Master of Business Administration-MBA Semester 4

MB0052 Strategic Management and Business Policy Assignment Set- 2 Q.1 Explain with respect to policies steps in framing business policy and stages of policy cycle. Will these help in decision making? Steps Involved in Framing Business Policies: Policy formulation is the process of designing the policy. The major function of designing the policy relies upon the managers. Policy framing is one of the phases of strategic planning in the organization. It is based on the underlying objectives of the organization. Framing and monitoring the policy is one of the critical tasks in the organization. The process of framing policies consists of the following steps: Definition of purpose The first step towards framing policies includes the process of identifying the objectives and the philosophy of the organization. The purpose is to select the guidelines for measuring the performance based on the organisations strengths and weaknesses, its available resources and the personnel. The basic concept of the business activities is defined in this phase.

Example the perception of the garment company is to develop the finest cloth at less cost. Adding to such a conceptual view, the company must define the purpose in terms of guidelines needed for measuring the performance and obtaining the desired targets. Preparation of strategic intelligence This step involves analyzing the internal environment of the organization. The strategic intelligence is the process of detailed description of what the company is and assessing its sphere of operations. The prediction of the future happenings including the opportunities and risks must be known because it lays heavy impact on the companys position in the market. Policy alternatives Alternating policies must be identified and analysed once the objectives of the organization are defined. The managers recognize the problems faced by the organization and discover the alternative policies. This step is the central phase of framing a policy. A list of policy alternatives is generated by considering the probabilities of the problems faced by the organization.

Example Inventory systems in Das n Das company The Das n Das company invested on control systems to avoid taking decisions on the routine matter regarding the orders, timing of production, etc. In such a situation, many factors are considered by the top level management to increase the production rate and the size of orders. Hence meetings are held to discuss the implementation of the policy that suits the best. The top level management introduced an alternative to the inventory control policy that consisted of determination and evaluation of various conflicting factors. The policy is adopted to represent a balance between the internal factors like employees, resources and the production. Policy Analysis This step involves analyzing the alternative policies and examining its contribution towards the objectives of the organization. An alternative policy is based on the consequences to be faced by the organization. The elements of policy analysis process include evaluating the consequences of various alternatives and their effects on the objectives of the organization. Strategic Choice It is the process of selecting the policies that is best suited for the organization. This is done by the top level management. The policies act as guidelines to fulfill

the organizsations purpose. Establishing the specific policies represents the strategic commitment towards achieving the objective of organization. Policy Review Policy review is the process to evaluate whether the framed policy is matching the organizational performance. A periodical review of policies is necessary to maintain the policies up to date.

Stages of Policy Cycle The policy cycle consists of the following stages: Setting the policy agenda: Policy agenda is the process of describing the sequence of business activities in the organization and planning the measures to frame a policy. A list of factors is considered which includes processes, resources, revenue etc. The top level management organizes committee meetings to discuss these factors and make a detailed planning for framing a policy. Writing Policy: It is the process of drafting the policy for the organization. The policy is drafted based on the various factors discussed in the meetings. A separate team under framing business policies is responsible for writing policies. The policy statements must be clear, concise and easily implemented in the organization. The policies are created in such a way that it does not lead to controversies. The drafted policies adhere to the organisations objectives. Implementation of policy: The implementation process is necessary to effectively communicate the drafted policies. This phase makes the policy visible to the employees in the organization. An environment of compliance is achieved between the organization norms and the employees only if the employees are aware of policies in the organization. Generally, employees view the policies as restrictions. Hence, implementing the policies systematically reduces the negative perception of the employees. Policy Implementation tasks are: Policy legitimating The proposed policy must obtain authenticity from mthe team implementing the policy. Constituency structure The policy must be marketed in such a way that it promotes the relationship between the beneficiaries. Resource allocation The resources that are supporting the implementation of policy must be acquired or reallocated depending on the implementation of the strategy. Organisational design and modification The existing organization must be re-engineered or modified according to the new policy Resource mobilization The resources in the organization must be redirected to provide the capacity to conduct action as per the implemented policy. Enforcing Policy: Enforcing policy is the process of applying the drafted policies in situations that are in compliance between the organization and the employees. The to level management has the clear responsibility for enforcing the policies. If the employees are found exploiting the policies then the organization has powers to impose penalties to the employees. Hence enforcing policies develops responses to the problems faced in the organization without hampering the organizations success. Reviewing the policy: Reviewing the policies is the process of checking whether the policies are matching the business activities in the organization. This phase includes re-examining the existing policies. All the policies must be reviewed on daily basis. If any errors are found that are not compatible to the organizations vies then it is reverted to the policy drafting team to re-draft. Reviewing policies ensures that they reflect the business realities of the moment. Updating Policy: If any changes are made in the process of the business activities then the existing policies also must be changed. The review team holds the responsibilities of updating policies. If the

policies are not updated then the organization experiences issues with various factors in the organization.

