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Part -A
Q1. Describe the benefits of Good Strategic Planning? Define and giveexamples
of key terms of Strategic Management?
Ans Strategic management allows and organization to be more proactive than reactive
inshaping its own future; it allows an organization to initiate and influence activities and thus
toexert control over its own destiny.Small business owners, chief executive
officers,presidents andmanagers of many for-profit and non-profit organizations have
recognized and realized the benefits of strategic management.Historically, the principle
benefit of strategic management has been to help organizationsformulate better strategies
through the use of the more systematic,logical and rational approachto strategic choice.
Financial Benefits:
1.Improvement in sales.2.Improvement in profitability.3.Improvement in productivity.
Non-Financial Benefits:
1.improved understanding of competitors strategies.2.Enhanced awareness of
threats.3.Reduced resistance to change.4.Enhanced problem-prevention capabilities.Strategic
planning is an involved, intricate, and complex process that takes an organization
intouncharted territory. It does not provide a ready-to-use prescription for success; instead,
takes theorganization through a journey and offers a framework for addressing questions and
solving problems. Being aware of potential pitfalls and being prepared to address them is esse
ntial tosuccess.Some pitfalls to watch for and avoid in strategic planning are these:
Failing to communicate the plan to employees, who continue working in the dark
Top managers making many intuitive decisions that conflict with the formal plan
The best example of strategic business unit would be totake organizations like HUL, P&G or LG in
focus. These organizations are characterized bymultiple categories and multiple product lines. For
example, HUL may have a line of products inthe shampoo category, Similarly LG might have a line
of products in the television category.Thus to track the investments against return, they may classify
the category as a different SBUitself.
There are several reasons SBUs are used in an organization and they are mentioned in my poston the
importance for using SBUs in a multi product organization. However, along with thereasons for
using SBUs there are also some
powers which needs to be inferred on an SBU.Planning independence, Empowerment and others are
such powers which influence a SBU. 3 of such features are discussed below.
1) Empowerment of the SBU manager
Several times the empowerment of SBU managers iscrucial for the success of the SBU / products.
This is mainly because this manager is the one whois actually in touch with the market and knows the
best strategies which can be used for optimumreturns. Thus several times, the SBU manager might
need a higher investment for his products.At such times the manager should be supported from the
organization. Only this confidence willhelp the manager in the progress of the SBU.
2) Degree of sharing of one SBU with another
This point is directly connected to the firstone. What if one SBU needs some budget but the same is
not offered because the budget is being
shared by 2 other SBUs and as it is the budget is short. Thus the first SBU does not get the
independence to implement some important strategies. Similarly there might be other
restrictionsapplied to one SBU as it is using some resources which are shared by another SBU. This
mightnot always be negative. Of one SBU gains more profit than usual, this revenue might
also become useful for the other SBU thereby promoting growth of both of them. This is wheresharin
g actually plays a positive role.
3) Changes in the market
An SBU absolutely needs to be flexible because it needs to adaptto any major changes in the market.
For example
if an LCD manager
knows that LEDs are
more in demand now, he needs to communicate to the top management that he would also like arange
of LED products to make the SBU even more profitable. Thus by adding LED to its
portfolio, the SBU can immediately become double profitable. Thus by adjusting to change onSBU
levels, the organization as a whole can become profitable.The key to Strategic business management
is to have a strict watch on the investment and returnsfrom each SBU. The SBU manager too plays a
crucial role in this and hence he is recruited fromthe industry with extensive experience of that
particular industry. Portfolio / Multi SBUmanagement and is done at the absolute top level of the
management. Each and every change in
the market, and its affect on SBUs is
anticipated which is then taken into consideration. Hence,for a multi product organization, business
management may actually mean product portfoliomanagement or SBU management.Strategy may
operate at different levels of an organization -corporate level, business level, andfunctional level.
Corporate Level Strategy
Corporate level strategy occupies the highest level of strategic decision-making and coversactions
dealing with the objective of the firm, acquisition and allocation of resources andcoordination of
strategies of various SBUs for optimal performance. Top management of theorganization makes such
decisions. The nature of strategic decisions tends to be value-oriented,conceptual and less concrete
than decisions at the business or functional level.
Business-Level Strategy.
