Subject code & name MB0052- Strategic Management and Business Policy

1 What is strategy(S)? Explain various level of S in an organization.

a) S comes from Greek word .It r.t military general & combines stratus (the army)
and ago (to lead). Its concept started in the military& over time, it entered
Business.Its & military S is to secure competitive advantage over rivals.
Seven definitions of S are as
As per Chandler (1962),we adopt courses of action for carrying out firms
goals.
As per Andrews (1962) ,plans for achieving goals are stated in such a way so
as to define what business co is .
As per Ansoff (1965),common thread among firms task &product-markets ...
that defines nature of business.
As per Glueck (1972), with unified & integrated plan,we get our goal.
As per Mintzberg (1987),intended S & emergent S are different.
As per Ansoff (1984), S is a set of rules.
As per Porter (1996),Develop & communicate firms unique position via S .

b) Levels of S
Strategies(S) exist at different levels in firm.Its 3 levels are as
i) Corporate S(CS) i) Strategic Business Unit(SBU) i) Functional or operational
S(FS)
CS are concerned with overall purpose or objective of firm;e.g, diversification through
JV, merger or acquisition.
SBU address themselves to issues of particular business unit or product group of
firm S for product development &identification & exploitation of new market
opportunities.
FS concentrate on particular F like manufacturing,marketing, logistics, etc.
For single-business firm, CS & SBU may not be much different. But for multi-
business firm
like Unilever (or its subsidiary Hindustan Unilever), SBU would be quite distinct from
CS. FS,however, would be common in both firm. 3 levels of S are not isolated: these
S support, complement or reinforce each other for the achievement of organizational
objectives.
2Q Specify the interrelationship between strategic planning(SP) & strategic
Management(SM). Which comes first?
a) SM as a discipline originated in the 1950s &60s. Although many who
contributed to its literature are , Philip Selznick, & Peter Drucker & some
as below:

As per Gluek W F,it is a stream of decisions &actions which lead to the

development of an effective S to help achieve corporate objectives. As
per Mr. Ansoff H L it is a systematic approach to key role of GM to
position &relate firm to environment

in a way which will assure its continued success & make it secure from
surprises.

As per Chandler it is determination of basic long-term goals & adoption

of course of action & allocation of resources needed to carry out these
goals.

As per Arthur Sharpline it is formulation &

implementation of plans & carrying out of activities relating to vital or

pervasive or continuing.

As per Paine & Naumes , it has wider ramifications &long time

perspective&

use of critical resources towards perceived opportunities or threats in a

changing environment.

Dr. Jagdish Sheth is respected authority on SP.As per Steiner, 1979 , it

does not try to make future decisions .It is useful only when it acts as a
supporting tool for strategic thinking &then leads to SM. It involves
anticipating the future, but decisions are made in the present. It is a tool
but it is not a substitute for the exercise of judgment by leadership.

Just as the hammer does not make shelf, so data analysis & this tools do
not make firm work .It can only support the intuition, reasoning skills, &
judgment that people bring to their firm.It is highly creative process &
fresh insight arrived at today may change the decision made yesterday.
Here we move forward & backward many times before arriving at the
final set of decisions.

So ,SM comes 1st It implements decisions about future &identify direction

in which firm is moving.It evaluates & controls the business, industries ,its
competitors .It sets goals to meet all existing and potential competitors &
then re-evaluates them on a regular basis to determine if to control or
benchmark.It keeps a continuous eye on the goals & objectives of firm.It
integrates various functions of firm completely, & ensure that these
harmonize & get together well.It needs total involvement of the Top . It
covers entire firm & also deals with a section or a department of the firm.
It aims to address current problems only.It demands foresight on the part
of the management and involves risk. No risk or mental tension is
involved in managing it. With it we can decide on areas as capital
investment, mergers etc.It is adaptive. Effective SM enable firms to move
quickly in response to new challenges, & replace out-dated ideas .It is not
magic. It involves analytical thinking .Its success or failure relies on many
extraneous factors also.

3 What is a mission statement(MS)? Differentiate between MS &vision statement(VS).

Ans:-
We have some purpose to do business.Purpose includes VS, MS, goal
etc. Purpose is entwined with VS & MS .
MS is a subset of its VS. Former is based on vision & links existing
business with future business. It is prepared after careful seeing present,
focussing on long term benefits. It must also focus on factors, which
impact S.It is guiding light for every e .It answers Question,
What is firms business? while vision answers Q,
What does firm want to become?
MS create brand image .Mi must be clear, enduring, realistic,& specific. It
should reflect the values, beliefs and philosophy of the company. E.g,
Asian Paints wants to ldr through Excellence

V is reason for existence of firm & is an insight into future. S does not
provide details of course of action. S is umbrella for allocating resources.
V is unchanging & maintains fundamental values of firm. It creates route
map for future, as it clarifies intention of firm & provides path for
connecting firm to society at large. It also clarifies direction taken by firm
to its employees(e)& this enables every e to contribute to it.