Setting Policy Agenda

Writing Policy

Updating Policy

Implement Policy

Reviewing the Policy

Figure: Policy Cycle Business Policy and Decision Making

Enforcing Policy

Whenever any business policy is framed, it has to be observed by the decision makers as feasible and beneficial for the organizations growth and success. Just because a policy is in place, it doesnt mean that it will help business decisions. Therefore, business policies have to be framed after a careful scrutiny and then decided whether such policies are needed or not. Once policies are not in place and implemented, it should further help in functional and operational decisions without causing any ambiguities or delays in procedures. Policies should act as guiding light to lead the organization and business strategies in the right path. A change in policy or amendments done to existing policies should also be considered in decision making before implementing them. Further, it should not cause any major disruptions in the internal environment. Policy making decisions together with strat5egic decisions must provide clarity, flexibility and assistance to other business decisions. Q.2 Assess the challenges involved in Strategic Management in the near future. Key Challenges Each and every organization faces certain challenges irrespective of the industry. The key challenges of an organization are: 1. Growth: The increasing impact of economic and social behavior has made the organizations to improve its quality, service and responsiveness either in saturated or declining markets. The organizations must emphasize that current share price, earnings per share, revenues and market share reflects the growth of the organization. The growth of the organization can be improved with respect to quality, service to its constituencies, influencing their business activities with efficient personnel and facilities etc.

2. Value: The organization must follow certain values that act as foundation to growth. The organization benefits by enhancing relationships among business activities according to the changing environment. The critical elements in improving the value of organization are, understanding the nature of values, its evolution, and consequent growth opportunities. 3. Focus: Focusing on the specific objective is difficult in the present era. The innovation of new technology, society and social factors result in diversification of objectives. Hence its a great challenge for organisations to focus on particular objective and avoid diversification. 4. Change: the organization adopts change when it expands its business activities in different fields. To meet the needs of the customers, the change is deployed in terms of resources, technology, internal obstacles that emerge due to the changes made. Organisations need to invest more to implement change. Hence the organisations must compete more creatively while maintaining continuity in the existing business activities. 5. Future: The future of the organisation depends on long term goals and plans. The uncertainties and risks are associated with organisations future view which creates need for hedges against downsides, while being focused on upside of the organisation.

6. Knowledge: It acts as the medium to address the challenges in organisation. Most of the
organisations face difficulties in transforming data, information and knowledge into actions to produce desired results. It involves understanding the role of information and knowledge to solve problems; and decision making in different domains. Archiving knowledge is required to meet the needs of the customers. 7. Time: It is a big challenge to the top level management of the organisations. Time is one of the important resources in the organisation. Transformational leadership includes devoting personal time for creating things that values more. It is a classic challenge for top management to maintain time in all business activities. Global Competitiveness The nature of competitiveness depends on the organisations globalization potential. A well designed strategic management helps the organisation to attain global competitiveness. It also helps in obtaining various advantages from the following sources. 1. Efficiency: the organizational efficiency lays a heavy impact on the global competitiveness. The various factors that increase the efficiency are economies of scale for access to more customers and markets, utilizing other countrys resources such as labour and raw materials; extending the product life cycle by selling old products to under developed countries and implementing new products according to the growing technology. 2. Strategies: First mover and the only provider of the product in the market, have an advantage of no competition in the market when it was introduced, a monopolist can gain higher profit than in a competitive market place. The first mover establishes a market position which can help to retain a dominant market share and higher margins than later entrants. Global competitiveness is attained by cross subsidization between countries. This helps in exploiting business opportunities across nations to achieve goals. Thus, cross subsidization between countries is impo0rtant to achieve global competitiveness. 3. Risks: The organisations face the risk of diversifying the business activities. This happens due to the disassociation of business cycle among the various countries. It also leads in diversification of the operational activities due to labor problems and social problems like earthquakes and wars. Therefore the organisations must implement a systematic business cycle such that I does not hamper the business process globally. 4. Learning: The organisations, which are working globally has an advantage of broadening the learning aspects due to diversity in operating environments. Learning latest technologies and

