Master of Business Administration- MBA Semester 4
NAME ROLL NO. LEARNING CENTER CODE DATE OF SUBMISSION
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PUJA GUHA 571112609 01637 15-02-2013
1.MB0052– Strategic Management and Business Policy
Q1. It involves the systematic identification of specifying the firm's objectives. 9. 6. Strategic management is the art and science of formulating. A strategy is made on rational and logical manner. Often companies draw to a close because of lack of proper strategy to run it. and acquiring and making available these resources to implement the policies and strategies to achieve the firm's objectives. 3. nurturing policies and strategies to achieve these objectives. thus its efficiency and its success are ensured. to achieve organizational goals. Porters model of competitive forces assumes that there are five competitive forces that identifies the competitive power in a business situation. Define the term “Strategic Management”. Strategic management also adds to the reputation of the organization because of consistency that results from organizations success. implementing and evaluating crossfunctional decisions that will enable an organization to achieve its objectives. Strategic management reduces frustration because it has been planned in such a way that it follows a procedure. Threat of substitute products Threat of new entrants Intense rivalry among existing players Bargaining power of suppliers Bargaining power of Buyers
. These five competitive forces identified by the Michael Porter are: 1. therefore. Explain the importance of strategic management. 8. production etc.
Q2. Strategic management focuses on proactive approach which enables organization to grasp every opportunity that is available in the market. 2. With strategic management organizations can avoid helter & skelter and they can work directionally. Strategic management looks at the threats present in the external environment and thus companies can either work to get rid of them or else neutralizes the threats in such a way that they become an opportunity for their success. 3. 7. Strategic management takes into account the future and anticipates for it. sales. 5. With strategic management companies can foresee the events in future and that’s why they can remain stable in the market. 2. It brings growth in the organization because it seeks opportunities.. integrates the activities of the various functional sectors of a business. Strategic management. A well-formulated strategy can bring various benefits to the organization in present as well as in future. 4. Describe Porter’s five forces Model. 4. such as marketing. Ans. Ans. 5.
Customer can easily switch to substitute products. Threat of substitute is high when:
There are many substitute products available Customer can easily find the product or service that you’re offering at the same or less price Quality of the competitors’ product is better Substitute product is by a company earning high profits so can reduce prices to the lowest level. When there are actual and potential substitute products available then segment is unattractive. In substitute industries. there is need to closely monitor price trends. Threat of substitute products Threat of substitute products means how easily your customers can switch to your competitors product. Threat of new entry depends upon entry and exit barriers. When both entry and exit barriers are high then profit margin is also high but companies face more risk
In the above mentioned situations. Profits and prices are effected by substitutes so. Threat of new entrants A new entry of a competitor into your market also weakens your power. Some new firms enter into industry and low performing companies leave the market easily.1. That segment is more attractive which has high entry barriers and low exit barriers. if competition rises or technology modernizes then prices and profits decline. So substitutes are a threat to your company. 2. Threat of new entry is high when:
Capital requirements to start the business are less Few economies of scale are in place Customers can easily switch (low switching cost) Your key technology is not hard to acquire or isn’t protected well Your product is not differentiated
There is variation in attractiveness of segment depending upon entry and exit barriers.
Can they work together in ordering large volumes. It is best way to make win-win relation with suppliers. price wars. modifications. It’s good idea to have multi-sources of supply. Bargaining power of Buyers Bargaining Power of Buyers means. Industry Rivalry Industry rivalry mean the intensity of competition among the existing competitors in the market. Buyers have more bargaining power when:
Few buyers chasing too many goods Buyer purchases in bulk quantities Product is not differentiated Buyer’s cost of switching to a competitors’ product is low Shopping cost is low Buyers are price sensitive Credible Threat of integration
. Suppliers are more powerful when
Suppliers are concentrated and well organized a few substitutes available to supplies Their product is most effective or unique Switching cost. 5. is high You are not an important customer to Supplier
When suppliers have more control over supplies and its prices that segment is less attractive. When these barriers are low then firms easily enter and exit the industry. Industry rivalry is high when:
There are number of small or equal competitors and less when there’s a clear market leader. Customers have low switching costs Industry is growing Exit barriers are high and rivals stay and compete Fixed cost are high resulting huge production and reduction in prices
These situations make the reasons for advertising wars.because poor performance companies stay in and fight it out. Bargaining power of suppliers Bargaining Power of supplier means how strong is the position of a seller. ultimately costs increase and it is difficult to compete. Intensity of rivalry depends on the number of competitors and their capabilities. 3. from one suppliers to another. How much control the buyers have to drive down your products price. profit is low. 4. The worst condition is when entry barriers are low and exit barriers are high then in good times firms enter and it become very difficult to exit in bad times. How much your supplier have control over increasing the Price of supplies.
