Qno: 01

What is Strategic Management?

Without a strategy the organization is like a ship without a rudder, going around in circles. Strategic management is also about the strategic coordination of efforts. Its communicating with all the stakeholders involved in a project so that they understand and accept its goals. It creates atmosphere for a better teamwork as team members know what they are meant to achieve both as a team and in carrying out their individual roles on that team. If an employee or consultant is not able to work toward the goal in question for whatever reason, or needs retraining or other support, it becomes evident quickly enough and the necessary adjustments to the team can be made. In a nutshell, it is goals-oriented management in which the mission and planned achievements of an organization are clearly set out and all management processes are designed and monitored toward reaching the organization's overall goals. Steps that have already been taken to reach the goals of the organization are carefully evaluated to make sure that they have been carried out in the most efficient manner possible and that they were indeed in line with the overall goals as set forth in the mission statement which governs the strategic management process. The Mission Statement Formulating a mission statement for the organization, as well as for any specific project, is the foundation of effective strategic management. The overall mission statement determines the purpose and goals of the organization, and a mission statement for a project sets forth the purpose of the project. Planning Activities All planned activities need to be analyzed before being put into action, in order to make sure that they are dedicated to the purpose of the organization and the project. Activities that are not within the mission statement or purpose of the project in question need to be shelved or shifted to a future project. Analysis Once a new strategically managed organization or project has been launched, qualitative and quantitative analysis and monitoring must be carried out on a regular basis to make sure that goals are being achieved. If circumstances have changed, activities need to be changed and even curtailed to make sure that goals are achieved regardless of these specific circumstances. The question that constantly has to be asked during the strategic management process is "Does this fit in with our big picture?" If an activity or process does not fit in with what the company is trying to achieve, whether in general or with a specific project, it needs to be revised or curtailed. Monitoring The overall goal of any management method is results, and the overall goal of strategic management is making sure the results are in line with the goal of the company or project.

Constant monitoring of all processes, from management to sales to production, is necessary to make sure that the results which are being achieved indeed meet the goals that they are meant to achieve. Data recorded as part of the monitoring process is used for analysis, and changes are made as necessary. Making Necessary Changes When strategic management processes are properly implemented, they allow for flexibility. Rather than changing the goal to meet what has been done at any stage of any project, monitoring and analysis of results allows for changes that are necessary to achieve the desired and stated goal of the firm or its project. These changes can include addition of personnel or equipment, technological changes and anything else that is necessary to achieve the desired overall results.

Key Terms in Strategic Management

Before we further discuss strategic management, we should define nine key terms: competitive advantage, strategists, mission statements, external opportunities and threats, internal strengths and weaknesses, long-term objectives, strategies, annual objectives, and policies. Strategists: Strategists are individuals who are most responsible for the success or failure of an organization. Strategists are individuals who form strategies. Strategists have various job titles, such as chief executive officer, president, and owner, chair of the board, executive director, chancellor, dean, or entrepreneur. Strategists help an organization gather, analyze, and organize information. They track industry and competitive trends, develop forecasting models and scenario analyses, evaluate corporate and divisional performance, spot emerging market opportunities, identify business threats, and develop creative action plans. Strategic planners usually serve in a support or staff role. Usually found in higher levels of management, they typically have considerable authority for decision making in the firm. The CEO is the most visible and critical strategic manager. Any manager who has responsibility for a unit or division, responsibility for profit and loss outcomes, or direct authority over a major piece of the business is a strategic manager (strategist). Strategists differ as much as organizations themselves and these differences must be considered in the formulation, implementation, and evaluation of strategies. Some strategists will not consider some types of strategies because of their personal philosophies. Strategists differ in their attitudes, values, ethics, willingness to take risks, concern for social responsibility, concern for profitability, concern for short-run versus long-run aims and management style. Vision Statements Many organizations today develop a "vision statement" which answers the question, what do we want to become? Developing a vision statement is often considered the first step in strategic planning, preceding even development of a mission statement. Many vision statements are a single sentence. For example the vision statement of Stokes Eye Clinic in Florence, South Carolina, is "Our vision is to take care of your vision." The vision of the Institute of Management

Accountants is "Global leadership in education, certification, and practice of management accounting and financial management." Mission Statements Mission statements are "enduring statements of purpose that distinguish one business from other similar firms. A mission statement identifies the scope of a firm's operations in product and market terms. It addresses the basic question that faces all strategists: What is our business? A clear mission statement describes the values and priorities of an organization. Developing a mission statement compels strategists to think about the nature and scope of present operations and to assess the potential attractiveness of future markets and activities. A mission statement broadly charts the future direction of an organization. An example mission statement is provided below for Microsoft. Microsoft's mission is to create software for the personal computer that empowers and enriches people in the workplace, at school and at home. Microsoft's early vision of a computer on every desk and in every home is coupled today with a strong commitment to Internet-related technologies that expand the power and reach of the PC and its users. As the world's leading software provider, Microsoft strives to produce innovative products that meet our customers' evolving needs. External Opportunities and Threats External opportunities and external threats refer to economic, social, cultural, demographic, environmental, political, legal, governmental, technological, and competitive trends and events that could significantly benefit or harm an organization in the future. Opportunities and threats are largely beyond the control of a single organization, thus the term external. The computer revolution, biotechnology, population shifts, changing work values and attitudes, space exploration, recyclable packages, and increased competition from foreign companies are examples of opportunities or threats for companies. These types of changes are creating a different type of consumer and consequently a need for different types of products, services, and strategies. Other opportunities and threats may include the passage of a law, the introduction of a new product by a competitor, a national catastrophe, or the declining value of the dollar. A competitor's strength could be a threat. Unrest in the Balkans, rising interest rates, or the war against drugs could represent an opportunity or a threat. A basic tenet of strategic management is that firms need to formulate strategies to take advantage of external opportunities and to avoid or reduce the impact of external threats. For this reason, identifying, monitoring, and evaluating external opportunities and threats are essential for success. Environmental Scanning: The process of conducting research and gathering and assimilating external information is sometimes called environmental scanning or industry analysis. Lobbying is one activity that some organizations utilize to influence external opportunities and threats. Environment scanning has the management scan eternal environment for opportunities and threats and internal environment for strengths and weaknesses. The factor which are most important for corporation factor are referred as a strategic factor and summarized as SWOT standing for strength, weaknesses, opportunities and threats. Environmental Scanning Internal Analysis External Analysis

The external environment consist of opportunities and threats variables that outside the organization. External environment has two parts: . Task Environment . Social Environment Task Environment: Task environment includes all those factors which affect the organization and itself affected by the organization. These factor effects the specific related organizations. These factors are shareholders community, labor unions, creditor, customers, competitors, trade associations. Social Environment: Social environment is an environment which includes those forces effect does not the short run activities of the organization but it influenced the long run activities or decisions. PEST analysis are taken for social environment PEST analysis stands for political and legal economic socio cultural logical and technological. Internal Strengths and Weaknesses/Internal assessments Internal strengths and internal weaknesses are an organization's controllable activities that are performed especially well or poorly. They arise in the management, marketing, finance/accounting, production/operations, research and development, and computer information systems activities of a business. Identifying and evaluating organizational strengths and weaknesses in the functional areas of a business is an essential strategic-management activity. Organizations strive to pursue strategies that capitalize on internal strengths and improve on internal weaknesses. Strengths and weaknesses are determined relative to competitors. Relative deficiency or superiority is important information. Also, strengths and weaknesses can be determined by elements of being rather than performance. For example, strength may involve ownership of natural resources or an historic reputation for quality. Strengths and weaknesses may be determined relative to a firm's own objectives. For example, high levels of inventory turnover may not be strength to a firm that seeks never to stock-out. Internal factors can be determined in a number of ways that include computing ratios, measuring performance, and comparing to past periods and industry averages. Various types of surveys also can be developed and administered to examine internal factors such as employee morale, production efficiency, advertising effectiveness, and customer loyalty.

Strategic management model refers to the pattern or mode of strategic management.

