MODULE 9: STRATEGIC MANAGEMENT

Quadrant 2

Animations:

1. Strategic Planning - Strategies Http://www.youtube.com/watch?V=kxanywaap0s

2. Alternative Competitive Advantage

Http://www.youtube.com/watch?V=qpu4v_Ae0Vc

3. Generic Strategies Mini-Lecture Http://www.youtube.com/watch?V=v14kuqyesxe

4. Porter's 5 Force Model Http://www.youtube.com/watch?V=pen1pvahssa

5. McDonalds SWOT Http://www.youtube.com/watch?V=qbyb0ht-dsk

6. SWOT Analysis - A Tool for Success

Http://www.youtube.com/watch?V=9n-ertzwu8i

7. Value chain Http://www.youtube.com/watch?V=heevocmbhhq

8. Strategic Planning For Your Business

Http://www.youtube.com/watch?V=gh6ej2mpvjy

9. Strategy Execution: It's Not That Complicated!

Http://www.youtube.com/watch?V=tqpofm0zdy4

10. Environmental Scanning Http://www.youtube.com/watch?V=LN03WRRlHwc

11. Strategy Formation Http://www.youtube.com/watch?V=zhuhoo8dbye

12. Environmental Analysis Http://www.youtube.com/watch?V=Q8Rur4nemik

13. Introduction to Strategic Management

Http://www.youtube.com/watch?V=rj2tmqrkicm

14. Strategize This! Strategy Evaluation and Control

Http://www.youtube.com/watch?V=nfklogzir4s

Illustrations:

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1. SWOT analysis example Http://som.csudh.edu/depts/cis/meyadat/classespage/CIS502/casestudies/SWOT%20Analysis%20Example.htm

2. Strategic management Https://www.google.co.in/search?Q=strategic+management+illustration&tbm=isch&tbo=u&source=univ&sa=X&ei=Jz_fuor_gsgprqfc1icgcg&ved=0ccoqsaq&biw=1092&bih=507

3. Strategic management Http://www.slideshare.net/anicalena/strategic-management-business-presentation-slides

4. A simplified approach tostrategic planning: Practicalconsiderations and anillustrated example

Http://www.emeraldinsight.com/journals.htm?Articleid=843496&show=html

5. A scenario-based approach tostrategic planning

Http://www.scenarioplanning.eu/fileadmin/user_upload/Scenario-based_strategic_planning_WP.pdf

Video demonstrations:

1. Strategic Management VideoLectures

Http://www.google.co.in/url?Sa=t&rct=j&q=&esrc=s&source=web&cd=17&ved=0cfyqfjagoao&url=http%3A%2F%2Ffreevideolectures.com%2fcourse%2F3014%2fstrategicmanagement&ei=6fiuutdjislwrqfd8oggbw&usg=afqjcnhfg2rcsqunacp_bcem1-l4gvj2_A

2. Michael Porter - Strategy Http://www.youtube.com/watch?V=kvywkm5by0s

3. Strategic Management -Part 1of 7

Http://www.youtube.com/watch?V=5_Uu1f0tSak

4. The evolution of strategicmanagement

Http://www.youtube.com/watch?V=tu6sqyawska

5. The Strategic ManagementProcess

Http://education-portal.com/academy/lesson/the-strategic-management-process.html#lesson

6. Strategic Planning: SWOT &TOWS Analysis

Http://www.youtube.com/watch?V=H8FANR-2u2q

7. Strategic Planning: PEST Analysisand Contingency Planning

Http://www.youtube.com/watch?V=tg2dlgtgcy8

8. Porter's Value Chain Http://www.youtube.com/watch?V=hkisczfhx80

9. Value Chains versus SupplyChains

Http://www.youtube.com/watch?V=mu9twlcjnkk

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10. Overview of the Strategic Planning Process

Http://www.youtube.com/watch?V=su3flxndv_A

11. Why Indians Win In Business Http://www.youtube.com/watch?V=rlricpsdg8w

Interactive simulation:

1. 15 Business Simulation Games Could Build Hands-on Business Experience

http://classroom-aid.com/2012/11/09/15-business-simulation-games-could-build-hands-on-business-experience/

2. Business simulation http://en.wikipedia.org/wiki/Business_simulation#External_links

3. Simulations - Harvard Business for Educators

http://hbsp.harvard.edu/list/simulations

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Quadrant 3

Questions:

Answer the following Questions on your own (Indicative/brief answers are provided at the end of the module):

1. Explain the various stages in strategic management process

2. Discuss PEST analysis with the help of an example

3. Highlight the characteristics of external business environment in India

4. List the macro-level factors that need to be considered while conducting economic analysis.

5. List the key technological factors that should be given due attention while conducting PEST analysis

6. List the key political factors that should be given due attention while conducting PEST analysis

7. What are the important social factors that should be given due attention while conducting PEST analysis

8. Discuss the seven factors to be analyzed while conducting industry analysis.

9. Explain the Porter’s five-forces model

10. What are the sources of information for conducting environmental analysis?

11. How do you structure environmental appraisal using ETOP approach

12. Discuss the construction of a BCG matrix that aids strategic decision making on various businesses

13. Describe the utility of TOWS matrix for choosing appropriate business strategy

14. Explain with examples, M.E. Porter’s three generic strategies

15. What are the functional prerequisites for implementing the generic strategies proposed by M.E.Porter?

16. What are the risks associated with the three generic strategies suggested by M.E.Porter

17. Discuss the structural- and process- related strategic response of firms vis-à-vis recent unprecedented changes in business environment