Business-level strategy is
applicable in those organizations, which have different businesses-and each business is treated as
strategic business unit (SBU). The fundamental concept in SBU isto identify the discrete independent
product/market segments served by an organization. Sinceeach product/market segment has a distinct
environment, a SBU is created for each suchsegment. For example, Reliance Industries Limited
operates in textile fabrics, yarns, fibers, and avariety of petrochemical products. For each product
group, the nature of market in terms of customers, competition, and marketing channel differs.Therefore, it requires different strategies for its different product groups. Thus, where SBUconcept is
applied, each SBU sets its own strategies to make the best use of its resources (itsstrategic
advantages) given the environment it faces. At such a level, strategy is a comprehensive plan
providing objectives for SBUs, allocation of re-sources among functional areas andcoordination
between them for making optimal contribution to the achievement of corporate-level objectives. Such
strategies operate within the overall strategies of the organization. Thecorporate strategy sets the longterm objectives of the firm and the broad constraints and policieswithin which a SBU operates.
The corporate level will help the SBU define its scope of operations and also limit or enhance
the SBUs operations by the resources the corporate levelassigns to it. There is a difference between
corporate-level and business-level strategies. For example, Andrews says that in an organization of
any size or diversity, corporate strategyusually applies to the whole enterprise, while business
strategy, less comprehensive, defines thechoice of product or service and market of individual
business within the firm. In other words,
business strategy relates to the how and corporate strategy to the what . Corporate strategy
defines the business in which a company will compete preferably in a way that focuses resources
to convert distinctive competence into competitive advantage.
Corporate strategy is not the sum total of business strategies of the corporation but it deals
withdifferent subject matter. While the corporation is concerned with and has impact on
businessstrategy, the former is concerned with the shape and balancing of growth and renewal rather
thanin market execution.
Functional-Level Strategy.
Functional strategy, as is suggested by the title, relates to a single functional operation
and theactivities involved therein. Decisions at this level within the organization are often described
astactical. Such decisions are guided and constrained by some overall strategic
considerations.Functional strategy deals with relatively restricted plan providing objectives for
specificfunction, allocation of resources among different operations within that functional area
andcoordi-nation between them for optimal contribution to the achievement of the SBU andcorporatelevel objectives. Below the functional-level strategy, there may be operations levelstrategies as each
function may be dividend into several sub functions. For example, marketingstrategy, a functional
strategy, can be subdivided into promotion
Q3. What should be the key Traits of a CEO? What are the forces thatdesign the
Strategic Management Systems?
Ans Strategic management analyzes the major initiatives taken by a company's top management on behalf of
owners, involving resources and performance in internal and external environments.[1] It entails specifying
the organization's mission, vision and objectives, developing policies and plans, often in terms of projects and
programs, which are designed to achieve these objectives, and then allocating resources to implement the policies and
plans, projects and programs. A balanced scorecard is often used to evaluate the overall performance of
the business and its progress towards objectives. Recent studies and leading management theorists have advocated
that strategy needs to start with stakeholders expectations and use a modified balanced scorecard which includes all
stakeholders.
Strategic management is a level of managerial activity below setting goals and above tactics. Strategic management
provides overall direction to the enterprise and is closely related to the field ofOrganization Studies. In the field of
business administration it is useful to talk about "strategic consistency" between the organization and its environment or
"strategic consistency." According to Arieu "there is strategic consistency when the actions of an organization are
consistent with the expectations of management, and these in turn are with the market and the context." [2]
"Strategic management is an ongoing process that evaluates and controls the business and the industries in which the
company is involved; assesses its competitors and sets goals and strategies to meet all existing and potential
competitors; and then reassesses each strategy annually or quarterly [i.e. regularly] to determine how it has been
implemented and whether it has succeeded or needs replacement by a new strategy to meet changed circumstances,
new technology, new competitors, a new economic environment., or a new social, financial, or political environment."
[4]
Strategic Management can also be defined as "the identification of the purpose of the organisation and the plans and
actions to achieve the purpose. It is that set of managerial decisions and actions that determine the long term
performance of a business enterprise. It involves formulating and implementing strategies that will help in aligning the
organization and its environment to achieve organisational goals."
Strategic management can depend upon the size of an organization, and the proclivity to change of its business
environment. These points are highlighted below:
A global/transnational organization may employ a more structured strategic management model, due to its
size, scope of operations, and need to encompass stakeholder views and requirements.
An SME (Small and Medium Enterprise) may employ an entrepreneurial approach. This is due to its
comparatively smaller size and scope of operations, as well as possessing fewer resources. An SME's CEO (or
general top management) may simply outline a mission, and pursue all activities under that mission.