According to the strategic management model, a number of steps are taken to achieve the objectives of a company. Different strategic management models are chosen by various companies according to their conveniences. About Strategic Management Model Strategic management model is also known as strategic planning model. A strategic planning model is selected for the purpose of formulating and implementing the strategic management plan of a particular organization. Nevertheless, it has been proved that no strategic planning

model is perfect. Every company designs its own strategic planning model frequently by choosing a model and transforming it as the company advances into formulating its strategic management plan procedures. A number of strategic planning model options are available for the companies from which they can choose. THE COMPONENTS OF A STRATEGIC MANAGEMENT MODEL In the decade of 1970s, a large number of corporations followed a recognized strategic planning model, which is top down in nature. According to this model, strategic planning was a calculated procedure where the top management would design the strategy of the company and after that it was passed on downward in the company for application. The steps involved in this strategic planning model were the following: Mission Objectives Situation Analysis Formulation of Strategies Application Control

The situation analysis is basically a blend of PEST Analysis (Political, Economic, Social and Technological Analysis) and SWOT Analysis (Strengths, Weaknesses, Opportunities and Threats Analysis). Internal analysis is an important component of situation analysis, which studies the condition within the company taking into account the following factors: Image of the company Culture of the company Key personnel Structure of the company Location on the experience curve Availability of natural resources Operational capability Operational effectiveness Market share Brand consciousness Exclusive agreements Financial resources Trade secrets and patents

A strategic planning model is applied in functional domains like the following: Research and development Marketing Production Procurement Information systems Human resources

FORMS OF STRATEGIC MANAGEMENT MODELS The different types of strategic management models can be categorized into the following types: Basic strategic planning model Alignment strategic planning model Goal-based or issue-based strategic planning model Self-organizing or organic strategic planning model Scenario strategic planning model

WHY DO SOME FIRMS NOT DO STRATEGIC PLANNING? Some reasons for poor or no strategic planning are as follows: Poor reward structures Fire fighting Waste of time Too expensive Laziness Content with success Fear of failure Overconfidence Prior bad experience Self-interest Fear of the unknown Honest difference of opinion Suspicion

PITFALLS IN STRATEGIC PLANNING Some pitfalls to watch for and avoid in strategic planning are provided below: Doing strategic planning only to satisfy accreditation or regulatory requirements Too hastily moving from mission development to strategy formulation 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 Top managers not actively supporting the strategic-planning process Failing to use plans as a standard for measuring performance Delegating planning to a planner rather than involving all managers Failing to involve key employees in all phases of planning Failing to create a collaborative climate supportive of change Viewing planning to be unnecessary or unimportant Becoming so engrossed in current problems that insufficient or no planning is done Being so formal in planning that flexibility and creativity are stifled

Ans no 2:

MCDONALDS: STRATEGIC MANAGEMENT

INTRODUCTION Strategies are important for all businesses, regardless of the products or services that they offer. Through strategic management and operations, companies are able to integrate new and effective means of running their respective businesses. In turn, these strategies results to increased profit or sales, stable market position and greater levels of customer loyalty. In the fast food industry, certain business strategies are also being developed and applied so as to achieve similar effects. In this report, the impact of some business strategies in actual businesses will be analyzed. The case study provided was about McDonalds and how the company has evolved to be successful in the British market. In addition, the case discussed the problems that McDonalds have been encountered throughout the years, specifically in terms of being considered as a company which offers unhealthy foods. Primarily, the main goal of this paper is to determine the business strategy of McDonald to sustain their competitive advantage in the global market.

Overview of the Company

The McDonalds is a US based food chain industry which has a rich history from its establishment in 1954. The food chain company was put to the market environment by Ray Kroc. With their effective approach, marketing ideas have been initiated and helped the industry to be considered as one of the most renowned fast food brands in the global market. The companys trademark design was carefully examined and it came with a happy clown character which is known as Ronald MacDonald (McDonald, 2008). It can be said that the Egg Muffin and the Big Mac was among the most innovative products of the food chain. In line with its marketing strategy, the happy meal idea was also considered to be creative as it attracts children to eat at the food chain stores because of the toys they can get. In this generation, McDonald is also appearing on the Internet bandwagon, for promotional and advertising operations (McDonalds Corporation, 2008). The restaurants of the food change provide a uniform and standardized menu, which is natural in the usual fast foods. This menu consists of burgers, sandwiches, French fries, vegetable salads, milk shakes, desserts, and ice cream sundaes. The top seller of the company can also be considered as innovative products which include the Quarter Pounder with Cheese, Big Mac, the Filet-O-Fish, and Chicken McNuggets. In order to adhere to the needs of the customers for a healthier products, the company has also added variety of nutritional foods which include the Salads Plus products i.e. Garden Side Salad and the Grilled Chicken Flatbreads (McDonalds Corp. UK, 2008). In addition, McDonald also considers the offering of coffee and other products to attract British Market. Uniformity continues in McDonald's restaurants operating in the US, UK and certain international markets that are open during breakfast hours and offer a full or limited breakfast menu. Breakfast offerings include the Egg McMuffin and Sausage McMuffin

with Egg sandwiches, hotcakes, biscuit and bagel sandwiches and muffins. Also, McDonald's tests new products on an ongoing basis and sell a variety of other products during limited-time promotions. In the fiscal 2003, McDonald's generated revenues of $17.1 billion, an increase of 11% on the previous year. Operated Restaurant business unit posted revenues of $12.8 billion in fiscal 2003, compared with $11.5 billion in 2002 and $11 billion in 2000 and represents approximately 75% of the company's net sales. On the other hand, the Franchised and Affiliated Restaurants business unit posted revenues of $4.3 billion in fiscal 2003, compared with $3.9 billion in 2002 and represents approximately 25% of the company's net sales. The geographic are of Europe accounts for 37%, second to the 39% total revenue in the US. MacDonalds Vision McDonald's vision is to be the world's best quick service restaurant experience. Being the best means providing outstanding quality, service, cleanliness, and value, so that we make every customer in every restaurant smile. McDonald's Missions Be the best employer for our people in each community around the world Deliver operational excellence to our customers in each of our restaurants; and Achieve enduring profitable growth by expanding the brand and leveraging the strengths of the McDonald's system through innovation and technology. THE STRATEGIC AUDIT The external environment in which a business operates can create opportunities which a business can exploit, as well as threats which could damage a business. However, to be in a position to exploit opportunities or respond to threats, a business needs to have the right resources and capabilities in place. An important part of business strategy is concerned with ensuring that these resources and competencies are understood and evaluated - a process that is often known as a "Strategic Audit". The process of conducting a strategic audit can be summarized into the following stages: (1) Resource Audit: The resource audit identifies the resources available to a business. Some of these can be owned (e.g. plant and machinery, trademarks, retail outlets) whereas other resources can be obtained through partnerships, joint ventures or simply supplier arrangements with other businesses. You can read more about resources here. (2) Value Chain Analysis: Value Chain Analysis describes the activities that take place in a business and relates them to an analysis of the competitive strength of the business. Influential work by Michael Porter suggested that the activities of a business could be grouped under two headings: (1) Primary

Activities - those that are directly concerned with creating and delivering a product (e.g. component assembly); and (2) Support Activities, which whilst they are not directly involved in production, may increase effectiveness or efficiency (e.g. human resource management). It is rare for a business to undertake all primary and support activities. Value Chain Analysis is one way of identifying which activities are best undertaken by a business and which are best provided by others ("outsourced") (3) Core Competence Analysis: Core competencies are those capabilities that are critical to a business achieving competitive advantage. The starting point for analyzing core competencies is recognizing that competition between businesses is as much a race for competence mastery as it is for market position and market power. Senior management cannot focus on all activities of a business and the competencies required undertaking them. So the goal is for management to focus attention on competencies that really affect competitive advantage. (4) Performance Analysis The resource audit, value chain analysis and core competence analysis help to define the strategic capabilities of a business. After completing such analysis, questions that can be asked that evaluate the overall performance of the business. These questions include: - How have the resources deployed in the business changed over time; this is "historical analysis" - How do the resources and capabilities of the business compare with others in the industry "industry norm analysis?" - How do the resources and capabilities of the business compare with "best-in-class" - wherever that is to be found- "benchmarking" - How has the financial performance of the business changed over time and how does it compare with key competitors and the industry as a whole? - "ratio analysis" (5) Portfolio Analysis: Portfolio Analysis analyses the overall balance of the strategic business units of a business. Most large businesses have operations in more than one market segment, and often in different geographical markets. Larger, diversified groups often have several divisions (each containing many business units) operating in quite distinct industries. An important objective of a strategic audit is to ensure that the business portfolio is strong and that business units requiring investment and management attention are highlighted. This is important - a business should always consider which markets are most attractive and which business units have the potential to achieve advantage in the most attractive markets. Traditionally, two analytical models have been widely used to undertake portfolio analysis: - The Boston Consulting Group Portfolio Matrix (the "Boston Box"); - The McKinsey/General Electric Growth Share Matrix (6) SWOT Analysis:

