Business Policies & SM 1) What are the different generic competitive strategies Ans: 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 analysing 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 a 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 below:

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. Examples of Differentiation Strategy: Mercedes cars; Bang & Olufsen

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Business Policies & SM 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 maximise sales, particularly if it has a significant cost advantage over the competition and, in doing so, it can further increase its market share. Examples of Cost Leadership: Nissan; Tesco; Dell Computers 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. Examples of Differentiation Focus: any successful niche retailers; (e.g. The Perfume Shop); or specialist holiday operator (e.g. Carrier) Strategy - Cost Focus Here a business seeks a lower-cost advantage in just one 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". Examples of Cost Focus: Many smaller retailers featuring own-label or discounted label products.

2) Define SWOT. How it is relevant for strategy formulation? Present SWOT analysis of a company of your choice Or Demonstrate SWOT on KPO industry in India. Justify your argument Ans: SWOT Analysis: SWOT stands for Strengths, Weaknesses, Opportunities and Threats. The analysis is a preliminary to strategic formulation exercise, which is a key element of business management. The whole exercise starts with the setting of clear objectives to be achieved; this objective can be a future business scenario towards which the company wants to move.

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Business Policies & SM Once the objective is specified, a situation analysis is done to identify and list existing factors that can prove helpful in achieving the objectives and also those that can pose problems. The situation analysis looks at both internal factors and external environmental factors. The internal analysis seeks to reveal the strengths and weakness of the company, while the external analysis looks at marketing and competitive environment as well as other factors that can affect the particular business or businesses in general. The SWOT Matrix The results of the analysis are represented in a matrix with four quadrants, representing Strengths, Weaknesses, Opportunities and Threats. The following list illustrates typical factors that are included under these heads: Strengths: Technology Know-how, Strong Brand Name, Established Distribution Channels, Good Product Reputation, Excellent Customer Relationship, Effective Management Weaknesses: Lack of technical skills, No Brand Name, Poorly Organized Distribution Network, Quality Problems, Poor Customer Retention Record Opportunities: New Technologies, Changing Market Conditions, Removal of Geographic Trade Barriers, Changing Population Age Structure, New Distribution Channels Threats: All the items listed as opportunities can work in reverse, posing threats to a particular business. For example, new technologies can make the company's product obsolete, and removal of trade barriers can flood the market with competing products from other countries It must be noted that only those factors that affect strategy formulation are relevant in the analysis. If a factor is not going to affect strategy one way or other, it should be ignored. Strategic formulation The findings of the SWOT analysis should be consciously used in formulating the strategies to achieve predefined objectives. Otherwise, the analysis becomes a mere listing exercise. The strategic formulation is related to the SWOT findings by: Identifying how the strengths can be utilized to pursue those opportunities that are a good fit for these strengths If there are some excellent opportunities that are not such a good fit, identifying ways to overcome the weaknesses that stand in the way of pursuing these In the case of potential threats, identifying how the strengths of the company can be used to minimize the degree of vulnerability Where the vulnerabilities are related to the company's weaknesses, developing a plan to prevent the threats from destroying the business

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Business Policies & SM SWOT analysis is a strategic planning preliminary. It seeks to list the strengths and weaknesses of the planning entity, and the opportunities and threats in the external environment that can help or hinder achieving defined objectives. SWOT Analysis on Indian KPO industry Knowledge Processing Outsourcing is an emerging sector and is growing at a very rapid rate. Many high- end areas of specialization that were earlier not considered for outsourcing are now being outsourced and are being handled by KPOs. Factors like cost, technology and labour availability, etc force organizations to outsource their high- end work. India has become a major KPO player in the world. Indian KPO sector has many opportunities for SMEs. Indian economy, the education system, political stability, technology, communication skills and qualified workforce altogether make India an excellent location for KPOs. KPO industry has a bright future. Strengths Large talented pool Quality IT training Low labour costs Success of BPOs Good knowledge of project management skills Supportive government policies Many new areas of specialization are being covered making KPO sector spreading its wings Consideration to quality standards like ISO 900x and Six Sigma Billing rates are lower as compared to billing rates in other countries Opportunities Increasing domain expertise More areas of specialization can be added to KPOs Ample opportunities for SMEs Weaknesses Immoral and unethical practices related to handling of crucial data Rising wages The inability to uniformly develop and provide infrastructural requirements as real estate prices are rising in major cities. Inadequate Intellectual Property Rights (IPR) protection regime in India Billing rates are higher as compared to billing rates in BPOs

Threats Non retention of talent Expected labour supply gap as jobs grow faster than the workforce.

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Business Policies & SM 3) What do you mean by Social responsibility of business? Should social responsibility be a part of business objectives? Explain Or What are the basic social obligation of business organization? Do these conflict with profit objective of business Ans: Definitions of social responsibility

An obligation, beyond that required by the law and economics, for a firm to pursue long term goals that are good for society The continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as that of the local community and society at large About how a company manages its business process to produce an overall positive impact on society

Business social responsibility means:

Conducting business in an ethical way and in the interests of the wider community Responding positively to emerging societal priorities and expectations A willingness to act ahead of regulatory confrontation Balancing shareholder interests against the interests of the wider community Being a good citizen in the community

The business responsibility view Businesses do not have an unquestioned right to operate in society Those managing business should recognise that they depend on society Business relies on inputs from society and on socially created institutions There is a social contract between business and society involving mutual obligations that society and business recognise that they have to each other The responsibility includes a responsibility for the natural environment. Decisions should be taken in the wider interest and not just the narrow shareholder interest Arguments for socially-responsible behavior

It is the ethical thing to do It improves the firm public image It is necessary in order to avoid excessive regulation Socially responsible actions can be profitable Improved social environment will be beneficial to the firm It will be attractive to some investors It can increase employee motivation

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Business Policies & SM 4) What are the implications of taking strategic management as a process? How is it dynamic process Or Discuss the nature and importance of Strategic management Ans: Strategic management is an ongoing process that evaluates and controls the business and the industries in which the company is involved; assesses its competitors and sets goals and strategies to meet all existing and potential competitors; and then reassesses each strategy annually or quarterly [i.e. regularly] to determine how it has been implemented and whether it has succeeded or needs replacement by a new strategy to meet changed circumstances, new technology, new competitors, a new economic environment., or a new social, financial, or political environment.

The Strategic Planning Process

Mission | V Objectives | V Situation Analysis | V Strategy Formulation | V Implementation | V Control This process is most applicable to strategic management at the business unit level of the organization. For large corporations, strategy at the corporate level is more concerned with managing a portfolio of businesses. For example, corporate level strategy involves decisions about which business units to grow, resource allocation among the business units, taking advantage of synergies among the business units, and mergers and acquisitions. In the process outlined here, "company" or "firm" will be used to denote a single-business firm or a single business unit of a diversified firm.

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Mission A company's mission is its reason for being. The mission often is expressed in the form of a mission statement, which conveys a sense of purpose to employees and projects a company image to customers. In the strategy formulation process, the mission statement sets the mood of where the company should go. Objectives Objectives are concrete goals that the organization seeks to reach, for example, an earnings growth target. The objectives should be challenging but achievable. They also should be measurable so that the company can monitor its progress and make corrections as needed. Situation Analysis Once the firm has specified its objectives, it begins with its current situation to devise a strategic plan to reach those objectives. Changes in the external environment often present new opportunities and new ways to reach the objectives. An environmental scan is performed to identify the available opportunities. The firm also must know its own capabilities and limitations in order to select the opportunities that it can pursue with a higher probability of success. The situation analysis therefore involves an analysis of both the external and internal environment. Strategy Formulation Once a clear picture of the firm and its environment is in hand, specific strategic alternatives can be developed. While different firms have different alternatives depending on their situation, there also exist generic strategies that can be applied across a wide range of firms. Michael Porter identified cost leadership, differentiation, and focus as three generic strategies that may be considered when defining strategic alternatives. Implementation The strategy likely will be expressed in high-level conceptual terms and priorities. For effective implementation, it needs to be translated into more detailed policies that can be understood at the functional level of the organization. Control Once implemented, the results of the strategy need to be measured and evaluated, with changes made as required to keep the plan on track. Control systems should be developed and implemented to facilitate this monitoring. Standards of performance are set, the actual performance measured, and appropriate action taken to ensure success. Dynamic and Continuous Process The strategic management process is dynamic and continuous. A change in one component can necessitate a change in the entire strategy. As such, the process must be repeated frequently in order to adapt the strategy to environmental changes. Throughout the process the firm may need to cycle back to a previous stage and make adjustments.

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Business Policies & SM Drawbacks of this Process The strategic planning process outlined above is only one approach to strategic management. It is best suited for stable environments. A drawback of this top-down approach is that it may not be responsive enough for rapidly changing competitive environments. In times of change, some of the more successful strategies emerge informally from lower levels of the organization, where managers are closer to customers on a day-to-day basis. Another drawback is that this strategic planning model assumes fairly accurate forecasting and does not take into account unexpected events. In an uncertain world, long-term forecasts cannot be relied upon with a high level of confidence. In this respect, many firms have turned to scenario planning as a tool for dealing with multiple contingencies.

5) Discuss the various stages in the organizational life cycle and the role of CEO during each stage Or Detail the impact of changing environment on the organization life cycle Ans: Organizational life can be as unpredictable as the weather, but it is somewhat predictable in stages of development. Like the human life cycle from birth to aging and death, some organizations have a comparable life cycle. Unlike the human life cycle, which moves for everyone through physical stages, the organization cycle is not inevitable. The first challenge for leaders who wish to grow their organizations is to understand what phase of the organizational life cycle one is in.Different experts will argue on how many phases there are, but there is elegance in using something easy to remember. Let us divide the organizational life cycle into the following phases: Startup. (or Birth) ,Growth; this is sometimes divided into an early growth phase (fast growth) and maturity phase (slow growth or no growth). However, maturity often leads to Decline. When in decline, an organization will either undergo Renewal or Death Each of these phases present different management and leadership challenges that one must deal with. The Start-Up Phase In this phase, we see the thinking about the business, a management group formed, a business plan written. For entrepreneurs needing money to kick start the business, the company goes into the growth phase once the investor writes the check. For those the don't need outside funds, the start-up ends when you declare yourself open for business. The Growth Phase

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Business Policies & SM In the growth phase, one expects to see revenues climb, new services and products developed, more employees hired and so on. The management textbooks love to assume that sales grow each year. The reality is much different since a company can have both good and bad years depending on market conditions. In organizations that have been around for a few years, a very interesting thing happens dry rot sets in. The Decline Phase Using the above definition, one finds a tremendous amount of corporate insanity out there. Management that expects next year to be better, but doesn't know or is unwilling to change to get better results. Many organizations will enter the decline phase unless there are is in place a rigorous program of transformational leadership development. If senior leaders can detect the symptoms of decline early, they can more easily deal with it. Some of the more obvious signs include: a. Declining sales relative to competitors, b. Disappearing profit margins, and c. Debt loads which continue to grow year after year. However, by the time the accountants figure out that the organization is in trouble, it takes tremendous leadership to get the organization to change course. The Renewal Phase Decline doesn't have to continue, however. External experts have focused on the importance of organizational development as a way of preventing decline or reducing its affects. One way to reverse dry rot is through the use of training as a way of injecting new knowledge and skills. One can also put in place a rigorous program to change and transform the organization's culture. This assumes, though, that one has enough transformational leaders to change the status quo. Without the right type of leadership, the organization will likely spiral down to bankruptcy. Dealth As many as 80% of business failures occur due to factors within the leadership's control. Even firms close to bankruptcy can overcome tremendous adversity to nurse themselves back to financial health. Lee Iacoccas turnaround of the Chrysler Corporation is one shining example.