Buyer’s bargaining power may be lowered down by offering differentiated product. Explain its importance Ans. Example :. Business policies are guidelines used to dictate the culture of a company and create expectations for employees and management. 4. Importance of Business Policy: Integrates knowledge Deals with constraint and complexity of real life business Broad perspective Make study and practice of management more meaningful For understanding business environment – Formulation of policies Makes management receptive Reduces feeling of isolation For understanding the organization Presents a basic frame work for understanding decision making Brings the knowledge in strategic decision making Importance of job performance For personal development – Career choice Offers unique perspective to employees
Q4. Promotional alliance: Two or more companies may come together to promote their products and services. in brief. Example :. Following are the different types of strategic Alliances: 1. If you’re serving a few but huge quantity ordering buyers. then they have the power to dictate you. Product and/or service alliance: Two or more companies may get together to synergise their operations.
. Ans. Example :. Example :. A manufacturing company may grant license to another company to produce its products. Policies can spell out specific behaviors that are deemed unacceptable and outline the disciplinary actions that will occur when they happen. including technical know-how.Sony Music created a retail corner for itself in the ice-cream parlours of Baskin-Robbins. Q3. The necessary market and product support.The Cricket Board may permit Coke’s products to be displayed during the cricket matches for a period of one year. 2.Coca-cola initially provided such support to Thums Up. Business policy is also used to establish organization in a company.1) Chocolate companies more often tie up with toy companies. Strategic alliances constitute a viable alternative in addition to Strategic Alternatives. Two companies. is provided as part of the alliance. 2) TV Channels tie-up with Cricket boards to telecast entire series of cricket matches live. Two companies may jointly market their products which are complementary in nature. 3. seeking alliance for their products and/or services. Creating a chain of command is a vital business function for allowing all parties to know which employees are responsible for which departments and duties. may produce a new product altogether. Companies can develop alliances with the members of the strategic group and perform more effectively. who come together in such an alliance. These alliances may take any of the following forms. What. are the types of Strategic Alliances and the purpose of each? Supplement your answer with one real life example of each. Define the term ‘Business Policy’. A company may agree to carry out a promotion campaign during a given period for the products and/or services of another company.
tend to obscure the true picture. and data marts). Example:. thus. Q5. However. Hyderabad. disturbing financial data and other irregularities.