SWOT is an abbreviation for Strengths, Weaknesses, Opportunities and Threats. SWOT analysis is an important tool for auditing the overall strategic position of a business and its environment. STRATEGIES OF MCDONALD Mc Donald is one of the famous food chain all throughout the world known by both the child and adult alike. It has increased it sales despite some issues being raised against the company. To further increase sales on the business and improve its performance, business strategies are done by person in-charge. It is in this stage wherein the company would improve what they lack thus making prospective customers to keep on coming back and ask for more. It is said that McDonald has been able to use various strategies to uplift and sustain their competitive advantage in the market. Part of its business strategy is its plan to phase out its Super Size French fries and soft drinks as it tries to create a healthier image for itself. The Super Size option is to be phased out in an attempt to slim down its menu amid increasing concerns and issues being raised about obesity (Crouch, 2004). The company is also planning other menu changes, such as switching to a cinnamon roll and a sausage burrito as its core breakfast offering, while bagels would become an optional item. The company also has to stop selling its 14 ounce McDonalds Fruit n Yogurt Parfait and replaced it with a smaller-sized version of the product (Crouch, 2004). All these changes in the menu are part of its strategy to provide a range of choices that support a balanced lifestyle. The company has also added that the simplified core menu would be rolled out to its entire restaurant. Furthermore, using the national rollout of its made for you platform as the opportunity to re-evaluate its core brand attributes, the company has quietly formed a global brand strategy task force that is looking for long and hard at the essence of the Golden Arches (Howard, 1999). The group which will be led by new vp-brand strategy has been meeting for several months and is anticipated to put forward its findings in fresh consumer messages by mid-2000. The slow-build will allow stores to work through an expected learning curve for the new cooking system and avert major miscues as it attempts to deliver on the promise of hotter, fresher foods made to order (Howard, 1999). The group also is evaluating all elements of the brand from menu, service, and restaurant dcor to brand icons Ronald McDonald. Even though domestic sales have turned to healthy 5% level, the said company is rethinking how to sustain growth in the face of both national and regional rivals. In the past, the companys marketing strategy has been criticized for being short-term focused and there has been no over-arching umbrella strategy. With that, the charge is to bring continuity and consistency to the brand strategy piece. Strategies in other areas of the organization is also made like the three-wheeled vehicle that is used to collect discarded cups and burger wrappings from the neighborhood around the restaurant and the provision of good services to customer which naturally begins and commences with hiring the right kind of people (Livesey, 1999). Staffs are encouraged to smile, be optimistic and treat customers particularly with respect, tell them what a person wants and follow up on the performance and reward their behavior. The restaurants bathroom is not spared. Issues are raised on the concerns about the said restaurant to be dirty and unhygienic. Customers want a

clean area especially the bathroom to make they feel comfortable. Strategies like this should also be applied (Livesey, 1999). McDonalds has developed three strategies for sustaining the competitive advantage. These are customer value, convenience, and optimal business operations. Together with the information technology strategies, it helps the company to create new and innovative ideas for the company. The McDonalds restaurants are described by the functions of the team as miniature manufacturing facilities. With the McDonalds objective of improving the suite of its business systems which supports the store, the management of McDonald has developed ways of using effective marketing and management strategy its overall operations. In order to adapt with the latest trends of having healthier menus, the company extends their services for family retreats and as a centre of community for senior citizens. The means for the former one are its innovation with their products to offer healthier foods. As this trend continues, an extension of more people -oriented strategies is needed. The company also conducts studies and surveys as part of their business strategy to better know which among the different alternatives serves the objective of McDonalds the best. To achieve customer convenience and satisfaction, one of their key initiatives is on the improvement of the ambience and looks of their stores in the country. The adherence of the company to put WIFI technology in their stores for instance has also become one of the attractive forces for customers. For the achievement of customer value, focus of the company remain on real-time information flow which permits instant corrections of the menu and prices in response to preferences and changing needs of the customers and competitive environment. Extent of the Strategy Used by McDonald McDonalds has been recognized as a highly flexible corporation. This company feature has been evidenced by its vast product differentiation. This is one of the companys major strategies in entering foreign markets. Teriyaki burgers in Japan, McPork Burgers and McTempeh in Indonesia, McSpaghetti in the Philippines and McLox Salmon sandwiches in Norway are some of the concrete examples of McDonalds ability to modify its products based on international tastes and preferences which they also done with their British market. While minor product changes are required for these countries, vast changes would have to be done for Britains case. With this approach, the products of McDonald had become more appealing to their customers even those health conscious individuals. As McDonalds typically serve beef burgers and non-spicy food items, the company would have to drastically change its menu for the Britain market to provide healthier menus for British people. For instance vegetable salads and chicken kebabs were also served to cater to the health conscious population. These are some of the many changes that McDonalds did in order to gain entry to the Britain market. In addition to product differentiation, regulation of the products prices is also a top priority. Effective promotions and advertising were also integrated into the companys international strategy. One of these tactics include the companys promotional offers of various items like

Internet cards, compact disc, concert tickets, caps, T-shirts and international trips . This promo had been done as the company collaborated with other organizations including Coca-cola, Sony, MTV, and General Motors. In addition, the McDonald also conducts programmes for children as part of their strategic management. Furthermore, the advertising strategies of McDonalds had given emphasis on creating an image of family comfort. Rather than just being an ordinary fast food that serves quality meals, McDonalds intends to appeal to the market by building a fast food image where families can get together, enjoy and relax. Overall, the international strategy of McDonalds for Britain has been effective. In general, the focus of these strategies was the customers. Customers play a significant role to a business success or failure. Being an important business element, meeting the needs and preferences of the consumers is the utmost priority of almost all businesses. McDonalds has clearly shown the importance of this concept by adapting to the Britain culture, its people and their tastes. By reaching out to the British market, McDonalds was able to successfully establish itself in Britain. McDonalds Strategic Recommendation Despite the success of McDonalds in Britain, it is important to consider that the cultural background and preferences of its market continues to change. New markets in the country will eventually emerge. Considering the strict competition within the food service industry, McDonalds should then implement new strategies so as to reach out to the new markets. Perhaps, one of the most significant initial steps for the company is constant conduction of consumer studies. Through this strategy, McDonalds can be updated with the latest market trends and identify new market segments. Changes in food preferences can be obtained through consumer research. Furthermore, this strategy can significantly help in increasing the companys market scope in the country. Another important strategy that McDonalds should do so as to address emerging markets in Britain is through enhanced advertising and promotions. This can be done through the implementation of the integrated marketing (IMC) approach. McDonalds employs a number of ways on how to promote its products in Britain. Aside from television commercials and printed advertisements, the company also uses the Internet and various promotional offers for advertising purposes. In order to optimize the functions of each promotional media, McDonalds can use the IMC Strategy. IMC enables interactivity, which results in allowing the counter flow of information within and outside. Through IMC, companies in the food service industry, such as McDonalds, will be able to combine core strategies with other forms of communication to gain more marketing advantages and generate better business effects. IMC is the strategic coordination of multiple communication voices. The main goal is to optimize the effect of persuasive communication on both consumer as well as the non-consumer which include trade and professional target market by coordinating such elements of the marketing mix as advertising, public relations, promotions, direct marketing, and package design (Moore and Thorson, 1996).

While conventional means of marketing approach such as advertising is considered to be one way in nature. Hence, the integrated marketing communication as part of the marketing approach of McDonald allows the company to do several business operations which include receiving and altering business images and information, and other business operations (Moore and Thorson, 1996; Moore, 1993). Brand building has also been one of the key factors or strategies that enable McDonald to be known in the global market. In the case of internet marketing, integrated marketing communication will allow food service companies to maximize the use of the internet in building bands by incorporating other marketing means. The effect of which will lead to enhance product promotions and better net sales. The IMC approach has been beneficial to several companies as it helps in identifying the most useful and appropriate methods in communicating and establishing good customer relations, including good relationships with stakeholders like the employees, investors, suppliers interest groups and the public in general. During the 1990s, the introduction of the integrated marketing communications has been one of the most important developments in marketing, which continued on up to the present. From here on, the IMC approach is being applied by large and small companies alike, and has been well-known among companies marketing consumer goods and services, including business to business marketers. Using this strategy, McDonalds may maximize the use of mass media, direct and online marketing. In order to maximize the purpose of the IMC strategy, the official website of McDonalds may be enhanced and integrated as well. The internet have changed the ways companies create, design and implement their whole business and marketing plans as well as their programs for marketing communications. In order to promote their product lines, companies, from large multinational enterprises to small local companies, are developing certain web sites, complete with vital information that will help enhance customer relations or attract potential consumers. In terms of the promotional mix, the internet is a capable medium of doing more than just advertise. Through this medium, McDonalds may offer other means of sales promotion through coupon, sweepstakes or contests online. Moreover, the internet may be used to perform, personal selling, public relations as direct marketing more efficiently and effectively. The official website of McDonalds Britain is actually well-made and attractive. It offers complete product details along with product pictures, which serves as an effective marketing tool. As Britains are very particular about the ingredients used for their food, the website also discusses the different ingredients included for the products it produces. Other services offered by the food company like parties are also included. In this website, the food items offered by the company are described as delicious, healthy, hygienic and refreshing. In addition, these food items are always served with a smile, implying the companys quality service (McDonald's Britain Official Website, 2005). With these major advertising elements, McDonalds could use the same elements for its commercials, print ads and other promotion channels. By doing so, the company can create a more distinct and definite brand that the Britain market can easily remember. In this case, this is where the IMC approach comes in. The coordination of different media channels can then help in making a more established McDonald brand in Britain, resulting to higher market support, market growth and sales.

