SM Assignment M.M. 25 Last date of submission-14th Nov. In groups of 3. Q.1 Briefly describe PESTLE in the remote environment of business.

Q.2(a) Corporate social responsibility (b) Mission statement provides substantive guidance while a vision statement provides inspirational guidance. Do you agree. Q.3 While exercising strategic choices companies use GE Matrix and BCG Matrix. Which one of the two is better and why? Q.4 Michael Porter has suggested three generic strategies. Discuss with examples. Q.5 Explain when and why it is important for a company to Globalize.?

Question.1 Briefly describe PESTLE in the remote environment of business.

Answer A PEST analysis (also sometimes called STEP, STEEP or PESTLE analysis) looks at the external business environment. A PESTLE analysis,

sometimes referred to as a PEST Analysis, is a useful tool for understanding the industry situation as a whole, and is often used in conjunction with a SWOT analysis to assess the situation of an individual business. A PESTLE Analysis is one of the most important frameworks of macro-environmental scanning, framework which comprises the most important factors used in environmental scanning, as part of advanced strategic management. Throughout the last few years, the acronym PESTLE has suffered a number of changes, but PESTLE seems to be the most commonly spread and almost unanimously accepted concept.

PESTLE stands for Political, Economic, Sociological, Technological, Legal and Environmental factors. The questions to ask yourself are:

What are the key political factors likely to affect the industry? What are the important economic factors? What cultural aspects are most important? What technological innovations are likely to occur? What current and impending legislation may affect the industry? What are the environmental considerations?

Each and every category of factors is of crucial importance to advanced strategic management, and the PESTLE analysis in itself is definitely a must for any business or company, regardless of its industry. It is true that the importance of each category of factors will always vary from business to business and from company to company, but nonetheless PESTLE remains a mandatory analysis technique that is usually a part of the larger and more comprehensive SWOT analysis. PESTLE helps a company determine exactly how various types and categories of factors influence its well-being. As aforementioned, the same factors will influence different companies in different ways. For instance, an online business will be less concerned about environmental factors while a waste management company will have to pay extra attention to environmental factors. To further understand what PESTLE is and how it can be used, it is very important that you know a thing or two about each individual category of factors. The below descriptions should help you gain a better understanding of each factor and of just how powerful and effective a PESTLE analysis can be for a business. - Political factors represent the way and the extent to which a government influences the economy and a certain business. Political factors are represented by specific areas, such as labour law, tax policy, tariffs,trade restrictions and even environmental law. - Economic factors refer to areas unique to economy and directly influenced by economy or comprised by economy, areas such as inflation rate, interest rate, economic growth or exchange rates. All these areas can greatly influence a business or company, which makes them an extremely important part of the PESTLE analysis. - Social factors mainly refer to demographic factors, which comprise factors like population growth rate, cultural aspects, age distribution and health consciousness. - Technological factors refer to automation, incentives, the rate of technological change and R&D activity. These factors greatly influence other areas or aspects, including the minimum efficient production level, quality, costs and even outsourcing decisions. - Legal factors refer to all the laws directly connected to a business/company and its area of activity, including consumer law, antitrust law, discrimination law and health and safety law. - Environmental factors refer to all the factors directly related, influenced or determined by the surrounding environment. This includes, but is not limited to weather, climate, geographical position, climate change and even insurance. Environmental factors are crucial to industries such as farming or tourism and can greatly influence a companys way to operate or even the products it offers. The PESTLE analysis consists in carefully determining all these factors and finding out exactly in what way and to what extent these factors influence a certain company. The