6) Examine the trends in globalization with some examples Or Discuss elaborately the impact of globalization on the strategy formulation and implementation in Indian Industries Ans:

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Business Policies & SM Business can no more be contained inside the country since the globe has become very small due to scientific advancement and globalization is the new buzzword that has come to dominate the world since the nineties of the last century. Globalization has brought in new opportunities to developing countries. Greater access to developed country markets and technology transfer hold out promise improved productivity and higher living standard. But globalisation has also thrown up new challenges like growing inequality across and within nations, volatility in financial market and environmental deteriorations. Impact on India: Till the nineties the process of globalisation of the Indian economy was constrained by the barriers to trade and investment. India opened up the economy in the early nineties following a major crisis that led by a foreign exchange crunch that dragged the economy close to defaulting on loans. Major measures initiated as a part of the liberalisation and globalisation strategy in the early nineties included scrapping of the industrial licensing regime, reduction in the number of areas reserved for the public sector, amendment of the monopolies and the restrictive trade practices act, start of the privatisation programme, reduction in tariff rates and change over to market determined exchange rates. Over the years there has been a steady liberalisation of the current account transactions, more and more sectors opened up for foreign direct investments and portfolio investments facilitating entry of foreign investors in telecom, roads, ports, airports, insurance and other major sectors. Globalisation in the form of increased integration though trade and investment is an important reason why much progress has been made in reducing poverty and global inequality over recent decades. Consequences: The implications of globalisation for a national economy are many. Globalisation has intensified interdependence and competition between economies in the world market. This is reflected in interdependence in regard to trading in goods and services and in movement of capital. As a result domestic economic developments are not determined entirely by domestic policies and market conditions. Rather, they are influenced by both domestic and international policies and economic conditions. It is thus clear that in a globalising economy, while formulating and evaluating its domestic policy cannot afford to ignore the possible actions and reactions of policies and developments in the rest of the world. This constrained the policy option available to the government which implies loss of policy autonomy to some extent, in decision-making at the national level. Examples: The way businesses operate today with having many satellite locations or call centers in other parts of the world to answer questions in another: example, KPOs; someone in India answering a call from the U.S. about a product or service

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Business Policies & SM 7)Discuss the strategic control process and explain how it differ from operational control Ans: Strategic control focuses on the dual questions of whether: (1) the strategy is being implemented as planned; and (2) the results produced by the strategy are those intended." This definition refers to the traditional review and feedback stages, which constitutes the last step in the strategic management process; strategy formulation, strategy implementation, and strategy evaluation (control). Strategy control: Once implemented, the results of the strategy need to be measured and evaluated, with changes made as required to keep the plan on track. Control systems should be developed and implemented to facilitate this monitoring. Standards of performance are set, the actual performance measured, and appropriate action taken to ensure success. It is concerned primarily with traditional controls processes, which involves the review and feedback of performance to determine if plans, strategies, and objectives are being achieved, with the resulting information being used to solve problems or take corrective actions. Recent conceptual contributors to the strategic control literature have argued for anticipatory feed forward controls that recognize a rapidly changing and uncertain external environment. Strategic control Vs Operational control: The differences between strategic and operational control are as follows: i. ii. iii. iv. v. vi. Strategic control requires data from more sources. The typical operational control problem uses data from very few sources. Strategic control requires more data from external sources. Strategic decisions are normally taken with regard to the external environment as opposed to internal operating factors. Strategic control is oriented to the future. This is in contrast to operational control decisions in which control data give rise to immediate decisions that have immediate impacts. Strategic control is more concerned with measuring the accuracy of the decision premise. Operating decisions tend to be concerned with the quantitative value of certain outcomes. Strategic control standards are based on external factors. Measurement standards for operating problems can be established fairly by past performance on similar products or by similar operations currently being performed. Strategic control relies on variable reporting interval. The typical operating measurement is concerned with operations over some period of time: pieces per week, profit per quarter, and the like.

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8) Discuss impact of internet revolution on the Indian Corporate Sector. Ans: India is a country with a rich blend of culture, people, and lifestyles that are an inherent part of its identity. For a long time, the general opinion about India was that of a poor, under developed third world country. Consequently the trade and transactions of the nation were quite limited in their reach and volumes. However the negative perceptions about the country have become a thing of the past. The power of the net has brought greater awareness of skills and resources, thus helping the various Indian markets reach a diverse global audience. It has played a major role in opening up the untapped markets of the country and bestowed the benefits of globalization on the Indian people. Some ventures due to which the Internet has helped India become a global market force are as follows:The Freelance Business India has the largest pool of English speaking people who have the requisite expertise to undertake freelance jobs in varied industries of software, writing, designing and so on. The Internet has helped people across continents find the best fit for their job, in the skilled talent pool of the Indian people. There are various Indian sites and organizations that offer varied freelance services like proofreading, content development, coding and testing. There isnt a better example than this site itself that caters to providing the best content from the contribution of its Indian freelance writers and developers. The connectivity of the net and other supporting factors have encouraged the top US companies to outsource their work to India and many more companies are expected to follow suit. Tourism and Travel Industry There are scores of tourist destinations in our country that have an abundance of natural beauty and historic significance. The Internet has proved to be a boon for the tourism industry as these days you can get all the relevant information of these hitherto unknown places. Numerous online sites offer all the requisite information about these exotic destinations within India- right from traveling to these places to hotel bookings and sight seeing. The net has transformed the face of the Indian tourism industry, by making India one of the top must-visit places in the world. International visitors now know that India has many places to satiate a visitors interest, no matter what their budget. E-commerce transactions The net has proved to be the best method for buyers and sellers to transact their wares in a fast and convenient manner. Websites like Indiamart.com and Baazee.com are a few examples of the online ventures that see outstanding volumes of e-commerce transactions. Real time selling and buying on baazee.com enables a person to sell

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Business Policies & SM everything from cars, books, stocks and virtually anything that comes to mind. The net has made the whole world your very own market place. The profits from online trading are garnering a lot of appreciation as well as opening new markets for further trading within India. Several sites also maintain the databases of all the Indian traders, manufacturers and sellers. These listings have boosted sales and created a wider market for the goods. Online fund transfer, an offshoot of the benefit of net penetration has ensured an inflow of money into the country from the expatriates. This has increased the valuable foreign exchange of the country, leading to greater prosperity and more wealth. Although e-commerce has not made a major impact in the country as compared to others, slowly and surely, Indians are realizing the benefits of online trading. Online art auctions Indian artists are among the most skilled in the world, creating exquisite artwork. Thanks to the power of the net, online auctions of their prized masterpieces has become a reality. To cite an example, a recent online art auction of Indian artworks by Saffronartonline registered record sales of 100 crores. Most artists now display their art online helping buyers to view, understand and buy their choice of art from the comfort of their homes. The Gifting Industry Homemade Indian products have a huge overseas market. Keeping this aspect in mind, many sites on the net have introduced several products and gift schemes to woo the buyers, thus creating many more jobs and opportunities in India. The sale of traditional Indian handicrafts as well as the spices and apparel industry has had a tremendous boost in recent years due to the proliferation of the net. Today anyone across the globe can log on to the sites of the Indian vendors and take their pick from goods as varied as sarees to freshly ground spices. These vendors also take the onus of securely delivering your selected gift to any place that you desire. This has in turn spawned another industry of delivery services in India that transport your gift to the right destination. India has joined the Internet bandwagon a bit late in the day but the current statistics indicate that the penetration of the net has been significant. Before the advent of the net, there was very little information or awareness about the benefits of trading with India. No longer is the trade of the Indian goods restricted to only the buyers in and around the sub continent. All the aforesaid industries have experienced tremendous success and the Internet will only open up more avenues for other new and profitable online ventures. The net has helped Indian industries reach a wider audience, thus making the world sit up and take notice of its artisans and their artistry.

9) Define and distinguish between vision, mission, goals, objectives and policies. Ans: Vision Page 13 of 60

Business Policies & SM Corporate vision is a short, concise, and inspiring statement of what the organization intends to become and to achieve at some point in the future, often stated in competitive terms. Vision refers to the category of intentions that are broad, all-inclusive and forward-thinking. It is the image that a business must have of its goals before it sets out to reach them. It describes aspirations for the future, without specifying the means that will be used to achieve those desired ends. Warren Bennis, a noted writer on leadership, says: "To choose a direction, an executive must have developed a mental image of the possible and desirable future state of the organization. This image, which we call a vision, may be as vague as a dream or as precise as a goal or a mission statement." Example: The Ford Motor Company vision is 'to become the world's leading consumer company for automotive products and services'. Mission Statement A mission statement is an organization's vision translated into written form. It makes concrete the leader's view of the direction and purpose of the organization. For many corporate leaders it is a vital element in any attempt to motivate employees and to give them a sense of priorities. A mission statement should be a short and concise statement of goals and priorities. In turn, goals are specific objectives that relate to specific time periods and are stated in terms of facts. Goals The major outcome of strategic road-mapping and strategic planning, after gathering all necessary information, is the setting of goals for the organization based on its vision and mission statement. A goal is a long-range aim for a specific period. It must be specific and realistic. Long-range goals set through strategic planning are translated into activities that will ensure reaching the goal through operational planning. All business systems are directed towards the achievement of specific goals such as production and supply of goods, services to the customers, profit making, service to the society etc.

Objectives

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Business Policies & SM Objectives define strategies or implementation steps to attain the identified goals. Unlike goals, objectives are specific, measurable, and have a defined completion date. They are more specific and outline the who, what, when, where, and how of reaching the goals. Comparison between goals and objectives Goals are broad objectives are narrow. Goals are general intentions; objectives are precise. Goals are intangible; objectives are tangible. Goals are abstract; objectives are concrete. Goals can't be validated as is; objectives can be validated. Policy A policy may be defined as an understanding by persons of a group that makes the actions of each member more predictable to other members. Policy is a guide to making decisions. It may also be defined as a plan or course of action, as of a government, political party, or business, intended to influence and determine decisions, actions, and other matters. Policies provide general guidelines to decide and adopt courses of action, and establish the role theory to be practiced in organizations. Policies are not specific as that of strategies as they aim at achieving general objectives, unlike strategies which aim at specific portions of the objectives.

10) What do you understand by Business policy? How is it different from strategic management? Or Explain using examples, how the principles of policy making rationalize the decisions in strategic management and operations management. Ans: Definition of Business Policy Business Policy defines the scope or spheres within which decisions can be taken by the subordinates in an organization. It permits the lower level management to deal with the problems and issues without consulting top level management every time for decisions. Business policies are the guidelines developed by an organization to govern its actions. They define the limits within which decisions must be made. Business policy also deals with acquisition of resources with which organizational goals can be achieved. Business Page 15 of 60

Business Policies & SM policy is the study of the roles and responsibilities of top level management, the significant issues affecting organizational success and the decisions affecting organization in long-run.

