Q1.Importance of strategies?

● It guides the company to move in a specific direction. It defines

organization’s goals and fixes realistic objectives, which are in
alignment with the company’s vision.
● It assists the firm in becoming proactive, rather than reactive, to make
it analyse the actions of the competitors and take necessary steps to
compete in the market, instead of becoming spectators.
● It acts as a foundation for all key decisions of the firm.
● It attempts to prepare the organization for future challenges and play
the role of pioneer in exploring opportunities and also helps in
identifying ways to reach those opportunities.
● It ensures the long-term survival of the firm while coping with
competition and surviving the dynamic environment.
● It assists in the development of core competencies and competitive
advantage, that helps in the business survival and growth.

The basic purpose of strategic management is to gain sustained-strategic

competitiveness of the firm. It is possible by developing and implementing
such strategies that create value for the company. It focuses on assessing the
opportunities and threats, keeping in mind firm’s strengths and weaknesses
and developing strategies for its survival, growth and expansion.

Q2.Types of strategies?
Q3.Role of strategy in decision making?
Strategic Management is a series of decisions and actions which leads to the development of
an effective strategy or strategies to help achieve corporate objectives. The strategic
management process is the way in which strategists determine objectives and make strategic
decisions.

Role of Strategists:

Strategists are individuals or groups who are primarily involved in the formulation,
implementation and evaluation of strategy. A strategist plays a crucial role in an
organization. A strategist must think differently. They must need to concentrate on three
 aspects of human intelligence like Intellectual Intelligence (IQ), Emotional Intelligence (EQ),
and Spiritual Intelligence (SQ).

The strategist must try to decide when to do strategy, identify target markets, competitive
advantage, 80/20 focus and alignment. They need to do research, analyse the given situation
with the available information and comes out with the best solutions. The end result of a
strategy i.e., the strategic plan, determines what is, and what is not important to the
company’s future, allocation of scarce resources such as budgets, and skills, who will be
gain or lose power. The strategist must have qualities like energy, creativity, action or doing,
wisdom, purpose, fun, awareness of the mystery, caring, motivating the people, stimulating
the new innovative ideas etc., A powerful strategist plays the major important roles like
predictor of future, artist, politician, guru and jail buster.

● A strategist must be a predictor of future who helps his team to imagine the future world
within which they will be competing. They begin by understanding the organisation by
identifying its competencies and unique strengths. They with imaginative thinking help the
team to visualize the future within which the business will operate.
● A strategist should also be an artist ‘who carves a form’ out of raw materials. The artist
strategist creates a unique role or purpose for the organisation. They predict the reason why
the organisation will be successful within the imagined future. The artist begins by defining
the organisation’s future target markets. They then provide the future shape of the
organisation by defining why its future customers will choose to support it, rather than any
future imagined competitor. Thus, the strategist changes systems, structures, rewards,
alliances, products and services to ensure that everything supports the organisational purpose.
● A politician is someone who is ‘skilled in the art of manoeuvring and manipulation.’ The
politician strategist knows the power players in the organisation. They know what drives each
leader and they also know who is motivated by what external and internal factors.
● A guru is ‘a person who gives personal spiritual guidance to his disciples.’ The strategist
guru, shows how each individual employee in the company, can contribute to the greater,
noble goal. They help individual employees to discover their incomparable personal purpose.
Then they show them how to channel their energy and talent towards achieving their purpose,
at the same time support the company’s goal.
● A strategist must also play a role of jail buster. At work, many employees find that their
talents, passions, creativity, imagination, and energy are locked behind bars of the company
culture. Timid managers who want to ‘be in control’, and ‘avoid making mistakes’, often hide
the keys to creativity, energy, passion, self-assurance, and innovation. The jail buster
strategist shows employees how to break out from their prison of boredom and fear without
affecting their fearful managers. They provide the key to unlocking their talents, creativity,
and energy.
● Types of Strategists:

There are various kinds of strategists like managers, board of directors, chief executive
officers, entrepreneurs, senior management, SBU-level executives, corporate planning staff,
consultants, middle level managers, executive assistants.

1. Board of Directors are the owners of an organization such as shareholders, controlling

agencies, government, financial institutions, etc. They are responsible for governance of an
organization, technology collaboration, new product development and senior management
appointments. They guide the senior management in setting and accomplishing objectives,
review and evaluate organization performance.
As the board of directors operates as the representatives of stockholders has following major
responsibilities:

1. To establish and update the company mission.

2. To elect the company’s top officers, the formost of whom is the CEO.

3. To establish the compensation level of the top officers, including their salaries and
bonuses.

4. To determine the amount and timing of the dividends paid to stockholders.

5. To set broad company policy on such matters as labour – management relations, product or
service lines of business and employee benefit packages.

6. To set company objectives and to authorize managers to implement the long-term

strategies that the top officers and the board have found agreeable.

7. To mandate company compliance with legal and ethical dictates.

2. The Chief Executive Officer is answerable for all aspects of strategic management from
the formulation to the evaluation of strategy. They play a major role in strategic decision
making and provide the direction for the organization so that it can achieve its purpose. They
assist in setting the mission of the organization. They are responsible for deciding the
objectives, formulating and implementing the strategy.

3. Entrepreneurs are strategist who starts a new business, initiator, searches for change,
respond to it and exploits it as an opportunity. Entrepreneurs play a proactive role. They are
implementers and evaluators of strategies. As initiators, they provide a sense of direction to
the organisation, set objectives and formulate strategies to achieve them. They are the major
implementers of strategies and also their evaluators. The strategic management process
adopted by entrepreneurs is, generally, not based on a formal system and, usually, they play
all the strategic roles simultaneously. Strategic decision-making is quick and the
entrepreneurs generate a sense of purpose among their subordinates.

4. Senior management or top management consists of managers at highest level managerial

hierarchy. They look after renovation, technology progression, diversification and expansion
and also focus on new product development. They assist the board and chief executives in
formulating, implementing and evaluating the strategy.

5. SBU level executives are profit centre heads or divisional heads. They manage
a diversified company as a portfolio of businesses, each business having a clearly
defined product-market segment and an unique strategy. SBU executives maintain
harmonization with other SBUs in the organizing, formulating and implementing the SBU
level strategy.
6. Corporate planning staff plays a supporting role. They put in order and communicate the
strategic plans. They make available administrative support and fulfil the function of assisting
the introduction, working and maintenance of strategic management system.

7. Consultants may be individuals, academicians or consultancy companies who are

specialized in strategic management activities. They will advise and assist managers
to improve the performance and effectiveness of an organization. They provide services
of corporate strategy and planning.

8. Middle level managers look after operational matters, so they rarely play an active role in
strategic management. They are the implementers of decision taken by top level and
followers of policy guidelines. They contribute to generation of ideas and in development of
strategic alternative. They also help in setting objectives at departmental level.

9. An executive assistant will assist the chief executive in the performance of his duties in
various ways. They assist the chief executive in data collection, analysis and in suggesting
alternatives. Coordinating activities with internal staff and outsiders and acting as a filter for
information are also performed by the executive assistant.

Q4.Features of strategic management?