PESTLE analysis provides the company with crucial information and this is why it is a mandatory analysis. In fact, it would be better to call this kind of analysis a business environmental analysis but the acronym PEST is easy to remember and so has stuck. PEST stands for Political, Economic, Sociocultural and Technological. (Technological factors in this case, include ecological and environmental aspects - the second E in STEEP and PESTLE, while the L in PESTLE stands for legal or legislative). The analysis examines the impact of each of these factors (and their interplay with each other) on the business. The results can then be used to take advantage of opportunities and to make contingency plans for threats when preparing business and strategic plans. You need to consider each PEST factor as they all play a part in determining your overall business environment. Thus, when looking at political factors you should consider the impact of any political or legislative changes that could affect your business. If you are operating in more than one country then you will need to look at each country in turn. Political factors include aspects such as laws on maternity rights, data protection and even environmental policy: these three examples alone have an on impact employment terms, information access, product specification and business processes in many businesses globally. Obviously politicians don't operate in a vacuum, and many political changes result from changes in the economy or in social and cultural mores, for example. Thus although tax rates are generally decided by politicians, tax decisions generally also include economic considerations such as what is the state of the economy. In Europe, the politicians drove the introduction of the euro currency but the impacts include economic factors: crossborder pricing, European interest rates, bank charges, price transparency and so on. Other economic factors include exchange rates, inflation levels, income growth, debt & saving levels (which impact available money) and consumer & business confidence. There can also be narrow industry measures that become important. Issues such as the availability of skilled labour or raw-material costs can impact industries in different ways. Advances in technology can have a major impact on business success, with companies that fail to keep up often going out of business. Technological change also affects political and economic aspects, and plays a part in how people view their world. Just as one example, the Internet has had a major influence on the ways consumers and businesses research and purchase products. Whereas in the early and mid-1990s, it was rare for consumers to consider cross-border purchases this is now becoming common via services such as eBay, with the result that even small businesses can now serve a global market. Politicians are still coming to grips with the tax issues involved. Meanwhile the music industry has still not found an effective solution to the threat posed by the successors to Napster, and the cinema/movie industry is also being challenged by the availability of peer-to-peer networks facilitating easy and free downloads of the latest

blockbuster films. Environmental factors to consider here include the impact of climate change: water and winter fuel costs could change dramatically if the world warms by only a couple of degrees. Ultimately, however, the various PEST factors are governed by the socio-cultural factors. These are the elements that build society. Social factors influence people's choices and include societal beliefs, values and attitudes. So understanding changes in this area can be crucial, as they lead to political and societal change. When looking at socio-cultural factors, you need to consider

demographic changes and also consumer views on your product & industry; environmental issues (especially if your product involves hazardous or potentially damaging production processes); lifestyle changes and attitudes to health, wealth age (children, the elderly, etc.), gender, work and leisure.

Added complications when looking at social and cultural factors are differences in ethnic and social groups. Not all groups have the same attitudes - and this influences how they view various products and services.

Question.2(a) Corporate social responsibility (b) Mission statement provides substantive guidance while a vision statement provides inspirational guidance. Do you agree.
Answer.2(a) Corporate Social Responsibility (CSR) defined as the ethical behavior

of a company towards the society, manifests itself in the form of such noble programs initiated by for-profit organizations. CSR has become increasingly prominent in the Indian corporate scenario because organizations have realized that besides growing their businesses it is also vital to build trustworthy and sustainable relationships with the community at large. This is one of the key drivers of CSR programs. Another reason fuelling this rapid adoption of CSR is the state of the Indian society. Though India is one of the fastest growing economies, socio-economic problems like poverty, illiteracy, lack of healthcare etc. are still ubiquitous and the government has limited resources to tackle these challenges. This scenario has opened up several areas for businesses to contribute towards social development. CSR is not a new concept in India. Corporates like the Tata Group, the Aditya Birla Group, and Indian Oil Corporation, to name a few, have been involved in serving the community ever since their inception. Many other organizations have been doing their part for the society through donations and charity events.