In addition, McDonald also considered the use of cost leadership and product differentiation strategy which also allows the companies to enhance their products as well as develop new ones based on market demands and needs. By means of new product development, generation of ideas that are different and unique among competitors becomes possible. Thus, by means of new product development, industries are able to overcome cutthroat competition. Increasing the companies market coverage is yet another effect of developing new products for the customers like what McDonalds have done with their British branches. Creating something that is unique to the market place increases the possibility of catching the interest of other potential consumers. This in turn increases the market coverage or diversifies the target market of the company. For McDonald's, people are its most important asset (McDonald, 2008). This is because customer satisfaction begins with the attitudes and abilities of employees and committed, effective workers are the best route to success. For these reasons, McDonald's strives to attract and hire the best, and to provide the best place to work. In fact, McDonald's is so active and successful in newly emerging markets that other companies will sometimes use the golden arches as a valuable indicator of future growth markets.

Conclusion
McDonalds has been successful in operating within the food service industry through efficient strategies and quality standards which enables them to gain competitive advantage. As evidenced by its international market growth, McDonalds has already been efficient in gaining entry even in the most challenging markets like Britain. Through its strong sense of quality service and customer satisfaction, McDonalds was able to offer its products to the Britain market. Products were modified to suit the British taste and preferences; affordable prices were implemented; effective promotions and offers were done. These are some of the strategies involved in the companys business strategy which allowed McDonalds to gain the Britain support. Despite these successes, the company should take into consideration the growing level of competitiveness in the food service industry. In Britain, several foreign fast food chains offering similar products are also being supported by the Britain consumers. However, there are some aspects which are still need to be changes which includes the speed and efficiency of the services in their restaurants. In this regard, constant strategic change is then necessary to ensure that the company would sustain their competitive advantage. In conclusion, McDonalds has been successful because of the value the company gives for its customers and the strategies that they used throughout their business operations. Hence, despite the controversial beginning of McDonalds in Britain, the company managed to adapt to its peoples cultural needs. Indeed, McDonalds is a learning organization, one that is willing to learn and open to change.

Ans no 3:
Resource-based view
The resource-based view (RBV) is a business management tool used to determine the strategic resources available to a company. The fundamental principle of the RBV is that the basis for a competitive advantage of a firm lies primarily in the application of the bundle of valuable resources at the firm's. To transform a short-run competitive advantage into a sustained competitive advantage requires that these resources are heterogeneous in nature and not perfectly mobile. Effectively, this translates into valuable resources that are neither perfectly imitable nor substitutable without great effort. If these conditions hold, the firms bundle of resources can assist the firm sustaining above average returns

Resource Based View (RBV) Of Competitive Advantage to Analyze McDonald

Use Resource Based View (RBV) of competitive advantage to analyze McDonald McDonalds being one of the largest food franchise company locally and abroad, has been successful in all its undertakings since its foundation in 1955. With its principle of increasing the shareholders welfare by increasing the growth of their profits and markets shares, McDonalds family continuously holding its impressive growth condition in the market. Now, in order for us to systematically evaluate the advantages of McDonalds, were going to use the Resource Based View of competitive advantage in this study . RBV is defined as a tool by which is being used in determining the strategic resources that are available for the firm. Basically, based from this principle, competitive advantages of firms come from the efficient allocation and application of bundles of valuable resources for its own consumption. The issue here is on how to have sustainable growth rather than having short term growth only , and the only way by which firms would attain sustainable growth would be when its bundle of goods are heterogeneous in nature and not perfectly mobile . One of the elements in order for a bundle of goods to be considered as heterogeneous is that each firm has its unique capabilities. McDonalds as taking into consideration its co-industry companies, they have their own characteristics. It is easy for customers to distinguish the difference in the design of the stores as well as the tastes of the food. As for McDonalds, one of its distinguished characters especially for kids is its M logo. At one glance they would already know that it is a store of McDonalds. Its foods are prepared in such a way that it would serve as their trade mark. Like the tastes of their burgers and fries. Another element of a heterogeneous bundle of resources is the ability of the firm to compete in the market place. In the case of McDonalds, it is pretty obvious that they have the guts and capabilities to compete fact to face with other international fast food chains. With its large market share and years of experience in this industry, they already have the advantage over other companies in the competing with each other. It is not only being heterogeneous of the bundle of resources is the factor that contributes for a firm to have competitive advantage. There are still other factors to consider such as resource and capabilities .In other words, the firm is very hard to imitate or has already been in the industry for several years. Of course, McDonalds has all of these traits. McDonalds has been in the industry of fast food chains for over 50 years and this gave them enough chances of improving their products and to study the behavior of the market. Competitor Analysis

Competitor Analysis is an important part of the strategic planning process. This revision note outlines the main role of, and steps in, competitor analysis Why bother to analyze competitors? Some businesses think it is best to get on with their own plans and ignore the competition. Others become obsessed with tracking the actions of competitors (often using underhand or illegal methods). Many businesses are happy simply to track the competition, copying their moves and reacting to changes. Competitor analysis has several important roles in strategic planning: To help management understand their competitive advantages/disadvantages relative to competitors To generate understanding of competitors past, present (and most importantly) future strategies To provide an informed basis to develop strategies to achieve competitive advantage in the future To help forecast the returns that may be made from future investments (e.g. how will competitors respond to a new product or pricing strategy? Questions to ask What questions should be asked when undertaking competitor analysis? The following is a useful list to bear in mind: Who are our competitors? (See the section on identifying competitors further below) What threats do they pose? What is the profile of our competitors? What are the objectives of our competitors? What strategies are our competitors pursuing and how successful are these strategies? What are the strengths and weaknesses of our competitors? How are our competitors likely to respond to any changes to the way we do business?

Sources of information for competitor analysis Davidson (1997) described how the sources of competitor information can be neatly grouped into three categories:

 Recorded data: this is easily available in published form either internally or externally. Good examples include competitor annual reports and product brochures; Observable data: this has to be actively sought and often assembled from several sources. A good example is competitor pricing; Opportunistic data: to get hold of this kind of data requires a lot of planning and organization. Much of it is anecdotal, coming from discussions with suppliers, customers and, perhaps, previous management of competitors. The table below lists possible sources of competitor data using Davidsons Recorded Data Annual report & accounts Press releases Newspaper articles Analysts reports Regulatory reports Government reports Presentations / speeches Observable Data Opportunistic Data pricing / price lists Meetings with suppliers advertising campaigns Trade shows Promotions Sales force meetings Tenders Seminars / conferences Patent applications recruiting ex-employees Discussion with shared distributors Social contacts with competitors

What businesses probably already know their competitors? Overall sales and profits Sales and profits by market Sales by main brand Cost structure Market shares (revenues and volumes) Organization structure Distribution system Identity / profile of senior management Advertising strategy and spending Customer / consumer profile & attitudes Customer retention levels

What businesses would really like to know about competitors? Sales and profits by product Relative costs Customer satisfaction and service levels Customer retention levels Distribution costs New product strategies Size and quality of customer databases Advertising effectiveness Future investment strategy

Contractual terms with key suppliers Terms of strategic partnerships

Competitive Advantage
Competitive Advantage - Definition A competitive advantage is an advantage over competitors gained by offering consumers greater value, either by means of lower prices or by providing greater benefits and service that justifies higher prices. Competitive Strategies Following on from his work analyzing the competitive forces in an industry, Michael Porter suggested four "generic" business strategies that could be adopted in order to gain competitive advantage. The four strategies relate to the extent to which the scope of businesses' activities are narrow versus broad and the extent to which a business seeks to differentiate its products. The four strategies are summarized in the figure:

The differentiation and cost leadership strategies seek competitive advantage in a broad range of market or industry segments. By contrast, the differentiation focus and cost focus strategies are adopted in a narrow market or industry. Strategy - Differentiation This strategy involves selecting one or more criteria used by buyers in a market - and then positioning the business uniquely to meet those criteria. This strategy is usually associated with charging a premium price for the product - often to reflect the higher production costs and extra value-added features provided for the consumer. Differentiation is about charging a premium price that more than covers the additional production costs, and about giving customers clear reasons to prefer the product over other, less differentiated products. Strategy - Cost Leadership With this strategy, the objective is to become the lowest-cost producer in the industry. Many (perhaps all) market segments in the industry are supplied with the emphasis placed minimizing costs. If the achieved selling price can at least equal (or near)the average for the market, then the lowest-cost producer will (in theory) enjoy the best profits. This strategy is usually associated with large-scale businesses offering "standard" products with relatively little differentiation that are perfectly acceptable to the majority of customers. Occasionally, a low-cost leader will also

discount its product to maximize sales, particularly if it has a significant cost advantage over the competition and, in doing so, it can further increase its market share. Strategy - Differentiation Focus In the differentiation focus strategy, a business aims to differentiate within just one or a small number of target market segments. The special customer needs of the segment mean that there are opportunities to provide products that are clearly different from competitors who may be targeting a broader group of customers. The important issue for any business adopting this strategy is to ensure that customers really do have different needs and wants - in other words that there is a valid basis for differentiation - and that existing competitor products are not meeting those needs and wants. Strategy - Cost Focus Here a business seeks a lower-cost advantage in just on or a small number of market segments. The product will be basic - perhaps a similar product to the higher-priced and featured market leader, but acceptable to sufficient consumers. Such products are often called "me-too's".

