ASSIGNMENT No.2 1. Explain in briefly about the Strategy formulation. Ans.

Strategy formulation is the process by which an organization chooses the most appropriate courses of action to achieve its defined goals. This process is essential to an organizations success, because it provides a framework for the actions that will lead to the anticipated results. Strategic plans should be communicated to all employees so that they are aware of the organizations objectives, mission, and purpose. Strategy formulation forces an organization to carefully look at the changing environment and to be prepared for the possible changes that may occur. A strategic plan also enables an organization to evaluate its resources, allocate budgets, and determine the most effective plan for maximizing ROI (return on investment). A company that has not taken the time to develop a strategic plan will not be able to provide its employees with direction or focus. Rather than being proactive in the face of business conditions, an organization that does not have a set strategy will find that it is being reactive; the organization will be addressing unanticipated pressures as they arise; and the organization will be at a competitive disadvantage. Strategy formulation requires a defined set of six steps for effective implementation. Those steps are: Step 1. Define the Organization : The first step in defining an organization is to identify the companys customers. Without a strong customer base, whose needs are being filled, an organization will not be successful. A company must identify the factors that are valued by its customers. Is the value based on a superior product or service relative to the competition? Are your customers buying your products for your low prices? Do you produce products that meet image needs of your customers? End Benefit : Organizations must remember that people are buying benefits not features. For example, if an airline only defined itself as being in the business of flying people from one place to another, then it would view its competition as being only other airlines. However, if it views itself as being in the transportation business, then it will recognize that its competition includes not only other airlines, but also trains, buses, car rental companies, and other ways of getting people from one place to another place. An airline must highlight the benefits of using its method of transportation as a means of persuading customers to purchase its service. Furthermore, an organization can explain how its product works or how it is built. Inevitably, customers will ask the question, Whats in it for me? Companies must be able to answer this question in order to meet the needs of their customers. They must be able to respond effectively to the so what? in order to influence customers to buy their product or service. Target Market: Companies can become successful by identifying themselves with a particular target group. This focus should not be limited only to demographic segmentation (i.e., age, income, education, gender, income, family life-cycle, culture) but also by psychographic indicators. For example, by understanding the values, attitudes, opinions, and lifestyles of a companys customers, the organization can better provide ways in which to meet its customers needs. For example, Nike has successfully identified itself not only with professional athletes, but with those who want to be part of the athlete world. Nikes marketing message has made everyone who wishes to participate in sports feel as if they can achieve their athletic goals. While most people who purchase Nike products are not professional athletes, the people who buy Nikes products are able to identify with Nikes culture and feel like they are part of an exclusive group.

Technology : Computer companies, medical research companies, and other companies that identify themselves with the tech world will find that they must be able to quickly adapt to changes in the marketplace. New products, services, and inventions are frequently introduced, making this a very difficult and challenging business environment in which to operate. For example, Genentech, Inc. conducts genetic engineering and medical research for the pharmaceutical industry. This company uncovers and discovers new advances every day, making it challenging to develop a specific strategy plan for its products and services. Step 2. Define the Strategic Mission : An organizations strategic mission offers a longrange perspective of what the organization strives for going forward. A clearly stated mission will provide the organization with a guide for carrying out its plans. Elements of a strong strategic mission statement should include the values that the organization holds, the nature of the business, special abilities or position the organization holds in the marketplace, and the organizations vision for where it wants to be in the future. Step 3. Define the Strategic Objectives : This third step in the strategic formulation process requires an organization to identify the performance targets needed to reach clearly stated objectives. These objectives may include: market position relative to the competition, production of goods and services, desired market share, improved customer services, corporation expansion, advances in technology, and sales increases. Strategic objectives must be communicated with all employees and stakeholders in order to ensure success. All members of the organization must be made aware of their role in the process and how their efforts contribute to meeting the organizations objectives. Additionally, members of the organization should have their own set of objectives and performance targets for their individual roles. Step 4. Define the Competitive Strategy : The next step in strategy formulation requires an organization to determine where it fits into the marketplace. This applies not only to the organization as a whole, but to each individual unit and department throughout the enterprise. Each area must be aware of its role within the company and how those roles enable the organization to maintain its competitive position. Another step in the competitive strategy process requires an organization to develop proactive responses to potential changes in the marketplace. As discussed in earlier readings, an organization must not wait for events in the marketplace to occur before taking steps; they must identify possible events and be prepared to take action. The final step in defining a competitive strategy is identifying an organizations resources and determining how those resources will be used. Each department, division, or location will have its own set of needs, and a company must determine how it will allocate resources in order to meet those needs. Three factors must be considered when determining the overall competitive strategy: the industry and marketplace, the companys position relative to the competition, and the companys internal strengths and weaknesses. The Industry When evaluating the overall industry, factors to be looked at include:

The Competition : An organization cannot be successful unless it has a full understanding of the other players in marketplace. A company must be able to identify the strengths and weaknesses of the competition and analyze the ways in which the competitions products or services meet the needs of its customer base. Has the competition created a significant product differentiation strategy? Has the competition cornered a specific target market? Is the competition in full-scale competition with another company? It is essential for these questions to be answered in order to develop the appropriate strategy for successful competition. Step 5. Implement Strategies: Developing a strategy is only effective if it is put into place. An organization may take all the necessary steps to understand the marketplace, define itself, and identify the competition. However, without implementing the strategy, the organizations work will be of little to no value. The methods employed for implementing strategies are known as tactics. These individual actions enable an organization to build a foundation for implementation. Companies are able to identify which of their efforts are more successful than others and will uncover new methods of implementation, if necessary. Step 6. Evaluate Progress : As in any plan, a regular evaluation of processes and results is vital to ongoing success. An organization must keep track of the progress it is making as defined by its strategic plan. If goals are not being met, the organization must be adaptable and flexible to recognize that changes may be needed. An organization should consider the following questions on a continuous basis in order to evaluate progress: Have market conditions changed that may require a change in corporate direction? Are there new entries in the marketplace to pose a competitive threat? Has the organization been successful in translating their strategy into actionable steps? An organization will be able to successfully implement its strategy both now and in the future through evaluating feedback. Conclusion A strategic plan is a living document that changes and grows as the conditions around it change. If an organization recognizes that it must constantly be aware of the business world around it and must be flexible to the changes that will inevitably occur, then it will be in a position to adapt and modify its plans to achieve maximum success. 2. Explain potters five forces of model Ans 2.

Michael Porter, a leading business analyst and professor at Harvard Business School, has identified five key forces that affect the strategy of any industry. His list, Porter's Five Forces, draws upon industrial organization (IO) economics to derive forces that determine the competitive intensity, and therefore attractiveness, of a market. Attractiveness refers to the overall industry profitability. An "unattractive" industry is one in which the combination of the Five Forces drives down overall profitability. A very unattractive industry would be one approaching "pure competition," in which available profits for all firms are driven to normal profit rates.

1. Threat of New Entrants: Profitable markets that yield high returns will attract new firms. This results in many new competitors, which eventually decreases profitability for all firms in the industry. Unless the entry of new firms can be blocked by incumbents, the abnormal profit rate will tend towards zero (perfect competition). 2. Threat of Substitute Products or Services: The existence of products outside of the realm of the common product boundaries increases the propensity of customers to switch to alternatives. This should not be confused with competitors' similar products but involves entirely different substitute ones. 3. Intensity of Industry Competition: For most industries, the intensity of competitive rivalry is the major determinant of the competitiveness of the industry. 4. Bargaining Power of Buyers: The bargaining power of customers is also described as the market of outputs. It is the ability of customers to put the firm under pressure, which also affects the customer's sensitivity to price changes. 5. Bargaining Power of Suppliers: The bargaining power of suppliers is also described as the market of inputs. When there are few substitutes, then suppliers of raw materials, components, labor, and services (such as expertise) to the firm can be a source of power over the firm. Suppliers, for example, may refuse to work with the firm or charge excessively high prices for unique resources. 3. What is value chain? Ans.

The idea of the value chain is based on the process view of organisations, the idea of seeing a manufacturing (or service) organisation as a system, made up of subsystems each with inputs, transformation processes and outputs. Inputs, transformation processes, and outputs involve the acquisition and consumption of resources - money, labour, materials, equipment,

buildings, land, administration and management. How value chain activities are carried out determines costs and affects profits. Most organisations engage in hundreds, even thousands, of activities in the process of converting inputs to outputs. These activities can be classified generally as either primary or support activities that all businesses must undertake in some form. According to Porter (1985), the primary activities are: 1. Inbound Logistics - involve relationships with suppliers and include all the activities required to receive, store, and disseminate inputs. 2. Operations - are all the activities required to transform inputs into outputs (products and services). 3. Outbound Logistics - include all the activities required to collect, store, and distribute the output. 4. Marketing and Sales - activities inform buyers about products and services, induce buyers to purchase them, and facilitate their purchase. 5. Service - includes all the activities required to keep the product or service working effectively for the buyer after it is sold and delivered. Secondary activities are: 1. Procurement - is the acquisition of inputs, or resources, for the firm. 2. Human Resource management - consists of all activities involved in recruiting, hiring, training, developing, compensating and (if necessary) dismissing or laying off personnel. 3. Technological Development - pertains to the equipment, hardware, software, procedures and technical knowledge brought to bear in the firm's transformation of inputs into outputs. 4. Infrastructure - serves the company's needs and ties its various parts together, it consists of functions or departments such as accounting, legal, finance, planning, public affairs, government relations, quality assurance and general management. 4. Explain the strategies for competing in Global markets. Ans.4 Strategy options for competing in world markets include maintaining a national (onecountry) production base and exporting goods to foreign markets, licensing foreign firms to use the company's technology or produce and distribute the company's products, employing a franchising strategy, using strategic alliances or other collaborative partnerships to enter a foreign market or strengthen a firm's competitiveness in world markets, following a multicountry strategy, or follow a global strategy. Strategic alliances with foreign partners have appeal from several angles: gaining wider access to attractive country markets, allowing capture of economies of scale in production and/or marketing, filling gaps in technical expertise and/or knowledge of local markets, saving on costs by sharing distribution facilities and dealer networks, helping gain agreement on important technical standards, and helping combat the impact of alliances that rivals have formed. Multicountry competition refers to situations where competition in one national market is largely independent of competition in another national marketthere is no "international market," just a collection of self-contained country (or maybe regional) markets. Global competition exists when competitive conditions across national markets are linked strongly