V combines 3 basic elements - our reason for existence, its core values
&the huge but achievable goals, which we have set for future.It needs to
be descriptive and reachable. It spells out core purpose e.g, Nike provide
experience of emotion of competition.
Once specialist asked 40 mgrs about V. No one raised a hand. He then
told them that they could strive toward greatness without V. He told
them that we can survive without V but can't expect to great.As per Burt
Nanus , V must be a realistic, credible.
e.g if we re developer for software firm that has carved out a small niche
& has a 1.5 % share ,V to overtake Microsoft & dominate software mkt is
not realistic!
V generates enthusiasm. It creates meaning in e' s lives. E.g difference
b/w hotel service e who can only say, "I make beds & clean bathrooms,"
other say, "I'm part of a team in providing quality service." Work is same,
but context & meaning is different.

4 What is SWOT analysis? Explain SWOT analysis in the form of a matrix?

ETOP & EFEM focus only on the opportunities and threats.But, to exploit an
opportunity or to consider a threat, firm should have required strengths or
competence. Firm also needs to know its weaknesses in terms of competence, as
weaknesses may affect its capability to take
advantage of an opportunity or negotiate a threat. So, simultaneously with
EA firm also need to assess their internal strengths and weaknesses. This is done
through SWOT analysis. SWOT, is acronym where: S Strengths W
Weaknesses , O - opportunity
T Threats.
Firm have been using SWOTA for long, whether for general business S or for
marketing S. In SWOT, S and W relate to internal competence factors,& O and
T pertain to external environment. S is a resource, skill, capability or any other
advantage relative to competitors and in relation to markets. A weakness is a
limitation or deficiency in resource, skills and capabilities or any other disadvantage
relative to competitors which impedes performance of an organization.SWOTA can
be a useful tool to analyse the extent to which S of firm & its more specific strength
& W are capable of dealing with the changes in the business environment. And, this
would decide whether a particular factor in the environment is an opportunity or
threat with reference to the particular strengths . For systematic SWOTA, major S &
W of firm for the S should be worked out. Then, key factors in the environment
relevant to this S should be identified. Finally,
S & W should be matched with the environmental factors through matching analysis
or a matrix.Matrix has 4 cells as:.
Cell 1 is the most favourable situation ; there are many opportunities & firm has
substantial internal strengths to exploit opportunities. Such condition suggests
aggressive growth strategies to take advantage of favourable match between S &
W . IBMs intensive market development strength in PC market was driven by a
favourable match
between its strengths (reputation and resources) and ample opportunity for
market growth.
In Cell 2, firm with key strengths faces an unfavourable environment.

In such situation, strategist(sist) should use current strength to create opportunities

in other products/ markets, that is, to go for diversification.
Firm in Cell 3 has plenty of market opportunities, but, is constrained by
major internal weaknesses. Businesses in this cell are like question marks in
the BCG Matrix. The focus of strength here should be to remove internal
weaknesses to capitalize on existing opportunities, that is, to follow some kind of a
turnaround strength .
Cell 4 is the least favourable situation with environment posing major threats & firm
suffering from major weaknesses. The most immediate strength in this situation is to
defend or sustain current position.Firms here should also work on internal
weaknesses or competences to be able to negotiate environmental threats as
Chrysler Corporation did in the 1980s when analysis revealed that it was in Cell 4.
5 Define corporate turnaround strategy(TS)? Distinguish between surgical and
nonsurgical TS. Explain with some examples?
TS may be called firms recovery from business decline or crisis. Decline means
continuous fall in turnover or revenue, eroding profit, or accrual or accumulation of
losses. So, see decline like business performance,. But, as per some decline in
terms of current comparisons also; e.g,relative to industry rates or averages or even
relative to economic growth of N. Corporate crisis means deepening or perpetuation
of a decline.
TS are usually needed for crisis situations. If decline is not continuous or severe,
corporate restructuring can provide the solutions. That is why TS may be said to be
an
extension of restructuring . When restructuring is comprehensive & leads to
corporate recovery, it almost becomes TS as case of Voltas.Decline manifests in
many forms or symptoms,including profitability. These symptoms are actually
different performance criteria
. Major symptoms which signal towards need for TS are:
Steadily declining market share ,Continuous negative cash flow ,Negative profit or
ccumulating losses ,Accumulation of debt ,Falling share price in a steady market
etc.
As per Slatter (1984) , there are 4 recovery situations as:
(a) Realistically non-recoverable situation
(b)Temporary recovery
)Sustained survival
(d)Sustained recovery