McDonalds Competitive Advantage

All companies seek competitive advantage. It is the force that holds their company above others in their industry and gives them power to stay in business for a while. It includes brand recognition and thrives on being the first choice of consumers. An example of a company with competitive advantage is McDonalds. They have been in the fast food business longer than the vast majority of their competitors and their brand is known globally. They are a front running company because they have great advertising and they are consistent. They are innovators in their industry by creating revolutionary ideas such as the $1 menu and introducing healthier lines of food such as salads and wraps to appeal to the changing tastes of consumers. They recently came out with a new premium coffee line that is taking business from Starbucks because it is much cheaper. McDonalds is a powerful company that consumers have come to know and trust and they have the power to change as tastes change. This keeps their competitive advantage alive. But, what was really wrong with McDonald's that a menu fixin' wouldn't cure? Nothing! Because of the durable competitive advantage it held over the rest of the industry and the value the McDonald's brand held worldwide, after some menu tampering McDonald's was once again off to the races. It has a worldwide distribution system second to none. It has since survived the premature death of two CEO's and shares are up 214% from their lows. Recent proof of McDonald's advantage has been the introduction of coffee at its locations (good coffee, I should say). It has been a huge success and chains like Dunkin' Donuts and Tim Horton's have noticed sales declines where McDonald's competes. At its low, McDonald's was a value investor's dream...

McDonald's Competitors
Burger KingSecond largest burger chain Wendy'sWorld's third largest hamburger fast food chain

Jack in the BoxAmerican fast food chain SubwayLargest single-brand restaurant chain Carl's Jr.Fifth largest American fast food chain Five GuysAmerican fast food chain WhataburgerAmerican fast food chain KrystalAmerican fast food chain White CastleAmerican fast food chain Yum!Largest multi-brand restaurant chain

SWOT Analysis Of The McDonalds Corporation

STRENGTHS Open door policy to the press CERES guidance and co-ordination & active CSR Selective supply chain strategy Rigorous food safety standards Affordable prices and high quality products Nutritional information available on packaging Decentralized yet connected system Innovative excellence program Promoting ethical conduct Profitable WEAKNESSES Inflexible to changes in market trends Difficult to find and retain employees Drive for achieving shareholder value may counter CSR Promote unhealthy food Promoted CSR meat imports in error

OPPORTUNITIES Attractive & flexible employment Positive environmental commitments Higher standards demanded from suppliers Corporate Responsibility Committee Honest & real brand image

THREATS Fabricated stories about the quality of our chicken Unhealthy foods for children Health concerns surrounding Beef, Poultry & Fish Labour exploitation in China CSR at the risk of profit loss Contributor to global warming Local fast food restaurants

Ans No. 4 a)

Market segmentation
Market segmentation is the process in marketing of grouping a market (i.e. customers) into smaller subgroups. This is not something that is arbitrarily imposed on society: it is derived from

the recognition that the total market is often made up of submarkets (called 'segments'). These segments are homogeneous within (i.e. people in the segment are similar to each other in their attitudes about certain variables). Because of this intra-group similarity, they are likely to respond somewhat similarly to a given marketing strategy. That is, they are likely to have similar feeling and ideas about a marketing mix comprised of a given product or service, sold at a given price, distributed in a certain way, and promoted in a certain way. The Need for Market Segmentation The marketing concept calls for understanding customers and satisfying their needs better than the competition. But different customers have different needs, and it rarely is possible to satisfy all customers by treating them alike. Mass marketing refers to treatment of the market as a homogenous group and offering the same marketing mix to all customers. Mass marketing allows economies of scale to be realized through mass production, mass distribution, and mass communication. The drawback of mass marketing is that customer needs and preferences differ and the same offering is unlikely to be viewed as optimal by all customers. If firms ignored the differing customer needs, another firm likely would enter the market with a product that serves a specific group, and the incumbent firms would lose those customers. Target marketing on the other hand recognizes the diversity of customers and does not try to please all of them with the same offering. The first step in target marketing is to identify different market segments and their needs. The requirements for successful segmentation are: Homogeneity within the segment Heterogeneity between segments Segments are measurable and identifiable Segments are accessible and actionable Segment is large enough to be profitable..... Currently a college student the marketing mix is now being introduced as the Four Ps of the Marketing Mix; Product, Place, Promotion, Price. Product (service) is whatever it may be that is being sold/marketed. Price refers to not only the actually price but also price elasticity. Place has evidently replaced distribution simply by where or what area the marketing campaign is going to cover. Today the idea of place is not limited to geographic profiling but also demographics and other categorizing variables. This has only occurred over the last ten years with the expansion of internet use and its ability to target specific types of people and not just people in a geographic area. Promotion simply refers to what media/medium vehicle will deliver the message and what the overall marketing strategy(s) is offering as a benefit. Bases for Segmentation in Consumer Markets Consumer markets can be segmented on the following customer characteristics.

 Geographic Demographic Psychographic Behavioralistic Geographic Segmentation The following are some examples of geographic variables often used in segmentation. Region: by continent, country, state, or even neighborhood Size of metropolitan area: segmented according to size of population Population density: often classified as urban, suburban, or rural Climate: according to weather patterns common to certain geographic regions Demographic Segmentation Some demographic segmentation variables include: Age Gender Family size Family lifecycle Generation: baby-boomers, Generation X, etc. Income Occupation Education Ethnicity Nationality Religion Social class Many of these variables have standard categories for their values. For example, family lifecycle often is expressed as bachelor, married with no children (DINKS: Double Income, No Kids), full-nest, emptynest, or solitary survivor. Some of these categories have several stages, for example, full-nest I, II, or III depending on the age of the children. Psychographic Segmentation Psychographic segmentation groups customers according to their lifestyle. Activities, interests, and opinions (AIO) surveys are one tool for measuring lifestyle. Some psychographic variables include: Activities Interests Opinions Attitudes Values Behavioralistic Segmentation Behavioral segmentation is based on actual customer behavior toward products. Some Behavioralistic variables include: Benefits sought

 Usage rate Brand loyalty User status: potential, first-time, regular, etc. Readiness to buy Occasions: holidays and events that stimulate purchases Market segmentation Link with strategy implementation Market segmentation is widely used in implementing strategies, especially for small and specialized firms. Market segmentation can be defined as the subdividing of a market into distinct subsets of customers according to needs and buying habits. Market segmentation is an important variable in strategy implementation for at least three major reasons. First, strategies such as market development, product development, market penetration, and diversification require increased sales through new markets and products. To implement these strategies successfully, new or improved market-segmentation approaches are required. Second, market segmentation allows a firm to operate with limited resources because mass production, mass distribution, and mass advertising are not required. Market segmentation can enable a small firm to compete successfully with a large firm by maximizing per-unit profits and per-segment sales. Finally, market segmentation decisions directly affect marketing mix variables: product, place, promotion, and price Marketing Mix Marketing decisions generally fall into the following four controllable categories: Product Price Place (distribution) Promotion The term "marketing mix" became popularized after Neil H. Borden published his 1964 article, The Concept of the Marketing Mix. Borden began using the term in his teaching in the late 1940's after James Colleton had described the marketing manager as a "mixer of ingredients". The ingredients in Borden's marketing mix included product planning, pricing, branding, distribution channels, personal selling, advertising, promotions, packaging, display, servicing, physical handling, and fact finding and analysis. E. Jerome

Does the Internet Make Market Segmentation Easier?

In the internet marketing world, market segmentation is frequently referred to in terms of 'niches'. The idea is to find a population, whether it's literally the people in a specific geographical location or simply the populace of a given online forum or mailing list, that agrees about something that they all need, and then give it to them. That is the essence of good market segmentation, and in turn, the foundation of a decent marketing strategy. If you have a brick-and-mortar business, it seems like finding the equivalent of a forum or mailing list might be more challenging, but the truth couldn't be farther from the truth: given the right incentive, they will find you. Word-of-mouth is much more effective outside of the digital arena.

Of course, you do need actual advertising from an agency which understands the niche concept, which can be challenging, especially for a mid-sized business on a budget. A solid company that does both internet and traditional marketing, both well, is hard enough to find. The ones that do exist can startle the budget-conscious operators of any business.

Ans No 4 b)

Strategic Audit Measurement Methods

There are several generally accepted methods for measuring organizational performance. One way for categorizing these methods divides into the distinct types: qualitative and quantitative. However, a few methods do not fall neatly into one or other of these categories but rather are a combination of both types.

