QUESTION1. What is meant by Strategy? What are the levels of strategy? Differentiate between goals and objectives.

ANSWER : Strategy is the method by which an organisation systematically achieves its future objectives. A business cannot progress for a long term without a reliable strategy. In this unit, you will learn meaning of business strategies, its conceptual evolution, scope and its importance, distinction between goals and objectives, analysing strategic intent through vision and mission statements and finding out the significance of core competencies of business and critical success factors. Strategic management is a systematic approach of analysing, planning and implementing the strategy in an organisation to ensure a continued success. Strategic management is a long term procedure which helps the organisation in achieving a long term goal and its overall responsibility lies with the general management team. It focuses on building a solid foundation that will be subsequently achieved by the combined efforts of each and every employee of the organisation. Types of Strategies Corporate level The board of directors and chief executive officers are involved in developing strategies at corporate level. Corporate level strategies are innovative, pervasive and futuristic in nature Business level Business level strategy relates to a unit within an organisation. Mainly strategic business unit (SBU) managers are involved in this level. It is the process of formulating the objectives of the organisation and allocating the resources among various functional areas. Business level strategy is more specific and action oriented. It mainly relates to how a strategy functions rather than what a strategy is in corporate level. Tactical of functional level The functional strategy mainly includes the strategies related to specific functional area in the organisation such as production, marketing, finance and personnel (employees). Decisions at functional level are often described as tactical decisions. Operational level Operational level is concerned with successful implementation of strategic decisions made at corporate and business level. The basic function of this level is translating the strategic decisions into strategic actions. GOALS Are long term Are general intentions with broad outcome Cannot be validated Are intangible can be qualitative as well as quantitative Are abstract OBJECTIVES Are usually meant for short term Are precise statements with specific outcome Can be validated Are tangible are usually quantitative and measurable Are concrete

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Question 2. Define the term Strategic Management. Explain the importance of strategic management. Answer : A strategy is an operational tool to achieve the goals, and thus, the corporate mission. Strategies do not attempt to outline exactly how the enterprise is to accomplish its objectives. A company may view downsizing as a strategy in a competitive market to render cost-effective services. Thus, strategy provides a framework to guide thinking and action. Strategies are very much useful in organisations for guiding, planning and control. Strategy is a way of life both at the macro as well as micro levels for everyone, whether it is a nation or a company. To win over in a given complex situation, the organisations, even trans-nationals adopt strategies. They make changes, if necessary, even to their global strategies. An individual company may formulate its own strategy to bring out the desired results. The eventual success of the organisation depends upon strategy formulation and implementation. The recently initiated moves such as globalisation, privatisation and liberalisation are strategies to attain a globally competitive economy. Business management must focus on following issues a. Vision- For proper growth of the company. b. Mission What the company wants to achieve. c. d. f. Goals To achieve the above mission.

Objectives To achieve the set goals

Policies To control strategies

e. Strategies To achieve the above objectives g. Programmes For implementation of objectives The above list outlines some of the key issues at every stage of action illustrating how: a. The mission springs out from vision statements b. Goals from the mission c. Objectives from goals d. Strategies from objectives e. And programmes from objectives It is the crux of the strategic management process. Strategy refers to the course of action desired to achieve the objectives of the enterprise. Formulation, together with its implementation, constitutes an integral part of the management activity. Managers use strategies for different purposes such as to overcome competition, to increase sales, to increase production, to motivate the employees to provide their best, and so on. Implementation of a strategy is a crucial task as the formulation of it. There may be a lot of resistance during the implementation process. It is necessary for the manager to be very tactful to involve the members of his group in the formulation of strategy to facilitate the implementation process.

Stages in Strategy Formulation and Implementation

a. b. c. d. e. f. g. Identification of mission and objectives Environment scanning Generic strategy alternatives Strategy variations Strategic choice Allocation of resources and formulation of organisational structure Formulation of plans, policies, programmes and administration

H Evaluation and control

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Question 3 Describe Porters five forces Model. Answer : Porters Five Force model Michael E. Porter developed the Five Force Model in his book, Competitive Strategy. Porter has identified five competitive forces that influence every industry and market. The level of these forces determines the intensity of competition in an industry. The objective of corporate strategy should be to revise these competitive forces in a way that improves the position of the organisation. Figure 3.4 describes forces driving industry competitions.