1. Objective Oriented: The business strategies are objectives
oriented and are directed towards organizational goal. To
formulate strategies the business should know the objectives that
are to be pursued. For 4 example if any business want to achieve
growth then it has to set following objectives. a) To increase
market share. b) To increase customers satisfaction. c) To enhance
the goodwill of the firm
2. Future Oriented: Strategy is future oriented plan and
formulated to attain future position of the organization. Therefore
strategy enables management to study the present position of
organization and decides to attain the future position of the
organization. This is possible because strategy answer question
relating to the following aspects. a) Prosperity of the business in
future. b) The profitability of the business in future. c) The scope
to develop and grow in future in different business.
3. Availability and Allocation of Resources: To implement strategy
properly there is need of adequate resources and proper
allocation of resources. If it is done then business can attain its
objectives. There are three types of resources required by
business namely physical resources, i.e plant and machinery,
financial resources i.e capital, and human resources i.e
manpower. If these resources are properly audited/evaluated and
find out its strength and weaknesses and coordinate well then
management can do better strategy implementation.
4. Influence of Environment: The environmental factors affect the
formulation and implementation of strategy. The business unit by
analyzing internal and external environment can find out its
strength and weaknesses as well as opportunities and threats and
can formulate its strategy properly.
5. Universally Applicable: Strategies are universally applicable and
accepted irrespective of business nature and size. Every business
unit designs strategy for its survival and growth. The presence of
strategy keeps business moving in right direction.
6. Levels of strategy: There are companies that are working in
different business lines with regards to products /services,
markets or technologies and are managed by same top
management. In this case such companies need to frame different
strategies. The strategies are executed at three different levels
such as – 5 a) Corporate level b) Business level c)
Functional/operational level Corporate level strategies are
overarching plan of action covering the various functions that are
performed by different SBUs(strategic business unit, which
involved in a signal line of business) the plan deals with the
objectives of the company, allocation of resource and co-
ordination of SBUs for best performance. Business level strategy is
comprehensive plan directed to attain SBUs objectives, allocation
of resources among functional areas and coordination between
them for giving good contribution for achieving corporate level
objectives. Functional level strategy is restricted to a specific
function. It deals with allocation of resources among different
operations within that functional area and coordinating them for
better contribution to SBU and corporate level achievement.
7. Revision of strategy: Strategies are to be reviewed periodically
as in the process of its implementation certain changes are going
to take place. For example while implementing growth strategy
there could be shortage of resources because of limited sources or
recession during the period so retrenchment strategy should be
 considered. 8. Classification of strategy: Strategies are classified
into four major categories known as – a) Stable growth strategy b)
Growth strategy c) Retrenchment strategy d) Combination
strategy.
Q5.Limitation of strategic management?
1. Limitation of Assumption: - Strategic management is based on certain
assumptions, if that assumptions remains good then the plans will be
implemented otherwise there be no use of strategic management.
2. Problem in Analyzing Environment: - the success of strategic management is
depend on the correct analysis of internal as well as external
environment.Here especially the external environment scanning is important
to grab opportunities which many times does not proved.
3. Unrealistic Mission and Objectives: - if the mission and objectives are not
realistic then the strategic management can’t be successful.
4. Problem of Setting Target: - sometimes it happens that the strategists may
be very enthusiastic so they may set unrealistic goal which will be difficult to
accomplish.
5. Problem in Implementation:- implementation of strategy is important if it is not
implemented well then there may be problem, the strategy may not give the desired result.
6. Lack of Commitment of Lower Level:- generally the strategies are framed by top level
management and at the time of framing if top level management has not consulted with
lower then lower level management may not be that much committed. In other word they
being unaware of the plans may not give desired performance. Their dedication may not be
there up to expected level.
7. Problem of Resistance: - there may be resistance on the part of employees to accept the
set target of the top management.
8. More theoretical in Nature:-as per experts opinion strategic management is more
theoretical. In practice there are different so it remains unsuccessful.
9. Problem of Internal Politics:-in organizations, there are differences among or between
departments. So as there is no good relation, proper coordination, strategies became
unsuccessful.
10.Problem of Traditional Management:- the traditional management has narrow approach
towards development. Its

Q6.Benefit of strategic management?

1. Choice of Strategy:- strategic management helps to management to select
the best possible strategy option. Then it may be internal or external growth of
the organization. For example in case of internal growth it may adopt
intensification or diversification strategy
2. Improves Employee’s Efficiency:- strategic management clarifies about what
to do, how to do, when to do a particular task to the employees. This helps to
employee to perform a job accurately and expertise which leads to increase in
efficiency.
3. SWOT Analysis:- A thorough analysis of internal and external environment of
a business enables to identify the strength and weakness as well as threats and
opportunities of the business.This helps the business to keep pace with the
changing nature of the environment affecting to the firm. And this is possible
only with the help of strategic management.
4. Aids in planning:- strategic management helps to frame realistic plans.
5. Organizing Resources:- business objectives can be accomplish with the help
of proper allocation and utilization of resources. This is possible only with the
systematic plan, which is the result of strategic management.
6. Helps in Evaluation:- the important aspect of strategic management is
evaluation of plans or strategy. Here the actual performance will be compared
with standards set and if any variation is found then the corrective measures
are taken.
7. Facilitates Communication and Coordination:- as the strategies are well
planned. For its proper execution there is need to have proper communication
and coordination at all levels of operations.
8. Helps to face Competition:- strategic management enables a firm to meet
competition more effectively. This is because strategic management enables to
develop effective strategies to face the competition.
Q7.Internal environment?
Internal environmental factors are these, which resides within company premises and are
easily adjustable and controllable. Company as per its necessity & requirements, moulds

it and take appropriate support from these factors, so that business activity can run safety &
smoothly.
Value System : The value system is helm (the position of control) of affairs of the founders.
Therefore it is widely acknowledge fact that the extent to which the value system is shared
by all in the organization is an important factor contributing to success. If the founder has
strong value, then he will never do any activity which is out of limit. For example,
Murugappa group had taken over the E.I.D. porry group, which is one of the most profitable
businesses. Its one of ailing business was liquor, which was sold off by Murugappa, as it did
not fit into its value system.

ii) Mission and Objectives: Mission is basic or fundamental cause because of what the
company came into existence. It is company’s domain, priorities, or ways of development.
Generally company is objectives are consistent with mission statements.ThereforeTherefore
it is always advisable to the company to Frame a mission statement and then to list out
various objectives. The study analysis of internal environment enabled the company to find
out, whether the objectives are in line with mission statement or not.

iii) Plans & Policies : Plans & policies are nothing but deciding in advance, of a particular
activity i.e. what is to be done, how it is to be done, when it is to be done etc. and according
executing them to attain the success. Here business unit need to frame there plans &
policies with the consultation of business objectives and available resources. Here internal
environment analysis will help to the firm to know the appropriateness of plans & policies.

iv) Human Resources : Human resources are most important resources among the required
all types of resources by the firm. ThereThere resources are very sensible; therefore every
business need to tackle them with carefulness and cautiousness, because the survival and
success of the firm is largely depends on the quality of human resources. The internal
environmental analysis in respect of human resources reveals the shortcomings of human
resources and measures need to be undertaken for its creativeness.

v) Physical Resources : Physical resources consist of machines, equipments, buildings

furniture’s and fixtures. The analysis of these resources reveals the deficiencies of these
resources. The business may take corrective steps to remove these deficiencies.

vi) Financial resources: Finance is the back bone of each & every business. So every business
needs to have proper financial management, which includes the consideration of financial
sources. Financial policies, financial positions, capital structure, management of working &
fixed capital, build up adequate reserves for future etc. The analysis of there resources
reveals that the soundness of its financial position.

vii) Labour management relations: It is stated that the business flourish to a greater extent,
if it is supported by labour / human resources well. Even if there are certain shortcomings
on the part of other physical, natural, resources, but there is good relation between
management and labour then there would not be a problem. To keep a good relationship
with labours a management needs to take care of all types of problems of the labour. It
includes salary, wages, facilities allowances, good working conditions, their promotion
transfer, etc. The analysis & internal environmental discloses the certain short comings.