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18. Elaborate on how the choice of a strategy influences the design of organization structure

19. Discuss the two cooperative strategies firms adopt.

20. What are the prominent reasons for firms to get into strategic alliance? Explain.

21. Discuss the various types of strategic alliances.

22. How are Mergers and Acquisitions classified?

23. Discuss the strategic considerations in Mergers and Acquisitions

24. How do you distinguish between forward and backward integration?

25. How does a company make a strategic choice? Explain.

26. Discuss the steps involved in making an effective contingency plan

27. What are directional strategies? Give their classification.

28. Explain with examples, the integration and diversification strategies.

29. What are turnaround strategies? Explain.

30. What are the symptoms of a distressed firm? How does a turnaround strategy help?

Quizzes: (Solutions are provided at the end of the module):

Choose the Appropriate Answer:

1.

Strategic decisions are typically:

a) in the purview of top management

b) decisions having long term consequences for the organization

c) involve considerable amount of uncertainty

d) All the above

2.

Corporate strategy provides the overall plan of action for

a) a functional department

b) a diversified business enterprise

c) an enterprise with a single product line

d) corporators

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3.

Strategic business area of a firm is the

a) business area in which the firm perceives competitive advantage

b) group of all its business areas

c) area in which the firm can devise newer strategies

d) business area offering maximum profitability

4.

The primary purpose of environmental scanning in strategic management is to

a) know about the new entrants to business

b) ensure ecological balance in the long run

c) know about the opportunities and threats facing the firm

d) assess the competitors’ strengths

5.

The mission of Walt Disney’s theme park is to

a) provide unique guest experience

b) make more and more money

c) create more imaginative characters

d) beat the competition in the entertainment industry

6.

BCG matrix is a tool for analyzing

a) profitability of an industry

b) portfolio of investments

c) Growth rate of a market

d) Stability of business

7.

The three generic strategies namely, cost leadership, differentiation and focus are propounded by

a) Michael Porter

b) Peter Drucker

c) CK Prahlad

d) Gary Hamel

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8.

BCG approach suggests to milk ‘Cash cows’ as much as possible to invest the milked cash in

a) Some more Cash cows

b) Stars and Dogs

c) Stars and Question marks

d) Question marks and Dogs

9.

Which of the following is not a force in the Michael Porter’s Five forces model of Industry attractiveness

a) Bargaining power of suppliers

b) Competitors

c) Government laws

d) Scope for Substitutes

10.

Differentiation strategy of the firm requires it to

a) Seek high efficiency to attain low cost structure

b) be unique in its product offering

c) Seek cost advantage in a niche market

d) Grow faster than others

11.

The advantage of being the first-mover into a market is

a) Possible brand loyalty

b) low development costs

c) Certainty in technological success

d) lesser financial and strategic risks

12.

‘T’ in PEST analysis represents

a) Threat

b) Technological changes

c) Time

d) Tax

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13.

Telco’s entry into passenger car segment with Tata Indica is a:

a) Policy matter b) Strategic issue

c) Regular procedure d) A major program

14. To know an organization's strategy, one needs to

a) Understand the mission statement of the firm

b) Go through its strategic plan

c) Observe what it does over a reasonable period of time

d) Ask the corporate planners

15. Regional culture may be considered to be a part of ………………… aspect of macro-environment

a) Economic

b) Political

c) Social

d) legal

16. When a firm acquires its supplier, then it is called as ………………….. integration

a) forward vertical

b) horizontal

c) diagonal

d) backward vertical

17. Growth, retrenchment and stability can represent ……………… strategies

a) Business

b) Functional

c) Corporate

d) Sectional

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18. Adding new, unrelated products or services for present customers is …………….

a) Concentric diversification

b) Conglomerate diversification

c) Horizontal diversification

d) Product development

19. Managerial decisions that together determine the long-term performance of a firm constitute:

a) Corporate planning

b) Tactical planning

c) Strategic planning

d) Operational planning

20. Porter’s 5-forces model is meant to analyze

a) Within company situation

b) The relevant industry

c) General business environment

d) None of the above

21. ETOP in strategic analysis refers to

a) Economic and Technological Opportunity Profile

b) Environmental Threat Occurrence Prediction

c) Environment Threat Opportunity Profile

d) Economic Treaty Of Partnership

22. Tata motor’s acquisition of Jaguar Land Rover is with an intention of

a) Reducing financial risk

b) Reducing political risk

c) Gaining access to new market

d) Increasing production capacity

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23. A solar power company that produces photovoltaic products acquiring a firm that manufactures the cells, wafers and modules to create those products is an example for

a) Vertical backward integration

b) Conglomerate diversification

c) Concentric diversification

d) Vertical forward integration

24. A company producing finger chips diversifies into producing ketch-ups to be used with the chips is an example for

a) Vertical backward integration

b) Conglomerate diversification

c) Concentric diversification

d) Vertical forward integration

B. State Whether True or False:

1. Business strategies are derived from the corporate strategies

2. Policies suggest the purpose of a business

3. Strategic management is comprised of actions to improve short-term performance of the organization

4. A given external environment should present the same opportunities or threats to all the firms in an industry

5. A big tours and travels company when expands business by acquiring several fuel stations , it is called vertical backward integration