Figure 3.4 Forces Driving Industry Competitions Forces driving industry competitions are: Threat of new entrants New entrants to an industry generally bring new capacity; desire to gain market share and substantial resources. Therefore, they are threats to an established organisation. The threat of an entry depends on the presence of entry barriers and the reactions can be expected from existing competitors. An entry barrier is a hindrance that makes it difficult for a company to enter an industry. Suppliers Suppliers affect the industry by raising prices or reducing the quality of purchased goods and services. Rivalry among existing firms In most industries, organisations are mutually dependent. A competitive move by one organisation may result in a noticeable effect on its competitors and thus cause retaliation or counter efforts. Buyers Buyers affect an industry through their ability to reduce prices, bargain for higher quality or more services. Threat of substitute products and services Substitute products appear different but satisfy the same needs as the original product. Substitute products curb the potential returns of an industry by placing a ceiling on the prices firms can profitably charge. Other stakeholders - A sixth force should be included to Porters list to include a variety of stakeholder groups. Some of these groups include governments, local communities, trade association unions, and shareholders. The importance of stakeholders varies according to the industry.

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Question 4. : What is strategic formulation and what are its processes? Answer : A strategy is an operational tool to achieve the goals, and thus, the corporate mission. Strategies do not attempt to outline exactly how the enterprise is to accomplish its objectives. A company may view downsizing as a strategy in a competitive market to render cost-effective services. Thus, strategy provides a framework to guide thinking and action. Strategies are very much useful in organizations for guiding, planning and control.

Strategy is a way of life both at the macro as well as micro levels for everyone, whether it is a nation or a company. To win over in a given complex situation, the organizations, even trans-nationals adopt strategies. They make changes, if necessary, even to their global strategies. An individual company may formulate its own strategy to bring out the desired results. The eventual success of the organization depends upon strategy formulation and implementation. Strategy refers to the course of action desired to achieve the objectives of the enterprise. Formulation, together with its implementation, constitutes an integral part of the management activity. Managers use strategies for different purposes such as to overcome competition, to increase sales, to increase production, to motivate the employees to provide their best, and so on. Implementation of a strategy is a crucial task as the formulation of it. There may be a lot of resistance during the implementation process. It is necessary for the manager to be very tactful to involve the members of his group in the formulation of strategy to facilitate the implementation process.

Following are the steps for implementing the business strategy

1. 2. 3. 4. 5. 6. 7. 8. Identification of mission and objectives Environment scanning Generic strategy alternatives Strategy variations Strategic choice Allocation of resources and formulation of organizational structure Formulation of plans, policies, programmes and administration Evaluation and control.

After formulating a business strategy, the process of strategy implementation calls for an integrated set of choices and activities. These include 1. Allocating Resources: A good strategy with effective implementation has a higher probability of success. There source allocation decisions, such as, which department is sanctioned how much of money and resources, in the name of the budget, and so on set the operative strategy of the firm. Budgets are formulated after a series of negotiations across different levels in the organization. Budgets may be of different types: corporate budgets, capital budgets, departmental budgets, sales budgets, expense budgets, and others. 2. Organising: An effective co-ordination and efficient division of labour requires an appropriate organizational structure. The best structure is one, which fits into the organizational environment. Also its internal characteristics should give rise to an effective strategy. Appropriate changes in the organization structure may be initiated to ensure strategic implementation of the proposed strategy. Effective strategic management practices suggest that organization structure should also change if the strategy changes or if the organization experiences any bottlenecks in this regard 3.

Formulation Of Policies, Plans, Programmes And Administration: The resources allocated are said to be
well-utilized only when they are well-monitored. For this purpose, it is essential: To develop policies and plans. To assign and reassign leaders the tasks and decisions to support the chosen strategy. To provide a conducive environment in the organization through proper administration to achieve the given objectives directly and indirectly. The implementation of plans and policies is designed in accordance with the strategy chosen. The firm creates plans and policies to guide managerial performance, and these make the chosen strategies work. The corporate success lies ultimately in the ability to convert corporate strategy into plans and policies that are compatible and workable.

4.

Evaluation And Control Of Strategy: Evaluation is the last phase of the strategic management process. It is at
this stage that the success of the programmes can be assessed. There should be a built-in mechanism to examine the deviations and initiate corrections as and when required. This assures that the chosen strategies will be implemented properly.

The control process requires identifying a set of parameters for evaluating and measuring the performance at the individual level and also at the department level. The performance has to be evaluated to identify deviations and take corrective action. The control and evaluation take place not only at the SBU level but also at the corporate level. This process may involve the participation of all the executives at all levels. Corrective actions are required wherever the evaluation reveals deviations between the actual performance and the projected one, over a given period of time.