Features of Business Policy An effective business policy must have following featuresa. Specific- Policy should be specific/definite. If it is uncertain, then the implementation will become difficult. b. Clear- Policy must be unambiguous. It should avoid use of jargons and connotations. There should be no misunderstandings in following the policy. c. Reliable/Uniform- Policy must be uniform enough so that it can be efficiently followed by the subordinates. d. Appropriate- Policy should be appropriate to the present organizational goal. e. Simple- A policy should be simple and easily understood by all in the organization. f. Inclusive/Comprehensive- In order to have a wide scope, a policy must be comprehensive. g. Flexible- Policy should be flexible in operation/application. This does not imply that a policy should be altered always, but it should be wide in scope so as to ensure that the line managers use them in repetitive/routine scenarios. h. Stable- Policy should be stable else it will lead to indecisiveness and uncertainty in minds of those who look into it for guidance. Definition of strategy A strategy is the grand design or the overall plan which an organization chooses in order to move or reach towards the set objectives by using the resources. It usually establishes a general program of action, and implied deployment of emphasis and resources, to attain comprehensive objectives. Strategy includes: i. Awareness of mission, purpose and objectives, providing a central concept for planning, identifying the business, customers, goods and services. ii. Uncertainty due to economic, social, technological and political considerations. iii. The need to take into account the probable behavior others in general, and rivals in particular.

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Strategic management 1. Strategic management embraces a set of decisions, actions and interactions for accomplishment of goals. 2. It is a long term innovative program identifying the potential for changes. 3. The level of importance is at the top managerial level. 4. It aims at generating alternative strategies and to choose the best for implementation. 5. It is dynamic and perpetual. It will not cease to exist at a particular period. 6. Strategic management is forward looking. It may even comprise of contradictory actions if warranted by the environment. 7. It depends upon the resources, both internal and external, to the organization

Comparison 1 2 3 Policy Guide lines or paths of action to reach goals Embraces both thought and action Usually spells out certain courses of action or approach to accomplish objectives. Lays emphasis mainly on long-term growth. Sets limit for managerial action Implementation may be delegated to subordinates. Policy is what is, or what is not done Strategic mgt. Major courses of decisions, actions and interactions to achieve goals. Concentrates mostly on decision and action Outlines ones approach to meet competitive situations. Uncertainties, risks etc. may arise in future. It is market, or situation oriented to meet competition, with potential for changes. Not so. It is used to mobilize resources. Not to be delegated. Strategy is a methodology used to achieve a target as prescribed by the policy

4 5 6 7

How the principles of policy making rationalize the decisions in strategic management and operations management.

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Business Policies & SM Strategic management is basically a top management function and operational management emphasizes day to day operations in the organization. Strategic management decides its operational counterpart, but at times operational management influences strategic management decisions. Operational management provides an extension of strategic management towards achieving goals. In this context, it is to be acknowledged that policies of an organization are their day to day guide, which rationalizes the decisions in strategic management and operations management. This advantage is provided by the following features. 1. Precedents: Policies serve as precedents, reducing repetitive rethinking, or reapplication of decisions in managerial functions. 2. Coordination: policies aid proper coordination as the whole organization is guided by the same policy. 3. Stability: Uniform policies ascertain predictable actions, minimize deviations and promote stability. 4. Decision making: Clear policies alleviate uncertainties and make the decision making process easier. 5. Measuring scale: Policies are used as measuring scales or yardsticks to measure the performance of an organization by comparing the actual results with the expected results. 6. Motivation: Good policies promote enthusiasm, good will and loyalty to the organization. 7. Participation: as it sets a pattern of behavior, it encourages active participation of employees, increases confidence and leads to better cooperation. 8. Control guides: Being the control guide for decision making, they ensure consistency and uniformity in decision making and control all managerial and staff activities. 9. Image: Good policies promote the Image of the company in public and make known its social responsibilities.

11) What are the various types of diversification? Describe the strategies adopted by ITC in this regard or describe the product diversification strategies. How it affects the product life cycle Ans: Diversification/diversification strategy

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Business Policies & SM Diversification is the process of entry into a field which is new to an organization, either market wise or technology wise. The diversification strategy is one by which the firm attains a growth level with the addition of new products or services internally to the existing product or service line. Features of diversification i. Through diversification, the company is in a position to enter into a new industry or market. ii. It can enter into a technology area altogether, unconnected or somewhat related to its original business. iii. Diversification is aimed at growth of the company by adding new products or services to the existing product line or service line. iv. Business may also be acquired outside the premises of the company. Types of diversification i. Horizontal integration: Under this concept, the company expands the same type of product capacity in the same product line. Vertical integration: Vertical integration is the combination of technically distinct production, distribution and other economic processes within the confine of a single organization. Vertical integration could either be Forward vertical integration or Backward vertical integration. By forward vertical integration an enterprise develops outlets for use or sale of its products. For example, a TV picture tube manufacturer may go in for production of television using its own picture tube, rather than supplying it as a component to other TV manufacturers. In backward vertical integration, additional process is undertaken in the reverse direction. For example, a weaving mill which is purchasing yarn for its unit may go in for a spinning mill. iii. Concentric diversification: in the concentric diversification, the diversification strategy relates to old business or product market in some form. The relationship may be in the market, technology, or both. For example, a company which is producing food stuff introduces pickles as a new item, and uses similar marketing techniques, distributors, dealers and retailers to reach its customers.

ii.

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Business Policies & SM iv. Conglomerate diversification: By this diversification, products not closely related to each other by technology, market factors etc. are clustered together by a company for its advantage. For example, SPIC which was into petrochemicals and fertilizers diversified into pharmaceuticals.

ITCs diversification strategy In February 2001, the Government of India (GoI) announced a ban on advertising by cigarette companies and restrictions on the sale and consumption of tobacco products. The declining sales of cigarettes, the ban on advertising, the increasing anti-tobacco campaigns and the experience in developed countries seemed to suggest that tobacco would no longer be a profitable business in the future. Consequently, ITC decided to diversify into non tobacco businesses. ITC made its first foray into a non-tobacco business long back in the 1970s, when it entered the hotel industry. Since then the company has diversified into a variety of other businesses- sportswear, greeting cards, and ready to serve packaged foods, confectionery and branded staples- to reduce its dependence on its cigarette business. ITC diversified into retailing and merchandising of sports goods and premium apparel under its cigarette brand, 'Wills' and ran holiday packages under another cigarette brand, 'Gold Flake'. These businesses helped keep alive the existing brands. However, so far ITC hasn't been able to earn significant profits through any of its non-tobacco businesses. ITC's core business, cigarettes, contributes almost 85 per cent to its revenues, while almost all the other diversified businesses put together contribute only 15 percent. Analysts feel that ITC's ability to grab a sizable share of the markets it has entered and progressively make profits is doubtful, because it has diversified into areas where there is intense competition. How it affected product lifecycle A product progresses through a sequence of stages from introduction to growth, maturity and decline. This sequence is known as product life cycle and is associated with changes in the marketing situation, thus impacting the marketing strategy and marketing mix. ITC was the market leader in the cigarette business with a share of over 78% in 2001 (Refer Table III). The three major players, ITC, Godfrey Phillips India Ltd (GPIL), and Vazir Sultan Tobacco (VST), together accounted for over 95% of the cigarette market. The declining sales of cigarettes, the ban on advertising, the increasing anti-tobacco campaigns and the experience in developed countries marked the decline of two of ITCs major product brands Wills and Gold Flake Page 20 of 60

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In 2000, ITC extended one of its most valuable cigarette brands, Wills, to fashion retailing. The product was called Wills Sport and ran holiday packages under another cigarette brand, 'Gold Flake'. These businesses helped keep alive the existing brands.

12) Identify the factors that would either create opportunities or threats for business process outsourcing (BPO) companies in the near future. Ans: Business process outsourcing (BPO) BPO is a form of outsourcing that involves the contracting of the operations and responsibilities of specific business functions (or processes) to a third-party service provider. Originally, this was associated with manufacturing firms, such as Coca Cola that outsourced large segments of its supply chain. In the contemporary context, it is primarily used to refer to the outsourcing of services. BPO is typically categorized into back office outsourcing - which includes internal business functions such as human resources or finance and accounting, and front office outsourcing - which includes customer-related services such as contact center services. BPO that is contracted outside a company's country is called offshore outsourcing. BPO that is contracted to a company's neighboring (or nearby) country is called near shore outsourcing.

BPO benefits By Outsourcing to third world developing nations such as India, China, Philippines, Mexico, Ireland etc companies can exploit the cheap labor and infrastructure facilities available in those lands and in turn cut down on man power costs, reduce operational costs and capital expenditure. Concentrate on Core Business Back office operations of a company are highly tedious and need specialized attention. Most of them are critical for the company's progress. By outsourcing their back office operations businesses can concentrate on their core competencies while their back office operations are being managed smoothly by a specialized third party company.

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Business Policies & SM Skilled manpower at lower rates Outsourcing gives an organization the chance to get access to skilled and trained man power at extremely lower rates that will lead to an increase in productivity and save costs in a major way. Advanced technologies at lower rates There are many technologically developed offshore destinations that can give the companies access to high tech newly developed technologies at very affordable rates. This in turn can help them progress at a rapid pace. Tax benefits By selecting the right BPO destination companies can save up on taxes in turn cutting their costs. Increased productivity By employing skilled manpower in more numbers at lower costs companies can highly boost up their productivity in turn resulting into better customer satisfaction and increased profitability. Beat Competition In a fast paced economy a company needs to provide the best service to its customers in order to retain them and do all this by keeping the rates low. Outsourcing in this case can help the company maintain lower rates with better service thereby helping them to stay abreast of the competition. These outsourcing advantages are well an indication that the outsourcing market has a great future. BPO limitations A failure to meet service levels Unclear contractual issues, changing requirements and unforeseen charges Dependence on the BPO reduces flexibility Outsourcing of an Information System can cause security risks, both from a communication and from a privacy perspective. From a knowledge perspective, a changing attitude in employees, underestimation of running costs and the major risk of losing independence. Outsourcing leads to a different relationship between an organization and its contractor.

BPO-opportunities 1. Outsourcing in traditional areas like customer care, financial services, manufacturing, IT, ITES is growing. 2. Large multinational companies are investing in captive BPO units in supplier countries in multiple locations, to reduce risk and control quality.

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Business Policies & SM 3. Outsourcing is becoming more sophisticated. Customers are looking for business process excellence, speed to market, improvement in quality, benchmarking to world-class standards. CEOs are involved to ensure the long-term success of strategic off shoring decisions. On their part, suppliers understand that they must compete globally and that outsourcing will play a more transformational and strategic role for the client. 4. There is increasing global competition and pressure on margins from emerging lower-cost outsourcing destinations. 5. Risk factors for outsourcing like terrorism and war, disaster and disease make contingency plans a necessity. 6. The IT industry will see roughly 10 to 15% of its jobs move overseas during the next ten years, inviting more political debate. 7. For the past two decades, China has been growing at an astounding 9.5% a year and India by 6%. They are impacting the global economy and leading the outsourcing revolution.

BPO-threats 1. Outsourcing expenditure will continue to rise. 2. Customers will take greater control in driving and designing deals. 3. Risk factors and unexpected occurrences like war, terrorism, disease, natural disasters and economic upheavals can throw a wrench in the works. 4. The rising price of oil will cause oil consuming countries like the USA to be less competitive resulting in more outsourcing to India and China. 5. Political backlash over outsourcing is likely to lessen over time as economies strengthen and companies continue to reap the benefits of off shoring. 6. Regional outsourcing hubs will develop as companies will take strategic nearshoring initiatives to minimize risk and leverage cultural and linguistic compatibility. The supplier countries are in the same time zone as their customers. 7. The large diverse Indian companies will face stiff competition from new focused smaller companies. Because these companies are able to focus and become excellent in one are they will be able to provide a higher level of service.