Today, CSR in India has gone beyond merely charity and donations, and is approached in a more organized fashion. It has become an integral part of the corporate strategy. Companies have CSR teams that devise specific policies, strategies and goals for their CSR programs and set aside budgets to support them. These programs, in many cases, are based on a clearly defined social philosophy or are closely aligned with the companies business expertise. Employees become the backbone of these initiatives and volunteer their time and contribute their skills, to implement them. CSR Programs could range from overall development of a community to supporting specific causes like education, environment, healthcare etc. For example, organizations like Bharath Petroleum Corporation Limited, Maruti Suzuki India Limited, and Hindustan Unilever Limited, adopt villages where they focus on holistic development. They provide better medical and sanitation facilities, build schools and houses, and help the villagers become self-reliant by teaching them vocational and business skills. On the other hand GlaxoSmithKline Pharmaceuticals CSR programs primarily focus on health and healthy living. They work in tribal villages where they provide medical checkup and treatment, health camps and health awareness programs. They also provide money, medicines and equipment to non-profit organizations that work towards improving health and education in under-served communities. Many CSR initiatives are executed by corporates in partnership with Non-governmental organizations (NGOs) who are well versed in working with the local communities and are experts in tackling specific social problems. For example, SAP India in partnership with Hope Foundation, an NGO that works for the betterment of the poor and the needy throughout India, has been working on short and long-term rebuilding initiatives for the tsunami victims. Together, they also started The SAP Labs Center of HOPE in Bangalore, a home for street children, where they provide food, clothing, shelter, medical care and education. CSR has come a long way in India. From responsive activities to sustainable initiatives, corporates have clearly exhibited their ability to make a significant difference in the society and improve the overall quality of life. In the current social situation in India, it is difficult for one single entity to bring about change, as the scale is enormous. Corporates have the expertise, strategic thinking, manpower and money to facilitate extensive social change. Effective partnerships between corporates, NGOs and the government will place Indias social development on a faster track. (b)Mission statement provides substantive guidance while a vision statement provides inspirational guidance. Do you agree. Answer (b)Yes I agree Mission statements are a useful tool companies use to communicate with their employees, managers,community, potential investors, and outside stakeholders. The mission statement can provide a clear link between individual

and company-wide senses of purpose. Using key principles outlined in themission statement, a company is able to concentrate on the most important aspects of its business:survival through growth and profitability. It can outline the general ways in which these goals can beaccomplished and demonstrate to everyone where their strongest strategic commitments lay.The mission statement is designed to provide insight into a companys values. Values are sustainedover the course of the companys existence. They are long-term declarations of how the company andits employees should manage its business affairs. Still, the mission should convey competitiveadvantage. The goals of survival, growth, and profitability are dependent on good strategies toachieve sustainable competitive advantages. Long-term statements about values and principles do notnegate a companys flexibility or adaptability in achieving competitive advantage. (See section titledCompany Goals: Survival; Growth; Profitability. A mission statement is meant to provide long-term guidance regardingwhat a firm does, what customers it serves, and what principles are most important to the company asa whole. It includes more information than the vision statement, which is easy to remember, usuallyonly one or two sentences long. The vision statement has to be more inspirational and make its pointmore quickly than the mission. It is also developed to express the aspirations of the firm, whereas themission statement shows what business the company is in.

It attracts commitment and energizes people. This is one of the primary reasons for having a vision for an organization: its motivational effect. When people can see that the organization is committed to a vision-and that entails more than just having a vision statement-it generates enthusiasm about the course the organization intends to follow, and increases the commitment of people to work toward achieving that vision. It creates meaning in workers' lives. A vision allows people to feel like they are part of a greater whole, and hence provides meaning for their work. The right vision will mean something to everyone in the organization if they can see how what they do contributes to that vision. Consider the difference between the hotel service worker who can only say, "I make beds and clean bathrooms," to the one who can also say, "I'm part of a team committed to becoming the worldwide leader in providing quality service to our hotel guests." The work is the same, but the context and meaning of the work is different. It establishes a standard of excellence. A vision serves a very important function in establishing a standard of excellence. In fact, a good vision is all about excellence. Tom Peters, the author of In Search of Excellence, talks about going into an organization where a number of problems existed. When he attempted to get the organization's leadership to address the problems, he got the defensive response, "But we're no worse than anyone else!" Peters cites this sarcastically as a great vision for an organization: "Acme Widgets: We're No Worse Than Anyone Else!" A vision so characterized by lack of a striving for excellence would not motivate or excite anyone about that organization. The standard of

excellence also can serve as a continuing goal and stimulate quality improvement programs, as well as providing a measure of the worth of the organization. It bridges the present and the future. The right vision takes the organization out of the present, and focuses it on the future. It's easy to get caught up in the crises of the day, and to lose sight of where you were heading. A good vision can orient you on the future, and provide positive direction. The vision alone isn't enough to move you from the present to the future, however. That's where a strategic plan, discussed later in the chapter, comes in. A vision is the desired future state for the organization; the strategic plan is how to get from where you are now to where you want to be in the future.