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Question No 5. What is Strategic Business Unit? What are its features and advantages? Answer : Strategic business units are absolutely essential for multi product organizations. These business units are basically known as profit centres. They are focused towards a set of products and are responsible for each and every decision / strategy to be taken for that particular set of products. Strategic business units can be best explained with an example. Example of Strategic business units The best example of strategic business unit would be to take organizations like HUL, P&G or LG in focus. These organizations are characterized by multiple categories and multiple product lines. For example, HUL may have a line of products in the shampoo category, Similarly LG might have a line of products in the television category. Thus to track the investments against return, they may classify the category as a different SBU itself. There are several reasons SBUs are used in an organization and they are mentioned in my post on the importance for using SBUs in a multi product organization. However, along with the reasons for using SBUs there are also some powers which needs to be inferred on an SBU. Planning independence, Empowerment and others are such powers which influence a SBU. 3 of such features are discussed below. 1) Empowerment of the SBU manager Several times the empowerment of SBU managers is crucial for the success of the SBU / products. This is mainly because this manager is the one who is actually in touch with the market and knows the best strategies which can be used for optimum returns. Thus several times, the SBU manager might need a higher investment for his products. At such times the manager should be supported from the organization. Only this confidence will help the manager in the progress of the SBU. 2) Degree of sharing of one SBU with another This point is directly connected to the first one. What if one SBU needs some budget but the same is not offered because the budget is being shared by 2 other SBUs and as it is the budget is short. Thus the first SBU does not get the independence to implement some important strategies. Similarly there might be other restrictions applied to one SBU as it is using some resources which are shared by another SBU. This might not always be negative. Of one SBU gains more profit then usual, this revenue might also become useful for the other SBU thereby promoting growth of both of them. This is where sharing actually plays a positive role. 3) Changes in the market An SBU absolutely needs to be flexible because it needs to adapt to any major changes in the market. For example if an LCD manager knows that LEDs are more in demand now, he needs to communicate to the top management that he would also like a range of LED products to make the SBU even more profitable. Thus by adding LED to its portfolio, the SBU can immediately become double profitable. Thus by adjusting to change on SBU levels, the organization as a whole can become profitable. The key to Strategic business management is to have a strict watch on the investment and returns from each SBU. The SBU manager too plays a crucial role in this and hence he is recruited from the industry with extensive experience of that particular industry. Portfolio / Multi SBU management and is done at the absolute top level of the management. Each and every change in the market, and its affect on SBUs is anticipated which is then taken into consideration. Hence, for a multi product organization, business management may actually mean product portfolio management or SBU management.

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Question No 6. Define the term Business policy. Explain its importance. Answer : Strategic Business Unit are the instructions laid by an organisation to manage its activities. It identifies the range within which the subordinates can take decisions in an organisation. It authorises the lower level management to resolve their issues and take decisions without consulting the top level management repeatedly. The limits within which the decisions are made are well defined. Business policy involves the acquirement of resources through which the organisational goals can be achieved. Business policy analyses roles and responsibilities of top level management and the decisions affecting the organisation in the long-run. It also deals with the major issues that affect the success of the organisation. Importance of Business Policies A company operates consistently, both internally and externally when the policies are established. Business policies should be set up before hiring the first employee in the organisation. It deals with the constraints of real-life business. It is important to formulate policies to achieve the organisational objectives. The policies are articulated by the management. Policies serve as a guidance to administer activities that are repetitive in nature. It channels the thinking and action in decision making. It is a mechanism adopted by the top management to ensure that the activities are performed in the desired way. The complete process of management is organised by business policies. Business policies are important due to the following reasons: Coordination Reliable policies coordinate the purpose by focusing on organisational activities. This helps in ensuring uniformity of action throughout the organisation. Policies encourage cooperation and promote initiative. Quick decisions Policies help subordinates to take prompt action and quick decisions. They demarcate the section within which decisions are to be taken. They help subordinates to take decisions with confidence without consulting their superiors every time. Every policy is a guide to activities that should be followed in a particular situation. It saves time by predicting frequent problems and providing ways to solve them. Effective control Policies provide logical basis for assessing performance. They ensure that the activities are synchronised with the objectives of the organisation. It prevents divergence from the planned course of action. The management tends to deviate from the objective if policies are not defined precisely. This affects the overall efficiency of the organisation. Policies are derived objectives and provide the outline for procedures. Decentralisation Well defined policies help in decentralisation as the executive roles and responsibility are clearly identified. Authority is delegated to the executives who refer the policies to work efficiently. The required managerial procedures can be derived from the given policies. Policies provide guidelines to the executives to help them in determining the suitable actions which are within the limits of the stated policies. Policies contribute in building coordination in larger organisations.

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