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STRATEGIC MANAGEMENT APRIL/MAY(2011)

PART - A

1.Define Strategic Management.

Thesystematicanalysis of thefactorsassociated withcustomers andcompetitors (theexternal

environment) and theorganization itself (theinternal environment) toprovide the basis for

maintainingoptimummanagementpractices. Theobjective ofstrategic management is

toachievebetteralignment ofcorporate policies andstrategic priorities. (or)

Strategic management is a level of managerial activity below setting goals and above tactics.

Strategic management provides overall direction to the enterprise and is closely related to the

field ofOrganization Studies. In the field of business administration it is useful to talk about

"strategic consistency" between the organization and its environment or "strategic consistency."

2. What is social Responsibility?

Actions that appear to further some social good, beyond the interests of the firm and the

which is required by law.

3. How is Industry Analysis carried out?

An examination of the important stakeholder groups, such as suppliers and costumers, in a

particular corporations task environment is a part of industry analysis.

4. Give the Strategic Business Units.

An autonomousdivision ororganizational unit,small enough to be flexible and large enough

toexercisecontrol over most of thefactors affecting itslong-termperformance.

Because strategic businessunits are more agile (and usuallyhaveindependentmissions andobjectives), they allow theowningconglomerate to respondquickly to changing economic ormarket situations.

5. What is Backward Integration?

Type ofvertical integration in which aconsumer ofraw materials acquires itssuppliers,

orsets up its ownfacilities to ensure a more reliable or cost-effectivesupply of inputs. (or)

A form of vertical integration that involves the purchase of suppliers. Companies will pursue

backward integration when it will result in improved efficiency and cost savings. For example,

backward integration might cut transportation costs, improve profit margins and make the firm

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/www.businessdictionary.com/definition/analysis.htmlhttp://www.businessdictionary.com/definition/systematic.html

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PART - B

11. (a) Explain the steps involved in formal Strategic Planning Process.

MISSIONAndGOALS

SWOT

Anal sis

International Analysis

STRENGTHS & WEAKNESS

External Analysis

OPPORTUNITIES & THREATS

Business Level Strategy

Global Level

Functional Level

Corporate Level

International Analysis

STRENGTHS & WEAKNESS

Designing

Control

S stems

Matching Strategy Structure

And

Control

Designing

Organization

Structure

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11.(b) Discuss the components of Corporate Governance.

Corporate governance is the mechanism established to allow different parties to contribute

capital, expertise and labor for their mutual benefit. The investor/shareholder participates in the

profits of the enterprise without taking responsibility for the operations. That involvement does

include, however, the right to elect directors who have a legal duty to represent the shareholders

and protect their interests. As representatives of the shareholders, directors have both the

authority and the responsibility to establish basic corporate policies and to ensure that they are

followed. The term corporate governance refers to the relationship among these three groups in

determining the direction and performance of the corporation.

1. Setting corporate strategy overall direction,mission, or vision

2. Hiring and firing the CEO and top management

3. Controlling, monitoring, or supervising top management

4. Reviewing and approving the use of resources

5. Caring for shareholder interests

Role of the Board in Strategic Management

How does a board of directors fulfill these many responsibilities? The role of the board of

directors

Monitor Evaluate and influence Intiate and determine

Board of Directors Continuum

Aboard of directors is involved in strategic management to te extent that it carries out the

three tasks of monitoring, evaluating and influencing, and initiating and determining.

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12. (a) Describe the forces for driving industry competition as per Michael

E.Porter model.

Threat of new

Entrants

Relative Power of

Union govt.etc

Bargaining Power Of Buyers.

Bargaining power

of suppliers.

Threat of substitute

Products or services

12.(b) Describe the steps in Strategy formulation with core competency.

Strategy formulation refers to the process of choosing the most appropriate course of action forthe 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 toset the long-term objectives of the organization. It is known that strategy is generally a

medium for realization of organizational objectives. Objectives stress the state of being

there whereas Strategy stresses upon the process of reaching there. Strategy includes boththe fixation of objectives as well the medium to be used to realize those objectives. Thus,

Potential Entrants

Industry

Competitors

Rivalry Among

Existing Firms

Buyers

Other

Stake holders

Suppliers

Suppliers

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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 easyto take strategic decisions.

2. Evaluating the Organizational Environment -The next step is to evaluate the generaleconomic and industrial 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 marketcan 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 opportun ities of threats to its

market or supply sources.

3. Setting Quantitative Targets - In this step, an organization must practically fix thequantitative target values for some of the organizational objectives. The idea behind thisis 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 byeach 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 thegap 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 thatpersists 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 ofaction is actually chosen after considering organizational goals, organizational strengths,

potential and limitations as well as the external opportunities.

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13.(a) Explain the dimension in Corporate Strategy.

The overallscope and direction of acorporation and the way in which its variousbusiness

operationswork together toachieveparticulargoals.

Dimension in Corporate Strategy:

Field

Foundation Function

13.(b) Discuss the different types of Strategic Alliance with example.

A strategic allianceis an agreement between two or more parties to pursue a set of agreed

upon objectives need while remaining independent organizations. This form of cooperation lies

betweenM&A and organic growth.

Partners may provide the strategic alliance with resources such as products, distribution

channels, manufacturing capability, project funding, capital equipment, knowledge, expertise, orintellectual property. The alliance is acooperation orcollaboration which aims for

asynergy where each partner hopes that the benefits from the alliance will be greater than those

from individual efforts. The alliance often involvestechnology transfer (access to knowledge and

expertise),economic specialization,[1]

shared expenses and shared risk.