Question 3.While exercising strategic choices companies use GE Matrix and BCG Matrix. Which one of the two is better and why? Answer GE/McKinsey Matrix The GE/McKinsey Matrix was developed in the 1970s by the management consulting firm McKinsey & Co. as a tool to screen General Electrics large portfolio of strategic business units (SBUs). The idea behind the matrix (a.k.a., the GE Business Screen or GE Strategic Planning Grid) is to evaluate businesses along two composite dimensions: industry attractiveness and industry strength. Conceptually, this matrix is similar to the BCG Growth-Share Matrix in that it maps SBUs on a grid of the industry and, at the same time, marks their competitive position. The GE/McKinsey Matrix improves on the BCG approach in two ways: 1) it utilizes more comprehensive axes (the BCG matrix uses market growth rate as a proxy for industry attractiveness and relative market share as a proxy for the strength of the business unit); and 2) it consists of nine-cells rather than four, allowing for greater precision.

Industry attractiveness and SBU strength are calculated by first identifying the criteria for each, determining the value of each parameter in the criteria, and multiplying that value by a weighting factor. The result is a quantitative measure of industry attractiveness and the SBUs relative performance in that industry. The industry attractiveness index is made up of such factors as market size, market growth, industry profit margin, amount of competition, the degree of seasonal and cyclical fluctuations in demand, and industry cost structure. The industry attractiveness index consists of factors like relative market share, price, competitiveness, product quality, customer and market knowledge, sales effectiveness, and geographic advantages. Each SBU can be portrayed as a circle plotted on the matrix, with the information conveyed as follows:

Market size is represented by the size of the circle.

Market share is shown by using the circle as a pie chart. The expected future position of the circles is indicated by an arrow. The sample diagram shows the relative position of an SBU with a market share of 65%. The arrow in the upward right position indicates that the SBU is expected to lose strength relative to competitors, and the that the business unit is in an industry that is projected to become increasingly less attractive. The tip of the arrow indicates the future position of the center point of the circle.

Both axes are divided into three segments, yielding nine cells. The nine cells are grouped into three zones: The Green Zone consists of the three cells in the upper left corner. If the SBU falls in this zone, its in a favorable position with relatively attractive growth opportunities. This position indicates a "green light" to invest and grow this SBU.

The Yellow Zone consists of the three diagonal cells from the lower left to the upper right. A position in the yellow zone is viewed as having medium attractiveness. Management must therefore exercise caution when making additional investments in this SBU. The suggested strategy is to protect or allocate resources on a selective basis rather than growing or reducing share.

The Red Zone consists of the three cells in the lower right corner. A harvest strategy should be used in the two cells just below the three-cell diagonal. These SBUs shouldnt receive substantial new resources. The SBUs in the lower right cell shouldnt receive any resources and should probably be divested or eliminated from a firms portfolio. There are strategy variations within these three groups. For example, within the Red Zone, a firm would be inclined to quickly divest itself of a weak business in an unattractive industry, whereas it might perform a phased harvest of an average SBU in the same industry.

While the GE/McKinsey Matrix represents an improvement over the relatively simplistic BCG Growth-Share Matrix, it still encompasses a limited view of the competitive landscape. The matrix doesnt take into account interactions among SBUs or the core competencies that lead to value creation. For these and other reasons, some believe the matrix is better suited for providing an overview of the current market rather than serving as a resource allocation tool.

BCG Growth Share Matrix Developed by the Boston Consulting Group (BCG), the BCG Growth Share Matrix is a popular approach to product portfolio planning. The matrix is defined by two factors: relative market share (the company's market share relative to the competition) and market growth. To use the matrix, place each individual product in your company's portfolio into one of the four quadrants and then do the same for your competitors' products. The result has implications for brand positioning and market share

The matrix has four distinct quadrants: Stars. A star is a product in a high growth market that controls a sizeable share of that market. Stars tend to generate strong revenues. Over time, as growth slows, stars become cash cows if they hold their market share and dogs if they don't.