Q8.Exteranl environment?
External environment is also important in survival and success of the business
unit. External environment means those factors or forces which resides outside
the business, but has its influence over the functioning of the business. As
these forces resides outside, does not have control over them. The
environment
factors are of two types known as i) Micro environment and ii)
Macro Environment.
i) Micro Environment :
Micro environmental factors mean those which are very close and direct effect
factors. It includes suppliers, competitor’s customers, marketing
intermediaries and the public at large. These factors are more intimately linked
with the company than the macro factors. These factors are giving individual
effect on each company rather than a particular industry. Let’s see the all these
factors in detail.
a) Suppliers : It is important force in micro environment. This force supplies the
inputs like raw materials and other supplies. This is important because of
supplying smoother functioning of the business. The supply is very sensitive. So
many companies give high importance to vendor development. The company
never depended on a single supplier because if they back out, or any other
problem with that supplier may seriously affect the company. b) Customers :
Customer is the king of the market. Therefore every company strives to create
& sustain customers in the market. So that it can survive & be success in the
market. In fact monitoring the customer sensitivity is the pre-requisite for the
business success. There are different categories of customers like individuals,
household industries and other commercial establishments and govt. etc.
Depending on a single customer is dangerous to the company as it place to the
company in poor bargaining position and customer’s switching to competitors
may lead to closure of the company. Therefore the choice of customer
segment should be made with the full consideration of profitability, stability of
demand, growth prospects and the extent of competition.
c) Competitors : In simple word competition means the firms which market the
same products. Here all those who compute for the discretionary income of
the consumer are considered as competitors. Discretionary income of the
consumers means creating consumers decisions for similar or equivalent needs
products. For example for A T.V. manufacturer another T.V. manufacturer is
not only a competitors but refrigerators, cooking ranges, or other saving and
investment institutions, as they are attracting consumers towards their
product.
d) Marketing Intermediaries : Marketing intermediaries means those who are
helping company to supply goods from manufacturing company to customer it
includes agents and merchants who help company to find customers sales it’s
the products or those who are physically distributing the goods from their
origin to their destination. It includes warehousing, transportations, marketing
firms, or promoting companies products. These intermediaries are vital link
between the company and the final users. So the wrong choice of the
marketing intermediaries may cost the company heavily.
2) Macro - Environment :
Macro environment is not that much immediate environment of a company.
This macro environment factors are for away from the company but it gives
indirect effects on companies functioning. The micro environment operates in
a large macro environment forces that shapes opportunities and pose threats
to the company. It includes demographic, economic, natural, social and
technological environmental forces or factors.
a) Demographic environment: It is relates to human population with reference
to its size, density, literary rate, gender, age, occupations etc. By going through
all these elements ofdemographic environment business units decides its
production and distribution strategies property. It also gives effect on
technology intensive business for its product if the high population growth rate
exists or vice versa. Again the occupational and spatial nobilities of population
have implications for business. i.e. it labour is easily moveable from one
business to another, as well as other
region, then its supply will be smooth otherwise business have to
face labour problem.
b) Economic Environment: Economic conditions, economic policies and the
economic system are the important external factors which are framing
economic environment for a business. The economic conditions of a country
means the nature of the economy, the level (slope) of development of
economy, economic conditions, the level of income of the people, or
distribution of income and assets etc. These factors are important while
determining the business strategies, for example in a developing country the
low income may be the cause for very low demand for a product, here
business can’t increase the purchasing power of the people to generate higher
demand for its product. So here the company should emphasis an reduction of
prices for higher sale. The economic policy of the govt. has great impact on
business in this case same business are favorably affected and same are
adversely affected by government policy. For example if govt. wants to protect
home industries then its affects import competing industries. On the other
hand if a liberalization of the import policy may create difficulties to home
industry.The economic system refers to the kind of economy; the country has
i.e. free market economy, capitals or socialist economy.
c) Natural Environment : If consists of geographical and ecological factors such
as natural resources endowments, weather and climatic conditions, location
aspects in the global context, port facilities, etc. which are relevant to business.
The geographical and ecological factors influence the location of certain
industries. For example industry with high material index tend to be located
near the raw material sources in the same way climate or weather conditions
matter a lot in certain industries like cotton textile industry. The ecological
factors have great importance. Say govt. policies aimed at the preservation of
environmental purity andecological balance have resulted in additional
responsibilities and problems for business. Same of these have dead business
towards increase in cost of production and distribution.
d) Social - Cultural environment: Socio cultural fabric is on important
environmental factors that would be analysed while formulation business
strategies. For a successful business, the buying and consumption habits of the
people, their languages,
beliefs and values, customs and traditions, taste and preferences and
education level should have to be considered and then it has to decide its
strategy so that it will be fit in social - cultural environment.
e) Technological environment: Technological environment are relate to
technological know - how, used in business. It is expected that business need
to introduce and use latest technology in their production. But technological
developments sometimes pose problems to business as business are not able
to cope up with developed technology and hence its existence came into
danger. The technological development may increase demand for a production
too. For example in India as we are having frequent power flections, if the
business introduces voltage stabilizers then definitely there will be growing
demand for electrical appliances.
f) Political environment: The government is the care taker of all of us. So it also
takes care of business too. While working on business govt. frames certain
policies as per its ideology. So whenever govt. through its policy brightness the
prospects of some enterprises may pose a threat to same others. For example
liberalization has opened up same opportunities to same business at the some
time it has give set back to same business. In our country the govt. is not a
static. It changes after every five years. So whenever new govt. comes into
power its changes its policy which affects business positively or negatively.
Q9.Porters 5 model of competition?
Porter’s Five Forces model of Competition
Michael E Porter has made immense contribution in the development of the ideas of industry
and competitor analysis and their relevance to the formulation of competitive strategies. A
model has been proposed consisting of five competitive forces – threat of new entrants,
rivalry among competitors, bargaining power of suppliers, bargaining power of buyers and
threat of substitute products- that determine the intensity of industry competition and
profitably.
1. Threat of New Entrants: Any industry making profit tends to attract new entrants. The
existing firms have either to share a growing market share with the new entrants or lose their
own market share to the new entrants.
The new entrants are exposed to two challenges: 1) the entry barriers to an industry and 2) the
expected resistence from existing firms.
The entry barriers are as follows:

● Economics of scale in production and sale of products leading to lower costs for
existing firms
● Capital requirements being high may prevent new entrants from making investments
● Product differentiation by existing firms leading to brand loyalty of customers
towards existing firms
 ● Access to distribution channel can be monopolized by the existing firms on the basis
of their long-term relationship with distributers
An existing firm with a large stake in the industry may lower its price.
A new entrant preferably should choose market niches not served by existing firms.

2. Rivalry among Competitors: The extent of rivalry among competitors in an industry

affects the competition within that industry. The dimensions of rivalry among competitors
are several.

● Competitive structure: This refers to the number of competitors, their size, and
their diversity. If an industry has large number of small or medium sized firms,
none of them are in a position to dominate the industry. This results in low entry
barriers and less chances for differentiation. If an industry consists of a few large
companies, such situation results in high entry barriers.
● Demand Conditions: This refers to the nature of the customer demand existing in
an industry. A high demand or stagnant demand or declining demand will
influence strategic formulation of both existing and new entrants.
● Exit barriers: This restricts the firms in an industry and prevent them from leaving,
even though the returns are low. The exit barriers are economic, strategic, or
emotional factors preventing companies from leaving the industry.

Collectively, the three factors of competitive structure, demand conditions, and

exit barriers determine the business strategies that a firm is likely to adopt.

3. Bargaining power of Buyers: This constitutes the ability of the buyers to force a reduction
in prices of products or services, demand a higher quality or more value for their purchases.
A higher bargaining power constitutes a negative feature for existing firms and new entrants
as well. A lower buyer bargaining power enables a firm to make the buyers accept a lower
quality of product or services at a higher price.

4. Bargaining power of Suppliers: This constitutes the ability of the suppliers to force an
increase in price of products or services, or make the buyers accept lower quality of products
or level of services. A lower supplier bargaining power constitutes a positive feature for
existing firms and new entrants as well. A higher supplier bargaining power make the firms
accept a lower quality of product or services at a higher price.

5. Threat of substitute products: Substitute products are those that satisfy the same set of
customer needs. Firms in industry having no close substitutes can charge higher price and
earn higher returns. For industries where close substitutes are available, the level of price
chargeable is restricted by the price of the substitute available. Thus, firms have to formulate
their business strategies keeping in view the intensity of the competitive force arising out of
the presence or absence of the threat of substitutes.
Q10.Process in strategy formulation?
Strategic Formulation

Strategy formulation refers to the process of choosing the most appropriate course of action
for the realization of organizational goals and objectives and thereby achieving the
organizational vision. The process of strategy formulation basically involves six main
steps. Though these steps do not follow a rigid chronological order, however they are very
rational and can be easily followed in this order.

1. Setting Organizations’ objectives - The key component of any strategy statement is

to set the long-term objectives of the organization. It is known that strategy is
generally a medium for realization of organizational objectives. Objectives stress the
desired results whereas Strategy stresses upon the process of reaching there. Strategy
includes both the fixation of objectives as well the medium to be used to realize those
objectives. Thus, strategy is a wider term which believes in the manner of deployment
of resources so as to achieve the objectives.