methods increases global competitiveness by attracting more customers and enduring latest outputs in meeting the customers needs. Hence, learning paves way for global competencies. The global competition strengthens, the managers will be more cautious of their ability to identify, cultivate and utilize distinctive competencies that help the growth of the organisation. Q.3 Four years back, Pure Ltd. was a newly started company. It deals in designer fabrics. Its top management comprises mainly of young talented persons. They would to know to make the company follow ethical codes and practice CSR as the company moves ahead. They are also interested in meeting its business obligations. Could you suggest to the management on how to go about it? Code of Ethics The code of ethics is the written guidelines issues by an organisation to its management which assists in conducting its actions according to the ethical standards. Every organisation needs to develop the code of ethics. The prime goal of the code of ethics is to focus on the top ethical values needed in the organisation and to avoid potential ethical dilemmas. The following are the guidelines to develop the code of ethics in an organisation. Reviewing the values that must adhere to the relevant laws and regulations in an organisation Reviewing the values which produce the best traits of the highly ethical and successful product or service Identifying values that address the current issues in the workplace Identifying values which needs to undergo proper strategic planning Considering the ethical values that are appreciated by stakeholders Collecting the high priority ethical values in the organisations. Ethical values include the following features: o o o o o o Trustworthiness honesty, integrity, promise-keeping, loyalty, so on Respect autonomy, privacy, dignity, courtesy, tolerance, acceptance so on Responsibility accountability, pursuit of excellence, so on Care compassion, consideration, giving, sharing, kindness, so on Justice and fairness procedural fairness, impartiality, consistency, equity, equality, and due process so on Civic virtue and citizenship following laws, community service, and environment protection so on

Composing the code of ethics and associating examples with each value which reflect the idea of each value Phrasing the terms which indicates that all employees are expected to obey the rules to the values stated in the code of ethics Obtaining the reviews from key members of the organisation Announcing and distributing the new code of ethics Updating the code, at least once a year

Role of Business ethics and business values Business ethics and business values play a significant role in maintaining standards of an organisation. The following are the roles played by them: Maximizes profit The importance of ethics in business can be understood by the fact that ethical businesses tend to make more profits than the others. The reason for this is that the customers of the business which follows ethics are loyal and satisfied with their services and product offerings. Thus business ethics create loyalty in customers and maximizes the profits. Efficient utilization of business resources In an organisation, if the top management officials follow ethical business practices like not appreciating bribe, not cheating the customers, investors and suppliers etc, then the employees are expected to follow the same practices. This will result in better and efficient utilization of the business resources. Creates goodwill in the market An organisation, which is well known for its ethical practices always creates goodwill in the market. Investors or venture capitalists always want to invest in a trustable business. The shareholders also remain satisfied with the practices of an ethical business.

Corporate Social Responsibilities (CSR) Corporate Social Responsibility (CSR) is the continuing obligation of a business to behave ethically and contribute to the economic development of the organisation. It improves the quality of life of the organisation. The meaning of CSR has two folds. On one hand, it exhibits the ethical behavior that an organisation exhibit towards its internal and external stakeholders. And on the other hand, it denotes the responsibility of an organisation towards the environment and society in which it operates. Thus CSR makes a significant contribution towards sustainability and competitiveness of the organisations. CSR is effective in number of areas such has human rights, safety at work, consumer protection, climate protection, caring for the environment, sustainable management of natural resources, and such other issues. CSR also provides health and safety measures, preserves employee rights and discourages discrimination at workplace. CSR activities include commitment to product quality, fair pricing policies, providing correct information to the consumers, resorting to legal assistance in case of unresolved business problems, so on. Example TATA implemented social welfare provisions for its employees since 1945. Features of CSR CSR improves the customer satisfaction through its products and services. It also assists in environmental protection and contributes towards social activities. The following are the features of CSR. Improves the quality of an organisation in terms of economic, legal and ethical factors CSR improves the economic features of an organisation by earning profits for the owners. It also improves the legal and ethical features by fulfilling the law and implementing ethical standards Builds an improved management system CSR improves the management system by providing products which meets the essential customer needs. It develops relevant regulations through the utilization of innovative technologies in the organisation. Contributes to countries by improving the quality of management CSR contributes high quality product, environment conservation and occupational health safety to various regions and countries. Enhances information security systems and implementing effective security measures CSR enhances the information security measures by establishing improved information security

system and distributing them to overseas business sites. The information system has improved by enhancing better responses to complex security accidents Creates a new value in transportation CSR creates a new value in transportation for the greater safety of pedestrians and automobiles. This is done by utilizing information and technology for automobiles. The information and technology helps in establishing a safety driving assistance system. Creates awareness towards environmental issues CSR serves in preventing global warming by reducing the harmful gases emitted into the atmosphere during the process of business activities.