6. In BCG matrix, Star businesses represent businesses with larger market share in low growth market

7. Air Deccan company adopted cost-leadership strategy for its business growth

8. Environmental analysis intends to examine exclusively the environment outside the company

9. Merger of Air India and Indian Airlines to form Indian is an example of horizontal integration

10. Retrenchment is a Turn Around strategy

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11. Corporate strategies are for organizations that run more than one type of business units

12. Diversification is an example for retrenchment strategy

13. PEST analysis in strategic planning is about analyzing political, economic, social and technological environment

14. Porter’s 5-forces model involves analyzing the role of government

15. Businesses under the ‘Question mark’ category have a potential to gain market share and become stars

16. Collusion is a cooperative strategy that firms adopt to benefit from

C. Fill in the Blanks with Appropriate Words:

1. The activities of environmental scanning, strategy formulation, its implementation, evaluation and control together are referred to as …………………

2. The process of gathering information about the newer opportunities and threats to business is called ……………..

3. In a diversified business conglomerate, middle level managers have the responsibility for developing and implementing ……………… strategies

4. When a yarn manufacturing firm acquires textile producing facility, it is engaging in ……………………….. strategy

5. Anything a company can do which its competitors cannot or can do better than competitors is represents ………………….

6. Businesses with low market share in a mature, slow-growing market are identified as …………. in BCG matrix.

7. A firm diversifying (through acquisition or merger) into an entirely different market or product that has little or no synergy with its core business is an example for ……………… diversification

8. The process through which a potential acquirer evaluates a target company or its assets before acquisition is known as …………. .

9. Ferrari targeting high performance sports car segment is an example for ............. form of generic strategy

10. …………………. is the capability of a company to produce unique core products that support several end products

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D. Cross-word:

1 6 Left to Right

3 1. A generic strategy from ME Porter

1 2 2. 5-force analysis of industry was by …….

3. Acquisition of supplier or customer is ….

4. Businesses with larger market share in a high growth market are called …….. 4

2

Top to Bottom

3 5 1. Strategic planning starts with …….. analysis

2. Grand plan of action to realize objectives

3. When two or more companies blend wholly to form one new company, it is called

4. A legitimate cooperation between two or more companies for mutual benefit

4 5. A company needs to deflect/eliminate …….

6. Illegal cooperative strategy of firms to exploit market

Assignments:

(Answer the following questions with the help of web course material in Quadrant 1 and Supplementary reading material in Quadrant IV)

1. Why do you think Strategic Management is very important today?

2. Define strategy. What is strategic management?

3. Discuss the hierarchy of strategies for a business conglomerate

4. What are the global mega trends that have characterized today’s business environment? Explain.

5. Describe the mega trends that have characterized Asian business environment

6. How does BCG matrix analysis help prioritizing business efforts? Explain

7. Giving real life examples, illustrate the adoption of M.E. Porter’s generic strategies

8. Apply SWOT analysis for your engineering degree program in your college

9. Discuss any three key environmental factors that have a bearing on outsourcing business in India

10. Explain the Michael Porter’s five forces model to assess industry attractiveness

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11. What are strategic alliances? Describe a few commonly seen forms of alliances

12. Differentiate between joint venture and licensing forms of strategic alliances

13. How do you use impact matrix to analyze the impacts of various trends in the business environment on strategic alternatives?

14. How does a firm choose a strategy among several alternatives? Explain

15. Comment on the strategies relevant to various quadrants of TWOS matrix

16. How are business objectives and strategies related? Explain with an example

17. Differentiate between ‘cost leadership’ and ‘product differentiation’ strategies with the help of examples

18. Discuss the various dimensions of grand strategies namely, (i) Internal/external, (ii) Related/unrelated, (iii) Horizontal/vertical, (iv) Active/passive strategies.

19. Explain in detail the retrenchment strategies namely, turnaround, liquidation and divestment strategies.

20. What are the criteria to be considered while evaluating strategic choice?

21. How the strategy chosen would be implemented? Give the typical process of implementation.

22. List the various sources of information that can be used while conducting environmental scanning

23. Identify the key aspects/issues that need to be examined in technological, social, political and economic environments before contemplating on the development of any strategy.

24. Profile the major opportunities and threats present before Indian education industry

25. Fetch the financial statements of a company, compute the various financial ratios to assess a company’s financial capabilities

26. Choose a company that has imported technology, and delineate the actions that enabled it to absorb the same.

27. Examine how a Balanced Score Card approach integrates financial with non-financial measures while implementing business strategy

28. Construct a GE portfolio matrix for Samsung in the Smart phone industry and analyse the same

29. Discuss Mc Kinsey’s 7S model proposed for diagnosing organizational problems and formulating remedial programmes

30. Identify any one strategic group in the Indian health care industry and describe its

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characteristics.

31. With the help of examples, distinguish clearly between integration and diversification strategies

32. Examine the case of Maruti Udyog Ltd to understand the advantages and limitations of being the’ first mover’ in to Indian small car segment.