While fixing the organizational objectives, it is essential that the factors which
influence the selection of objectives must be analyzed before the selection of
objectives. Once the objectives and the factors influencing strategic decisions have
been determined, it is easy to take strategic decisions.

2. Evaluating the Organizational Environment - The next step is to evaluate the

external and internal environment in which the organization operates. This includes a
review of the organizations competitive position. It is essential to conduct a
qualitative and quantitative review of an organizations existing product line. The
purpose of such a review is to make sure that the factors important for competitive
success in the market can be discovered so that the management can identify their
own strengths and weaknesses as well as their competitors’ strengths and weaknesses.

After identifying its strengths and weaknesses, an organization must keep a track of
competitors’ moves and actions so as to discover probable opportunities of threats to
its market or supply sources. Analysis of external environment facilitates an
organisation to identify threat and opportunities and accordingly objectives and
strategies can be developed.

3. Setting Quantitative Targets - In this step, an organization must practically fix the
quantitative target values for some of the organizational objectives. In other words,
predetermined standards or criteria are essential for measurement of results. The idea
behind this is to compare with long term customers, so as to evaluate the contribution
that might be made by various product zones or operating departments.
4. Aiming in context with the divisional plans - In this step, the contributions made by
each department or division or product category within the organization is identified
and accordingly strategic planning is done for each sub-unit. This requires a careful
analysis of macroeconomic trends.
5. Performance Analysis - Performance analysis includes discovering and analyzing
the gap between the planned or desired performance. A critical evaluation of the
 organizations past performance, present condition and the desired future conditions
must be done by the organization. This critical evaluation identifies the degree of gap
that persists between the actual reality and the long-term aspirations of the
organization. An attempt is made by the organization to estimate its probable future
condition if the current trends persist.
6. Choice of Strategy - This is the ultimate step in Strategy Formulation. The best
course of action is actually chosen after considering organizational goals,
organizational strengths, potential and limitations as well as the external
opportunities.

Q11.McKinsey 7 points framework?

McKinsey 7s model

is a tool that analyzes firm’s organizational design by looking at 7 key internal

elements: strategy, structure, systems, shared values, style, staff and skills, in order to
identify if they are effectively aligned and allow organization to achieve its
objectives.

McKinsey 7s model was developed in 1980s by McKinsey consultants Tom Peters, Robert
Waterman and Julien Philips with a help from Richard Pascale and Anthony G. Athos. Since
the introduction, the model has been widely used by academics and practitioners. It is one of
the most popular strategic planning tools. It places more emphasis on human resources (Soft
S), rather than the traditional mass production, capital, infrastructure and equipment, as a key
to higher organizational performance. The goal of the model was to show how 7 elements of
the company: Structure, Strategy, Skills, Staff, Style, Systems, and Shared values, can be
aligned together to achieve effectiveness in a company. The key point of the model is that all
the seven areas are interconnected and a change in one area requires change in the rest of a
firm for it to function effectively.

The McKinsey model, given below, represents the connections between seven areas and
divides them into ‘Soft Ss’ and ‘Hard Ss’. The shape of the model emphasizes
interconnectedness of the elements.

The model can be applied to many situations and is a valuable tool when organizational
design is at question. The most common uses of the framework are:

● To facilitate organizational change.

● To help implement new strategy.
 ● To identify how each area may change in a future.
● To facilitate the merger of organizations.

7s factors

In McKinsey model, the seven areas of organization are divided into the ‘soft’ and ‘hard’
areas. Strategy, structure and systems are hard elements that are much easier to identify and
manage when compared to soft elements. On the other hand, soft areas, although harder to
manage, are the foundation of the organization and are more likely to create the sustained
competitive advantage.

Strategy is a plan developed by a firm to achieve sustained competitive advantage and

successfully compete in the market. In general, a sound strategy is the one that’s clearly
defined, is long-term, helps to achieve competitive advantage and is reinforced by strong
vision, mission and values. But it’s hard to tell if such strategy is well-aligned with other
elements when analyzed alone. So the key in 7s model is not to look at one’s company to find
the great strategy, structure, systems and etc. but to look if its aligned with other elements.
For example, short-term strategy is usually a poor choice for a company but if it is aligned
with other 6 elements, then it may provide strong results.

Structure represents the way business divisions and units are organized and includes the
information of who is accountable to whom. In other words, structure is the organizational
chart of the firm. It is also one of the most visible and easy to change elements of the
framework. An organisation structure can be team based, virtual and so on.

Systems are the processes and procedures of the company, which reveal business’ daily
activities and how decisions are made. Systems are the area of the firm that determines how
business is done and it should be the main focus for managers during organizational change.

Skills are the abilities that firm’s employees perform very well. They also include capabilities
and competences. During organizational change, the question often arises of what skills the
company will really need to reinforce its new strategy or new structure.

Staff element is concerned with what type and how many employees an organization will
need and how they will be recruited, trained, motivated and rewarded.

Style represents the way the company is managed by top-level managers, how they interact,
what actions do they take and their symbolic value. In other words, it is the management style
of company’s leaders.

Shared Values are at the core of McKinsey 7s model. They are the norms and standards that
guide employee behavior and company actions and thus, are the foundation of every
organization.

The authors of the framework emphasize that all elements must be given equal importance to
achieve the best results.

Q12.Mintzberg 5 points framework?What are the 5 P’s of Strategy?

In 1987, the Canadian management scientist Henry Mintzberg distinguished five visions for
strategy for organisations. He calls them the 5 P’s of Strategy. They stand
for Plan, Pattern, Position, Perspective and Ploy. These five components allow an
organisation to implement a more effective strategy. A strategy is aimed at the future,
concerns the long term and involves different facets of an organisation. Competition is
always a factor, but it would be a mistake to develop strategies only aimed at competitors.
The strategies should also take into account the organisational culture and the other
possibilities and developments within an organisation.

According to Mintzberg, developing a good strategy is difficult. With the help of the 5 P’s of
Strategy, one can at least include as many different aspects as possible and approach the
strategy from different perspectives.

Plan

A strategy is a plan for dealing with situations. A plan has to be made before possible actions
are taken and it’s also important that the plan is followed consciously and
effectively. Goals can only be achieved with a good plan. They enable managers to give their
teams clarity and work towards interim evaluations and final results. However, a clear
organisational strategy requires more than just a plan.

Patterns

Where making a plan is about the intended strategy, patterns are about strategies that have
been implemented before. On the one hand, there are strategies that achieved their intended
result. There are strategies that still have to be worked out in more detail. Patterns are an
important part of developing the new strategy. If certain choices have already been made in
the past, an organisation is likely to make those decisions again in the future. In such cases,
past behaviour is a pattern that’s included in strategy development. Patterns are accepted by
everyone. Awareness of such patterns within the organisation, facilitates to include their
strengths in developing a strategy.

Position

It’s important to consider carefully in advance how the organisation wants to position itself.
What will its identity look like and does that match the idea stakeholders have of the
organisation? This can contribute significantly to developing a lasting competitive advantage.
The strategic position helps to with stand stiff competitions and gives the organisation a firm
place in the market.

Perspective

Strategy is much more than creating position. It’s important to find out how different target
audiences perceive the organisation. For example, how do the employees regard their
employer? what do customers think of the organisation? what is their image among
investors? All these individual perspectives and thought patterns are a valuable source of
information for the organisation, which they can use to make targeted strategic choices.

Ploy

It’s also a strategic choice to use a ploy. For instance one those competitors don’t expect.
Organisations can offer a new product concept which no one could have anticipated. For
instance, a phone service provider can mislead others by suddenly also offering internet
service and digital television free of cost. That puts them in competition with other potential
providers of those services. It’s a ploy to outsmart the competition.

Planning process

The Mintzberg 5 P’s of Strategy are part of an organisation’s strategy. The 5 P’s of strategy
facilitates to develop a strong and successful strategy. It’s useful to employ the 5 Ps
throughout the planning process. They provide relevant information necessary in the initial
stages of strategy development. When implementing the strategy, the 5 P’s of Strategy can
help with testing, evaluation and possibly with making adjustments. Finally, the 5 P’s of
Strategy can be used as a final check of the developed strategy at the end of the planning
process, in order to discover if there are inconsistencies or if anything is missing. Identifying
problems during the planning phase can save an organisation a lot of money in the end.