Roles played in terms of ethical conduct. CSR plays a significant role in maintaining ethical conduct in an organisation. The following are the roles played by CSR. Improves the relationships with the investment community and develops better access to capital and risks. Enhances ability to recruit, develop and retain staff Improves the reputation and branding of the organisation Improves innovation, competitiveness and market positioning Improves the ability to attract and build effective and efficient supply chain relationships Improves relationships with regulators Reduces the costs through re-cycling process Enhances stronger financial performance and profitability through operational efficiency gains.

Business Obligations Every business operates to earn profit. Profit is defined as the income earned by a company in a certain period of time. There are two types of profit namely gross profit and net profit. Certain amount of risk is involved while earning profits. In this section we will discuss the sources and obligations of business profits. Sources of business profits A business needs several factors to earn profits. It starts with a proper plan which includes proper research of the market, availability of raw materials research of the competitor, research of the local laws and setting goals. The next step in the execution of the strategic plan with proper adherence to the ethical standards and business values. A companys income should be more than its expenses to earn profits. In other words, we can say that a companys revenue generated from selling its products, services, share value, net asset worth should exceed the input costs of its raw-materials, labour, production, and other functional costs or expenditures. Companies have to mandatorily prepare financial statements and maintain accounts to show transparency in its financial position and business transactions. Profit and loss statements and a balance sheet are prepared and published annually as per the companies act regulation. Obligations vested on business undertakings Business obligations are the ties which bind an organisation to pay or to do something agreeable by the laws and customs of the country in which the obligation is made. Obligations in terms of business are the duties of an organisation towards the upliftment of the people and the country. Organisations

also have to essentially take care of the interests of its stakeholders and employees. A portion of the business profits may be retained back so as to cycle the funds within the business. There are various obligations of a business. Following are some of the business obligations in terms of social, ethical, moral and environmental ways; Social business obligations The sense of principles and morality regarding social and community issues may be referred to as the social obligations. Business is about the relationships with people and community. But in the current world, businesses follow limited obligation towards social issues. Social responsibility is demonstrated by the determination of the organisation to treat customers, employees and investors fairly and honestly. There are several social issues that affect the current business workplace, but ethical standards play an important role in business decision making in an organisation. Factors which enhance social business obligations are as follows: Implementing punishable act towards corruption or any illegal act in an organisation The employer-employee relationships must be stable Although an organisation might succeed, but it must respect ethical values, people and community The quality and loyalty of companys workforce must not change The higher officials must possess the following qualities like honesty, responsibility, consistency, dignity etc.

Example The reasons for the death of employees who inhale fumes from chemical spill in a factory is a negligence of social obligation that failed to provide safety and security for its employees. Moral Business Obligations Moral obligation is a responsibility of balancing various needs of an individual by accurate understanding of the right or wrong actions using the acquired knowledge by an organisation. Moral responsibility is based on the relationships among friends, neighbours, co-workers and family members. The vital components of moral responsibility are deeply rooted in the structure of every society and are a part of social life. Wars, gang violence, toxic waste spills, corporate fraud, manufacture of unsafe and defective products, failure of legislative bodies, financial waste by governmental agencies are the outcomes of poor moral obligations of an organisation. Collective moral responsibility of a business deals with appropriate arrangements of the widespread harm and misconduct by different groups. Example The emergence of HIV infection and AIDS has refocused the interest of moral obligations in preventive the transmission of such communicable disease by the medical institutes of the nation. Ethical Business Obligations In the time of rapid technological and social change, a business organisation must help their employees to develop a new understanding of ethical values. Many ethical conflicts have arisen around the business world in the past. An organisation has certain responsibility towards reducing unethical issues. Example Worldwide inequality of income can result in unethical practices such as child labour, monopoly suppliers can exploit consumers, etc.