enough to form a true world market and when leading competitors compete head-to-head in many different countries. Once a company has chosen to establish international operations, it has three basic options: (1) a think-local, act-local approach to crafting a strategy; (2) a think-global, act-global approach to crafting a strategy; and (3) a combination think-global, act-local approach. A think-local, act-local strategy is appropriate for industries where multicountry competition dominates; a localized approach to strategy making calls for a company to vary its product offering and competitive approach from country to country in order to accommodate differing buyer preferences and market conditions. A think-global, act-globalapproach works best in markets that are globally competitive or beginning to globalize; global strategies involve employing the same basic competitive approach (low-cost, differentiation, best-cost, focused) in all country markets and marketing essentially the same products under the same brand names in all countries where the company operates. A think-global, act-local approach can be used when it is feasible for a company to employ essentially the same basic competitive strategy in all markets but still customize its product offering and some aspect of its operations to fit local market circumstances. There are three ways in which a firm can gain competitive advantage (or offset domestic disadvantages) in global markets. One way involves locating various value chain activities among nations in a manner that lowers costs or achieves greater product differentiation. A second way involves efficient and effective transfer of competitively valuable competencies and capabilities from its domestic markets to foreign markets. A third way draws on a multinational or global competitor's ability to deepen or broaden its resource strengths and capabilities and to coordinate its dispersed activities in ways that a domestic-only competitor cannot. Companies racing for global leadership have to consider competing in emerging markets like China, India, Brazil, Indonesia, and Mexicocountries where the business risks are considerable but the opportunities for growth are huge. To succeed in these markets, companies often have to (1) compete on the basis of low price, (2) be prepared to modify aspects of the company's business model or strategy to accommodate local circumstances (but not so much that the company loses the advantage of global scale and global branding), and/or (3) try to change the local market to better match the way the company does business elsewhere. Profitability is unlikely to come quickly or easily in emerging markets, typically because of the investments needed to alter buying habits and tastes and/or the need for infrastructure upgrades. And there may be times when a company should simply stay away from certain emerging markets until conditions for entry are better suited to its business model and strategy. STRATEGIC CHOICES FOR COMPETING IN FOREIGN MARKETS Strategic options for a company entering and competing in foreign market that decides to expand outside its domestic market and compete internationally or globally. Important strategic options for a company competing in international market are listed below: Export Strategy Company is manufacturing products and service for exporting to foreign markets. It is an excellent Initial strategy for pursuing international sales. It minimizes both the risk and capital requirements. With an export strategy, a manufacturer can limit its involvement in foreign markets by contracting with foreign wholesalers who are experienced in importing to