Q13.Process of strategic evaluation?

Strategic evaluation appraises the implementation of strategies and measures
organizational performance. The feedback from strategic evaluation is meant
to exercise control over the strategic management process. Here the managers
try to assure that strategic choice is properly implemented and is meeting the
objectives of the firm. It consists of certain elements which are given below.
1. Setting of standards:- The strategists need to set standards, targets to
implement the strategies. it should be in terms of quality, quantity, costs and
time. The standard should be definite and acceptable by employees as well as
should be achievable.
2. Measurement of Performance:- Here actual performances are measured in
terms of quality, quantity, cost and time.
3. Comparison Of Actual Performance With Set Targets:- The actual
performance needs to be compared with standards and find out variations, if
any.
4. Analyzing Deviation And Taking Corrective Measures:- If any deviation is
found then higher authorities tries to find out the causes of it and accordingly
as per its nature takes corrective steps. Here some time authority may re-set
its goals, objectives or its planning, policies and standards.
Q14.Difference between strategic control and operational control?

Q15.Expectation of key stakeholder?

Stakeholders are the individuals and groups who can affect and are affected by, the strategic
outcomes achieved. They could oppose the top management of an organisation in strategy
formulation and implementation. Organisations that can effectively manage stakeholder
relationships generally do better. Managing stakeholder relationships is critical for strategic
management of business.

Stakeholders can be divided into internal and external stakeholders.

● Internal stakeholders such as shareholders/owners, managers, or employees

● External stakeholders such as customers, suppliers or government.

Organisation and Stakeholders’ Relationship

The stakeholders’ association with the organisation are a two-way relationship. Stakeholders
provide support to the organisation and contribute in many ways. In return the organisation
tries to satisfy the expectations of the stakeholders and honour their legitimate claims.

External stakeholders such as customers pay the price for the products and services, suppliers
provide materials, creditors grant finance and government offers support through legislation
and regulations.

Internal stakeholders such as shareholders buy shares, employees provide skills and labour,
managers undertake decision making and directors offer guidance and supervision to the
organisation’s managers.

The stakeholders have expectations and claims. An external stakeholder like customer will
expect good quality and fair dealing and claim, value for money. The government will expect
that the organisation pays taxes and follows rules and regulations. An internal stakeholder
like the shareholder will expect effective performance of the organisation and claim high
returns on their investments. Employees will expect fair dealing from their employing
organisation and claim compensations in terms of salary and wages. With the growing
importance of environmental issues, for instance, all organisations need to give importance to
stakeholders dealing with environment protection.

Thus, the nature of expectations and claims of different types of stakeholders are diverse.
Also, the organisation realizes that all stakeholders are not equally important to them.
Stakeholder relationship management requires that stakeholder analysis be done, to identify
the relative importance of various stakeholders and to ensure that the claims of the more
important stakeholders are satisfied first. An effective relationship includes many elements
such as direct and indirect support of the stakeholder in organisational affairs particularly in
matters of strategy formulation, strategy implementation, and playing an effective role in
helping the organisation to evaluate the effectiveness of its strategies. The role of the top
management of the organisation and particularly chief executive is extremely important in
stakeholders’ relationship management.
Q16.Steps in framing business policy?
Clear, well-written policies are essential for running a successful and profitable small
business. While specific policy directives depend on the topic, such as compliance, safety or
internal control, virtually every business policy goes through five main development stages.
Each stage provides a measure of guidance that work together to improve productivity and
strengthen your bottom line.

1. Identify Policy Objectives

Effective policies answer a question or solve an ongoing business problem. For these reasons,
identifying questions or issues a firm’s business should address is the first stage of policy
creation. Most often, questions and issues arise from and link to long-term business
objectives. In the same way, business objectives arise from and link to vision and mission
statement. Ideas for creating effective business policies come from goals such as innovation,
providing outstanding customer service and complying with government regulations. Policies
that focus on finances arise from profit maximization, cost minimization and internal control
objectives.

2. Policy Formation

During the policy formation stage, strategize about how to address unresolved questions or
issues. Brainstorming is common during policy formation, as most issues have more than one
potential solution. 5

3. Adopting the Best Solution

In many small businesses, decisions about which potential solution best addresses business
needs comes directly from the business owner. In larger businesses, policy adoption
procedures may follow a more democratic process. For example, businesses with a board of
directors most often require a majority of the board to approve new policies by casting votes.
If the majority doesn’t agree, the proposed policy goes back to the formation stage.

4. Implementing Business Policies

While the first three stages of policy-making focus on “what,” the fourth stage focuses on
publicizing the policy and making it work. This stage consists of creating policy statements
with clear parameters, including whom the policy applies to, the circumstances under which
policy statements and directives apply and important conditions or restrictions. Parameters
should clearly identify whether the policy applies to all or only certain areas of the
workplace.

5.Evaluating Policy Directives

The final stage of policy-making process involves an ongoing evaluation. This stage is
especially vital, with policies that focus on complying with government regulations. The
evaluation stage ensures polices are up to date and continue to reflect long-term business
goals. When a review determines a policy is proving ineffective, or if regulatory or business
 standards change, the business owner or decision-making team determines whether changing
the existing policy or creating an entirely new policy is the best solution.

Q17.Implimentation of policy change?

Q18.Role of policies in strategic management?
According to Edmund, the associates’ business policy is concerned with the top
management function of:

1. Shaping high-level, long-range corporate objectives and strategic that will be matched, to
both company capacities and to external realities in a world marked by rapid technological,
economical, social and political change.
2. Casting up an effective well-matched set of general policies for the pursuit of that strategy.
3. Guiding the organization in accordance with that strategy.

The mission of the top management is influenced by the policy at various levels and
phases. They are:

1. Perception of industry and economic trends that affect the prospects of the economy.
2. Clearly understanding the needs, opportunities, threats, strengths, weakness and problems.
3. Selecting the best opportunity or opportunities from an array of them, this can cope with the
capacity of the company.
4. Formulating of a strategy taking into account the opportunity and availability of resources.
5. Development of operating plans for the pursuit of the chosen strategy and policies.
6. Creation of organizational relationships, organizational climate, and an atmosphere for the
proper implementation of policy.
7. Evaluating the performance and the progress, and
8. Periodic re-evaluation of positions in the light of developments within the organization and
its environment.

To sum up it can observe that the overall performance of the company depends on the
pragmatic policies, and the top management is mainly responsible for the policy formulation.

Business policies cover such a wide variety of subjects and are so broad-based that every
possible matter that affects the interests of any one in the organization, the community and
the government are included in them.

In fact, business policies cover all the functional areas of business- production, marketing,
personnel and finance. These functional areas are generally covered by the term as “major
policies” and “minor policies”.

Q19.Benefits of MNC?
1. Employment Generation:
MNCs create large scale employment opportunities in host countries. This is a big
advantage of MNCs for countries; where there is a lot of unemployment.

2. Automatic Inflow of Foreign Capital:

MNCs bring in much needed capital for the rapid development of developing
countries. In fact, with the entry of MNCs, inflow of foreign capital is automatic. As a
result of the entry of MNCs, India e.g. has attracted foreign investment with several
million dollars.

3. Proper Use of Idle Resources:

Because of their advanced technical knowledge, MNCs are in a position to properly
utilize idle physical and human resources of the host country. This results in an
increase in the National Income of the host country.

4. Improvement in Balance of Payment Position:

MNCs help the host countries to increase their exports. As such, they help the host
country to improve upon its Balance of Payment position. MNCs also reduce the host
countries dependence on imports.

5. Technical Development:

A multinational corporation helps the technological growth of the country as well.

They bring new innovations and technological advancements to the host
country. They help modernize the industry in developing countries.

6. Managerial Development:
MNCs employ latest management techniques. People employed by MNCs do a lot of
research in management. In a way, they help to professionalize management along
latest lines of management theory and practice. This leads to managerial
development in host countries.
7. End of Local Monopolies:
The entry of MNCs leads to competition in the host countries. Local monopolies of
host countries either start improving their products or reduce their prices. Thus
MNCs put an end to exploitative practices of local monopolists. As a matter of fact,
MNCs compel domestic companies to improve their efficiency and quality. In India,
many Indian companies have acquired ISO-9000 quality certificates, due to fear of
competition posed by MNCs.