Building ethical obligations in an organisation is highly significant for a business. A company owes an ethical obligation to the individuals and groups who are responsible for the success of the company. There are four groups of people who are generally responsible for the success of a business. It includes employees, customers, community and shareholders. Ethical obligations in an organisation include the following ethical duties with different values, assumptions and social constructions of the employment relationship. Example Infosys has developed its corporate social responsibility by establishing social rehabilitation and rural upliftment programme, educational system upliftment programme, etc. the company could fulfill its CSR due to its ethical obligations. Environmental Business Obligations Environmental management has become immensely important in modern period as the volume of environmental administration and regulations has increased considerably. All businesses like offices, shops etc. hat to meet legal environmental obligations. It is always essential to develop ways to improve the surrounding environment performance by reducing costs and unnecessary wastes. A risk evaluation must be carried out as a part of an overall review of the environmental impact. Local authorities are responsible for the environmental regulation practices, particularly for lower risk businesses such as offices and shops. The main environmental regulators include the environment agency in England and Wales, the Scottish environment protection agency and the environment and heritage service in Northern Ireland. Some of the issues in terms of environment management are as follows: Managing waste products You must minimize packaging of substances to a greater extent. Packaging is appreciated only when it meets the environmental standards and can be recovered or reused later. Larger packaging producers need to register with their environmental regulators and meet the recycling and recovery targets. You must store and dispose of waste properly. You must use a waste-disposal contractor who is empowered to treat and handle the waste and disposes at a site that has a permit. You must implement extra controls on hazardous waste and also on the storage of potentially harmful substances such as chemicals. Controlling pollution and contamination You need an environmental permit if your business activities produces significant air pollution. You must be ensured that the emissions are not produced in abundance which might cause a nuisance to the neighbours. You must have the approval from your water company to discharge any trade effluent like liquid waste and the like. You must have approval from your environmental regulator before discharging any trade effluent or solid waste into the surface water or groundwater. Also prevention of the accidental contamination of groundwater due to harmful contaminants is essential.

Companies producing dangerous substances which can cause pollution must notify the regulator, carry out a risk assessment task and produce a major accident handling plan for the effective environment management. Most organisations are following Go Green initiatives to support environmental issues and reduce pollutions of any kind.

Q.4. What is BCP? Discuss its importance and influence on strategic management. How contingency planning is related to BCP? According to the Business Continuity Institute, a Business Continuity Plan (BCP) is defined as:

A document containing the recovery timeline methodology, test-validated documentation, procedures, and action instructions developed specifically for use in restoring organisation operations in the event of the declared disaster. To be effective, most Business Continuity Plans also require resting, skilled personnel, access to vital records, and alternate recovery resources including facilities. BCP is a collection of procedures which is developed, recorded and maintained in readiness for use in the event of an emergency of disaster. BCP and its influence on Strategy Management Strategy Management refers to the formation of vision and direction of an organisation, setting mission statements, identifying markets to achieve the objective of an organisation. BCP is concerned with the determination and selection of alternative operating strategies to be used to maintain the organisations critical activities. BCP strategy ensures that its activities are aligned with the supports the overall business strategy. Positive Effects of BCP on strategy management: A BCP strategy has both positive and negative effects on the organisation. The positive effects of BCP on strategic management are as follows: Structural problems within an organisation can be recognized and resolved. Few structural problems are as follows: o o Bad organisation of workflow Processes moving away from their original purpose within the organizational model.

A clear understanding of processes within an organisation can be obtained by a business impact analysis within a BCP. This enhances process optimization program which results in expenditure reduction in BCP. The BCP program address Backlog Trap problem. Backlog Trap is the combined restart of the current work and the previous backlog, in situations where severe backlogs happen due to interruptions for various reasons. The BCP program assists in simplifying the processes of recovery from an event. BCP program overcomes the effects of organisations hierarchy at all levels which was affected by an event. BCP program identifies the mission critical activities of an organisation. This allows the service level to be monitored in the organisation. A good BCP program will identify the vital records to be stored within the organizational budget. Mission critical activities along with BCP program has to focus on the protection of physical and logistical securities.

Negative Effects of BCP on strategy management: The negative effects of BCP on strategic management are as follows: Change in the BCP program may introduce other risk which has to be identified, assessed and controlled. In some cases it is beyond the design stage. The cost of implementing and testing a BCP program is high Relocating and accommodating recovery team members lead to logistical difficulties. More time is required to set up facilities, although it is within the recovery time frame of BCP program The whole BCP program is time consuming.

Contingency Planning Contingency planning is a planning strategy that deals with uncertainty by identifying specific responses to possible future conditions. Contingency planning realizes that future is impossible to predict, so it is best to have a variety of flexible and responsive solutions available. It is an alternative course of action that can be implemented in the event when a primary approach fails to function as it should. Contingency plans allow the businesses and other entities to quickly adapt to the changing circumstances. Concepts: Contingency plans are developed by identifying possible failure in the usual flow of operations and strategies. Contingency plans should overcome these failures and continue with the functions of the organisation. Organisations create contingency plans to achieve the objectives that are listed below. Day to day operations of the organisation continue without a great deal of interruption or interference Backup plan is capable of remaining functional as long as it takes to restore primary plan Emergency plan minimizes inconvenience to customers, allowing the organisation to continue providing good and services.