Generally, there are two methods as:

Surgical TS It more commonly Non-surgical TS adopts the opposite
practiced in the West, involves sweeping approach, that is, peaceful means
changes like firing of staff, managers, revamping or recovery through meetings,
wholesale reshuffling of portfolios, discussions, persuasions, consensus,
closing down operations, etc. Some call it etc.
bloodbath or bloodshed.
.
The operations in former are like this: the first step is to replace CEO of the ailing co
by a new iron chief. The new CEO gets into action; he asserts his authority. He
issues pre-emptory orders, centralizes functions and spears some convenient
scapegoats. Then he goes about firing e & auctioning/selling whole plants and
divisions until the fat is satisfactorily cut to the bone. The bloodbath over, the product
mix is revamped, obsolete machinery is replaced, marketing is strengthened,
controls are toughened, accountability for performance is focussed and so on. How
bloody this sort of TS can be may be seen from in US video games manufacturer
Atari, which, among other actions, cut its labour by two-thirds to 3500 to turn itself
around. At British Leyland, 84,000 employees (40 per cent) were axed to complete
the surgery. At GE, 1,00, 000 of e of 4,00, 000 lost their jobs; at Imperial Chemical
Industries (ICI), the
labour force was reduced from 90,000 to 59, 000; half the staff at Chrysler
Corporation disappeared; at British Steel, half the companys production capacity
and 80 per cent of workforce were gone. TS of the humane type may involve
negotiated & humane layoffs and divestiture, but, not a bloodbath. This type of TS
also is generally brought about by the new helmsman. But, he spends a great deal of
time in trying to understand organizational problems and deliberating on them. He
takes all the stakeholders including unions into confidence; forms groups within firm
to brainstorm together on what needs to be done to get over the crisis; tries to create
a new work culture; and, generally infuses a strong sense of participation among e
and many critical decisions
become participative decisions. There are many examples of successful TS of the
humane type including Enfield, Volkswagen, Lucas, Air India, SPIC, BHEL and SAIL.
In SAIL, losses were about `100 crore during 198283 and `200 crore in 198384. A
price
rise during 198485 saw SAIL break even in that year. But, rapid increases in
coal prices and freight rates threatened a loss in 198586. The steel ministry and
SAIL management then called for another price hike. Krishnamurthy entered the
scene as Chairman, SAIL in mid-1985. He promptly lobbied against price increase
on the ground that efficiency had to be improved. Indian steel was already the
costliest in the world and any further increase in steel price would have ruinous
effects on the economy, contended Krishnamurthy. He spent several months talking
to small groups of executives, officials, staff and workers in SAIL. He estimates
that he talked to over 25,000 e to identify operating problems, got
perception of how firm was doing and what e thought should
be done to improve performance & turn around the company. TS finally emerged
from discussions at all levels.
6 What are the major characteristics of an effective strategy evaluation system(ES)?
Analyse these characteristics.
Motivations are required to induce employees/managers to perform. ES or appraisals
are necessary to ascertain whether they are actually performing or performing
satisfactorily. So, ES has a role almost parallel to the motivation system. ES system
assesses managerial performance in terms of organizational objectives, priorities,
and strategies. The purpose of a positive ES is to remind managers
how they are discharging their tasks and responsibilities, particularly in relation
to the strategy implementation. In a progressive organization, this is a continuous
process.
For the development of an effective ES , choice of factors to be used for appraisal
becomes a critical issue. It is generally advisable to use manyfactors or multiple
criteria to make the assessment system more objective and broad based. This
indicates the need for inclusion of a good number of quantitative factors in addition to
the subjective or qualitative factors. Several
ES are available; some are purely quantitative or objective, some
are totally subjective or qualitative, and, some are mix of the two. Most of the
actual ES are based on an appropriate mix of the two types of
factors to make the system more acceptable and reliable.
Also, relevance or suitability of ES method to the corporate
strategy adopted by firm should be considered.e.g, if stability strategy is followed, the
objective of ES should be to focus on improving efficiency in current operations.
Improvement of efficiency in current operations, combined with initiative, can also
help to achieve shortterm
growth. For long-term growth, i.e., growth through expansion or
diversification, focus should be on long-term managerial characteristics of
initiative, aggressiveness, risk taking attitude, etc. ES should lay emphasis on these
factors and be structured accordingly.