8. Improvement in Standard of Living:

By providing super quality products and services, MNCs help to improve the
standard of living of people of host countries.

9. Promotion of international relations:

MNCs integrate economies of various nations with the world economy. Through their
international dealings, MNCs promote international culture; and pave way for world
peace and prosperity.
Q20.Limitation of MNC?
Limitations of MNCs from the Viewpoint of Host Country:
(i) Danger for Domestic Industries:
MNCs, because of their vast economic power, pose a danger to domestic industries;
which are still in the process of development. Domestic industries cannot face
challenges posed by MNCs. Many domestic industries have to wind up, as a result of
threat from MNCs. Thus MNCs give a setback to the economic growth of host
countries.

(ii) Repatriation of Profits:

(Repatriation of profits means sending profits to their country).

MNCs earn huge profits. Repatriation of profits by MNCs adversely affects the
foreign exchange reserves of the host country; which means that a large amount of
foreign exchange goes out of the host country.

(iii) Danger to Independence:

Initially MNCs help the Government of the host country, in a number of ways; and
then gradually start interfering in the political affairs of the host country. There is,
then, an implicit danger to the independence of the host country, in the long-run.

(iv) Disregard of the National Interests of the Host Country:

MNCs invest in most profitable sectors; and disregard the national goals and
priorities of the host country. They do not care for the development of backward
regions; and never care to solve chronic problems of the host country like
unemployment and poverty.

(v) Misuse of Mighty Status:

MNCs are powerful economic entities. They can afford to bear losses for a long
while, in the hope of earning huge profits-once they have ended local competition
and achieved monopoly. This may be the dirties strategy of MNCs to wipe off local
competitors from the host country.

(vi) Careless Exploitation of Natural Resources:

MNCs tend to use the natural resources of the host country carelessly. They cause
rapid depletion of some of the non-renewable natural resources of the host country.
In this way, MNCs cause a permanent damage to the economic development of the
host country.

(vii) Selfish Promotion of Alien Culture:

MNCs tend to promote alien culture in host country to sell their products. In India,
e.g. MNCs have created a taste for synthetic food, soft drinks etc. This promotion of
foreign culture by MNCs is injurious to the health of people also.
(viii) Exploitation of People, in a Systematic Manner:
MNCs join hands with big business houses of host country and emerge as powerful
monopolies. This leads to concentration of economic power only in a few hands.
Gradually these monopolies make it their birth right to exploit poor people and enrich
themselves at the cost of the poor working class.

Q21Business strategies of MNC?

Q22.Types of strategic alliances?
1 Types / Structure of Strategic Alliances : Structure of a strategic Alliance
refers to the formal arrangement by which work is co-ordinate between firms
who are parties to the alliance. This structure defines the framework within
which the activities take place. The structure of strategic Alliances can be of
different forms based on different criteria as given below. 105 a) Based on the
parties to alliance : i) Horizontal Strategic Alliance - In this type, two or more
firms in the same industry, collaborate with each other. ii) Vertical Strategic
Alliance - In this type, the firms integrate backward or forward with either
supplier or marketing firm. iii) Intersectoral Strategic Alliance - In this type, the
firms belonging from different industries collaborate with each other. b) Based
on financial involvement : i) Non - Equity Strategic Alliance - Non - Equity
Strategic Alliances can range from close working relations with suppliers,
outsourcing of activities or licensing of technology, sharing of R & D, industry
clusters and innovation networks. Informal alliances without any agreements,
or based on ‘Gentlemen’s agreement are common among smaller companies
and within university research groups. ii) Equity Strategic Alliance - In this type,
the companies invest in each other’s equity, making the parties shareholders
as well as stakeholders in each other. The cross shareholding of companies
may result in a complex network where company. A owns equity in Company B
that owns equity in C, creating direct and indirect ownership. iii) Joint -
Venture Strategic Alliance - Joint ventures are distinguished from other types
in that the participating companies usually form a new and separate legal
entity in which they contribute equity and other resources such as brands,
technology or intellectual property. The parties agree to share revenues,
expenses and control of the new company for one specific project only or a
continuing business relationship. c) Based on Participation of the Government :
i) Host - Country’s Government - It acts as local partner in strategic alliance.
Such strategic alliances are effective in socialist - countries. ii) Public - Private
Venture - This involves partnership between a government and a private
company This type of Strategic Alliance is created under the following
circumstances – 106 a) When a country allows entry of foreign companies only
through Strategic Alliances with the government. b) When the priority of the
Government for development matches with the competence of a private
company. c) Firms can enter centrally controlled economies like China and
Sweden only through Strategic Alliances with the Government. iii) Private
Partners - In this case private companies enter into Strategic Alliance
agreement.
Q23.Problems of strategic alliances?
Strategic Alliances are common in business world. They are significant to achieve synergy.
Synergy means increased effectiveness or achievement gained by combined action or
cooperation. Strategic Alliances provide synergy due to sharing of resources and combined
efforts of different parties. However problems or difficulties in the operations of Strategic
Alliances can occur due to the following reasons.
1. Conflict between Partners - Joint ownership can result into conflict between Partners.
Conflict is more common when management is shared equally. In such case, neither
partner’s managers have the final say on decisions. This problem can be solved by
establishing unequal ownership whereby one partner maintains 51% ownership and has the
final say on decisions.
2. Government Interference - The loss of control over a joint venture’s operations can result
when the local government is a partner in the Strategic Alliance. This situation occurs in
industries considered important to national security such as broadcasting, infrastructure
and defense. The profitability of the Strategic Alliance could suffer because the local
Government would have motives that are based on national interest, which may compel
them to interfere in the operations of the Strategic Alliances.
3. Delay in Decision Making - Decision making is normally slowed down due to involvement
of a number of parties. This may lead to inefficient - operations. Opportunities may be lost
which may affect the growth of the business.
4. Differences in Work Culture - The work culture of the companies forming Strategic
Alliances are different. MNCs who generally are parties to the Strategic Alliances are profit
centered. All decisions are taken from economic angle. This may conflict with the culture of
the local company it’s decisions may be socially oriented. This may make functioning of the
Strategic Alliances difficult.
5. Losing of Secrecy - There is a risk of losing control over proprietary information, especially
regarding complex transactions requiring extensive coordination and intensive information
sharing.
6. Expensive and Time Consuming - The procedure for formation of Strategic Alliances is
lengthy, complicated and time consuming. The formation of Strategic Alliance can increase
costs because of the absence of a formal hierarchy and administration within the strategic
alliance. Even costs can rise due to the element of hidden costs and activities outside the
scope of original agreement and inefficiency in management.
7. Problems Due to Changes in Government Policies - The changes in government policies
relating to foreign exchange and technology transfer may create problems in the formation
of Strategic Alliances.
8. Unfair Terms and Conditions - The terms and conditions laid down in the agreement may
not be fair and reasonable to both partners. Thus, there are several risks and limitations
associated with Strategic Alliances. Failures are often caused due to lack of mutual trust and
confidence, unrealistic expectations, lack of commitment, cultural differences, and so on.

Q24.Benefits of strategic alliances?

The Internet, advances in telecommunications, and improved transportation systems
have helped firms enter foreign markets and have contributed to the globalization of
business. Simultaneously, they have facilitated the creation of strategic alliances.
The decision to form a strategic alliance depends on the needs and goals of the
companies involved and on the laws of the countries in which the companies are
doing business. (It should be noted, however, that discussion of the specific laws of
various countries is beyond the scope of this article.) The auto industry is an
example of an industry that relies heavily on strategic alliances. In the 1990s the
auto industry began to rely heavily on joint venture strategic alliances as it expanded
its operations in Mexico and Latin America. Auto makers began to demand more
complete systems from their suppliers in Mexico, and engineering responsibility was
transferred from the auto makers to their suppliers. In conjunction with this trend,
auto makers are identifying Tier II and Tier III "partners" for the Tier I supplier. They
are encouraging Tier I suppliers to enter joint ventures with other companies. And, in
general, the Tier I suppliers have the authority to select their own suppliers and joint
ventures partners except in areas such as safety and regulatory matters where
control is crucial.