13) Explain the impact of cultural values on managerial effectiveness Or Detail, using examples, the impact of cultural values on the effectiveness of managers Ans: Culture

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Business Policies & SM Culture is the is the integrated pattern of human behavior that includes thought, speech, action and artifacts and depends on mans capacity for learning and transmitting knowledge to succeeding generations. Culture binds people together and gives meaning and purpose to their day to day lives. It is this bondage which helps shape ones personal and professional life. Even companies have a culture, with widely shared philosophies, emphasizing on the importance of people. The top management tries to spread the philosophies through training and communication. Elements of culture Business environment: every company has its own business environment, which influences the business culture. Values: Values, which are basic concepts and beliefs of an organization, establish the standards of achievement within the organization. Heroes: Smart companies select talented, lovable, cultured people as role models or heroes for the employees to follow. Rites and rituals: these are programmed, systematic routines of day to day life, which show the employees the kind of behavior that is expected out of them. The cultural network: It is the carrier of the corporate values and heroic mythology, like story tellers, spies, priests, cabals and whisperers from a hidden hierarchy of power.

Managerial effectiveness and cultural values 1. Managers must understand clearly how the culture works in an enterprise if they want to accomplish what they set out to do. Culture comes down to understanding the importance of working with people in any organization. 2. A strong culture works as a system of informal rules that spell out how people are expected to behave. A strong culture enables the managers as well as the employees to feel better about what they do and are likely to work better. 3. If the managers are able to convey the corporate values and beliefs and project some role models or heroes, the employees are likely to emulate them. 4. Cultural shock is one reason why people leave one organization for another. Procter and Gamble example Page 24 of 60

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Procter and Gamble, Cincinnati, Ohio, is one of the companies which has adopted value based principles in its business endeavors. Their ideologies are as follows: i. The consumer is important ii. Things dont just happen; you have to make them happen. iii. We want to make employee interest our own. iv. The stronger the culture, the richer and more complex the value system.

14) Enumerate the strategies for international operation Or Strategies for international operations cannot be the same and uniform. Discuss and explain with respect to Global business environment, competition, legal, ethical dimensions. Ans: Why to go global? Business can no more be contained inside the country since the globe has become quite small due to technological advancements, and the needs of human beings have crossed the territorial boundaries of nations. Globalization compels the domestic firms to strive hard to sustain its business in the local market or to go global by establishing itself in the world market. However, the competition in the global market being comparatively larger, the companies must have clear strategies for international operations. Strategies for international business 1. 2. 3. 4. 5. 6. Looking at the international marketing environment. deciding whether to go abroad Deciding which market to enter Deciding how to enter the market Deciding on the market program Deciding on the marketing organization

1) Looking at the international marketing environment. a) International trade system:

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Business Policies & SM Imposes trade restrictions imports, which includes ban on certain products which are detrimental to the economy, culture or interests of the country, limits or quota for certain products etc. b) Economic communities of free trade zones. i. Such communities facilitate free business among member countries, but limits business with non-members. c) Economic environment: The company must consider the countrys industrial structure and income distribution. Industrial structure: i. Subsistence economies where the majority live on agriculture, which offer very few markets. ii. Raw material exporting economies, which are ideal for large equipments, tools, supplies, trucks etc. iii. Industrializing economies-demand for raw materials, machinery, steel automobile and imported goods for the rich and middle-class population. Income distribution: the people can be segregated into 4 main groups. i. Very low income below poverty line ii. Low income suffering for better survival iii. Medium income, but cannot afford luxury. iv. Higher income group d) Political and legal environment: Stability in political environment, monetary regulations, clear government bureaucracy and appreciable attitude towards international buying. Political changes may dictate import/international buying policies Monetary regulations, controlled by the trade and foreign exchange regulation practiced by the country. Government and bureaucracy: harassment to foreign companies, lethargy, red-tapism, inefficiency of various departments, insufficient information, and unreliable banking system are sure deterrents. Cultural environment decides the business in certain areas. Each country has its own folkways, norms and taboos which influence the decisions. Thus, the traditional and cultural style of behavior of each country must be studied before entering into business. 2) Deciding whether to go abroad Having understood the international marketing environment a company may venture into the global markets. However, the company must consider the advantages and disadvantages of going global. Competitions, both global and domestic, may provide the following options for the company; i.

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Business Policies & SM a. b. c. d. e. Counter attack the domestic competitors Discover global markets that present higher opportunities and profits. May enlarge its customer base due to shrinking domestic market. Reduce dependency on one market and reduce risk Expanding customer base abroad necessitates international servicing.

The company also has to weigh several risk factors and answer several questions as follows: a. b. c. d. Does it understand the needs, wants and buyer behavior of chosen country. Do they have the abilities to adapt to the business cultures of the foreign country? Do the managers have international business experience? Is the company aware of the political and regulatory environment of the foreign country? e. Is the company aware of the business risks in that country? 3) Deciding which market to enter Steps to decide international marketing: i. ii. iii. iv. v. Define international marketing objectives and policies. What volume of foreign sales is proposed How many countries are selected for international marketing, What are the types of countries to enter? (products, geographical factors, income and population, political climate and other factors) After listing all possible markets they should be arranged on priority and the best is selected.

4) Deciding on how to enter the international market (market entry strategies0 There are 3 major choices for entry: 1. Exporting: the company may export its products, as such or with suitable modifications. It may resort to indirect exporting where they act as middlemen, while exporting a 3rd partys product. 2. Joint venturing: This adopts the method of joining with foreign companies to produce or market its products or services. Joint ventures could be: a. Licensing: By this agreement the licensee grants the company the rights to use its manufacturing process, trade mark; trade secrets etc. the company thus gains direct entry into the foreign market. b. Contract manufacturing: By this method the company contracts with manufacturers in the foreign market to produce its products or provide services. c. Management contracting: Under this concept, the domestic firm supplies the firm the knowhow to a foreign company which supplies the capital. The domestic firm exports management services rather than products.

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Business Policies & SM d. Joint ownership: A company joins with one or more foreign investors to create a local business in which they share joint ownership and control. 3. Direct investment: Bigger involvement comes through direct foreign investment, development of foreign based assembly or manufacturing facilities. 5) Deciding the global marketing program (marketing mix0 Under the global marketing program two types of marketing mix are adopted world wide. i. Standard marketing mix under which a global marketing mix is standardized by the company and adopted world wide. ii. Adopted marketing mix under which the producer adjusts the marketing mix elements to each target market. The products adapt to the needs, preferences, tastes according to demographic, geographic and cultural heritages of the country. The products could be straight product extensions (no change), product adaptations (to meet local needs) or product inventions 9new product as per demand). Promotional strategies, price and marketing channels are decided as a part of this strategy.

6) Deciding on the global marketing organization. 1. Export department: The Company may set up an export department to export whatever it intends to. 2. International division: They may be geographically placed international subsidiaries when the export ability of the company increases manifold. 3. Global division: when the company grows beyond the international divisions a global division may be considered, recruiting personnel from many countries, buying components and supplies wherever it is cheap, and investing in countries where the returns are the best.

15) Explain the different dimension of corporate image Ans: Refer page 160 / 161 16) Explain the different types of business policy Ans: A policy is a model of thought and principles underlying in the activities of the business organization.

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Business Policies & SM Business policies can be classified on the basis of its custom, traditions of business / industry and past experience. 1) Classification of policies according to nature or origin Original or originated policies: These policies are framed by the top management such as board of directors, chairman/president, GM etc. They will flow through the hierarchy up to the level of executives for implementation. Such type of policies emanates from company objectives and are expected to shape the business policies further. Appealed or suggested policies: These are suggested by subordinates and will be approved upon general approval bt top management. Imposed policies: These are imposed policies by agencies such as government rules and regulations, statutory laws, orders passed by through courts, pressure from trade unions etc. Derivative policies: These are subsets of major policies made by the organization. They are concerned with the achievement of certain time bound and specific goals. Generally they are formed by departments or sections such as production, finance, marketing, personal etc. 2) Classified as per level of formation Top management policies: These policies are made at the top level and they are responsible for the effect of these policies on the organization and their results. Some areas of these policies are: Long range product selection, diversification, acquisition, merger, capital mobilsation and dividends, matters related to executives, goals / objectives of the organization etc. Middle level management These are the type of policies such as establishment of organization and departments, operating policies and routines, methods and technology of production, channels of distribution, accounts, cost control, functional employment and training, lower level functional policies etc. Lower level management policies:

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Business Policies & SM The lower level management people have direct control over the working cadres and hence these policies with regard to jobs to best suited persons, tools, raw material, job setting etc. 3) Classification according to expression: Business policies can be classified into two broad categories; express policies and implied or hidden policies Express policies: These policies are explicitly stated in clear terms either orally or in writing Implied policies: These are policies which are neither expressed orally or in writing, but could be understood by the behaviour of the executives, by the code of conduct or by their mode of behaviour. 4) Classification according to scope of organization: These are basic policies, general policies and specific policies 5) Classification according to Managerial functions: These are planning, organizing, staffing, directing and controlling policies. Planning policies are concerned with course of planning activities to accomplish the goals of organization. Organising policies are concerned with the division and allocation of necessary cometent activities to members of various groups of the organization for better results. Staffing policies concerned with the sub-functional activities such as locating employment sources, recruiting, training etc. Controlling policies aid to measure actual results of present performance comparing them with the standard results or performance and to take remedial action for mistakes and deviations.

17)Explain the steps involved in strategic planning Or Enumerate the steps in strategic planning of a manufacturing organization Ans: same as the answer for question # 4

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18) Discuss the nature of environment analysis required for strategic formulation Ans: Basic strategic planning is comprised of several components that build upon the previous piece of the plan, and operates much like a flow chart. However, prior to embarking on this process, it is important to consider the players involved. There must be a commitment from the highest office in the organizational hierarchy. Without buy-in from the head of a company, it is unlikely that other members will be supportive in the planning and eventual implementation process, thereby dooming the plan before it ever takes shape. Just as importantly, the strategic-planning team should be composed of top-level managers who are capable of representing the interests, concerns, and opinions of all members of the organization. As well, organizational theory dictates that there should be no more than twelve members of the team. This allows group dynamics to function at their optimal level. The components of the strategic-planning process read much like a laundry list, with one exception: each piece of the process must be kept in its sequential order since each part builds upon the previous one. The only exceptions to this are environmental scanning and continuous implementation, which are continuous processes throughout. ENVIRONMENTAL SCANNING This element of strategy formulation is one of the two continuous processes. Consistently scanning its surroundings serves the distinct purpose of allowing a company to survey a variety of constituents that affect its performance, and which are necessary in order to conduct subsequent pieces of the planning process. There are several specific areas that should be considered, including the overall environment, the specific industry itself, competition, and the internal environment of the firm. The resulting consequence of regular inspection of the environment is that an organization readily notes changes and is able to adapt its strategy accordingly. This leads to the development of a real advantage in the form of accurate responses to internal

19) Explain the various steps in product development Ans: Step 1. IDEA GENERATION

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The first step of new product development requires gathering ideas to be evaluated as potential product options. For many companies idea generation is an ongoing process with contributions from inside and outside the organization. Many market research techniques are used to encourage ideas including: running focus groups with consumers, channel members, and the companys sales force; encouraging customer comments and suggestions via toll-free telephone numbers and website forms; and gaining insight on competitive product developments through secondary data sources. One important research technique used to generate ideas is brainstorming where open-minded, creative thinkers from inside and outside the company gather and share ideas. The dynamic nature of group members floating ideas, where one idea often sparks another idea, can yield a wide range of possible product that can be further pursued. Step 2. SCREENING In Step 2 the ideas generated in Step 1 are critically evaluated by company personnel to isolate the most attractive options. Depending on the number of ideas, screening may be done in rounds with the first round involving company executives judging the feasibility of ideas while successive rounds may utilize more advanced research techniques. As the ideas are whittled down to a few attractive options, rough estimates are made of an ideas potential in terms of sales, production costs, profit potential, and competitors response if the product is introduced. Acceptable ideas move on to the next step.