handle the entire distribution and marketing of outputs and marketing function in their countries regions of the world. If it has more advantages to Company and has to domination to the control over these functions. In this case, a manufactures can establish its own distribution and sales organization in some or all of the target foreign markets. Either Way, a firm minimizes its direct investments in foreign countries because of its home-based production and export strategy. Whether an export strategy can be pursued successfully over the long run depends on the relative Cost competitiveness of a home country production base. In some countries, firms gain additional sale economies and firm centralizing production on several giant plants whose output capability exceeds demand in any country market. An export strategy is open for firms when the manufacturing costs in the home country are substantially higher than in foreign countries where rivals have plants or when it has relatively high-shipping costs. Unless an exporter can keep its production and shipping costs competitive with rivals having low-costs plants in location close to end user markets, its success will be limited. Licensing Strategy Licensing foreign companies to use the companys technology or giving permission to produce and distribute the companys products and service, Licensing mode carries low financial risk to the licensor. Licensing presents considerable economic uncertainty and is politically volatile. By licensing the technology or the production rights to foreign-based firm, the firm does not have to bear any risk. The licensee is freed from the risk of product failure and at the same time is able to generate income from royalties. Advantages of Licensing Strategy Licensing mode carries low financial risk to the licensor. Licenser can investigate the foreign market without many efforts on his part. Licenser gets all the benefits with minimal investment on R and D. Licensee is free from the risk of product failure. Disadvantages of Licensing Strategy Licensing agreements reduce the market opportunities for both the licenser and licensee. Both parties have responsibility of maintaining the product quality and also in promoting the product. Therefore, one party's actions can affect the other. Costly and tedious litigation may crop up and hurt both the parties and the market. There is scope for misunderstanding between the parties despite the effectiveness of the agreement. There is a problem of leakage of the trade secrets of the licensor. The licensee may develop his reputation. The licensee could sell the product outside the agreed market territory and/or after the expiry of contract. Franchising Strategies Franchising strategies is better suited to the firm that entered to global business and expanded its products and service to international market. Franchising is a form of licensing. The franchising can exercise more control over the franchised compared to licensing. In franchising, a separate organization called the franchisee operates the business with the name of another company called the franchiser. Under this agreement, the franchisee pays fees to the franchiser. The franchiser provides the following service to the franchisee: Trade mark Operating Systems, Continuous support systems like advertisement, Human-Resource development, reservation services and quality assurance programmes. Franchising Agreements The franchising agreement should contain important items as listed below:

Franchisee has to pay a fixed amount and royalty based on the sales to the franchiser. Franchisee should agree to adhere to follow the franchisers requirements like appearan ce, financial reporting and operation procedures and customer services etc. Franchiser helps the franchisee in establishing the manufacturing facilities, service facilities, provide expertise, advertising and corporate image etc. Franchiser allows the franchisee some degree of flexibility in order to meet the local tastes and preference. For example, in India NIIT have the franchised computer training centres in entire India. Advantages of Franchising Franchiser can enter global markets with low investment and low risks. Franchiser can get free knowledge regarding markets, different cultural aspects of the new market and the environment in general of the host city or nation. Franchiser learns more lessons from the experiences of the franchisees, which he could not experience from the home countrys market. Franchisee can early start a business with low risk as he selects an established and proven product and operating system. Franchisee gets the benefits of Research & Development at a low cost. Franchisee is free from the risk of product failure.

Disadvantages of Franchising International franchising can become more complicated than domestic franchising. It is difficult to have full control over an international franchisee. Franchising agents reduce the market opportunities for both the franchiser and franchisee. Both parties have equal responsibility of maintaining the quality of the product and also in promotion of the product. There is scope for misunderstanding between the parties. There can be leakage of trade techniques and other secrets. A Multi-country Strategy vs. A Global Strategy A multi-country strategy is suitable for industries where multi-country competition has high dominance. Domestic responsiveness is very essential in such a scenario. A global strategy works best in markets; therefore it is globally competitive or beginning to globalize. ALLIANCES WITH FOREIGN PARTNERS Strategic alliances can help multinational firms in globally-competitive industries to strengthen their competitive positions while at the same time preserving their independence. Alliance refers to agreement between companies to do business in host country market and international market. Companies will make strategic alliance and cooperative agreement towards another company to enter foreign market. It increases strength of the strategic partner in the world markets. More recently, companies from different parts of the world have formed strategic alliances and partnership arrangements to strengthen their mental ability and partnership arrangements to serve whole continents and move toward more global market. Strategic alliances are very useful in helping establish new opportunity in world markets

5. Write the short notes on Stretch. Ans 5 Stretch is a misfit between resources and aspirations The strategic fit is central to the strategy school of positioning where techniques like SWOT analysis can be used to analyze and assess the organizational capabilities and environmental opportunities. Strategic Intent is seen as going beyond Business as Usual Seen as Core Competency in Practice Apple and Honda's strategic intent was global dominance. Compare with Strategic Fit which doesn't

have a long term component. Basically they used their core competences to achieve Strategic Intent. The difference between Intent and Resources is call Strategic Stretch. Examples:

Apple beat Microsoft in mobile apps market Google beat Microsoft is search and categorization of networked information CNN beat CBS is news and current affairs presentation

Firms first need to understand the competitive environment - e.g. those companies winning and losing market share. The next step is to diagnose the competitive environment. e.g. Its market segments, potential for profitability and growth. Industrial structure analysis points us to the what of competitiveness. i.e What make the company more profitable. News whats have been exhorted such as Six Sigma, become customer led, compete on time. Understanding the what of competitiveness is a prerequisite to catching up. Understanding the why is the prerequisite for getting out in front. Who do some companies continually redefine the competitive environment e.g. Apple while others just follow. Many companies focus external factors such as monetary and fiscal policy, education policy, tax and other factors as ways of explaining their competitive decline. Instead they should focus on internal factors as the key to their competitiveness success. This is exactly opposite to the idea of fit and deals with positioning the firm by matching its organizational resources to its environment.