Implementation: Contingency plans can be practically applied to any level of organisation as a part of planning process. It involves the following steps: Identify the objectives and targets Identify various strategies that help to achieve objectives and targets. Evaluate the costs and benefits of each strategy, and rank them according to cost-effectiveness or benefit/cost ratios. The ranking can take other significant factors into account such as implementation and other additional benefits. Implement the required strategies to achieve the targets. It generally starts with the most cost effective and easy to implement strategies, and working down the list to more costly and difficult strategies. After they are implemented, assess the programs and strategies with regard to various performance measures, to ensure that they are effective. Evaluate overall results with regard to targets to decide if the additional strategies should be implemented.

Q. 5 Mention any 5 successful strategic alliances and discuss the key aspects concerned with it. What kinds of problems were faced by companies that were involved in these strategic alliances? Joint Venture Joint venture is the most powerful business concept that has the ability to pool two or more organisations in one project to achieve a common goal. In a joint venture, both the organisations invest on the resources like money, time and skills to achieve the objectives. Joint venture has been the hallmark for most successful organisations in the world. An individual partner in joint venture may offer time and services whereas the other focuses on investments. This pools the resources among the organisations and helps each other in achieving the objectives. An agreement is formed between the

two parties and the nature of agreement is truly beneficial with huge rewards such that the profits are shared by both the organisations. The advantages of joint venture are A long term relationship is built among the participating organisations It increases integrity by teaming with other reputable and branded organisations Helps in gaining new customers It helps in investing little money or no money. It provides the capability to compete in the market with other organisations Reduces production time as the organisations are into joint venture More new products and services can be offered to other customers Sometimes the organisations deal with wrong people, thereby losing investments. The organisations do not have the opportunity to take up decisions individually. There are risks of disputes among the organisations that lead to poor performance If the organisation enters into joint venture agreement with unprofessional selfish organisation, then it increases the risk of hurting business reputation and devastating customers trust

The disadvantages of joint venture are

Example The China Wireless Technologies, a mobile handset maker is getting into an agreement with the Reliance Communications Ltd (RCom) to launch its new mobile. The joint venture between the two companies is to gain profits and provide affordable mobile phones to the market that consists of advanced features and aims to earn eight billion dollars in the next five years. The new mobile consists of dual SIM smart phone with 3G technology at a cheaper rate. Merger and Acquisitions Merger is the process of combining two or more organisations to form a single organisation and achieve greater efficiencies of scale and productivity. The main reason to involve into mergers is to join with other company and reap the rewards obtained by the combined strengths of two organisations. A smart organisations merger helps to enter into new markets, acquire more customers, and excel among the competitors in the market. The participating organisation can help the active partner in acquiring products, distribution channel, technical knowledge, infrastructure to drive into new levels of success. With the perception of organisation structure, here are a few types of mergers. The different types of mergers are: Horizontal Merger The horizontal merger takes place when two organisations competing in the same market join together. This type of merger either has a maximum or minimum effect on the market. The minimum effect could also be zero. They share the same product line and markets. The results of the mergers are less noticeable if the small organisations horizontally merge. Consider a small local drug store that horizontally merges with another small local drug store, then the effect of this merger on drug market would be minimal. But when the large organisations set up horizontal merger, then higher profits are obtained in the market share providing advantages over its competitors. Consider two large organisations that merge with twenty percent share in the market. They achieve forty percent increase in the market share. This is an added advantage of the organisations over its competitors in the market.

Vertical Merger This involves the union of a customer with the vendor. It is the process of combining the assets to capture a sector of the market that it fails to acquire as an individual organisation. The participating organisations determine the intentions of joining forces that will strengthen the current positions of both the organisations and lay basis for expanding into other areas. The purpose of a vertical merger is to build the strengths of the two organisations for an effective future growth. In order to explore new methods of using existing products to create a new product line for wider markets, it is also important to consider the assets like property, buildings, inventories and cash assets. The vertical merger involves careful planning Market-extension merger It is the process of merging two organisations that sell same products in different geographical areas. The main purpose of this merger is to make the merging organisations to achieve higher positions in bigger markets and ensure the bigger base for client. Product-extension merger Most of the organisations execute product extension merger to sell different products of a related category. They serve the common market. This merger enables the new organisations to pool their products to serve a common market. Conglomerate merger This merger involves organisations alliance with unrelated type of business activities. The organisations under conglomerate merger are not related either horizontally or vertically. There are no important common factors among the organisations in terms of production, marketing, research, development and technology. It is the union of different kinds of businesses under one management organisation. The main purpose of this merger is to utilize financial resources; enlarge debt capacity and obtaining synergy of managerial functions. The organisations do not share the resources; instead it focuses on the process of acquiring stability and using resources in a better way to generate additional revenue.