MARKET ENTRY
A strategic alliance can ease entry into a foreign market. First, the local firm can
provide knowledge of markets, customer preferences, distribution networks, and
suppliers. This is especially true in Eastern Europe. Bestfoods is a food-processing
firm that sells products such as Mazola corn oil. Bestfoods has formed strategic
alliances with firms in several Eastern European countries that, in turn, market its
products. A strategic alliance between British Airways and American Airlines was
created in 1993 and designed to give the two airlines increased access to North
American and European markets, respectively.
Sometimes, foreign countries require that a certain percentage of ownership remain
in the hands of its citizens. For example, in Mexico, foreign investment is limited by
law to 49 percent in specified areas, including bonding companies, firms that print
and publish periodicals for national distribution, engine and car repairs, and
operation of railway terminals. Thus, foreign firms cannot enter such markets alone;
a joint venture is required.

SHARING RISKS AND EXPENSES.

Another major benefit of a strategic alliance is that the firms involved can share risks.
For example, in the early 1990s, film manufacturers Kodak and Fuji joined with
camera manufacturers Nikon, Canon, and Minolta to create cameras and film for an
"Advanced Photo System." The strategic alliance (which was not based on a
strategic alliance) was terminated in 1996 after the film and camera were developed.
But it benefited the parties, because, by developing a common product for the
market, they shared expenses and they minimized the risks that would have been
involved if two or more of them had developed new, but noncompatible, formats.
They avoided the potential for the kinds of losses suffered by the Sony Corp. when
its Betamax format for videocassette recorders was rejected by the public in favor of
the VHS format.

SYNERGISTIC EFFECTS OF SHARED KNOWLEDGE AND

EXPERTISE.
A strategic alliance can help a firm gain knowledge and expertise. Further, when
partners contribute skills, brands, market knowledge, and assets, there is a
synergistic effect. The result is a set of resources that is more valuable than if the
firms had kept them separate. For example, in the early 1990s, Motorola initiated an
alliance among various partners, including Raytheon, Lockheed Martin, China Great
Wall, and Nippon Iridium, to develop and build a global satellite-based
communications network. This new network, called Iridium, allowed the partners to
develop and implement a worldwide, space-based communications network.

GAINING COMPETITIVE ADVANTAGE.

Similarly, a strategic alliance can help a firm gain a competitive advantage. For
example, a strategic alliance can be used to take advantage of a favorable brand
image that has been established by one of the partners. (Establishing a brand image
is a lengthy, expensive process.) It can also be used to gain shelf space for
products. For example, PepsiCo formed a joint venture with the Thomas J. Lipton
Co. to market readyto-drink teas throughout the United States. Lipton contributed
brand recognition in teas and manufacturing expertise. PepsiCo, as the world's
second-largest soft-drink manufacturer, shared its extensive distribution network.

Q25.Investment strategies of enterprises?

Q26.Forms of business ventures?
Q27.Steps in business plan?
Q28.Corporate ethics?
Q29.Recent scenario in digital transformation?
Digitalization Transformation/ Internet strategies for traditional firms
Digitalisation is defined as digital coding of information and the growing productivity
gains in processing and transmission it enables
Methods for digitalisation:
• Deconstruction: Digitalisation changes the way that value chains and value
system might work. While the physical product can be delivered through
traditional means, the other inputs in the value chain like an instructional
manual, warranty services, customer services, can be delivered digitally. This
process is called deconstruction. It will enhance the value to the consumers. It
also enables organisation to outsource and enter strategic alliances where
partners can join in to deliver enhanced value to the consumers.
• Disintermediation: When some processes in the value chain are eliminated, it
is called disintermediation. For example, digitalisation enables the making of
reservation and payment online by eliminating travel agent or going to
booking office.
• Re-intermediation: When processes in the value chain are supplemented by
one or more intermediaries, it is called reintermediation. The introduction of
these intermediaries, often called as infomediaries as they provide
information. For example, online booksellers never own books they sell, but
they provide wealth of information to prospective buyers.
• Industry morphing: Digitalisation has created a situation where traditional
industries are transforming into entirely new types of industries. In other
words, the transactions can be done online and replaced or substituted physical
delivery. For example, banking, insurance, retailing etc.,
• Cannibalisation: In many businesses, a set of activities performed in the value
chain are being replaced by a new set of activities, thus eating away that part
of the value chain. This eating away is called the cannibalisation of the value
chain. For example, the services of travel agents are replaced digitally by the
internet.
• Techno-intensification: Digitalisation of the value chain and value system
results in a situation where there is more intensive use of technology and a
decreased use of human resources. This phenomenon is called as techno
intensification. It requires lot of investments in information technology,
greater reliance on third parties for alliances and outsourcing and providing
accesses to customers on a 24*7*365 basis.
• Re-channelling: Re-channelling takes place when manufacturers of products
and services pick and choose some components in the value chain and
specialise in them, while letting others perform the rest of the processes in the
value chain. Rechannelling occurs, for instance, when manufacturers focus on
production and outsource marketing to specialised agencies or divest
traditional channels of distribution in favour of Internet marketing
 • Digitalised business or e-business: is “a business process transformed to leverage the
World Wide Web (www) (Internet, intranet and extranet) technology for business
benefit.
• Digitalisation and competitive advantage: The competitive advantage of an
organisation lies in its ability to use the advantage that it derives out of information
technology applications.
• Digitalisation and corporate strategy: Organisations can leverage Internet capabilities
for their corporate-level strategies. There are several ways in which leveraging can
take place as below.
• It enables new means of generating synergies, enhancing revenue among
elements of a diverse firm, streamlining distribution, linking sources of supply
and dealing with suppliers efficiently.
• Digitalisation and business strategy: Business strategy of cost leadership and
differentiation lays emphasis on efficiency leading to cost advantage and
differentiation of products, services over its rivals respectively. Digitalisation must
help a cost leader in attaining efficiency, cost advantage and enable a focuser to offer
cheaper and/or better products services than rivals.

Q30.Networked organisation?
7.2.7 Network Structure
A radical organizational design, the network structure is an example of what
could be termed a “non-structure” by its virtual elimination of in house
business functions. Many activities are outsourced. A corporation organized in
this manner is often called a virtual © The Institute of Chartered Accountants
of Indiaorganization because it is composed of a series of project groups or
collaborations linked by constantly changing non-hierarchical, cobweb-like
networks. The network structure becomes most useful when the environment
of a firm is unstable and is expected to remain so. Under such conditions, there
is usually a strong need for innovation and quick response. Instead of having
salaried employees, it may contract with people for a specific project or length
of time. Long-term contracts with suppliers and distributors replace services
that the company could provide for itself through vertical integration.
Electronic markets and sophisticated information systems reduce the
transaction costs of the marketplace, thus justifying a “buy” over a “make”
decision. Rather than being located in a single building or area, organization’s
business functions are scattered at different geographical locations. The
organization is, in effect, only a shell, with a small headquarters acting as a
“broker”, electronically connected to some completely owned divisions,
partially owned subsidiaries, and other independent organisation. In its
ultimate form, the network organization is a series of independent firms or
business units linked together by a common system that designs, produces,
and markets a product or service.Companies like Airtel use the network
structure in their operations function by subcontracting manufacturing to
other companies in low-cost.
The network organization structure provides an organization with increased
flexibility and adaptability to cope with rapid technological change and shifting
patterns of international trade and competition. It allows a company to
concentrate on its distinctive competencies, while gathering efficiencies from
other firms who are concentrating their efforts in their areas of expertise. The
network does, however, have disadvantages. The availability of numerous
potential partners can be a source of trouble. Contracting out functions to
separate suppliers/distributors may keep the firm from discovering any
synergies by combining activities. If a particular firm overspecialises on only a
few functions, it runs the risk of choosing the wrong functions and thus
becoming non-competitive.The new structural arrangements that are evolving
typically are in response to social and technological advances. While they may
enable the effective management of dispersed organizations, there are some
serious implications, The learning organization that is a part of new
organizational forms requires that each worker become a self motivated,
continuous learner. Employees may lack the level of confidence necessary to
participate actively in organization-sponsored learning experiences. The flatter
organizational structures that accompany contemporary structures can seem
intrusive as a result of their demand for more intense and personal
interactions with internal
and external stakeholders. Combined, the conditions above may create stress
for many employees.