33. Conduct a SWOT analysis of your education institution

34. Discuss the Indian government’s strategy of divestment in Indian public sector companies

35. Analyze the fit between strategy and structure of a firm operating in rapidly changing business environment.

On-line feedback through discussion forums:

1. Strategic management forum http://www.smfi.org/

2. Strategic management forum http://strategicmanagementforum.org/

3. Strategic Management Society Discussion forum

http://forums.strategicmanagement.net/

4. Balanced Score Card Institute – Strategy Management Group

https://www.balancedscorecard.org/Resources/StrategicPlanningBasics/tabid/459/Default.aspx

5. A Harvard Law school forum http://blogs.law.harvard.edu/corpgov/2012/08/23/strategic-risk-management-a-primer-for-directors/

FAQs:

1. FAQs on Strategic Management http://www.pim.com.pk/faq.htm

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Quadrant 4

Supplementary reading:

1. Strategic management ppt http://www.iuc-edu.eu/group/mba_learning/2012STRATMAN/EV%20L1%20Introduction.pdf

2. Introduction to Strategic Management

http://www.introduction-to-management.24xls.com/en233

3. Strategic management www1.ximb.ac.in/users/fac/Amar/...nsf/.../NCS2-SM%20Evolution.ppt

4. Thinking strategically http://www.mckinsey.com/insights/strategy/thinking_strategically

5. Strategic Management - A Complete Study Guide

http://www.managementstudyguide.com/strategic-management.htm

6. SWOT Analysis http://www.mindtools.com/pages/article/newTMC_05.htm

7. SWOT Analysis http://www.quickmba.com/strategy/swot/

8. Industry analysis http://www.marsdd.com/articles/industry-analysis/

9. Value chain analysis https://www.inkling.com/read/strategic-management-david-14th/chapter-4/value-chain-analysis-vca

10. Value Chain Analysis for Assessing Competitive Advantage

http://www.imanet.org/PDFs/Public/Research/SMA/Value%20Chain%20Analysis.pdf

11. GE McKinsey matrix http://www.quickmba.com/strategy/matrix/ge-mckinsey/

12. BCG growth-share matrix http://www.strategicmanagementinsight.com/tools/bcg-matrix-growth-share.html

13. Enduring ideas - McKinsey 7S framework

http://www.mckinsey.com/insights/strategy/enduring_ideas_the_7-s_framework

14. Strategic thinking http://www.1000ventures.com/business_guide/crosscuttings/thinking_strategic.html

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Wiki development on the course/Other resources:

1. Strategic planning http://en.wikipedia.org/wiki/Strategic_planning

2. Business strategy: Overview of Business planning

http://en.wikibooks.org/wiki/Business_Strategy/Overview_of_Strategic_Planning

3. Everything about Global Strategic Alliances

https://www.google.co.in/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&cad=rja&ved=0CDIQFjAB&url=http%3A%2F%2Fwww.vedpuriswar.org%2Fbooks%2FGoingGlobal%2FChapter%252009_Partnering%2520for%2520competitive%2520advantage.doc&ei=afgxUuWhEMjorAfly4HgCA&usg=AFQjCNGZrY8YcAoXIP53Ne4eILgs23ieBw

4. Reading material about strategic thinking

http://www.1000ventures.com/business_guide/crosscuttings/thinking_strategic.html

5. SWOT analysis: the example of the Indian Library Association

http://www.ifla.org/node/5749

6. Global Strategic Alliances http://www.vedpuriswar.org/books/Glob_ceo/Chapter%207%20Global%20Strategic%20Alliances.doc

7. An overview of strategic alliances

http://www.ux1.eiu.edu/~cfyak/Articles/An%20overview%20of%20strategic%20alliances.pdf

8. Competitor analysis http://en.wikipedia.org/wiki/Competitor_analysis

9. Value chain http://en.wikipedia.org/wiki/Value_chain

10. GE multi-factoral analysis http://en.wikipedia.org/wiki/G._E._multi_factoral_analysis

11. BCG Matrix & GE/McKinsey Matrix

http://wiki.telfer.uottawa.ca/ci-wiki/index.php/BCG_Matrix_%26_GE/McKinsey_Matrix

12. BCG growth-share matrix http://en.wikipedia.org/wiki/Growth%E2%80%93share_matrix

13. McKinsey 7S framework http://en.wikipedia.org/wiki/McKinsey_7S_Framework

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Open content in the internet:

1. Course lecture through slides: Strategic Management: The Competitive Edge

Http://nptel.iitm.ac.in/courses/110108047/

2. MIT Open Courseware Lecture notes on Strategic Management

Http://ocw.mit.edu/courses/sloan-school-of-management/15-902-strategic-management-i-fall-2006/lecture-notes/

3. Strategic Management -NPTEL

Http://www.youtube.com/playlist?List=PL6NHntKSc5RyEZO7Zg8ir6CkzJnYHaQfp

4. Core- Strategic management -NPTEL

Http://www.youtube.com/playlist?List=PL03A70BC250C931F0

Case studies:

1. Strategic Management Case studies

Http://srinivasatimes.com/Strategic%20management%20case%20studies.pdf

2. A case study of Yahoo Http://www.academia.edu/3457826/A_case_study_of_Yahoo

3. Darkness to light : How a smart turnaround strategy helped Havells to make a comeback

Http://businesstoday.intoday.in/story/smart-turnaround-strategy-helped-havells/1/197235.html

4. Ebay: “The world’s largest online marketplace”- A Case Study

Http://dspace.iimk.ac.in/bitstream/2259/510/1

5. Strategic Management: A Case study of Walmart Inc

Http://www.articlesbase.com/strategic-planning-articles/strategic-management-a-case-study-of-walmart-inc-945260.html