Whittington (2001) highlighted four approaches to strategic management. These are Classical, Processual,
Evolutionary and Systemic approaches[5].
[3]
Mintzberg stated there are prescriptive (what should be) and descriptive (what is) approaches. Prescriptive
schools are "one size fits all" approaches that designate "best practice" while descriptive schools describe how
strategy is implemented in specific contexts.
Q4. Discuss the various grand strategies at the Corporate Level i.e.Stability,
Growth and Retrenchment.
Ans Corporate Level StrategiesKinds of Grand Strategies:* Stability Strategies* Growth
Strategies* Retrenchment Strategies* Combination StrategiesStability Strategies
The basic approach is maintain present course: steady as it goes.
In an effective stability strategy, companies will concentrate their resources where
the company presently has or can rapidly develop a meaningful competitive advantage in the
narrowest possible productmarket scope consistent with the firms resources and market requirement
Types of
Ans Even a cursory study of business history, however, reveals plenty of cases in which firms strategies
shaped industry structure, from Fords Model T to Nintendos Wii. For the past 15 years, we have been developing
a theory of strategy, known as blue ocean strategy, that reflects the fact that a companys performance is not
necessarily determined by an industrys competitive environment.2The blue ocean strategy framework can help
companies systematically reconstruct their industries and reverse the structure-strategy sequence in their favor.
Blue ocean strategy has its roots in the emerging school of economics called endogenous growth3, whose central
paradigm posits that the ideas and actions of individual players can shape the economic and industrial
landscape. In other words, strategy can shape structure. We call this approach reconstructionist.
While the structuralist approach is valuable and relevant, the reconstructionist approach is more appropriate in
certain economic and industry settings. Indeed, todays economic difficulties have heightened the need for a
reconstructionist alternative. The first task of an organizations leadership, therefore, is to choose the appropriate
strategic approach in light of the challenges the organization faces. Choosing the right approach, however, is not
enough. Executives then need to make sure that their organizations are aligned behind it to produce sustainable
performance. Most executives understand the mechanics of making the structuralist approach work, so this article
will focus on how to align an organization behind the reconstructionist approach to deliver high and sustainable
performance.
Assignment B
This five forces analysis, is just one part of the complete Porter strategic models. The other elements are
the value chain and the generic strategies.[citation needed]
Porter developed his Five Forces analysis in reaction to the then-popular SWOT analysis, which he found
unrigorous and ad hoc.[1] Porter's five forces is based on the Structure-Conduct-Performance paradigm in
industrial organizational economics. It has been applied to a diverse range of problems, from helping businesses
become more profitable to helping governments stabilize industries
Advertising - Incumbent firms can seek to make it difficult for new competitors by spending heavily on
advertising that new firms would find more difficult to afford. This is known as the market power theory of
advertising.[5] Here, established firms' use of advertising creates a consumer perceived difference in its
brand from other brands to a degree that consumers see its brand as a slightly different product.[5] Since the
brand is seen as a slightly different product, products from existing or potential competitors cannot be
perfectly substituted in place of the established firm's brand.[5] This makes it hard for new competitors to gain
consumer acceptance.[5]
Capital - need the capital to start up such as equipment, building, and raw materials
Control of resources - If a single firm has control of a resource essential for a certain industry, then
other firms are unable to compete in the industry.
Cost advantages independent of scale - Proprietary technology, know-how, favorable access to raw
materials, favorable geographic locations, learning curve cost advantages.
Customer loyalty - Large incumbent firms may have existing customers loyal to established products.
The presence of established strong brands within a market can be a barrier to entry in this case.
Distributor agreements - Exclusive agreements with key distributors or retailers can make it difficult for
other manufacturers to enter the industry.
Economy of scale - The increase in efficiency of production as the number of goods being produced
increases. Cost advantages can sometimes be quickly reversed by advances in technology. For example,
the development of personal computers has allowed small companies to make use
of database and communications technology which was once extremely expensive and only available to
large corporations.
Government regulations - A rule of order having the force of law, prescribed by a superior or
competent authority, relating to the actions of those under the authority's control. Requirements for licenses
and permits may raise the investment needed to enter a market, creating an effective barrier to entry.
Inelastic demand - One strategy to penetrate a market is to sell at a lower price than the incumbents.
This is ineffective with price-insensitive consumers.