Step 3. CONCEPT DEVELOPMENT AND TESTING With a few ideas in hand the marketer now attempts to obtain initial feedback from customers, distributors an its own employees. Generally, focus groups are convened where the ideas are presented to a group, often in the form of concept board presentations (i.e., storyboards) and not in actual working form. For instance, customers may be shown a concept board displaying drawings of a product idea or even an advertisement featuring the product. In some cases focus groups are exposed to a mock-up of the ideas, which is a physical but generally non-functional version of product idea. During focus groups with customers the marketer seeks information that may include: likes and dislike of the concept; level of interest in purchasing the product; frequency of purchase (used to help forecast demand); and price points to determine how much customers are willing to spend to acquire the product.

20) How would you evaluate the performance of social audit Or Discuss the benefits of Social Audit Ans: The purpose of a social audit is to consider the impact a business has on the surrounding community, environment and economy, as well as upon individual people. In this fact sheet we look at some of the reasons why you might want to introduce social auditing, provide an overview of what is involved and outline some of the approaches you might take.

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Business Policies & SM Why a social audit is important Businesses of all types and sizes introduce social audits into their annual reporting for various reasons. Reputation and image-building By emphasising some of the good things that have resulted from the business, you can develop a positive image and reputation. Corporate social responsibility This is the idea that businesses are like citizens and, as such, should play their part in a local community. A social audit shows how well a company is fulfilling this responsibility. Tendering opportunities Pragmatically, some organisations or agencies might require you to undertake a social audit if you are to qualify to carry out work on their behalf. Boosting morale Staff and volunteers are very much part of the audit process, and it can be motivating for them to be involved in a social audit. Making a difference Remember, your organisation exists for a social purpose. A social audit can show whether or not you are succeeding in making a real difference. In particular, it can help identify some of the soft outcomes of your work. These are the less tangible differences you make to individuals or communities through your work.

21) Explain the various classifications of strategies Ans: Refer pages: 48 / 49

22 Details various generic strategies involved in policy making. Explain any two of them with corporate examples Stable Growth strategy is followed by those firms which are having smooth sailing and where environment is neither turbulent not hostile. Stable growth strategy will be followed where no applicable deviation form the existing strategy is needed and no major changes are made in the objectives or goals of the organization. In addition, the enterprises will continue to serve the same targeted customers without any major changes in the product line or product services. Also it should be noted that

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Business Policies & SM during this period environment is also calm so that a status quo can be maintained in the marketing policy of the enterprise. Some more sub strategies are found for stable growth strategy. Incremental growth strategy In this strategy the firms usually concentrate on one product or service line and go slowly and incrementally by entering new territories, taking new product line etc. Profit strategy This strategy follow when the objective of the firm is to generate cash immediately for itself or for the stock holder, profit strategies are followed. The profit strategy is usually called as the young game strategy. Pause Strategy If any enterprise feel that higher growth becomes both inefficient and unmanageable or when a firm requires breathing spell to stabiles itself before taking up new machine, it may restrict its growth at a certain balance level in doing so, it may concentrate on resources utility, better operations etc. to attain higher level efficiency. Growth Strategy A strategy based on investing in companies and sectors which are growing faster than their peers. The benefits are usually in the form of capital gains rather than dividends.

Retrenchment Strategy Retrenchment is a corporate-level strategy that seeks to reduce the size or diversity of an organization's operations. Retrenchment is also a reduction of expenditures in order to become financially stable. Retrenchment is a pullback or a withdrawal from offering some current products or serving some markets. Retrenchment is often a strategy employed prior to or as part of a Turnaround strategy. Combination Strategy: Also called horizon-matching, a variation of multi period immunization and cash flowmatching in which a portfolio is created that is always duration-matched and also cashmatched in the first few years.

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Business Policies & SM 23 What are the reasons for adopting merger? Discuss the reason for failure of mergers? A merger takes place when two companies decide to combine into a single entity. An acquisition involves one company essentially taking over another company. While the motivations may differ, the essential feature of both mergers and acquisitions involves one firm emerging where once there existed two firms. Another term frequently employed within discussions on this topic is takeover. Essentially, the difference rests in the attitude of the incumbent management of firms that are targeted. A so-called friendly takeover is often a euphemism for a merger. A hostile takeover refers to unwanted advances by outsiders. Thus, the reaction of management to the overtures from another firm tends to be the main influence on whether the resulting activities are labeled friendly or hostile. There are a number of possible motivations that may result in a merger or acquisition. One of the most oft cited reasons is to achieve economies of scale. Economies of scale may be defined as a lowering of the average cost to produce one unit due to an increase in the total amount of production. The idea is that the larger firm resulting from the merger can produce more cheaply than the previously separate firms. Efficiency is the key to achieving economies of scale, through the sharing of resources and technology and the elimination of needless duplication and waste. Economies of scale sounds good as a rationale for merger, but there are many examples to show that combining separate entities into a single, more efficient operation is not easy to accomplish in practice. A similar idea is economies of vertical integration. This involves acquiring firms through which the parent firm currently conducts normal business operations, such as suppliers and distributors. By combining different elements involved in the production and delivery of the product to the market, acquiring firms gain control over raw materials and distribution out-lets. This may result in centralized decisions and better communications and coordination among the various business units. It may also result in competitive advantages over rival firms that must negotiate with and rely on outside firms for inputs and sales of the product.

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Business Policies & SM A related idea to economies of vertical integration is a merger or acquisition to achieve greater market presence or market share. The combined, larger entity may have competitive advantages such as the ability to buy bulk quantities at discounts, the ability to store and inventory needed production inputs, and the ability to achieve mass distribution through sheer negotiating power. Greater market share also may result in advantageous pricing, since larger firms are able to compete effectively through volume sales with thinner profit margins. This type of merger or acquisition often results in the combining of complementary resources, such as a firm that is very good at distribution and marketing merging with a very efficient producer. The shared talents of the combined firm may mean competitive advantages versus other, smaller competition. The ideas above refer to reasons for mergers or acquisitions among firms in similar industries. There are several additional motivations for firms that may not necessarily be in similar lines of business. One of the often-cited motivations for acquisitions involves excess cash balances. Suppose a firm is in a mature industry, and has little opportunities for future investment beyond the existing business lines. If profitable, the firm may acquire large cash balances as managers seek to find outlets for new investment opportunities. One obvious outlet to acquire other firms. The ostensible reason for using excess cash to acquire firms in different product markets is diversification of business risk. Management may claim that by acquiring firms in unrelated businesses the total risk associated with the firm's operations declines. However, it is not always clear for whom the primary benefits of such activities accrue. A shareholder in a publicly traded firm who wishes to diversify business risk can always do so by investing in other companies shares. The investor does not have to rely on incumbent management to achieve the diversification goal. On the other hand, a less risky business strategy is likely to result in less uncertainty in future business performance, and stability makes management look good. The agency problem resulting from incongruent incentives on the part of management and shareholders is always an issue in public corporations. But, regardless of the motivation, excess cash is a primary motivation for corporate acquisition activity. To reverse the perspective, an excess of cash is also one of the main reasons why firms become the targets of takeover attempts. Large cash balances make for attractive potential assets; indeed, it is often implied that a firm which very large amount of cash is Page 36 of 60

Business Policies & SM not being efficiently managed. Obviously, that conclusion is situation specific, but what is clear is that cash is attractive, and the greater the amount of cash the greater the potential to attract attention. Thus, the presence of excess cash balances in either acquiring or target firms is often a primary motivating influence in subsequent merger or takeover activity. Another feature that makes firms attractive as potential merger partners is the presence of unused tax shields. The corporate tax code allows for loss carry-forwards; if a firm loses money in one year, the loss can be carried forward to offset earned income in subsequent years. A firm that continues to lose money, however, has no use for the loss carryforwards. However, if the firm is acquired by another firm that is profitable, the tax shields from the acquired may be used to shelter income generated by the acquiring firm. Thus the presence of unused tax shields may enhance the attractiveness of a firm as a potential acquisition target.

There are several reasons merger or acquisition failures. Some of the prominent causes are summarized below: If a merger or acquisition is planned depending on the (bullish) conditions prevailing in the stock market, it may be risky. There are times when a merger or an acquisition may be effected for the purpose of "seeking glory," rather than viewing it as a corporate strategy to fulfill the needs of the company. Regardless of the organizational goal, these top level executives are more interested in satisfying their "executive ego." In addition to the above, failure may also occur if a merger takes place as a defensive measure to neutralize the adverse effects of globalization and a dynamic corporate environment. Failures may result if the two unifying companies embrace different "corporate cultures."

It would not be correct to say that all mergers and acquisitions fail. There are many examples of mergers that have boosted the performance of a company and addressed the well-being of its shareholders. The primary issue to focus on is how realistic the goals of the prospective merger are.

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Business Policies & SM 24 Examine the important changes in the environment of business and their implication to Indian companies The different environmental factors that affect the business can be broadly categorized as internal and has its own external factors. INTERNAL FACTORS: Internal factors are those factors which exist within the premises of an organization and directly affects the different operations carried out in a business. These internal factors are : VALUE SYSTEM : It implies the culture and norms of the business. In other words, it means the regulatory framework of a business and every member of the organization has to act within the limits of this framework. MISSIONS AND OBJECTIVES : Different priorities, policies and philosophies of a business is guided by the mission and objectives of a business. FINANCIAL FACTORS: Financial factors like financial policies, financial position and capital structure also affect a business performance and its strategies. INTERNAL RELATIONSHIP: Factors like the amount of support the top management enjoys from its shareholders, employees and the board of directors also affects the smooth functioning of a business. The EXTERNAL FACTORS include all those factors which exists outside the firm and are often regarded as uncontrollable. These external forces can further be categorized as MICRO ENVIRONMENT and MACRO ENVIRONMENT.

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Business Policies & SM MICRO ENVIRONMENT includes the following factors. SUPPLIERS: Suppliers are those people who are responsible for supplying necessary inputs to the organization and ensure the smooth flow of production. COMPETITORS : Competitors can be called the close rivals and in order to survive the competition one has to keep a close look in the market and formulate its policies and strategies as such to face the competition. MARKETING INTERMEDIARIES: Marketing intermediaries aid the company in promoting, selling and distribution of the goods and services to its final users. Therefore, marketing intermediaries are vital link between the business and the consumers. MACRO ENVIRONMENT includes the following factors. ECONOMIC FACTORS: Economic factors include economic conditions and economic policies that together constitutes the economic environment. These include growth rate, inflation, restrictive trade practices etc. Which have a considerable impact on the business SOCIAL FACTORS: Social factors includes the society as a whole alongside its preferences and priorities like the buying and consumption pattern, beliefs of people their purchasing power, educational background etc. POLITICAL FACTORS: The political factors are related to the management of public affairs and their impact on the business. It is important to have a political stability to maintain stability in the trade.