6. Case Study: Maruti Suzuki Ritz – Live the moment

Http://www.indiasocial.in/case-study-maruti-suzuki-ritz-live-the-moment/

7. Http://www.tcs.com/sitecollectiondocuments/case%20studies/bancs_case_sbi.pdf

Case Study: State Bank of India, World's Largest Centralized Core Processing Implementation

8. Strategic Alliances and Joint Ventures in Civil Aviation – A Case study

Http://dspace.iimk.ac.in/bitstream/2259/490/1/309-322.pdf%20rel%3D%27nofollow%27

9. Strategic Alliance —Case Study of Lenovo and IBM

Http://edissertations.nottingham.ac.uk/973/1/07msclixlj2.pdf

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10. When Strategic Alliances Really Work - A Case Study

Http://www.synthesis.biz/synergies/blog/031313

11. Vision, values and business strategies

Http://businesscasestudies.co.uk/tesco/vision-values-and-business-strategies/introduction.html#axzz2gsvg4rqs

12. Fuelling the digital revolution – An Arm case study

Http://businesscasestudies.co.uk/arm/fuelling-the-digital-revolution/introduction.html#axzz2gsvg4rqs

13. Using PEST analysis to support decision making – A Johnson Matthey case study

Http://businesscasestudies.co.uk/johnson-matthey/using-pest-analysis-to-support-decision-making/introduction.html#axzz2gsvg4rqs

14. The acquisition of Dr Pepper/Seven-Up company inc A Cadbury Schweppes case study

Http://businesscasestudies.co.uk/cadbury-schweppes/the-acquisiton-of-dr-pepperseven-up-company-inc/introduction.html#axzz2gsvg4rqs

Anecdotal information:

1. 7 Concepts of Strategic Management - Illustration from Mahabharata

http://www.citehr.com/342866-7-concepts-strategic-management-illustration-mahabharata.html

2. Strategy Stories http://www.easy-strategy.com/strategy-stories.html

3. Winning mantra from the Mahabharata

http://www.slideshare.net/psudhir20/learn-winning-strategy-from-mahabharata-e-briks-infotech

4. Do You Know How to Learn Winning Strategy from Mahabharat

http://www.dailymotion.com/video/xxytu9_do-you-know-how-to-learn-winning-strategy-from-mahabharata-by-ebriks-infotech_tech

Historical development:

1. A video on the Evolution of Strategic Management by Dr. Michael J. Mol, Warwick Business School

Http://hstalks.com/main/view_talk.php?T=1824&r=534&j=767&c=250

2. Historical development of Strategic Management

Http://en.wikipedia.org/wiki/Strategic_management

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3. Business Strategy/History of Business Management until the 1970s

Http://en.wikibooks.org/wiki/Business_Strategy/History_of_Business_Management_until_the_1970s

4. The History of Strategic Management

Http://catalog.flatworldknowledge.com/bookhub/reader/3085?E=ketchen_1.0-ch01_s03

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MODULE 9: STRATEGIC MANAGEMENT

Answers to Questions and Quizzes of Quadrant 3

Answers to Questions: Answers are only brief and indicative. Expand on them as appropriate.

1. Strategic management process essentially involves four stages namely, a) Scanning the environment (Both external and internal environments)

° General external environment: Societal, technological, economic, regulatory, and competitive environment (PEST and ETOP analysis)

Industry and Competition analysis: Porter’s 5-forces model, Value-chain analysis, Strategic group analysis

° Internal environment: Organizational capability analysis (SWOT, TOWS and evaluation of organization structure and culture, and assessment of organizational resources.

b) Strategy formulation (Establishing mission and objectives, Corporate, Business and Functional strategies, and the related policies)

c) Strategy implementation (Preparation and implementation of programs i.e., activities needed to accomplish the plans; Budgets i.e., resource allocation for activities, and Procedures i.e. sequence of steps to be executed to complete the job. Creating necessary structure, processes and mechanisms to support implementation of the chosen strategy).

d) Evaluation and control of performance (Monitoring the performance/progress, Using feedback and control systems for analyzing the gap and take corrective actions).

2. Analyzing the components of external environment such as Political, Economical, Social and Technological components from the perspectives of business interest is known as PEST analysis. Usually this is intended for a long-term business analysis. Analyse the examples: a) A firm proposing to develop contraceptive pills for males b) Hindustan Aeronautical Limited engaging in the indigenous development of

Light Combat Aircraft.

3. External business environment in India is characterized by: a) complex and interactive relationships of too many factors (which have both

independent as well as interactive influences on the business outcome), b) dynamic influences of these factors (which keep changing in magnitude,

direction and rate over time), and c) multifaceted scenarios (with different environmental situations presents

opportunities for some, while threats for others)

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4. Some of the factors to be considered during economic analysis are:

° General economic conditions

° Economic conditions of different segments of population

° Trends in income distribution and consumer spending patterns

° Rate of growth of each sector of economy

° Rate of inflation

° Behavior of capital market

° Interest rate/exchange rate

° Tax rates

° Prices of materials/energy

° Labour scene

5. Important Technological factors to be considered are:

° Source of technology like company, external and foreign sources, cost of technology acquisition, collaboration and transfer of technology.

° Technological development, rate of change of technology and research and development.

° Impact of technology on human beings, the man-machine system and the environmental effects of technology.

° Communication, infrastructure and managerial technology.