Q31.Distinguish: blue ocean and red ocean?

Red Ocean Strategy Blue Ocean Strategy
1. Basis Business is done in the existing market place The idea is to create a new,
uncontested market place
2. Competition Approach of the strategy is to beat the competition. Approach
of the competition is make the competition irrelevant
3. Demand It uses to exploit the existing demand Creating new demand
4. Focus Company activities focus on the strategic choice between products'
differentiation or low cost Company activities aim at the pursuit of products'
differentiation and low cost
5. System Approach System approach is towards low cost and differentiation System
approach is towards creativity and innovation
6. Profit opportunity Profit Opportunity Profit opportunity of using Red Ocean Strategy is
low. Profit opportunity of using Blue Ocean Strategy is High.
7. Customer focus Focus is on existing stream of customers. Focus is on creation of
new customers
8. Importance of value-cost trade-off Important Not to relevant

Q32.Strategic canvass and value canvass?

Strategy canvass

Strategy canvas is one of the techniques used in Blue Ocean Strategy. It is a simple
and yet a powerful visualization methodology. It is a tool for visualizing competitive
differentiation and innovation opportunities. A strategy canvas is basically a line
graph that plots factors against importance for a company. It then overlays
competitors or industry benchmarks. In this way, information can be built to help
formulate a competitive strategy.
The strategic canvas uses two dimensions which are plotted in two axis. The
horizontal axis contains a list of factors that the industry competes on and invests in,
as well as potential areas were customer value could be created. The vertical axis
indicates the degree to which each competitor invests in each factor. To create the
strategy canvas, the company plots points for its current performance and all
competitors, and then “connect the dots” to create a series of lines that represents
the “value curve” for each company. The value curve is a part of the strategic canvas
and it graphically percentages the relative performance of the company as compared
to the competition factors of its industry. In this way, information can be built to help
formulate a competitive strategy.

The strategy canvas offers several advantages to strategists:

 ● It enable a company to quickly see own market areas as well as competitors
coverage
● It shows areas of divergence, where the company's strategy differs
significantly from that of its competitors
● It also helps to see “white space” opportunities for innovation and competitive
differentiation.
● Pin
The Value Curve
A Value Curve is a diagram which can be used to show instantly where value is
created within an organization’s products and services. The Value Curve shows
graphically the way the company configures its consumer offering. It is thus a
powerful tool to create new market spaces (blue ocean strategy). The Value Curve
Model can be used to instantly show where the aspect of value is created within the
organization’s offerings of products and services. It is one of the most powerful tools
to create new market spaces and graphically showcases the way company
configures its offerings to the target consumers.

The main purpose of the Value Curve Model is to show the current and existent
competition in the marketplace and how it is going to affect the company. It allows
the company to study the position of the competitors, where they are investing their
resources, the features of their product offerings, their unique selling propositions
etc.

The Value Curve Model allows the company to make use of this information to
create new and innovative offerings formulating new markets and
new demands which do not compete with the existing competitors. The model
graphically shows where the different product offerings compete within the same and
particular marketplace. Such information can be used to create new offerings which
do not compete with existing competitors, as they create new markets and new
demand.

When drawing a Value Curve the vertical axis represents the products available in
the marketplace, or the offerings available to the consumer. The horizontal axis
represents the factors the industry competes on. It also considers the range of
factors the industry invests in. A higher score represents the customer being offered
more, hence we can say that the company invests more in this area.

Example of value curve

The Value curve created by Apple when considering introducing the iPad to the
marketplace.
In this example, the market consists of two main types of competitors, netbooks and
tablet PCs. It can be seen that tablet PCs perform better across all the users
considering features, but this additional functionality results in a higher price tag.

The value Curve diagram after the introduction of the iPad is as under:

As seen in the diagram, Apple invested in creating a great user experience, with fast
Internet access and a long battery life. The real key to their success, however, was
in keeping the price point low by limiting the technology features in the device (not
competing in this area). This enabled them to create a new marketplace. Further, in
this strategy for the iPad, Apple did not try to satisfy everyone.

Q33.Priciple of blue ocean strategy?

Principles of Blue Ocean Strategy
The six main principles that guide companies through the formulation and execution of their
Blue Ocean Strategy are explained as under:
1. Reconstruct market boundaries- A Company needs to look what the market is doing and
competing on and create a strategy that is different than that of the rest of the market. This
principle suggests the need to develop a strategy that will create uncontested market space.
It identifies the paths by which managers can systematically create uncontested market
space. The six paths focus on looking across
• alternative industries- Companies must try to find alternative industries where
customers commonly seek substitutes or alternative to the company offerings. By focusing
on the key factors that lead buyers to trade across alternative industries and by eliminating
or reducing everything else, a company can create a blue ocean of new market space.
• Strategic groups- These are the groups within an industry that pursue a similar
strategy. Strategic groups are usually built on two dimensions, price and performance. Thus
by looking across strategic groups, an organization has to find why do buyers trade up for
the higher group, and why do they trade down for the lower one? For example, Toyota
implemented a new blue ocean by creating the Lexus, with the quality of the high-end
Mercedes, BMW and Audi at a price closer to the lower-end mid-class.
• buyer groups- There are a chain of buyers who are directly or indirectly involved in
the buying decision i.e. purchasers, actual users and influencers. By identifying a new
market group within the chain of buyers, a product can be repositioned to attract a new
group of buyers.
• complementary product and service offerings- A Company must identify and offer
other products and services that are required to use its products. For e.g. a petrol pump can
offer petrol as well as mechanical services.
• functional and emotional appeal for buyers- Companies must make use of functional
and/or emotional appeal to convince the target audience to buy their products.
• time/trends- Companies must create reactive strategies in order to adapt to the ever
changing business environment. Apple has used this strategy successfully. Google has
changed the ICT industry by adding cloud-based services.
2. Focus on the big picture, not the numbers- This principle illustrates how to design a
company’s strategic planning process to go beyond incremental improvements to create
value innovations. It presents an alternative to the existing strategic planning process, which
focuses on numbers and not on making incremental improvements. This principle tackles
planning risk. Using a visualizing approach that drives managers to focus on the big picture
rather than on numbers and jargon, this principle proposes a four-step planning process
whereby a company can build a strategy that creates and captures blue ocean
opportunities.
3. Reach beyond existing demand- This principle suggests that a company should focus on
reaching beyond existing customers. In other words, it must focus on how to get potential
future customers who are not currently purchasing the product. In other words, it
emphasizes on what is keeping the potential customers out of the market and make efforts
in reaching them.
4. Get the strategic sequence right- This principle describes a sequence which companies
should follow to ensure proper implementation of the blue ocean strategy. The sequence
includes
• Buyers utility- The product must provide exceptional utility to the customers
• Price- The product must be priced in a manner that it meets customer expectations
and demonstrate demand.
• Cost- The cost structure for delivering the product must allow for adequate profit
margin
• Adoption- The hurdles in executing the blue ocean strategy must be identified. For
instance, limited available resources, internal opposition etc.
5. Overcome key organizational hurdles- Tipping Point Leadership is the set of leadership
principles that allow managers to overcome execution hurdles fast and at low cost while
winning employees’ backing in executing a breakthrough strategy. Tipping point leadership
is based on the belief that in every organization, there are people, acts, and activities that
exercise a disproportionate influence on performance. It focuses on on conserving resources
and cutting time by focusing on identifying and then leveraging the factors of
disproportionate influence in an organization.
6. Build execution into strategy- For effective formulation and implementation of the blue
ocean strategy, fair process must be followed. Fair process is defined by three elements-
engagement, explanation and clarity of expectations.
Engagement means involving individuals in the strategic decisions that affect them. It
involves effective communication of management's goals and objectives. Explanation means
that everyone involved and affected should understand why final strategic decisions are
made. Expectation clarity requires that after a strategy is set, managers clearly state their
expectations from the employees.