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TECHNOLOGICAL FACTORS: Latest technologies help in improving the marketability of the product plus make it more consumers friendly. Therefore, it is important for a business to keep a pace within the changing technologies in order to survive in the long run.

25 Explain competitive analysis and to narrate in detail how to carry out the competitive analysis Or Explain the framework of competitor analysis and justify its relevance in strategic planning Competitor analysis is a critical part of a firm's activities. It is an assessment of the strengths and weaknesses of current and potential competitors, which may encompass firms not only in their own sectors but also in other sectors. Directly or indirectly, competitor analysis is a driver of a firm's strategy and impacts on how firms act or react in their sectors. Gluck, Kaufman and Walleck (2000) showed that competitor analysis is one of two components that give a firm a strong market understanding (see figure 1). This drives the formulation of a strategy and it applies whether a firm formulates a strategy through strategic thinking, formal strategic planning, or opportunistic strategic decision making. Competitor analysis, together with an understanding of major environmental trends, is a key input in strategy formulation and should be developed properly. In utilising competitor analysis as part of strategy formulation, firms are able to adapt or build their own strategies and be able to compete effectively, improve performance and gain market share in their businesses. In a large number of instances, firms are able to tap new markets or build new niches. For example, after European air travel was deregulated in the mid-1990s, Ryanair and Easyjet focused on the no-frills market and provided low-cost travel across Europe after figuring out through competitor analysis, where the opportunities were emerging (Binggeli and Pompeo, 2002). The authors showed that, at the point in time, Ryanair and Easyjet were performing better than their competitors with operating margins of 26% and 9.5% respectively, which were significantly better than the operating margins achieved by the traditional airlines. MAIN ASPECTS OF COMPETITOR ANALYSIS The key objectives in competitor analysis are to develop a greater understanding of what competitors have in place in terms of resources and capabilities, what they plan to do in their businesses, and how the competitors may react to various situations in reaction to what the firm does. Michael Porter has defined a competitor analysis framework that Page 40 of 60

Business Policies & SM focused on four key aspects (Porter, 1980 cited in netmba.com): competitor's objectives, competitor's assumptions, competitor's strategy, and competitor's resources and capabilities. These four aspects of competitor analysis are the areas critical for a firm to understand and they should pursue this knowledge not only for current competitors but also for other potential competitors in the business. There are other competitor analysis frameworks that firms can utilise. An example is an international competitor analysis framework presented by Garsombke (1989) but the foundations follow Porter's framework with additional components relating to the understanding of the "international" marketplace. Others focus on specific components and thus become a subset of the framework. For example, Slater and Narver (1994) looked at this through the value to customers and identified three components in the analysis: customer orientation, competitor focus and cross-functional coordination. Rather than compare various competitor analysis frameworks, the focus from hereon is Porter's framework (see figure 2) for competitor analysis. This framework is broken into two parts. The competitor's objectives and assumptions drive the competitor while the competitor's strategy and resources and capabilities define what the competitor is doing or is capable of doing. Together, these four aspects define a competitor response profile which gives the firm an understanding of what actions a competitor may take. Taking this analysis across a firm's key competitors will give the firm a viewpoint on where the sector is heading, and provides the firm with a basis for developing their strategy and actions. The key aspects of competitor analysis and the resulting competitor response profile are defined further below. Competitor's Strategy A third aspect in competitor analysis is the understanding of a competitor's strategy. In most cases, this strategy will be defined and stated, particularly for public firms. In other cases, it may not be openly stated what competitors' strategies are but these can be understood by utilising a number of sources available to firms from analysing a competitor's behaviour in certain situations to discussing with industry experts to get their viewpoints. For example, bookmaker Ladbrokes has clearly been expanding their international presence through joint ventures in other markets. This strategy was pursued after the firm split from the Hilton Group in 2006 (Attwood, 2007). By observing Ladbrokes' activities, one can determine what the firm's strategy has been since the split. Another example is Southwest Airlines, which pursued a "no-frills, point-to-point service and which turned out to be a highly innovative, industry-changing and value-creating strategy" (Courtney, Kirkland and Vihuerie, 2000). These two examples indicate the value of having an understanding of competitors' strategies and their focus. A number of questions that need to be addressed are: What are the strategy and plans of

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Business Policies & SM competitors in their key markets? Which markets and products will the competitor focus on? HOW TO WRITE A GOOD COMPETITOR ANALYSIS There are several principles to follow in writing a good competitor analysis. These principles are:

Understand the key aims in pursuing a competitor analysis While these follow the objectives mentioned in the previous section, a competitor analysis can be pursued with a specific aim in mind. This could be as specific as defining a competitor's strategy, understanding a firm's competitive advantages versus a particular competitor, or just keeping management informed of any recent developments that need to be highlighted. Utilise comprehensive sources of information relevant to the particular aim As will be discussed in the next section, there is much information available for carrying out a competitor analysis. The key point is to ensure that the relevant ones are included for the specific analysis needed. Analyse the information relative to the firm and also relative to other competitors It is important to analyse the information within the context of the sector or the other players. For example, having a pre-tax ROIC of 27.2% does not mean anything on its own. It can only become an important figure when presented versus other benchmarks or information from competitors (see figure 3), with further analysis explaining these. Summarise key points of analysis Finally, instead of including all the information that's retrieved from various sources, a good competitor analysis would analyse the information and pull out the key points.

Limitations The limitations of competitor analysis are linked to the information gathered from various sources and the interpretation of the information. Also, with the exception of a few information sources (e.g. patent applications, forecast financial statements), most of the other printed information shows historical information and may not necessarily give a good indication of a competitor going forward. This is particularly the case if there are a lot of structural changes happening in a sector and all players are expected to have dynamic strategies to capture their market. CONCLUSION Competitor analysis is an important part of a firm's development of its strategy. Its importance lies in the understanding of competitors, their strategy, and resources and

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Business Policies & SM capabilities. More specifically, competitor analysis also allows a firm to assess its own firm versus competitors and plan for what competitors' actions may be as a reaction to actions the firm may take. A competitor analysis provides a firm with the knowledge to leverage its strengths and address its weaknesses and, conversely, take advantage of weaknesses of competitors and counter their strengths. Finally, competitor analysis also gives a firm a better understanding not only of the competitors but also their overall sector and where the emerging opportunities may be.

26 Prepare the ETOP for a company of your choice and show what factors are given importance in those ETOPs and why Profile or strategic advantages is a summary statement which provides an over view of the advantages and disadvantages in key areas likely to affect future operations of the firm. It is a tool for making a systematic evaluation of the strategic advantage factors which are significant for the company in its environment Example Data: XYZ company which is dealing with production of herbal soap and markets it in south India. Comprising of tamilnadu, Kerala, Karanataka and Andra pradhes. The soap is made up of 17 herbs and under traditional process. It also uses the technology imported from USA in manufacturing toilet soap tablets. However the cost of production of the soap is something over than other toilet soaps of catchy brands by 10 percent and the selling praise higher by 8%. The companys production yard is very highly sophisticated and it uses pure coconut oil and avoids irritating fatty acids. Now it is having 40% of the market share in south india among the herbal soaps and 10% of share in the toilet soap market. The packaging of the soap is not attractive and the company doesnt prefer to advertise through newspapers or magazines. How ever it advertises through TV in a big manner. The users are upper and lower middle income people of society the fragrance is to be improved which is lemonade now. Young and ambitious chemists are working the companys R&D establishment to improve or modify the product. The sales network is not strong because of which the company experience a lot of problems in channeling its product. The company is not in a position expand immediately due to financial crunch.

S/No: 1

Internal Area Marketing

Plus/Minus Strength /Weakness Plus Nicher in nature of marketing Minus it has marketing potential only in south india

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Business Policies & SM Minus Plus Minus Minus Plus Minus Minus Plus Minus Plus Minus Plus Minus Plus Minus Minus Plus Minus selling price is higher by 8% having 40% of market share in herbal soaps in south india 10% of market share in toilet soaps in south india the packaging is not attractive advertisement by TV advertisement by other media is lacking users are middle class people only and other areas or not touched it is a market nicher sales force are not strong it is purely herbal soap and pure ingredients are used cost of production is high it has collaboration with USA based company on similar line its fragrance has to be improved it is not containing fatty acids no R&D efforts so far financial crunch is prevailing and it could not expand ambitious chemist are working in the organization sales force personnel are not strong, better training needed

2 3

Production R&D

4 5

Finance Cooperate resources

Through a systematic exercise as above, the firms should develop a strategy over time, which revolves around an area of distinct advances and pushing disadvantages

27 Discuss different types of Acquisitions Ans: Acquisitions: A company is said to have "Acquired" a company, when one company buys another company. Acquisitions can be either: Hostile Friendly

In case of hostile acquisitions, the company, which is to be bought has no information about the acquisition. The company, which would be sold is taken by surprise. In case of friendly acquisition, the two companies cooperate with each other and settle matters related to acquisitions. There are times when a much smaller company manages to take control of the management of a bigger company but at the same time retains its name for the Page 44 of 60

Business Policies & SM combination of both the companies. This process is known as "reverse takeover". Kinds of acquisitions: There may be two types of acquisitions depending on the option adopted by the buying company. In one case, the buying company may buy all the shares of the smaller company. The other option is buying the assets of the smaller companies.

28 Discuss the guidelines for foreign investment and collaboration There are two types of foreign collaborations: Financial collaboration (foreign equity participation) where foreign equity alone is involved: Technical collaboration (technology transfer) involving licensing of technology by the foreign collaborator on due compensation. There are two approving authorities Reserve Bank of India, and Department of Industrial Development in the Ministry of Industry, Government of India. Government Policy The Government of Indias policy on foreign private investment is based mainly on the approach adopted in 1949. The basic policy is to welcome foreign private investment on a selective basis in areas advantageous to the Indian economy. The conditions under which foreign capital is welcome are as follows: a) All undertakings (Indian or foreign) have to conform to the general requirements of the Governments Industrial Policy. b) Foreign enterprises are to be treated at par with their Indian counterparts. c) Foreign enterprises would have the freedom to remit profits and repatriate capital, subject to foreign exchange considerations. The Industrial Policy 1991, is based on the view that while freeing Indian Industry from official controls, opportunities for promoting foreign investments in India should also be fully exploited. It is felt that foreign investment would bring attendant advantages of technology transfer, marketing expertise, introduction of modern managerial techniques and new possibilities for promotion of exports. Areas of Foreign Collaboration

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The Government of India issues from time to time a list of industries indicating where foreign investments may be permitted. The lists so issued are illustrative only (refer chapter 5). The Government of India (Foreign Investment Promotion Board) also considers import of technology in Industries listed in Annexure A & Annexure B of Schedule 1 of Foreign Exchange Management (Transfer or issue of security by a person resident outside India) Regulations, 2000 subject to compliance with the provisions of the Industrial Policy and Procedures as notified by Secretariat for Industrial Assistance (SIA) in the Ministry of Commerce and Industry, Govt. of India, from time to time Procedure for Setting Up Collaboration Proposals for foreign investment and technical collaborations would require Government approval as per the Government Policy and Foreign Exchange Laws in force. However, with the Industrial Policy, 1991 and the subsequent amendments to laws regulating foreign collaborations and industry, this procedure has been simplified. With the enactment of FEMA foreign collaborations and investments have become further easy. Clearance for the foreign collaboration proposal under MRTP is also now unnecessary and approval is no longer needed for hiring foreign technicians in India. Foreign companies can directly submit applications for foreign collaboration approvals in their own name without tying with an Indian party or forming a company. In such cases, a letter will be issued to foreign companies conveying approval "in principle". The approval will later be transferred to a company incorporated in India by the foreign company. Approval of Collaboration Proposals Approval for Foreign Collaboration / Joint Venture At present in India most of the Foreign Collaboration or Joint Venture do not require any approval prior approval from Government of India. However any Joint Venture or Foreign Collaboration where the Foreign Equity Participation exceeds the prescribed limit allowed for automatic route would require prior approval as per the provisions of FEMA and Government Investment Policy. Approval for Foreign Technology Agreements