6. The key political factors to be considered are:

° The political system and its features like nature of the political system, ideological forces of the political parties and sentries of power

° The political structure, its goals and stability

° Political process like party systems, elections, funding of elections and legislation in economic and industrial matters and regulations

° Political philosophy, role of government in business and its policy approach towards economic and business development

7. Important social factors to be considered are:

° Demographic characteristics

° Social concerns

° Social attitudes

° Family structure and changes in it

° Role of women in society, position of children and adolescents in family and society

° Educational level, awareness and consciousness of rights and work ethics of

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members of the society.

8. Seven factors to be analyzed during industry analysis are: a) General features and basic conditions of the industry (industry size, product

range, relative volumes, recent performance of the industry) b) Industry environment (fragmented, emerging, matured, declining, and global

industries) c) Industry structure (number of players, market size, relative shares of the player,

nature of the competition, differentiation practiced by the various players in the industry, cost structure of the players)

d) Industry attractiveness (industry potential, industry growth, industry profitability, future pattern of the industry barriers and forces shaping the competition

e) Industry performance (production, sales, profitability and technological development)

f) Industry practices (what a majority of the players do in the industry with respect to essential aspects of the business such as distribution, pricing, promotion, methods of selling, service field support, R&D and legal tactics)

g) Emerging trends and likely future (product life cycle, stage of the industry, rate of growth, changes of buyer needs, innovation in product/process, entry and exit of firms and emerging changes in the regulatory environment governing the industry.

9. Porter argues that there are five forces that determine the profitability of an industry. They are:

° Threat of industry,

° Bargaining power of suppliers,

° Bargaining power of buyers,

° Rivalry among existing players and

° Threat of substitute products. The collective strengths of these forces determines the ultimate profit potential in the industry, where profit potential is measured in terms of long run return on investment capital.

Threat of Potential entrants

Bargaining power of suppliers

Threat of substitutes

Bargaining powers of buyers

Competitors: Rivalry among existing

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10. Important sources of information for environment analysis include:

° Documentary and secondary (published) sources

° Mass media

° Internal sources of the company

° Industry associations, professional bodies

° Formal studies and surveys

° Corporate espionage and surveillance

11. We can use our personal/collective experience and judgement to identify and assess the overall influence of various factors under each dimension of the business environment so that a clearer picture of threat and opportunity presented by the environment can be obtained. This can be done by Environment Threat Opportunity Profile (ETOP) Pick a dimension of the business environment. Say, Political. Identify its subcomponents such as regulatory bodies, international pressure, stability of the government, etc. For each of these subcomponents, see if the impact on our business if favourable, neutral or unfavourable and indicate the influence by upward, horizontal and downward pointing arrows. This representation provides us a clearer picture of our business environment.

12. BCG matrix was created by Bruce D. Henderson for the Boston Consulting Group in 1970 to help corporations to analyze their business units, i.e. their product lines. To use the chart, analysts plot a scatter graph on which the business units (or products) are located on the basis of their relative market shares and growth rates of their respective markets. Four categories of businesses in the matrix are identified as follows: a) Cash cows: When a company has high market share in a slow-growing market.

These units typically generate cash in excess of the amount of cash needed to maintain the business. They are to be ‘milked’ continuously with as little investment as possible.

b) Dogs: These are units with low market share in a mature, slow-growing market. These units typically ‘break even’, generating barely enough cash to maintain the business’s market share. They depress a profitable company’s return on assets ratio and they may be sold off.

Relative market share

High Low

Market growth rate

High Stars Question Marks

Low Cash cows Dogs

c) Question marks: These are business operating in a high growth market, but having a low market share. They are a starting point for most businesses. Question marks have a potential to gain market share and become stars, and eventually cash cows when market growth slows. They must be analyzed in order to determine whether they are worth the investment required to grow

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market share. d) Stars: These are units with a high market share in a fast-growing industry. They

are graduated question marks with a market or niche leading trajectory. Stars require high funding to fight competitions and maintain a growth rate.

13. TOWS matrix is used to analyze the strategy development situation. The information/data on the threats and opportunities facing the firm, and internal strengths and weaknesses of the firm are gathered. They are plotted as shown in the table below and analyzed. Strategies are worked out by matching the opportunities and threats with internal strengths & weakness to gain advantages to the firm.

Internal environment

Strengths (ex. Resources, core competence)

Weaknesses (lack of resources and competence)

Exte

rnal

env

ironm

ent

Opportunity (due to conditions of economy, technology, society, politics, legal environment, etc.)

S-O: Maxi-Maxi strategy, Maximise both strengths and opportunities, Encash the opportunities using strengths.

W-O: Min-Maxi strategy, Minimise weaknesses and Maximise opportunities. Utilize opportunities to minimise weaknesses (say, through acquisition, merger, joint ventures, training, etc.).

Threat (due to competition, depleting resources, Govt policies, environmental & Technological changes, etc.)

S-T: Maxi-Min strategy, Maximise strengths and Minimise threats. Use strengths to deflect or cope up with threats.

W-T: Min-Min strategy, Minimise both weaknesses and threats.

Minimise weaknesses by liquidating, retrenching, etc. to eliminate/reduce the threats.