Importance: A decision system has great impact on the profits of the company. Logistic alliance: Here the focus is on developing or extending logistics support.5.. Example :. comparative sales figures between one week and the next. A General Manager must have a bird’s eye view of his company. This could lead to wrong decision-making. inventory and inflation policies. Explain the concept. It forces the management to rationalize the depreciation. need for and importance of a Decision Support System. 6. or business models to identify and solve problems and make decisions. A properly designed DSS is an interactive software-based system intended to help decision makers compile useful information from a combination of raw data. a single supplier. documents. That a false Profit and Loss (PNL) picture will emerge – both on the single product level – and generally. Need: Many companies in developing countries have a very detailed reporting system going down to the level of a single product. Kolkata entered into a logistic alliance with TDK Logistics Ltd. the following phenomena could happen: That the management will highly leverage the company by assuming excessive debts burdening the cash flow of the company. It warns the management against impending crises and problems in the company. these reports – which are normally provided to the General Manager – should not be used by them at all. The strategy should be to select such a partner who has complementary strengths and who can offset the present weaknesses. Ans. cubes. That the inventory will not be fully controlled and appraised centrally. That the company will pay excessive taxes on its earnings. Concept: Decision support systems constitute a class of computer-based information systems including knowledge-based systems that support decision-making activities. That the wrong cash flow picture will distort the decisions of the management and lead to wrong (even to dangerous) decisions. Typical information that a decision support application might gather and present are: an inventory of all of your current information assets (including legacy and relational data sources. Projected revenue figures based on new product sales assumptions. personal knowledge. meat and eggs from Hyderabad etc. It is also explained as a class of information systems (including but not limited to computerized systems) that support business and organizational decision-making activities. Pricing collaborations: Companies may join together for special pricing collaborations. Companies should be very careful in selecting strategic partners.The outlets of Pizza Hut. One company extends logistics support for another company’s products and services. He must be alerted to unusual happenings.It is customary to find that hardware and software companies in information technology sector offer each other price discounts. data warehouses. based on wrong data. a single day. to outsource the requirements of these outlets from more than 30 vendors all over India – for instance. It specially helps in following areas:
. As things stand now. They are too detailed and.
So. the establishment of a decision system does not hinder the functioning of the company in any way and does not interfere with the authority and functioning of the financial department. the content and format of the business plan is determined by the goals and audience. responsible business. or larger community. A business plan represents all aspects of business planning process declaring vision and strategy alongside sub-plans to cover marketing. and sustainable competitive advantage will lead to a high exit valuation. It has been proven that without proper feedback. client. operations. consumers. When the existing business is to assume a major change or when planning a new venture. Q6. taxpayer. also known as corporate responsibility. b) Business plan is a formal statement of a set of business goals. corporate citizenship. Essentially. CSR policy would function as a built-in. sustainable responsible business (SRB). upcoming growth opportunities. Business plans may also target changes in perception and branding by the customer. and international norms. business would proactively promote the public interest by encouraging community growth and development. so a business plan for a bank loan will build a convincing case for the organization’s ability to repay the loan. A decision system allows for careful financial planning and tax planning. It may also contain background information about the organization or team attempting to reach those goals. A business plan is a summary of those disciplinary plans. employees. when required. tax liabilities are minimized and cash flows are maintained positive throughout. Business would embrace responsibility for the impact of their activities on the environment. The decision system is an integral part of financial management in the West. regardless of legality. Rather. Planet and Profit.
. or corporate social performance. a business plan for a non-profit might discuss the fit between the business plan and the organization’s mission. It is completely compatible with western accounting methods and derives all the data that it needs from information extant in the company. managers tend to take too much credit and burden the cash flow of their companies.The management knows exactly how much credit it could take. and the plan for reaching those goals. a) Corporate social responsibility (CSR). the reasons they are believed attainable. Banks are quite concerned about defaults. There is no fixed content for a business plan. finance. Furthermore. feasibility. ethical standards. stakeholders and all other members of the public sphere. CSR is the deliberate inclusion of public interest into corporate decision-making. Business plans are decision-making tools. self-regulating mechanism whereby business would monitor and ensure its adherence to law. communities. and the honoring of a triple bottom line: People. Ideally. human resources as well as a legal plan. Write short notes on: a) Corporate social responsibility b) Business plan Ans. Venture capitalists are primarily concerned about initial investment. is a form of corporate self-regulation integrated into a business model. A business plan for a project requiring equity financing will need to explain why current resources. and voluntarily eliminating practices that harm the public sphere. and exit valuation. non cash outlays are controlled. since investors will look for their annual return in that timeframe. For example. for how long (for which maturities) and in which interest rate. a 3 to 5 year business plan is required. Profits go up.
Writing a good business plan can’t guarantee success.Preparing a business plan draws on a wide range of knowledge from many different business disciplines: finance. but it can go a long way toward reducing the odds of failure. It can be helpful to view the business plan as a collection of sub-plans. understandable. and marketing. supply chain management. among others."
. "a good business plan can help to make a good business credible. and attractive to someone who is unfamiliar with the business. intellectual property management. operations management. one for each of the main business disciplines. human resource management.