Types of Strategic Alliance

Corporate

Coherence

Corporate

Rules

Corporate

Scope

Corporate

Synergy

Corporat

e Control

Corporate

Responsiv

eness

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exporting licensing, including franchising Equity joint ventures Wholly owned foreign subsidiaries

Advantages

The advantages of forming a strategic alliance include:

Allowing each partner to concentrate on their competitive advantage. Learning from partners and developing competencies that may be more widely exploited

elsewhere.

Adequate suitability of the resources and competencies of an organization for it to survive. To reduce political risk while entering into a new market.DisadvantagesRisk of losing control over proprietary information, especially regarding complex

transactions requiring extensive coordination and intensive information sharing.

Coordination difficulties due to informal cooperation settings and highly costly disputeresolution.

Agency costs:As the benefit of monitoring the alliance's activities effectively is not fullycaptured by any firm, afree rider problem arises (the free rider problem seems to be less

pronounced in settings with multiple strategic alliances due to reputational effects).

Influence costs because of the absence of a formal hierarchy and administration within thestrategic alliance.

Stages of Alliance Formation

A typical strategic alliance formation process involves these steps:

Strategy Development: Strategy development involves studying the alliances feasibility,objectives and rationale, focusing on the major issues and challenges and development of

resource strategies for production, technology, and people. It requires aligning alliance

objectives with the overall corporate strategy.

Partner Assessment: Partner assessment involves analyzing a potential partners strengthsand weaknesses, creating strategies for accommodating all partners management styles,

preparing appropriate partner selection criteria, understanding a partners motives for joining

the alliance and addressing resource capability gaps that may exist for a partner.

Contract Negotiation: Contract negotiations involves determining whether all parties haverealistic objectives, forming high calibre negotiating teams, defining each partners

contributions and rewards as well as protect any proprietary information, addressing

termination clauses, penalties for poor performance, and highlighting the degree to which

arbitration procedures are clearly stated and understood.

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Alliance Operation: Alliance operations involves addressing senior managementscommitment, finding the calibre of resources devoted to the alliance, linking of budgets and

resources with strategic priorities, measuring and rewarding alliance performance, and

assessing the performance and results of the alliance.

Alliance Termination: Alliance termination involves winding down the alliance, forinstance when its objectives have been met or cannot be met, or when a partner adjustspriorities or re-allocates resources elsewhere.

Strategy Development

Features common to transactions that are natural candidates for strategic alliances are:

High impediments to comprehensive contracting resulting in a major degree of contractincompleteness

High complexity minimizing the auxiliary potential of the body of law for resolving issuesnot specified in the contract

Both allies have to invest in relationship-specific assets resulting in potential formutualhold-ups

Excessive cost for one party to develop the expertise to carry the transaction itself (e.g. duetoexperience curve)

Transitory or uncertain character of market opportunity making a merger or verticalintegration unattractive

Need for a local party in a country due to regulatory environment (as is often the case inChina)

14.(a) Explain the steps in strategic implementation.

Strategy implementation is the translation of chosen strategy into organizational action so

as to achieve strategic goals and objectives. Strategy implementation is also defined as themanner in which an organization should develop, utilize, and amalgamate organizational

structure, control systems, and culture to follow strategies that lead to competitive advantage and

a better performance. Organizational structure allocates special value developing tasks and rolesto the employees and states how these tasks and roles can be correlated so as maximize

efficiency, quality, and customer satisfaction-the pillars of competitive advantage. But,

organizational structure is not sufficient in itself to motivate the employees.

An organizational control system is also required. This control system equips managers with

motivational incentives for employees as well as feedback on employees and organizational

performance. Organizational culture refers to the specialized collection of values, attitudes,norms and beliefs shared by organizational members and groups.

Follwoing are the main steps in implementing a strategy:

Developing an organization having potential of carrying out strategy successfully.

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Disbursement of abundant resources to strategy-essential activities.

Creating strategy-encouraging policies.

Employing best policies and programs for constant improvement.

Linking reward structure to accomplishment of results.

Making use of strategic leadership.

Excellently formulated strategies will fail if they are not properly implemented. Also, it is

essential to note that strategy implementation is not possible unless there is stability between

strategy and each organizational dimension such as organizational structure, reward structure,resource-allocation process, etc.

Strategy implementation poses a threat to many managers and employees in an organization.New power relationships are predicted and achieved. New groups (formal as well as informal)are formed whose values, attitudes, beliefs and concerns may not be known. With the change in

power and status roles, the managers and employees may employ confrontation behaviour.

14.(b)Enumerate various techniques for strategic evaluation and control.

i. Determine what to measure

ii. Establish standards of performance

iii. Measure actual performance

iv. Compare actual performance with standard

v. Take corrective action

15(a). Explain the strategic management process In Non-Profit Organization.

NPO : By definition, non-profit organizations such as government agencies, universities and

charities are not in business to make profits.

Impact on strategy Formulation

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- Goal conflict with rational planning.

- An integrated planning focus shifting for results to resources

-Ambiguous operating objectives

-Rigid Professionalization

Impact on strategy Implementation

- Decentralization complicated

- Linking pin for externalinternal integration

- Job enlargement and executives development restrained by professionalization

Impact of evaluation and Control

- Rewards and penalties have little or no relation to performance

- Inputs rather than are heavily controlled

15 (b). Discuss the sub stages of Small Business Development.

The implementation problems or small business change as the company grows and develops over

time. Just as the decision-making process for entrepreneurial ventures is different from that of

established business, the managerial systems in small companies oftern vary form those of largecorporation. In attempting to show clearly how small business develop, chruchill and Lewis

propose five sub stages of small business development.

Stage A : Existence

Stage B : Survival

Stage C : Success

Stage C1 : Disengagement

Stage C2 : Growth

Stage E : Take-Off

Stage F : Resources Maturity