14. Michael Porter suggested 3 generic strategies for use by business units. They are: a) Overall cost leadership: Drive down cost based on experience. Objective is to

have lowest cost structure in the market. Eg. HLLs Wheel powder v/s surf excel

Air Deccan’s low cost air travel v/s others

b) Differentiation strategy : Offer something unique in the product and process which others cannot offer. Eg. Hero Honda - mileage

Microsoft - user friendliness Xerox- quality (min number of defects)

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c) Focus strategy: Focus on a special group of customers or a particular product line or a specific region and concentrate all resources and efforts. This may be achieved through cost leadership or differentiation strategies. Eg. HDFC - Housing fiancé

Sony - Elite customers NIKIE - Sports shoes

15. The following table indicates the prerequisites for implementing Porter’s generic strategies.

Generic strategy

Commonly required skills and resources

Common organizational requirements

Overall cost

leadership

• Sustained capital investment and access to capital

• Process engineering skills

• Intense supervision of labour

• Products designed for ease in manufacture

• Low cost distribution system

• Tight cost control

• Frequent detailed control reports

• Structured organization and responsibilities

• Incentives based on meeting strict quantitative targets

Differentiation • Strong marketing abilities

• Product engineering

• Creative flair

• Strong capability in basic research

• Corporate reputation for quality or technological leadership

• Long tradition in the industry or unique combination of skills drawn from other businesses

• Strong cooperation from channels

• Strong coordination among functions in R&D, product development and marketing.

• Subjective measurement and incentives instead of quantitative measures

• Amenities to attract highly skilled labor, scientists or creative people

Focus • Combination of the above policies directed at the particular strategic target

• Above policies directed at the particular strategic target

• Combination of the above policies directed at the particular strategic target

16. Risks associated with the three generic strategies: a) Overall cost leadership: A firm may have achieved this by economies of scale or

learning curve effects, or advanced technology, etc. It may not be easy to sustain cost leadership for long.

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The risks associated with this strategy are: (i) newer technological development may eliminate/reduce our advantage due

to economies of scale and learning curve effects; (ii) other areas of advantage such as product improvement and market

development may be missed due to overemphasis on cost reduction; (iii) inflation in the economy may offset the advantage; (iv) competitors can cut costs learning inexpensively from the leaders’

experiences. b) Product differentiation: If the cost of maintaining the differentiation is very

high, this strategy cannot be easily sustained. Imitation by competitors may reduce differentiation. Buyers’ need for differentiation reduces as their needs change.

c) Focus: Technological developments may eliminate the advantage of focus. Competitors may enter our focused market or attempt to subdivide the market. Cost differential of the focusing player relative to others may widen so that the market niche slowly disappears.

17. The recent unprecedented changes in the business environment include globalization, liberalization, rapid increase in the supply of and demand for technological knowledge, and dramatic expansion of markets. In a bid to survive, grow and prosper, business firms are responding to such changes by modifying their structure and processes as follows: Structure related responses include: a) creation of strategic business units, b) matrix structure to handle multiple projects effectively and efficiently, c) de-layering and flattening the organization to speed up organizational response

to changes. Process related responses include: a) Quality Strategies - international quality certification programmes, b) Just-in-time Inventory c) Benchmarking d) Building Core Competencies e) Setting Vision & Mission, f) Cost & Asset Utilization Strategies, g) Technological Up-gradation & Indigenization h) Information Technology i) Research & Development j) Marketing Strategies, k) Project Management

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18. Implementation of strategy requires right structure that balances the need for specialization with the need for integration. Strategy determines the product portfolio, scale of production, technology, degree of centralization, market focus, etc. all of which in turn determine the structure. In general, strategy i) determines organizational tasks, the way they are to be grouped and the manner

in which they are to be aligned with the market needs. ii) influences the choice of technology and people responsible for the

accomplishment of tasks and iii) determines degree of centralization/decentralization iv) determines the specific environment within which the organization will operate All these, in turn, influence the design and operation of the organization structure

19. The two cooperative strategies firms adopt to benefit from are: a) Collusion: Illegal arrangement/agreement (may be explicit or implicit) between

companies to collude together to reduce output so as to decrease supply and thereby increase price of the product/service (Example: Oil producing companies can reduce their output to increase the price of oil)

b) Strategic alliance: A strategic alliance is the legitimate cooperation between one or two companies to achieve the mutually beneficial strategic objectives.

20. Some of the reasons for strategic alliance are: a) To obtain technology or manufacturing capabilities (HCL with HP) b) To obtain access to specific markets (Tata-Jaguar, Mobil with BP) c) To obtain access to local distribution network (P&G with Godrej) d) To reduce the financial risk (Collaborative research of Siemens and Philips) e) To access additional financial resources (Nissan with Renault) f) To reduce political risk (Suzuki with Maruti Udyog) g) To achieve or ensure competitive advantage (Arcelor- Mittal steels)

21. Types of strategic alliances include: Formal alliances:

° Consortia

° Joint venture

° Franchising

° Licensing

° Subcontracting

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Informal alliances: These may vary in degree of relationship

22. Broadly, Mergers and Acquisitions (M&A) can be classified as: 1. Related v/s Unrelated 2. Horizontal v/s Vertical:

Horizontal M/A: This happens when both acquiring and acquired firms are in the same industry (Eg. Merger of two or more petroleum refining firms). This may enhance economies scale, reduce cost, facilitate access to modern technology and skilled HR, etc.) Vertical M/A: This occurs when one firm is a supplier or customer to the other (Eg. Yarn supplier merging with textile manufacturing firm), This may reduce operating cost, control over input quality, delivery time, market, etc.)

