilateral negotiations.

✔ 7. Psychological Approach

As per the psychological approach, the main reason behind industrial disputes is the different perceptions and mindsets, lack of trust, and negative feelings among the key participants of industrial relations i.e., the employees and the management.

This negative perception about each other not only affect economic but also non-economic factors, like power, position, recognition, beliefs, education, social security, and income of the individuals.

All factors create a tense interpersonal relationship leading to conflicts that ultimately hinder the image and interest of the individuals involved.

✔ 8. VV Giri’s Approach to industrial relations

This approach to industrial relations was given by the late President of India Shri V.V. Giri who was a renowned politician and trade union leader.

The Giri approach emphasized the importance of collective bargaining and mutual negotiations between management and labor should be used to settle industrial disputes.

He suggested that every industry should set up bipartite machinery to resolve the industrial conflict and this bipartite committee consist of both management and trade union representatives.

Giri’s emphasized the voluntary efforts of the management and the trade unions to resolve their differences, through voluntary arbitration, and collective bargaining rather than compulsory arbitration.

✔ 9. Human Relations Approach to industrial relations

The human relation approach of Elton Mayo has laid considerable importance on human behavior.

This approach analyzes the behavior of individuals and groups at the workplace and also helps in modifying individual behavior toward the accomplishment of organizational objectives.

This school of thought highlights all the aspects of human behavior that ensure individual integration motivation, teamwork, productivity, and cooperation with management.

The human relations approach stresses certain policies and techniques that are vital for improving employee morale, efficiency, communication, the workplace as a social system, group dynamics, and participation in management and job satisfaction.

This approach outlines all the attributes that determine the labor-management relations which may arise from industrial disputes or conflicts like job and social security, good pay and working conditions, recognition, participation in decision-making, etc.

Also Read : Code of Discipline in Industrial Relations