Intellectual property - Potential entrant requires access to equally efficient production technology as
the combatant monopolist in order to freely enter a market. Patents give a firm the legal right to stop other
firms producing a product for a given period of time, and so restrict entry into a market. Patents are intended
Investment - That is especially in industries with economies of scale and/or natural monopolies.
Network effect - When a good or service has a value that depends on the number of existing
customers, then competing players may have difficulties in entering a market where an established company
has already captured a significant user base.
Predatory pricing - The practice of a dominant firm selling at a loss to make competition more difficult
for new firms that cannot suffer such losses, as a large dominant firm with large lines of credit or cash
reserves can. It is illegal in most places; however, it is difficult to prove. See antitrust. In the context of
international trade, such practices are often called dumping.
Restrictive practices, such as air transport agreements that make it difficult for new airlines to obtain
landing slots at some airports.
Research and development - Some products, such as microprocessors, require a large upfront
investment in technology which will deter potential entrants.
Supplier agreements - Exclusive agreements with key links in the supply chain can make it difficult for
other manufacturers to enter an industry.
Sunk costs - Sunk costs cannot be recovered if a firm decides to leave a market. Sunk costs therefore
increase the risk and deter entry.
Switching barriers - At times, it may be difficult or expensive for customers to switch providers
Tariffs - Taxes on imports prevent foreign firms from entering into domestic markets.
Case Study
Haier and ThereWalking down the aisles of one of its 22
factories in Qingdao, China, seeingrows of steel being
converted into stylish front-loading washing machines,
onecouldn't help but marvel that only 23 years ago, Haier,
China's largest and theworld's second largest consumer
durables brand, was on the verge of bankruptcy.In fact, the
'Haier Group' - as it is known today - did not even exist.
Whatexisted was a bleeding company called Qingdao General
Refrigerator Factory thatproduced sub-standard refrigerators for
local consumption.What caught the eye was the pin-drop
silence among the workers. The company'sIndian head, Pranay
200 crore in India so far, having recently acquired the 40-acre Anchor
marketstoday, and we want the country to have greater stake in the global group." Infact, Haier, which
set up shop on Indian soil three years ago, is moving fast to make India a manufacturing and
exporting hub given the convenient geographicallocation of the country and its proximity to the global
headquarters in China.However, not everything has been hunky dory. It entered the currently overRs35,000 crore durables market in India almost seven years after rivals LG andSamsung did, and had
to deal with the whole notion of being a 'Chinese' company. Pranay Dhabhai, Wholetime Director and
COO of the Group's Indian subsidiary,Haier Applainces (India) Pvt Ltd, says, "Well, we at Haier like
to do thingsdifferently. We consider ourselves a global brand with the right productoffering and good
quality as well. It will be unfair to compare us to othercompanies because what others took to achieve
in nearly a century, Haierglobally has done in merely 23 years
Assignment - C1.
1.Which approach to the study of leadership emphasizes the role of
situationalfactors and how these moderate the relationship between
leader traits orleadership behaviors and leadership effectiveness?
(a) Leader-oriented approach.
(b) Contingency approach.
d) Porter's Diamond
3.)It is generally agreed that the role of strategy is to:
(b) Complementors
(c) Substitutes
d) Government regulation
(c) Objectives
(d) Strategy
21. The statement of an organization's aspirations can be found
in the organization's:
(a) Policies
(b) Mission
(c) Strategy
(d) Vision
22. A substitute product or service is:
(a) A new entrant into the industry
37. When actual performance results are better than what the plan called
for,managers should:
(a) Find creative ways to exploit the situation.
(b) Issue more stock options to employees.
(c) Increase prices.
(d) Ignore it.
38. Value for shareholders of a firm is measured by:
(a) stock performance and profitability
(b) sales revenue
(c) satisfactory employee targets
(d) profitable year-end balance sheet
39. The _____ for PepsiCo is "We believe our commercial success depends
uponoffering quality and value to our consumers and customers; providing
productsthat are safe, wholesome, economically efficient and environmentally
sound; andproviding a fair return to our investors while adhering to the highest
standards of quality."
(a) mission
(b) organizational code of conduct
(c) functional code
(d) benefits statement
40. A firm can acknowledge the critical importance of its _____, by
havingexplicit goals that state its intention to improve work conditions by
addingmore lighting and providing the workers with more and better safety
equipment.
(a) employee welfare
(b) market share
(c) sales revenue
(d) satisfaction