23. The predominant strategic considerations in M&A are: a) fit with mission and strategy b) fit with portfolio strategy c) competitive impact d) scale economies and synergy e) preemptive motive f) comparison with establishment of new unit g) long-term financial considerations h) tax shields and i) strengthening ownership control and guarding against acquisition

24. Backward integration: Owning a business that supplies input material/components to the current business. Example: Textile manufacturer developing/acquiring a business that produces yarns. Forward integration: Owning a business that consumes the output of the current business. Example: A textile manufacturer launching readymade garment production too.

25. Strategic choice is the evaluation of alternative strategies and selection of the best alternative. With firms conscious of the realities of a dynamic world arriving at the strategy through consensus gives way to strategic choice by extensive and conflicting arguments. Making a strategic choice is essentially a decision making process. It consists of the following four steps. a) Focusing on strategic alternatives b) Choosing the selection criteria and evaluation of alternatives (objective as well

as subjective) c) Making the choice among available alternatives (based on judgement,

experience, and research) d) Prepare the strategic plan for implementation (also a contingency plan)

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26. Steps involved in contingency planning are: a) Identify the events favorable and unfavorable to the firm’s strategy b) Specify trigger points c) Assess the impact of each contingent event d) Develop contingency plans as compatible with current strategies e) Determine the potential value of each plan f) Determine and monitor the early warning signals g) Develop advance action plans for contingent events with reliable early

warnings.

27. A directional strategy is often developed with a focus on one or more of the three directions: Stability, Growth and Retrenchment. Once the business needs are assessed, the firm can choose the type of directional strategy that suits its needs. Without a directional strategy, companies may lose sight of their goals and objectives. They are categorized into three groups namely, (i) Growth (ii) Stability and (iii) Retrenchment strategies.

Growth Stability Retrenchment

Concentration(integration):

° Vertical growth ° Horizontal growth

Diversification:

° Concentric ° Conglomerate

° Pause/proceed with caution

° No change ° profit

° Turnaround ° Captive company ° Sell-out/Disinvestment ° Bankruptcy/liquidation

28. Concentration(integration): Vertical Integration: This happens when a company integrates into its business, firms that are on the same value chain. i.e., when a manufacturer integrates with its supplier and/or distributor. Vertical integration can help companies reduce costs and improve efficiency. Eg. A solar power company that produces photovoltaic products acquires a firm that manufactures the cells, wafers and modules to create those products. Horizontal integration: This happens when the company acquires businesses that are at the same level of the value chain in similar or different industries. This can be achieved by internal or external expansion. Because the firms are operating in the same stage of production, their integration allows them to share resources at that level. Eg. An oil company acquiring additional oil refineries.

Diversification: Concentric diversification (also called related diversification strategy): This occurs when a company expands by entering into an industry related to its current operations. Companies implement this strategy to attain synergy, which occurs

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when related businesses perform better as a whole than as the sum of their parts, through sharing resources, combining operations and transferring knowledge. Eg. A company producing finger chips diversifies into producing ketch-ups to be used by the same customers with the chips. Conglomerate diversification: This occurs when a firm diversifies (through acquisition or merger) into an entirely different market or product that has little or no synergy with its core business. The main reasons for adopting such a strategy are first to improve the profitability and the flexibility of the company, and second to get a better reception in capital markets as the company gets bigger. Eg. ITC Ltd. acquiring businesses in the areas of tourism, edible oils, etc.

29. Turnaround strategy means plan of action to turn the business from negative (loss-making) to positive (profit making). It is an action plan that can give struggling businesses the guidance and direction they need to get revitalized. The aim is to return an underperforming or distressed company to normal in terms of acceptable levels of profitability, solvency, liquidity and cash flow.

30. The symptoms of a distressed firm include:

° Persistent negative cash flows

° Negative profits

° Declining market share

° Deterioration in physical facilities

° High turnover, low morale, Mismanagement

° Uncompetitive products, sick company The turnaround strategy aims to reverse the negative trend in the performance of the firm.

Answers to Quizzes:

A. Choose the Appropriate Answer

1. d 9. c 17. c

2. b 10. b 18. b

3. a 11. a 19. c

4. c 12. b 20. b

5. a 13. b 21. c

6. b 14. b 22. c

7. a 15. c 23. a

8. c 16. d 24. c

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B. State Whether True or False

1. True 9. True

2. False 10. True

3. False 11. True

4. False 12. False

5. True 13. True

6. False 14. False

7. True 15. True

8. False 16. True

C. Fill in the Blanks

1. Strategic Management 9. focus

2. environmental scanning 10. core competence

3. business

4. vertical forward

5. distinctive competence

6. Dogs

7. conglomerate

8. Due diligence

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D. Cross-word:

S C Left to Right

W M O 1. Porter’s Generic strategy

F O C U S E L 2. 5-force analysis of industry was by …….

T T R L 3. Acquisition of supplier or customer is ….

R G U 4. Businesses with larger market share in a high growth market are called …….. A E A S

P O R T E R L I

E L O Top to Bottom

I N T E G R A T I O N 1. Strategic planning starts with …….. analysis

H Y A 2. Grand plan of action to realize objectives

R N 3. When two or more companies blend wholly to form one new company, it is called

E C 4. A legitimate cooperation between two or more companies for mutual benefit

S T A R S E 5. A company needs to deflect/eliminate …….

T 6. Illegal cooperative strategy of firms to exploit market

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