Qualitative Organizational Measurements

There is no universally endorsed list of critical questions designed to reflect important facets of organizational operations. However, several that might be useful to the practicing managers are presented below. Sample Questions to be asked for Qualitative Organizational Measurement Are the financial policies with respect to investment dividends and financing consistent with opportunities likely to be available? Has the company defined the market segments in which it intends to operate sufficiently specifically with respect to both product lines and market segments? Has it clearly defined the key capabilities needed for success? Does the company have a viable plan for developing a significant and defensible superiority over competition with respect to these capabilities? Will the business segments in which the company operates provide adequate opportunities for achieving corporate objectives? Do they appear as attractive as to make it likely that an excessive amount of investment will be drawn to the market from other companies? Is adequate provision being made to develop attractive new investment opportunities? Are the management, financial, technical and other resources of the company really adequate to justify an expectation of maintaining superiority over competition in the key areas of capability? Does the company have operations in which it is not reasonable to expect to be more capable than competition? If so, can the board expect them to generate adequate returns on invested capital? Is there any justification for investing further in such operations, even just to maintain them? Has the company selected business that can reinforce each other by contributing jointly to the development of key capabilities? Or are there competitors that have combinations of operations which provide them with an opportunity to gain superiority in the key resource areas? Can the company's scope of operations be revised so as to improve its position competition?

To the extent that operations are diversified, has the company recognized and provided for the special management and control systems required?

The Evaluation of Corporate Strategy Each organization has its own approach to evaluation. There are not absolute answers as to the proper evaluation standards. However, there are three basic questions to ask in strategy evaluation: 1. Is the existing strategy any good? 2. Will the existing strategy be good in the future? 3. Is there a need to change a strategy? The first question may need additional detailing to indicate whether the current strategy is useful and beneficial to the organization. Seymour Tiles has written a classic article on the qualitative assessment of organizational performance. This article serves several particular questions to be asked for evaluation. These questions are: 1. Is the strategy internally consistent? Internal consistency refers to the cumulative impact of various strategies on the organizations. According to Tilles, a strategy must be judged not only in relationships to other strategies. 2. Is organizations strategy consistent with its environment? An important test of strategy is whether the chosen strategy in consistent with environment (constituent demands, competition, economy, product / industry life cycle, suppliers, customers) - whether the really make sense with respect to what is going on outside. 3. Is the strategy appropriate in view of available resources? Resources are those things that company is or has and that help it to achieve its corporate objectives. Included are money, competence, facilities and other. Without appropriate resources, organization simply cannot make strategic work. 4. Does the strategy involve an acceptable degree of risk? Strategy and resources, taken together, determine the degree of risk which the company is undertaken. Each company must determine the amount of risk it wishes to incur. This is a critical managerial choice. In attempting to assess the degree of risk associated with a particular strategy, management must assess such issues as the total amount of resources a strategy requires, the proportion of the organization's resources that a strategy will consume, and the amount of time that must be committed. 5. Does the strategy have an appropriate time horizon? A significant part of every strategy is the time horizon on which it is based. For example, a new product developed, a plant put on stream, a degree of market penetration, become significant strategic objectives only if accomplished by a certain time. Management must ensure that the time necessary to implement the strategy is consistent. Inconsistency between these two variables can make it impossible to reach goals in a satisfactory way. Is the strategy workable?

6. E. P. Learned and others, building on the Tilles model, suggest that the following are also proper evaluative questions: 7. Is the strategy identifiable? Has it been clearly and consistently identified and are people aware of it? 8. Is the strategy appropriate to the personal values and aspirations of key managers? 9. Does strategy constitute a clear stimulus to organizational effort and commitment? 10. Is the strategy socially responsible? 11. Are there early indications of the responsiveness of markets and market segments to the strategy? J. Argenti adds: 12. Does the strategy rely on weakness or do anything to reduce them? 13. Does the strategy exploit major opportunities? 14. Does it avoid, reduce, or mitigate the major threats? If not, are there adequate contingency plans? All these questions can by applied as the strategy progresses through its various stages, including implementation. The answers can provide guidelines as to how the strategy should be altered or changed. The second basic question "Will the existing strategy be good in the future?" seeks to ascertain if the strategy would continue to satisfy the firm's objective in the future. The answer to this is based upon unforeseeable changes in the organization's environment or resources, or changes in its mission, goals, or objectives. The answer to the third question "Is there a need to change the strategy?" will provide direction toward a strategy formation task. Qualitative measurements methods can be very useful, but their application involves significant amounts of human judgment. Thus, conclusions based on such methods must be drawn carefully.

Quantitative Organizational Measurements

Quantitative measurements provide information and insight as to how well an organization is accomplishing its goods and objectives. In attempting to evaluate the effectiveness of corporate strategy quantitatively, we can see how the firm has done compared wit its own history, or compared with its competitors. Many quantitative measures may be developed to determine performance results. These standards expressed in quantitative terms include: 1. 2. 3. 4. 5. 6. 7. Sales (growth of sales) Net profit Dividend returns Return on equity Return on investment Return on capital Marker share

8. Earnings per share The list is long and many other factors could be included. The objective of all of these endeavors is financial control. But financial control is only part of the total strategic management control process. Much of the activity affects financial performance in non financial nature. This include consideration of labor efficiency and productivity; production quantity turnover, and tardiness; on a very limited basis, human resources accounting and personnel satisfaction measures; more commonly, management by objectives systems; social analysis; operational audits of any functional, divisional, or staff component, distribution cost and efficiency; management audits modeling; and so forth. Which factors should be used? Establishing the standards and tolerance limit is not as easy as we might expect. Managers need to first define the critical success factors - the factors which are most important to the strategy and being successful in the business. Most of these measures are internal. But objective assessments can also be made by comparing the firm's results of similar firms (see section Benchmarking) Below we present a set of worthwhile guidelines that managers might follow in designing and implementing more comprehensive strategic audits. A strategic audit is conducted in three phases: diagnosis to identify how, where, and in what priority in-depth analyses need to be made; focused analysis; and generation and testing recommendation. Objectivity and the ability to ask critical, probing questions are key requirements for conducting a strategic audit. Phase one: Diagnosis 1. The diagnostic phase includes the flowing tasks: Review key document such as: Strategic plan Business or operational plans Organizational arrangements Major policies governing matters such as resource allocation and performance measurement. 2. Review financial, market, and operational performance against benchmarks and industry norms to identify jet variances and emerging trends. 3. Gain an understanding of: Principal roles, responsibilities, and reporting relationships. Decision - making processes and major decisions made. Resources, including physical facilities, capital, management, technology. Interrelationships between functional staffs and business or operating units. 4. Identify strategic implications of strategy for organization structure, behavior patterns, systems, and processes. Define interrelationships and linkages to strategy. 5. Determine internal and external perspectives.

Survey the attitudes and perceptions of senior and middle managers and other key employees to assess the extent to which these are consistent with the strategic direction of the firm. One way to accomplish this task is through carefully focused interviews and / or questionnaires, wherein employees are asked to identify and make trade-offs among the objectives and variables they consider most important. Interview a carefully selected sample of customers and prospective customers and other key external sources to gain understanding of how the company is viewed. 6. Identify aspects of the strategy that are working well. Formulate hypotheses regarding problems and opportunities for improvement based on the findings above. Define how and in what order each should be pursued. Phase two: Focused analysis 1. Test the hypotheses concerning problems and opportunities for improvement through analysis of specific issues. Identify interrelationships and dependencies among components of the strategic system. 2. Formulate conclusions as to weaknesses in strategy formulation, implementation deficiencies, or interactions between the two. Phase three: Recommendations 1. Develop alternative solutions to problems and ways of capitalizing on opportunities. Test [these alternatives] in light of their resource requirements, risk, rewards, priorities, and other applicable measures. 2. Develop specific recommendations. Develop an integrated, measurable, and time - phased action plan to improve strategic results.

Ans No 5).
Mergers and Acquisitions
Introduction
Mergers and acquisitions (M&A) and corporate restructuring are a big part of the corporate finance world. Every day, Wall Street investment bankers arrange M&A transactions, which bring separate companies together to form larger ones. When they're not creating big companies from smaller ones, corporate finance deals do the reverse and break up companies through spinoffs, carve-outs or tracking stocks. Not surprisingly, these actions often make the news. Deals can be worth hundreds of millions, or even billions, of dollars. They can dictate the fortunes of the companies involved for years to come. For a CEO, leading an M&A can represent the highlight of a whole career. And it is no wonder we hear about so many of these transactions; they happen all the time. Next time you flip open the newspapers business section, odds are good that at least one headline will announce some kind of M&A transaction.