Collaborations and co-branding Collaboration is the process of cooperative agreement of two or more organisations which may or may not have previous relationship of working together to achieve a common goal. It is the beginning to pool resources like knowledge, experience and sharing skills of team members to effectively contribute to the development of a product rather working on narrow tasks as an individual team member in support to the development. Such collaborations are the foundation for concepts like concurrent engineering or integrated product development. Collaboration is a win-win methodology. It means that both the organisations insist upon each other to gain equal profits with no negative attitude of acquiring each others possessions. Effective collaboration can be obtained by the following actions: The organisations must get involve in the process from the beginning and avail the necessary resources for collaboration. The work culture in the organisation must encourage teamwork, cooperation and collaboration. There must be effective team work and cooperation among the employees of both the organisations to achieve the goal. Systematic approach of product development process much be based on sharing of information, technology etc.

Co-branding involves the process of combining two or more brands into a single product or service. It is becoming a positive way to associate different brands and develop a strong brand in the market. It creates synergy among the various brands. An organized co-branding strategy leads the co brand partners to a win-win situation and helps in realizing large demands in the market

The co-branding agreement includes the important aspects such as rights, obligations, and restrictions that are abiding to both the organisations. It also includes important provisions and the needs must be carefully drafted to provide clear guidelines to the involved organisations. The organisations form cobranding to accomplish many goals which include expansion of customers, obtain financial benefits, respond to the needs of customers, strengthening its competitive position, introducing new product with strong image and to gain operational benefits. It is more frequently used in the field of fashion and apparels. It can also be used for promoting campaigns, using cartoons on T-shirts, logos, distributing through branded retailer etc. Example The sportswear giant Nike formed co-branding agreements with Philips consumer electronic products. The Philips electronic products will contain Nikes logos and it is mainly marketed in United States since the market share of Philips is not much impressive. The newly introduced digital audio player and portable CD players of Philips will be unveiled with the Nike logo to enhance profits in the market share in United States. Technological partnering It is the process of associating the technologies of two different companies to achieve a common goal. The two organisations work as co-owners in business and share the profits and losses. The technologies of individual organisations are shared to achieve desired outcome. The required resources like knowledge, machinery, and expertise are collaborated between the organisations. Example: The software giant, Infosys Technologies Ltd. Has entered into partnership with US based NVIDIA, GPU inventor and the worlds visual technologies giant. The purpose of this partnering is to develop NVIDIA CUDA (Compute Unified Device Architecture). This technology is viewed as the next big revolution in the field of technology in lending high performance in computing. The software helps the developers of various applications to tap into the previously uncultivated power of GPU. This will enable certain applications to achieve high performance. The capacity of CUDA is expected to multiply fifty times the performance of existing computing and reduce the run time to advance the user enterprise. Contractual Agreements It is the process of agreement with specific terms between two or more organisations which guarantee in performing a specific task in return for a valuable benefit. The contractual agreement is the heart of business dealings. It is the most significant areas of legal concern and involves variations in certain situations and complexities. The organisations require analyzing fundamental factors before involving in contractual agreements. The elements to be analysed are: It is necessary to identify the type of offer being laid by the organisation to make an agreement. The acceptance of the information involved in offer which results in meeting the market needs. The organisations are required to recognize the strong commitment towards the contractual agreement. Systematic scheduling of the process involved in manufacturing product without any hindrances to both the organisations. Discover the terms and conditions for manufacturing the product and the guarantee of the organisations in fulfilling it.

The contract agreement includes several documents such as letters, orders, offers and counteroffers. There are various types of contractual agreements. They are:

Conditional It is based on occurrence of an event. Joint and several The organisations promise to perform together but still they possess individual responsibilities Implied The judicial court will determine the contract between the organisations based on circumstances. The parties will be able to buy all manufactured products, enter into a contract to supply others requirements, or renewal of existing contract.