Cash cows. A cash cow commands a large share of a slow growth market. The more the company invests in cash cows, the greater the return. Cash cows tend to pay the dividends, the interest on debt and cover the corporate overhead.

Dogs. A dog has a low share of a slow growth market. Dogs often report a profit even though they are net cash users. They are essentially cash traps.

Question marks (sometimes called wildcats). A question mark is a product with a low share of a high growth market. Their cash needs are great because of their growth, but generate little in return because their market share is low. Question marks are difficult to turn into stars because the cost of acquiring market share compounds the cash needs. They may be big winners if backed to the limit, but most often, they fail to develop a leading market position before growth slows and become dogs. The purpose of this tool is to help you balance your product portfolio. Ideally, you would eliminate any dogs, while keeping the others in a kind of dynamic equilibrium. The cash generated by cash cows can then be used to turn question marks into stars, which, in turn, may become cash cows. As noted above, many of the question marks will become dogs, which means you'll need to compensate for these failures by improving margins on the stars and cash cows.

Question4 .Michael Porter has suggested three generic strategies. Discuss with examples.
Answer Main aspects of Porters Generic Strategies Analysis

Companies can achieve competitive advantages essentially by differentiating their products and services from those of competitors and through low costs. Firms can target their products by a broad target, thereby covering most of the marketplace, or they can focus on a narrow target in the market. According to Porter, there are three generic strategies that a company can undertake to attain competitive advantage: cost leadership, differentiation, and focus.
Cost leadership

The companies that attempt to become the lowest-cost producers in an industry can be referred to as those following a cost leadership strategy. The company with the lowest costs would earn the highest profits in the event when the competing products are essentially undifferentiated, and selling at a standard market price. Companies following this strategy place emphasis on cost reduction in every activity in the value chain. It is

important to note that a company might be a cost leader but that does not necessarily imply that the companys products would have a low price. In certain instances, the company can for instance charge an average price while following the low cost leadership strategy and reinvest the extra profits into the business (Lynch, 2003). Examples of companies following a cost leadership strategy include Deccan Airlines.

The risk of following the cost leadership strategy is that the companys focus on reducing costs, even sometimes at the expense of other vital factors, may become so dominant that the company loses vision of why it embarked on one such strategy in the first place.
Differentiation

When a company differentiates its products, it is often able to charge a premium price for its products or services in the market. Some general examples of differentiation include better service levels to customers, better product performance etc. in comparison with the existing competitors. Porter (1980) has argued that for a company employing a differentiation strategy, there would be extra costs that the company would have to incur. Such extra costs may include high advertising spending to promote a differentiated brand image for the product, which in fact can be considered as a cost and an investment. McDonalds , for example, is differentiated by its very brand name and brand images of Big Mac and Ronald McDonald. Differentiation has many advantages for the firm which makes use of the strategy. Some problematic areas include the difficulty on part of the firm to estimate if the extra costs entailed in differentiation can actually be recovered from the customer through premium pricing. Moreover, successful differentiation strategy of a firm may attract competitors to enter the companys market segment and copy the differentiated product. Focus Porter initially presented focus as one of the three generic strategies, but later identified focus as a moderator of the two strategies. Companies employ this strategy by focusing on the areas in a market where there is the least amount of competition (Pearson, 1999). Organizations can make use of the focus strategy by focusing on a specific niche in the market and offering specialized products for that niche. This is why the focus strategy is also sometimes referred to as the niche strategy (Lynch, 2003). Therefore, competitive