Sure, M&A deals grab headlines, but what does this all mean to investors? To answer this question, this tutorial discusses the forces that drive companies to buy or merge with others, or to split-off or sell parts of their own businesses. Once you know the different ways in which these deals are executed, you'll have a better idea of whether you should cheer or weep when a company you own buys another company - or is bought by one. You will also be aware of the tax consequences for companies and for investors.

Definition
The Main Idea One plus one makes three: this equation is the special alchemy of a merger or an acquisition. The key principle behind buying a company is to create shareholder value over and above that of the sum of the two companies. Two companies together are more valuable than two separate companies - at least, that's the reasoning behind M&A. This rationale is particularly alluring to companies when times are tough. Strong companies will act to buy other companies to create a more competitive, cost-efficient company. The companies will come together hoping to gain a greater market share or to achieve greater efficiency. Because of these potential benefits, target companies will often agree to be purchased when they know they cannot survive alone. Distinction between Mergers and Acquisitions Although they are often uttered in the same breath and used as though they were synonymous, the terms merger and acquisition mean slightly different things. When one company takes over another and clearly established itself as the new owner, the purchase is called an acquisition. From a legal point of view, the target company ceases to exist, the buyer "swallows" the business and the buyer's stock continues to be traded. In the pure sense of the term, a merger happens when two firms, often of about the same size, agree to go forward as a single new company rather than remain separately owned and operated. This kind of action is more precisely referred to as a "merger of equals." Both companies' stocks are surrendered and new company stock is issued in its place. For example, both Daimler-Benz and Chrysler ceased to exist when the two firms merged, and a new company, DaimlerChrysler, was created. In practice, however, actual mergers of equals don't happen very often. Usually, one company will buy another and, as part of the deal's terms, simply allow the acquired firm to proclaim that the action is a merger of equals, even if it's technically an acquisition. Being bought out often carries negative connotations, therefore, by describing the deal as a merger, deal makers and top managers try to make the takeover more palatable. A purchase deal will also be called a merger when both CEOs agree that joining together is in the best interest of both of their companies. But when the deal is unfriendly - that is, when the target company does not want to be purchased - it is always regarded as an acquisition.

Whether a purchase is considered a merger or an acquisition really depends on whether the purchase is friendly or hostile and how it is announced. In other words, the real difference lies in how the purchase is communicated to and received by the target company's board of directors, employees and shareholders. Synergy Synergy is the magic force that allows for enhanced cost efficiencies of the new business. Synergy takes the form of revenue enhancement and cost savings. By merging, the companies hope to benefit from the following: Staff reductions - As every employee knows, mergers tend to mean job losses. Consider all the money saved from reducing the number of staff members from accounting, marketing and other departments. Job cuts will also include the former CEO, who typically leaves with a compensation package. Economies of scale - Yes, size matters. Whether it's purchasing stationery or a new corporate IT system, a bigger company placing the orders can save more on costs. Mergers also translate into improved purchasing power to buy equipment or office supplies - when placing larger orders, companies have a greater ability to negotiate prices with their suppliers. Acquiring new technology - To stay competitive, companies need to stay on top of technological developments and their business applications. By buying a smaller company with unique technologies, a large company can maintain or develop a competitive edge. Improved market reach and industry visibility - Companies buy companies to reach new markets and grow revenues and earnings. A merge may expand two companies' marketing and distribution, giving them new sales opportunities. A merger can also improve a company's standing in the investment community: bigger firms often have an easier time raising capital than smaller ones.

Varieties of Mergers From the perspective of business structures, there is a whole host of different mergers. Here are a few types, distinguished by the relationship between the two companies that are merging: Horizontal merger - Two companies that are in direct competition and share the same product lines and markets. Vertical merger - A customer and company or a supplier and company. Think of a cone supplier merging with an ice cream maker. Market-extension merger - Two companies that sell the same products in different markets. Product-extension merger - Two companies selling different but related products in the same market. Conglomeration - Two companies that have no common business areas.

Acquisitions As you can see, an acquisition may be only slightly different from a merger. In fact, it may be different in name only. Like mergers, acquisitions are actions through which companies seek

economies of scale, efficiencies and enhanced market visibility. Unlike all mergers, all acquisitions involve one firm purchasing another - there is no exchange of stock or consolidation as a new company. Acquisitions are often congenial, and all parties feel satisfied with the deal. Other times, acquisitions are more hostile.

Mergers and Acquisitions: Doing the Deal

Start with an Offer When the CEO and top managers of a company decide that they want to do a merger or acquisition, they start with a tender offer. The process typically begins with the acquiring company carefully and discreetly buying up shares in the target company, or building a position. Once the acquiring company starts to purchase shares in the open market, it is restricted to buying 5% of the total outstanding shares before it must file with the SEC. In the filing, the company must formally declare how many shares it owns and whether it intends to buy the company or keep the shares purely as an investment. Working with financial advisors and investment bankers, the acquiring company will arrive at an overall price that it's willing to pay for its target in cash, shares or both. The tender offer is then frequently advertised in the business press, stating the offer price and the deadline by which the shareholders in the target company must accept (or reject) it. The Target's Response Once the tender offer has been made, the target company can do one of several things: Accept the Terms of the Offer - If the target firm's top managers and shareholders are happy with the terms of the transaction, they will go ahead with the deal. Attempt to Negotiate - The tender offer price may not be high enough for the target company's shareholders to accept, or the specific terms of the deal may not be attractive. In a merger, there may be much at stake for the management of the target - their jobs, in particular. If they're not satisfied with the terms laid out in the tender offer, the target's management may try to work out more agreeable terms that let them keep their jobs or, even better, send them off with a nice, big compensation package. Not surprisingly, highly sought-after target companies that are the object of several bidders will have greater latitude for negotiation. Furthermore, managers have more negotiating power if they can show that they are crucial to the merger's future success. Execute a Poison Pill or Some Other Hostile Takeover Defense A poison pill scheme can be triggered by a target company when a hostile suitor acquires a predetermined percentage of company stock. To execute its defense, the target company grants all shareholders - except the acquiring company - options to buy additional stock at a dramatic discount. This dilutes the acquiring company's share and intercepts its control of the company. Find a White Knight - As an alternative, the target company's management may seek out a friendlier potential acquiring company, or white knight. If a white knight is found, it will offer an equal or higher price for the shares than the hostile bidder.

Mergers and acquisitions can face scrutiny from regulatory bodies. For example, if the two biggest long-distance companies in the U.S., AT&T and Sprint, wanted to merge, the deal would require approval from the Federal Communications Commission (FCC). The FCC would probably regard a merger of the two giants as the creation of a monopoly or, at the very least, a threat to competition in the industry. Closing the Deal Finally, once the target company agrees to the tender offer and regulatory requirements are met, the merger deal will be executed by means of some transaction. In a merger in which one company buys another, the acquiring company will pay for the target company's shares with cash, stock or both. A cash-for-stock transaction is fairly straightforward: target company shareholders receive a cash payment for each share purchased. This transaction is treated as a taxable sale of the shares of the target company. If the transaction is made with stock instead of cash, then it's not taxable. There is simply an exchange of share certificates. The desire to steer clear of the tax man explains why so many M&A deals are carried out as stock-for-stock transactions. When a company is purchased with stock, new shares from the acquiring company's stock are issued directly to the target company's shareholders, or the new shares are sent to a broker who manages them for target company shareholders. The shareholders of the target company are only taxed when they sell their new shares. When the deal is closed, investors usually receive a new stock in their portfolios - the acquiring company's expanded stock. Sometimes investors will get new stock identifying a new corporate entity that is created by the M&A deal.

Mergers and Acquisitions: Break Ups

As mergers capture the imagination of many investors and companies, the idea of getting smaller might seem counterintuitive. But corporate break-ups, or de-mergers, can be very attractive options for companies and their shareholders.

Advantages
The rationale behind a spinoff, tracking stock or carve-out is that "the parts are greater than the whole." These corporate restructuring techniques, which involve the separation of a business unit or subsidiary from the parent, can help a company raise additional equity funds. A break-up can also boost a company's valuation by providing powerful incentives to the people who work in the separating unit, and help the parent's management to focus on core operations. Most importantly, shareholders get better information about the business unit because it issues separate financial statements. This is particularly useful when a company's traditional line of business differs from the separated business unit. With separate financial disclosure, investors are better equipped to gauge the value of the parent corporation. The parent company might attract more investors and, ultimately, more capital.

Also, separating a subsidiary from its parent can reduce internal competition for corporate funds. For investors, that's great news: it curbs the kind of negative internal wrangling that can compromise the unity and productivity of a company. For employees of the new separate entity, there is a publicly traded stock to motivate and reward them. Stock options in the parent often provide little incentive to subsidiary managers, especially because their efforts are buried in the firm's overall performance.