Problems involved in Strategic Alliances There are numerous problems related to strategic alliances. Some of them are: One of the organisations suffers benefits due to incoherent goals Lack of trust between the organisations lead to poor performance in achieving the desired goal The existence of conflicts between the organisations due to internal issues like personnel and resources causes problem to the strategic alliance. Lack of commitment between the organisations leads to terminations of the alliance contract. Many organisations experience the risk of sharing too much knowledge with the partner organisation to become a competitor Reduces the possibility of future opportunities of getting into agreement with partners competitors

Q. 6 Give a note on strategic evaluation and strategic control. Strategic Evaluation The core aim of strategic management succeeds only if it generates a positive outcome. Strategic evaluation and control consists of data and reports about the performance of the organisation. Improper analysis, planning or implementation of the strategies will result in negative performance of the organisation. The top management needs to be updated about the performance to take corrective actions for controlling the undesired performance. All strategies are subject to constant modifications as the internal and external factors influencing a strategy change constantly. It is essential for the strategist to constantly evaluate the performance of the strategies on a timely basis. Strategic evaluation and control ensures that the organisation is implementing the relevant strategy to reach its objectives. It compares the current performance with the desired results and if necessary, provides feedback to the management to take corrective measures. Strategic evaluation consists of performance and activity reports. If performance results are beyond the tolerance range, new implementation procedures are introduced. One of the obstacles to effective strategic control is the difficulty in developing appropriate measures for important activities. Strategic control stimulates the strategic managers to investigate the user of strategic planning and implementation. After the evaluation, the manager will have knowledge about the cause of the problem and the corrective actions. The five step process of strategic evaluation and control is illustrated in the below figure.

Recognize the activity to be measured

Create pre-established standards

Measure performance

STOP

Is the performance within tolerable range?

Take remedial action

Retrieved from Concepts in Strategic Management and Business Policy by Thomas L. Wheelen, J. David Hunger (2002), Pearson Education, New Delhi. Recognize the activity to be measured Top management including the operations manager has to specify the implementation processes and the results that are to be evaluated. The processes and results must be compared with the organisations objectives in a consistent manner. The strategy of all the important areas must be evaluated irrespective of the difficulty. However, focus should be on the most significant elements in a process. Example The process that accounts for the highest proportion of expense, the greatest number of problems etc. Create the pre-established standards Strategic objectives provide a crystal view of the standards to measure performance. Each standard defines a tolerance range for acceptable deviations. Standards can also be set for the output of intermediate stages of production along with the final output. Measure actual performance Actual performance must be measures on a timely basis. Status of actual performance If the results of the actual performance are within the tolerance range, the evaluation process stops here. Take remedial action If the actual performance result exceeds the tolerance range, corrective actions must be taken to control the deviation. The following questions must be answered:

o o o

Is the variation, a minor or temporary fluctuation? Are the procedures being implemented appropriately? Are the procedures appropriate to the achievement of the desired standard?

Strategic Control Strategic control is established to focus on the resources used in the performance (input), activities that generate the performance (behavior) and the result of actual performance (output). Strategic control involves tracking the strategy as it is being planned, implemented and take necessary actions when it indicates any negative performance. Example Consider an air conditioner fixed inside a room. The air conditioner registers a specific temperature to the thermostat. When the thermostat senses an increase in temperature, the motorized fans circulate conditioned air to ensure that the temperature of the room is maintained. In this example, strategic control is related to the method by which the target temperature is maintained. An effective strategic control should ensure that strategic aims are translated into effective action plans that are designed and monitored to achieve these aims. The three types of strategic control are: Feedforward./ input controls These focus on input resources like knowledge, skills, abilities, values and motives of employees. Concurrent/ behavior controls These take place when an activity is in progress. They guide on how the strategic activities need to be performed through top management orders, standard operating procedures, policies, and rules. The managers must harmonise resources and capabilities within the different departments of the organisation. Feedback / output controls These focus on the end results of the behavior controls to achieve the objectives and performance targets. These are more appropriate when the connection between the activities and results is not clear.

Input, behavior and output controls are not interchangeable. Input controls are more appropriate when it is difficult to measure and end result and when there is no clear cause between the behavior and performance of the organisation. Behavior controls are more appropriate in situations when the performance results are hard to measure, but the cause-effect relationship between the activities and result is clear. Output controls are used in situations when the performance results are achievable but the cause-effect connection between the activities and results is unclear. Guidelines: The top management should not forget that controls are established to follow strategies. The guidelines for effective strategic control are: It should contain only the most important information It should examine only meaningful activities and results It should be well-timed It should use long-term and short-term controls It should be able to identify the activities that do not fall within the tolerance range It should determine the rewards for meeting or exceeding standards.