advantage can be achieved only in the companys target segments by employing the focus strategy. The company can make use of the cost leadership or differentiation approach with regard to the focus strategy. In that, a company using the cost focus approach would aim for a cost advantage in its target segment only. If a company is using the differentiation focus approach, it would aim for differentiation in its target segment only, and not the overall market. This strategy provides the company the possibility to charge a premium price for superior quality (differentiation focus) or by offering a low price product to a small and specialized group of buyers (cost focus). Ferrari and Rolls-Royce are classic examples of niche players in the automobile industry. Both these companies have a niche of premium products available at a premium price. Moreover, they have a small percentage of the worldwide market, which is a trait characteristic of niche players. The downside of the focus strategy, however, is that the niche characteristically is small and may not be significant or large enough to justify a companys attention. The focus on costs can be difficult in industries where economies of scale play an important role. There is the evident danger that the niche may disappear over time, as the business environment and customer preferences change over time. Question 5. Explain when and why it is important for a company to Globalize.? Answer 5. Globalization, as a concept, refers both to the "shrinking" of the world and the increased consciousness of the world as a whole. It is a term used to describe the changes in societies and the world economy that are the result of dramatically increased cross-border trade, investment, and cultural exchange. The processes and actions to which the concept of globalization now refers have been proceeding, with some interruptions, for many centuries, but only in relatively recent times has globalization become a main focus of discussion. The current or recently-past epoch of globalization has been dominated by the nation-state, national economies, and national cultural identities. The new form of globalization is an interconnected world and global mass culture, often referred to as a "globalvillage." Globalization is perhaps the central concept of our age. Yet, a single definition of globalization does not--exist either among academics[1] or in everyday conversation. There is also a lack of consensus as to whether or not globalization is a useful concept to portray current events.[2] While most conceptions focus on different aspects of growing interdependence be it economic, cultural, technological, and the like, at a basic level globalization refers to growing interconnectedness. Some certainly do reject the notion that we have entered a fundamentally new era.[3] There are many, however, who see globalization as a genuine restructuring of social organization. Most definitions incorporate a notion of a growing magnitude of global

flows such that one can truly speak of A global society. They find evidence that human activity has become interregional or intercontinental in scale.[4] Although the globalization process is a long, historically rooted one, it is not without fits and starts and is not teleological.[5] In short, globalization is a highly complex interaction of forces producing integration and disintegration, cooperation and conflict, order and disorder.[6] There is much debate and little consensus on whether globalization is a positive development. Recent popular titles on globalization, "Lexus and the Olive Tree" and "Jihad Vs. McWorld," attest to the seemingly contradictory unifying and divisive forces inherent in globalization. For some, globalization processes, on balance, represent a tremendous opportunity for prosperity, peace, and democracy.[7] Others, by contrast, see greater potential for conflict, extreme self-interest, unbridled corporate power, and disregard for people and entire civilizations.[8] The attacks of September 11 are perhaps the most dramatic evidence that people feel great unease about the forces of globalization and modernity.[9] As a microcosm of the complexity of globalization, the motivation of the attackers may have been anti-modern and anti-globalization, the preparation and the attack itself were facilitated by globalizing processes. In reality, globalization has sparked unease and discontentment in a range of groups from all parts of the world.[10] The advantages and disadvantages of globalization have been heavily scrutinized and debated in recent years. Proponents of globalization say that it helps developing nations "catch up" to industrialized nations much faster through increased employment and technological advances. Critics of globalization say that it weakens national sovereignty and allows rich nations to ship domestic jobs overseas where labor is much cheaper. Globalization gives companies access to wider markets and consumers access to a greater variety of goods and services. But the benefits of globalization are not always shared by all of the parties involved in trade. Unfortunately, developing countrieswhich need the potential benefits of globalization the mostare often the losers. "The downside of global capitalism is the disruption of whole societies, from financial meltdowns to practices by multinationals that would never be tolerated in the West," the Business Week article noted. "Industrialized countries have enacted all sorts of worker, consumer, and environmental safeguards since the turn of the century, and civil rights have a strong tradition. But the global economy is pretty much still in the robber-baron age." Some people view globalization in positive terms, as a key force in promoting worldwide economic development. But others believe that unrestricted global trade will only serve to increase the inequality between developed and developing countries. In reality, globalization offers both opportunities and risks for developing countries, and there is a great deal of variation in their experiences with it. Some regions, like Asia, have integrated into the global economy quickly and achieved economic growth as a result. But other regions, like Africa, have suffered from increased political instability, poverty, and environmental degradation since they became involved in international trade.