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The Government now provides for automatic approval most of the technology agreements as subject to FEMA. Applications for automatic approval must be made to the Reserve Bank of India (RBI) and must clearly state the description of the goods to be manufactured in the Indian Trade Classification System. After RBI approval, the entrepreneurs may approach authorized dealers for foreign exchange release along with a copy of the technology agreement. All other proposals must comply with general procedures in force. In order to give Indian industries more freedom in negotiating foreign technology agreements, the government no longer requires the companies to obtain approval for the hiring of foreign technicians and foreign testing of indigenously developed technologies. Foreign Investment Policy Changes have been made in the foreign investment policy to create a more favourable fiscal environment for foreign collaborations and investment in virtually every sector of the economy except those selected industries reserved for the public sector. The obstacles that once stood in the way of foreign collaborations are becoming things of the past. The procedures for approval from the Government are being constantly simplified to make investments more attractive and beneficial. FDI policy is reviewed on an ongoing basis and measures for its further liberalization are taken. Change in sectoral policy/sectoral equity cap is notified from time to time through Press Notes by the Secretariat for Industrial Assistance (SIA) in the Department of Industrial Policy & Promotion. Policy announcement by SIA are subsequently notified by RBI under FEMA. All Press Notes are available at the website of Department of Industrial Policy & Promotion. Foreign Investment Promotion Board (FIPB) The Foreign Investment Promotion Board (FIPB) has been constituted by the Government with a view to promote and attract foreign investment in India. The FIPB is a high powered committee comprising the Principal Secretary to the Prime Minister (Chairman), Finance Secretary and Commerce Secretary, and is located at the Ministry of Industry. The FIPB is empowered to consider proposals for investment in India which do not fall within the parameters of the existing policy. The functions of the Board include: (a) Expeditious clearance of proposals;

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(b) Establishment of contacts with and inviting select international companies for investment in the country in appropriate ventures and to periodically review the implementation of the projects cleared; (c) The Board.s programmes of investment include a variety of activities such as marketing, designing and export promotion, energy conservation, technology upgradation and modernisation, infrastructure development, better utilisation of raw materials and natural resources and substantial increase in employment. The Indian Government has allowed foreign investment in the areas of transport, communications, electronics, energy, oil and gas exploration, chemicals, fertilizers, biotechnology, telecommunication, civil aviation, industrial, agricultural and electrical machinery.

29 What is a vision statement? Illustrate its significance with suitable examples A vision statement is sometimes called a picture of your company in the future but its so much more than that. Your vision statement is your inspiration, the framework for all your strategic planning. A vision statement may apply to an entire company or to a single division of that company. Whether for all or part of an organization, the vision statement answers the question, Where do we want to go? What you are doing when creating a vision statement is articulating your dreams and hopes for your business. It reminds you of what you are trying to build. While a vision statement doesnt tell you how youre going to get there, it does set the direction for your business planning. Thats why its important when crafting a vision statement to let your imagination go and dare to dream and why its important that a vision statement captures your passion. Unlike the mission statement, a vision statement is for you and the other members of your company, not for your customers or clients. When writing a vision statement, your mission statement and your core competencies can be a valuable starting point for articulating your values. Be sure when youre creating one not to fall into the trap of only thinking ahead a year or two. Once you have one, your vision statement will have a huge influence on decision making and the way you allocate resources. Examples:

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Business Policies & SM A vision statement for a company offering whale watching tours: Within the next five years, ZZZ Tours will become the premier eco-tour company in ________, increasing revenues to 1 million dollars in 2010 by becoming internationally known for the comfort and excitement of the whale-watching tours it offers.

30) Enumerate the basic guidelines for policies of business organizations Ans: A policy is typically described as a principle or rule to guide decisions and achieve rational outcome(s). The term is not normally used to denote what is actually done, this is normally referred to as either procedure or protocol. Whereas a policy will contain the 'what' and the 'why', procedures or protocols contain the 'what', the 'how', the 'where', and the 'when'. Policies are generally adopted by the Board of or senior governance body within an organisation where as procedures or protocols would be developed and adopted by senior executive officers. Further reading ; pages 7 & 8 (BP)

31) Give the conditions under which and state reasons as to why Expansion strategy is adopted Ans: Realizing your business' growth potential is one of the most challenging and rewarding pursuits you face as an entrepreneur. A properly executed external growth strategy can help you realize maximum growth potential at the right pace. To develop a practical and effective growth strategy, you need to understand your business' current state and your options for achieving your future state. Establishing Your Position Before you can chart a course for where you want to be, you must understand where you are. You need to assess your current state - your business and your market position.

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Business Policies & SM Consider these questions: Have you been experiencing rapid growth that's straining your resources? Restructured in order to return to profitability? Do you have a strong, 'deep' management team? Limited - or excess - production capacity? Has your software or other technology reached the peak of its life cycle? Are there any new products in development? What's your financial capacity? Do you dominate your market? And what about your personal and corporate objectives? Undoubtedly, you want to maximize the value of the business and your personal wealth as a shareholder. And you also want to achieve your corporate goals, which may include international expansion, rapid and profitable growth, diversification, maintaining corporate culture or retaining key people.
Mapping Your Route

There are many external growth strategies available to an expanding company. They include entering new markets, divesting or acquiring new business units, strategic alliances, partnering relationships and mergers. As part of the process of selecting an appropriate strategy, you need to consider the targeted outcome of your growth plan, whether it's product/market integration, geographic expansion and diversification, added capacity, competitive market advantage, reduced business risk or the acquisition of key people. A key benefit of strategic alliances, partnering relationships and mergers is that they allow you to share risk and resources when entering a new market. These growth strategies also present the opportunity to develop more expertise, or take advantage of an existing strong management team with excess capacity. Appropriate growth strategies also address opportunities for diversification, realizing business synergies and achieving product rationalization. Note, however, that strategic alliances, partnering relationships and mergers also require you and the other party (or parties) to agree on mutual expectations and governance issues. Divestiture of non-core operations, in addition to allowing you to focus on core businesses, offers you the opportunity to increase liquidity and realize the value created in maturing business segments.
Funding The Voyage

Financing remains a key element in any growth strategy, of course. You can generate expansion capital through cash flow from operations, the sale of non-core assets, private placements, strategic alliances, revised financing structures and banking arrangements, tax structuring and through the public markets. To ensure your growth goals are realistic and can be financed given current alternative financing sources, each strategy should be modeled using alternative financial structures. This value analysis confirms your course of action from a financial perspective.

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In assessing your business' financial structure, 'hidden value' can often be found on your balance sheet. It's not uncommon to achieve greater financial flexibility by renegotiating or replacing existing credit arrangements. For example, senior debt capacity can often be enhanced with asset-based lenders.
Achieving Your Future State

It can be difficult to determine the most appropriate external growth strategy for your business. It can be even more difficult to determine how to finance it. That's where the experience and expertise of corporate finance professionals comes in. A corporate finance professional can work with you to: Establish a clear picture of your business' current state, market position and objectives. Explore your external growth options, assessing each strategy's merits and implications in relation to your objectives, your business' future value, and your ability to finance your next growth cycle. Obtain financing for your growth strategy, assessing alternative financial structures and introducing you to appropriate sources of financing. Assess the appropriateness and implications of the financing terms. In every engagement, the objective should be to turn your vision into reality and ensure your external growth strategy is achieved successfully.

32) Give the conditions under which and state reasons as to why Expansion strategy is adopted Ans: Realizing your business' growth potential is one of the most challenging and rewarding pursuits you face as an entrepreneur. A properly executed external growth strategy can help you realize maximum growth potential at the right pace. To develop a practical and effective growth strategy, you need to understand your business' current state and your options for achieving your future state. Establishing Your Position Before you can chart a course for where you want to be, you must understand where you are. You need to assess your current state - your business and your market position. Consider these questions: Have you been experiencing rapid growth that's straining your resources? Restructured in order to return to profitability? Do you have a strong, 'deep' Page 51 of 60

Business Policies & SM management team? Limited - or excess - production capacity? Has your software or other technology reached the peak of its life cycle? Are there any new products in development? What's your financial capacity? Do you dominate your market? And what about your personal and corporate objectives? Undoubtedly, you want to maximize the value of the business and your personal wealth as a shareholder. And you also want to achieve your corporate goals, which may include international expansion, rapid and profitable growth, diversification, maintaining corporate culture or retaining key people.
Mapping Your Route

There are many external growth strategies available to an expanding company. They include entering new markets, divesting or acquiring new business units, strategic alliances, partnering relationships and mergers. As part of the process of selecting an appropriate strategy, you need to consider the targeted outcome of your growth plan, whether it's product/market integration, geographic expansion and diversification, added capacity, competitive market advantage, reduced business risk or the acquisition of key people. A key benefit of strategic alliances, partnering relationships and mergers is that they allow you to share risk and resources when entering a new market. These growth strategies also present the opportunity to develop more expertise, or take advantage of an existing strong management team with excess capacity. Appropriate growth strategies also address opportunities for diversification, realizing business synergies and achieving product rationalization. Note, however, that strategic alliances, partnering relationships and mergers also require you and the other party (or parties) to agree on mutual expectations and governance issues. Divestiture of non-core operations, in addition to allowing you to focus on core businesses, offers you the opportunity to increase liquidity and realize the value created in maturing business segments.

Funding The Voyage

Financing remains a key element in any growth strategy, of course. You can generate expansion capital through cash flow from operations, the sale of non-core assets, private placements, strategic alliances, revised financing structures and banking arrangements, tax structuring and through the public markets. To ensure your growth goals are realistic and can be financed given current alternative financing sources, each strategy should be modeled using alternative financial structures. This value analysis confirms your course of action from a financial perspective.

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Business Policies & SM In assessing your business' financial structure, 'hidden value' can often be found on your balance sheet. It's not uncommon to achieve greater financial flexibility by renegotiating or replacing existing credit arrangements. For example, senior debt capacity can often be enhanced with asset-based lenders.
Achieving Your Future State

It can be difficult to determine the most appropriate external growth strategy for your business. It can be even more difficult to determine how to finance it. That's where the experience and expertise of corporate finance professionals comes in. A corporate finance professional can work with you to: Establish a clear picture of your business' current state, market position and objectives. Explore your external growth options, assessing each strategy's merits and implications in relation to your objectives, your business' future value, and your ability to finance your next growth cycle. Obtain financing for your growth strategy, assessing alternative financial structures and introducing you to appropriate sources of financing. Assess the appropriateness and implications of the financing terms. In every engagement, the objective should be to turn your vision into reality and ensure your external growth strategy is achieved successfully.