Disadvantages
That said, de-merged firms are likely to be substantially smaller than their parents, possibly making it harder to tap credit markets and costlier finance that may be affordable only for larger companies. And the smaller size of the firm may mean it has less representation on major indexes, making it more difficult to attract interest from institutional investors. Meanwhile, there are the extra costs that the parts of the business face if separated. When a firm divides itself into smaller units, it may be losing the synergy that it had as a larger entity. For instance, the division of expenses such as marketing, administration and research and development (R&D) into different business units may cause redundant costs without increasing overall revenues.

Restructuring Methods
There are several restructuring methods: doing an outright sell-off, doing an equity carve-out, spinning off a unit to existing shareholders or issuing tracking stock. Each has advantages and disadvantages for companies and investors. All of these deals are quite complex.

Sell-Offs
A sell-off, also known as a divestiture, is the outright sale of a company subsidiary. Normally, sell-offs are done because the subsidiary doesn't fit into the parent company's core strategy. The market may be undervaluing the combined businesses due to a lack of synergy between the parent and subsidiary. As a result, management and the board decide that the subsidiary is better off under different ownership. Besides getting rid of an unwanted subsidiary, sell-offs also raise cash, which can be used to pay off debt. In the late 1980s and early 1990s, corporate raiders would use debt to finance acquisitions. Then, after making a purchase they would sell-off its subsidiaries to raise cash to service the debt. The raiders' method certainly makes sense if the sum of the parts is greater than the whole. When it isn't, deals are unsuccessful.

Equity Carve-Outs
More and more companies are using equity carve-outs to boost shareholder value. A parent firm makes a subsidiary public through an initial public offering (IPO) of shares, amounting to a partial sell-off. A new publicly-listed company is created, but the parent keeps a controlling stake in the newly traded subsidiary.

A carve-out is a strategic avenue a parent firm may take when one of its subsidiaries is growing faster and carrying higher valuations than other businesses owned by the parent. A carve-out generates cash because shares in the subsidiary are sold to the public, but the issue also unlocks the value of the subsidiary unit and enhances the parent's shareholder value. The new legal entity of a carve-out has a separate board, but in most carve-outs, the parent retains some control. In these cases, some portion of the parent firm's board of directors may be shared. Since the parent has a controlling stake, meaning both firms have common shareholders, the connection between the two will likely be strong. That said, sometimes companies carve-out a subsidiary not because it's doing well, but because it is a burden. Such an intention won't lead to a successful result, especially if a carved-out subsidiary is too loaded with debt, or had trouble even when it was a part of the parent and is lacking an established track record for growing revenues and profits. Carve-outs can also create unexpected friction between the parent and subsidiary. Problems can arise as managers of the carved-out company must be accountable to their public shareholders as well as the owners of the parent company. This can create divided loyalties.

Spinoffs
A spinoff occurs when a subsidiary becomes an independent entity. The parent firm distributes shares of the subsidiary to its shareholders through a stock dividend. Since this transaction is a dividend distribution, no cash is generated. Thus, spinoffs are unlikely to be used when a firm needs to finance growth or deals. Like the carve-out, the subsidiary becomes a separate legal entity with a distinct management and board. Like carve-outs, spinoffs are usually about separating a healthy operation. In most cases, spinoffs unlock hidden shareholder value. For the parent company, it sharpens management focus. For the spinoff company, management doesn't have to compete for the parent's attention and capital. Once they are set free, managers can explore new opportunities. Investors, however, should beware of throw-away subsidiaries the parent created to separate legal liability or to off-load debt. Once spinoff shares are issued to parent company shareholders, some shareholders may be tempted to quickly dump these shares on the market, depressing the share valuation.

Tracking Stock
A tracking stock is a special type of stock issued by a publicly held company to track the value of one segment of that company. The stock allows the different segments of the company to be valued differently by investors. Let's say a slow-growth company trading at a low price-earnings ratio (P/E ratio) happens to have a fast growing business unit. The company might issue a tracking stock so the market can value the new business separately from the old one and at a significantly higher P/E rating.

Why would a firm issue a tracking stock rather than spinning-off or carving-out its fast growth business for shareholders? The company retains control over the subsidiary; the two businesses can continue to enjoy synergies and share marketing, administrative support functions, a headquarters and so on. Finally, and most importantly, if the tracking stock climbs in value, the parent company can use the tracking stock it owns to make acquisitions. Still, shareholders need to remember that tracking stocks are class B, meaning they don't grant shareholders the same voting rights as those of the main stock. Each share of tracking stock may have only a half or a quarter of a vote. In rare cases, holders of tracking stock have no vote at all.

Mergers and Acquisitions: Why They Can Fail

It's no secret that plenty of mergers don't work. Those who advocate mergers will argue that the merger will cut costs or boost revenues by more than enough to justify the price premium. It can sound so simple: just combine computer systems, merge a few departments, use sheer size to force down the price of supplies and the merged giant should be more profitable than its parts. In theory, 1+1 = 3 sounds great, but in practice, things can go awry. Historical trends show that roughly two thirds of big mergers will disappoint on their own terms, which means they will lose value on the stock market. The motivations that drive mergers can be flawed and efficiencies from economies of scale may prove elusive. In many cases, the problems associated with trying to make merged companies work are all too concrete.

Flawed Intentions
For starters, a booming stock market encourages mergers, which can spell trouble. Deals done with highly rated stock as currency are easy and cheap, but the strategic thinking behind them may be easy and cheap too. Also, mergers are often attempt to imitate: somebody else has done a big merger, which prompts other top executives to follow suit. A merger may often have more to do with glory-seeking than business strategy. The executive ego, which is boosted by buying the competition, is a major force in M&A, especially when combined with the influences from the bankers, lawyers and other assorted advisers who can earn big fees from clients engaged in mergers. Most CEOs get to where they are because they want to be the biggest and the best, and many top executives get a big bonus for merger deals, no matter what happens to the share price later. On the other side of the coin, mergers can be driven by generalized fear. Globalization, the arrival of new technological developments or a fast-changing economic landscape that makes the outlook uncertain are all factors that can create a strong incentive for defensive mergers. Sometimes the management team feels they have no choice and must acquire a rival before being acquired. The idea is that only big players will survive a more competitive world.

The Obstacles to making it Work

Coping with a merger can make top managers spread their time too thinly and neglect their core business, spelling doom. Too often, potential difficulties seem trivial to managers caught up in the thrill of the big deal.

The chances for success are further hampered if the corporate cultures of the companies are very different. When a company is acquired, the decision is typically based on product or market synergies, but cultural differences are often ignored. It's a mistake to assume that personnel issues are easily overcome. For example, employees at a target company might be accustomed to easy access to top management, flexible work schedules or even a relaxed dress code. These aspects of a working environment may not seem significant, but if new management removes them, the result can be resentment and shrinking productivity. More insight into the failure of mergers is found in the highly acclaimed study from McKinsey, a global consultancy. The study concludes that companies often focus too intently on cutting costs following mergers, while revenues, and ultimately, profits, suffer. Merging companies can focus on integration and cost-cutting so much that they neglect day-to-day business, thereby prompting nervous customers to flee. This loss of revenue momentum is one reason so many mergers fail to create value for shareholders. But remember, not all mergers fail. Size and global reach can be advantageous, and strong managers can often squeeze greater efficiency out of badly run rivals. Nevertheless, the promises made by deal makers demand the careful scrutiny of investors. The success of mergers depends on how realistic the deal makers are and how well they can integrate two companies while maintaining day-to-day operations.

Conclusion:
One size doesn't fit all. Many companies find that the best way to get ahead is to expand ownership boundaries through mergers and acquisitions. For others, separating the public ownership of a subsidiary or business segment offers more advantages. At least in theory, mergers create synergies and economies of scale, expanding operations and cutting costs. Investors can take comfort in the idea that a merger will deliver enhanced market power. By contrast, de-merged companies often enjoy improved operating performance thanks to redesigned management incentives. Additional capital can fund growth organically or through acquisition. Meanwhile, investors benefit from the improved information flow from de-merged companies. M&A comes in all shapes and sizes, and investors need to consider the complex issues involved in M&A. The most beneficial form of equity structure involves a complete analysis of the costs and benefits associated with the deals. A merger can happen when two companies decide to combine into one entity or when one company buys another. An acquisition always involves the purchase of one company by another. The functions of synergy allow for the enhanced cost efficiency of a new entity made from two smaller ones - synergy is the logic behind mergers and acquisitions. Acquiring companies use various methods to value their targets. Some of these methods are based on comparative ratios - such as the P/E and P/S ratios - replacement cost or discounted cash flow analysis.

An M&A deal can be executed by means of a cash transaction, stock-for-stock transaction or a combination of both. A transaction struck with stock is not taxable. Break up or de-merger strategies can provide companies with opportunities to raise additional equity funds unlock hidden shareholder value and sharpen management focus. De-mergers can occur by means of divestitures, carve-outs spinoffs or tracking stocks. Mergers can fail for many reasons including a lack of management foresight, the inability to overcome practical challenges and loss of revenue momentum from a neglect of dayto-day operations.