33) Explain BCG matrix with examples Ans:

The business portfolio is the collection of businesses and products that make up the company. The best business portfolio is one that fits the company's strengths and helps exploit the most attractive opportunities. The company must: (1) Analyse its current business portfolio and decide which businesses should receive more or less investment, and (2) Develop growth strategies for adding new products and businesses to the portfolio, whilst at the same time deciding when products and businesses should no longer be retained. Methods of Portfolio Planning

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The two best-known portfolio planning methods are from the Boston Consulting Group (the subject of this revision note) and by General Electric/Shell. In each method, the first step is to identify the various Strategic Business Units ("SBU's") in a company portfolio. An SBU is a unit of the company that has a separate mission and objectives and that can be planned independently from the other businesses. An SBU can be a company division, a product line or even individual brands - it all depends on how the company is organised.

The Boston Consulting Group Box ("BCG Box")

Using the BCG Box (an example is illustrated above) a company classifies all its SBU's according to two dimensions: On the horizontal axis: relative market share - this serves as a measure of SBU strength in the market On the vertical axis: market growth rate - this provides a measure of market attractiveness By dividing the matrix into four areas, four types of SBU can be distinguished: Stars - Stars are high growth businesses or products competing in markets where they are relatively strong compared with the competition. Often they need heavy investment to sustain their growth. Eventually their growth will slow and, assuming they maintain their relative market share, will become cash cows. Cash Cows - Cash cows are low-growth businesses or products with a relatively high market share. These are mature, successful businesses with relatively little need for investment. They need to be managed for continued profit - so that they continue to generate the strong cash flows that the company needs for its Stars. Question marks - Question marks are businesses or products with low market share but which operate in higher growth markets. This suggests that they have potential, but may require substantial investment in order to grow market share at the expense of more powerful

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competitors. Management have to think hard about "question marks" - which ones should they invest in? Which ones should they allow to fail or shrink? Dogs - Unsurprisingly, the term "dogs" refers to businesses or products that have low relative share in unattractive, low-growth markets. Dogs may generate enough cash to break-even, but they are rarely, if ever, worth investing in. Using the BCG Box to determine strategy Once a company has classified its SBU's, it must decide what to do with them. In the diagram above, the company has one large cash cow (the size of the circle is proportional to the SBU's sales), a large dog and two, smaller stars and question marks. Conventional strategic thinking suggests there are four possible strategies for each SBU: (1) Build Share: here the company can invest to increase market share (for example turning a "question mark" into a star) (2) Hold: here the company invests just enough to keep the SBU in its present position (3) Harvest: here the company reduces the amount of investment in order to maximise the short-term cash flows and profits from the SBU. This may have the effect of turning Stars into Cash Cows. (4) Divest: the company can divest the SBU by phasing it out or selling it - in order to use the resources elsewhere (e.g. investing in the more promising "question marks").

34) Describe the pre-requisites for the success of corporate planning system Ans: A common failure in many kinds of planning is that the plan is never really implemented. Instead, all focus is on writing a plan document. Too often, the plan sits collecting dust on a shelf. Therefore, most of the following guidelines help to ensure that the planning process is carried out completely and is implemented completely -- or, deviations from the intended plan are recognized and managed accordingly. Involve the Right People in the Planning Process It is critical that all parts of the system continue to exchange feedback in order to function effectively. This is true no matter what type of system. When planning, get input from everyone who will responsible to carry out parts of the plan, along with representative

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Business Policies & SM from groups who will be affected by the plan. Of course, people also should be involved in they will be responsible to review and authorize the plan. Write Down the Planning Information and communicate it widely New managers, in particular, often forget that others don't know what these managers know. Even if managers do communicate their intentions and plans verbally, chances are great that others won't completely hear or understand what the manager wants done. Also, as plans change, it's extremely difficult to remember who is supposed to be doing what and according to which version of the plan. Key stakeholders (employees, management, board members, funders, investor, customers, clients, etc.) may request copies of various types of plans. Therefore, it's critical to write plans down and communicate them widely. Goals and Objectives Should Be SMARTER Specific: For example, it's difficult to know what someone should be doing if they are to pursue the goal to "work harder". It's easier to recognize "Write a paper". Measurable: It's difficult to know what the scope of "Writing a paper" really is. It's easier to appreciate that effort if the goal is "Write a 30-page paper". Acceptable: If I'm to take responsibility for pursuit of a goal, the goal should be acceptable to me. For example, I'm not likely to follow the directions of someone telling me to write a 30-page paper when I also have to five other papers to write. However, if you involve me in setting the goal so I can change my other commitments or modify the goal, I'm much more likely to accept pursuit of the goal as well. Realistic: Even if I do accept responsibility to pursue a goal that is specific and measurable, the goal won't be useful to me or others if, for example, the goal is to "Write a 30-page paper in the next 10 seconds". Time frame: It may mean more to others if I commit to a realistic goal to "Write a 30-page paper in one week". However, it'll mean more to others (particularly if they are planning to help me or guide me to reach the goal) if I specify that I will write one page a day for 30 days, rather than including the possibility that I will write all 30 pages in last day of the 30-day period. Extending: The goal should stretch the performer's capabilities. For example, I might be more interested in writing a 30-page paper if the topic of the paper or the way that I write it will extend my capabilities.

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Business Policies & SM Rewarding: I'm more inclined to write the paper if the paper will contribute to an effort in such a way that I might be rewarded for my effort. Build in Accountability (Regularly Review Who's Doing What and By When?) Plans should specify who is responsible for achieving each result, including goals and objectives. Dates should be set for completion of each result, as well. Responsible parties should regularly review status of the plan. Be sure to have someone of authority "sign off" on the plan, including putting their signature on the plan to indicate they agree with and support its contents. Include responsibilities in policies, procedures, job descriptions, performance review processes, etc. Note Deviations from the Plan and Replan Accordingly It's OK to deviate from the plan. The plan is not a set of rules. It's an overall guideline. As important as following the plan is noticing deviations and adjusting the plan accordingly. Evaluate Planning Process and the Plan During the planning process, regularly collect feedback from participants. Do they agree with the planning process? If not, what don't they like and how could it be done better? In large, ongoing planning processes (such as strategic planning, business planning, project planning, etc.), it's critical to collect this kind of feedback regularly. During regular reviews of implementation of the plan, assess if goals are being achieved or not. If not, were goals realistic? Do responsible parties have the resources necessary to achieve the goals and objectives? Should goals be changed? Should more priority be placed on achieving the goals? What needs to be done? Finally, take 10 minutes to write down how the planning process could have been done better. File it away and read it the next time you conduct the planning process. Recurring Planning Process is at Least as Important as Plan Document Far too often, primary emphasis is placed on the plan document. This is extremely unfortunate because the real treasure of planning is the planning process itself. During planning, planners learn a great deal from ongoing analysis, reflection, discussion, debates and dialogue around issues and goals in the system. Perhaps there is no better example of misplaced priorities in planning than in business ethics. Far too often, people put emphasis on written codes of ethics and codes of conduct. While these documents certainly are important, at least as important is conducting ongoing communications around these documents. The ongoing communications are what sensitize people to understanding and following the values and behaviors suggested in the codes. Nature of the Process Should Be Compatible to Nature of Planners A prominent example of this type of potential problem is when planners don't prefer the "top down" or "bottom up", "linear" type of planning (for example, going from general to specific along the process of an environmental scan, SWOT analysis, mission/vision/values, issues and goals, strategies, objectives, timelines, etc.) There are other ways to conduct planning. For an overview of various methods, see (in the Page 57 of 60

Business Policies & SM following, the models are applied to the strategic planning process, but generally are eligible for use elsewhere): Critical -- But Frequently Missing Step -- Acknowledgement and Celebration of Results It's easy for planners to become tired and even cynical about the planning process. One of the reasons for this problem is very likely that far too often, emphasis is placed on achieving the results. Once the desired results are achieved, new ones are quickly established. The process can seem like having to solve one problem after another, with no real end in sight. Yet when one really thinks about it, it's a major accomplishment to carefully analyze a situation, involve others in a plan to do something about it, work together to carry out the plan and actually see some results. So acknowledge this -celebrate your accomplishment!

35) Compare merger, acquisition and joint venture with examples Ans: What mergers, joint ventures and acquisitions all have in common, is that they each involve the dramatic restructuring of a company or organization, but in very different ways. A merger refers to an agreement between two companies to combine their resources, in order to arise as a more powerful and dominant marker player. For example, when Air France and KLM-Royal Dutch Airlines merged in May 2004 to form the Air France-KLM group, they automatically became continental Europe's largest carrier. This merger, however, turned out to be more of an acquisition, in that Air France remains the dominant player in the holding company, and the firm is based at the Paris Charles de Gaulle Airport, rather than in Amsterdam. A joint venture, in contrast, is when two otherwise independent companies or entrepreneurs join forces in order to cooperate on a common project or in providing a specific service. In many cases, a new firm or organization is actually created, and both of the independent founders have a stake in this joint company. All revenue which is not re-invested into the firm is then divided between the founders. A good example of a joint venture is Verizon Wireless. In this case, Verizon teamed up with Vodafone to provide a mobile communication service. An acquisition is simply when a more dominant company purchases a smaller firm, which also happens to be a competitor. By removing a key competitor from the market, the larger company increases its dominance. For instance, in October 2008 Delta Air Lines bought Northwest Airlines, and as such, it will eventually phase out the latter's independent brand name.

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Business Policies & SM 36) Identify any two Indian conglomerates and fix the generic and grand strategies adopted by them Ans:

37) Construct the GE matrix and explain its business applications Ans: The business portfolio is the collection of businesses and products that make up the company. The best business portfolio is one that fits the company's strengths and helps exploit the most attractive opportunities. The company must: (1) Analyse its current business portfolio and decide which businesses should receive more or less investment, and (2) Develop growth strategies for adding new products and businesses to the portfolio, whilst at the same time deciding when products and businesses should no longer be retained. The two best-known portfolio planning methods are the Boston Consulting Group Portfolio Matrix and the McKinsey / General Electric Matrix (discussed in this revision note). In both methods, the first step is to identify the various Strategic Business Units ("SBU's") in a company portfolio. An SBU is a unit of the company that has a separate mission and objectives and that can be planned independently from the other businesses. An SBU can be a company division, a product line or even individual brands - it all depends on how the company is organised. The McKinsey / General Electric Matrix The McKinsey/GE Matrix overcomes a number of the disadvantages of the BCG Box. Firstly, market attractiveness replaces market growth as the dimension of industry attractiveness, and includes a broader range of factors other than just the market growth rate. Secondly, competitive strength replaces market share as the dimension by which the competitive position of each SBU is assessed. The diagram below illustrates some of the possible elements that determine market attractiveness and competitive strength by applying the McKinsey/GE Matrix to the UK retailing market:

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Business Policies & SM

Factors that Affect Market Attractiveness Whilst any assessment of market attractiveness is necessarily subjective, there are several factors which can help determine attractiveness. These are listed below: Market size Market-growth Market-profitability Pricing-trends Competitive-intensity/rivalry Overall-risk-of-returns-in-the-industry Opportunity-to-differentiate-products-and-services Segmentation Distribution structure (e.g. retail, direct, wholesale
Factors that Affect Competitive Strength

Factors to consider include:

-Strength-of-assets-and-competencies

-Relative-brand-strength -Market-share -Customer-loyalty -Relative-cost-position -Distribution-strength -Record-of-technological-or-other-innovation -Access to financial and other investment resources

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