Q.1 Define the term “strategic Management”. Explain the importance of strategic management.

Strategic Management Strategic management is a systematic approach of analysing, planning and implementing the strategy in an organization to ensure a continued success. Strategic management is a long term procedure which helps the organization 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 organization. Importance of strategic management      A rapidly changing environment in organizations requires a greater awareness of changes and their impact on the organization. Hence strategic management plays an important role in an organization. Strategic management helps in building a stable organization. Strategic management controls the crises that are aroused due to rapid change in an organization. Strategic management considers the opportunities and threats as the strengths and weakness of the organization in the crucial environment for survival in a competitive market. Strategic management helps the top level management to examine the relevant factors before deciding their course of action that needs to implement in changing environment and thus aids them to better cope with uncertain situations. Changes rapidly happen in large organizations. Hence strategic management becomes necessary to develop appropriate responses to anticipate changes. The implementation of clear strategy enhances corporate harmony in the organization. The employees will be able to analyse the organization’s ethics and rules and can tailor their contribution accordingly. Systematically formulated business activities helps in providing consistent financial performance in the organization. A well designed global strategy helps the organization to gain competitive advantages. It increases the economies of scale in the global market, exploits other countries resources, broadens learning opportunities, and provides reputation and brand identification.

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Q2. Describe Porter’s five forces model. A vital task of a strategist is to anticipate and/or recognize the nature of competition and potential threat from competitors and to develop appropriate response strategies. The most difficult task in this is to properly assess the magnitude of existing competition and correctly foresee the threat from new and emerging competitors. Porter (1980) in his pioneering work on competitive strategy had identified five major types of competitive threats (Figure 11.5), which are valid even today. These are: Figure Threat of New entrants New Entrants Industry competitors Intensity of Rivalry

Bargaining Suppliers Power of Suppliers

Bargaining power of buyers Buyers

Bargaining power of buyers 4. Surf and Ariel. particularly if it is a market leader or challenger. Generic substitution takes place when different products or services compete for a share in the same family income or household income: for example.Substitutes Threat of Substitutes Source: M E Porter. i. no close substitutes available for the product offered by the supplier. Ongoing battles between Coca-Cola and Pepsi. substitution of need and generic substitution. on the stage of the product life cycle. they can become stronger bargainers or create competition among suppliers under certain specific conditions. Substitution of need means that a new product or service makes an existing product or service redundant. Substitution depends on whether an alternative product offers higher perceived value to the customers. to a large extent. or. The industry consists of a large number of small operators so that buyers can easily create competition among them. there is no long-term contract. Bargaining power of suppliers 5. or sellers. Industry (existing) competitors 2. 1980). the buyer purchases a very significant proportion of total output of the supplier —can happen typically in industrial products. Threat of substitutes 3. Competitive Strategy: Techniques for Analysing Industries and Competitors (New York: The Free Press. can be strong bargainers under certain conditions. 1. Threat of new entrants Industry competitors: Various degrees or intensities of competitive rivalry exist in the market for a product. Some of these conditions are: i. Competitive intensity or rivalry depends. for industrial or service products. ii.. e-mail substituting for postal service or mobile phones substituting for landlines. IV. iii. Colgate and Peps dent are good examples. Product-for-product substitution or substitution for the same use are same. for example. IT has provided e-Commerce as a tool which has generally made secretarial services or printing redundant to a large extent. then starts growing steadily and becomes significant till the product enters the decline stage. For example. Bargaining power of buyers: Buyers are generally in a better bargaining position. substitutes are available or there is no product differentiation.e. generally in a weak bargaining position. Cost of switching a supplier is low. Backward integration into supplier’s product—a truck or car manufacturer beginning to make components or accessories likes Tata Motors or an air conditioner manufacturer also making compressors like Carrier Aircon or a color TV manufacturer also making picture tubes like Sony. The product(s) sold by the supplier(s) is an important or critical input . Threat of substitutes: Substitute products reduce demand for a particular product or a category of products because some customers switch over to the alternatives. air conditioner manufacturers competing with color televisions or music systems or home theatres for snatching a share in ‘fixed’ household income. ii. But. Substitution may take three different forms: product-for-product substitution. This is the battle for market share and is the most immediate concern of a company. Such market conditions are: i. Competition is practically non-existent at the introduction stage. Bargaining power of suppliers: Suppliers.

Business Policy Business policies are the instructions laid by an organization to manage its activities. Business policies are important due to the following reasons:  Coordination. Business policy involves the acquirement of resources through which the organizational goals can be achieved. It authorizes the lower level management to resolve their issues and take decisions without consulting the top level management repeatedly. Importance of Business Policy A company operates consistently. Weston TV. for example. iii. a carbon black producer entering into tyre manufacturing and competing with tyre manufacturers or TVS (earlier Lucas-TVS). It identifies the range within which the subordinates can take decisions in an organization. But. Policies encourage cooperation and promote initiative. both internally and externally when the policies are established. This helps in ensuring uniformity of action throughout the organization. HMT watches. Policies serve as a guidance to administer activities that are repetitive in nature. traditionally a component or accessories maker. new entrants pose a major threat to the existing market players. Quick decisions. Define the term “Business policy”. The complete process of management is organized by business policies. ICs and chips in electronic Products which can be bought only from few or selected suppliers.in the buyer’s product. They demarcate the section within which decisions are to be taken. The limits within which the decisions are made are well defined. Every policy is a guide to  . They help subordinates to take decisions with confidence without consulting their superiors every time. High switching cost of changing a supplier —may be because the supplier manufactures a special product or the product is clearly differentiated. Business policies should be set up before hiring the first employee in the organization. enters into production of motor cycles (TVS-Suzuki).policies help subordinates to take prompt action and quick decisions. It deals with the constraints of real life business. It is a mechanism adopted by the top management to ensure that the activities are performed in the desired way. Maruti Suzuki’s entry into the Indian car market. etc. iv. Forward integration into buyer’s product. Q3. We have the examples of Padmini (earlier Fiat) cars. Business policy analyses roles and responsibilities of top level management and the decisions affecting the organization in the long run. The policies are articulated by the management. Forecasting the emergence of new entrants is very important for existing competitors and it is also one of the most difficult jobs. In fact. Examples of entry of Toyota and Honda in the US car market (and also in the global market). It channels the thinking and action in decision making. companies which fail to foresee the new entrants or ignore them may even face disastrous results. for example. It also deals with major issues that affect the success of the organization.Reliable policies coordinate the purpose by focusing on organizational activities. Vimal fabrics in the Indian textile market and Titan in the Indian watch market are well known. Explain its importance. It is important to formulate policies to achieve the organizational objectives. most of the established products and brands in consumer and industrial markets today were new entrants at some point of time. Threat of new entrants: Many times.

either through the purchase of its shares or assets. Example: . time and skills to achieve the objectives. Authority is delegated to the executives who refer the policies to work efficiently. and policy environment. The management tends to deviate from the objective if policies are not defined precisely. Example: . both the organizations invest on the resource like money. This affects the overall efficiency of the organization. in brief. It prevents divergence from the planned course of action. archiving. Policies provide guidelines to the executives to help them in determining the suitable actions which are within the limits of the stated policies. They are obtained by the co-operation between the companies. What.joint venture is the most powerful business concept that has the ability to pool two or more organizations in one project to achieve a common goal. are the types of strategic Alliances and the purpose of each? Supplement your answer with real life examples.policies provide logical basis for assessing performance. It saves time by predicting frequent problems and providing ways to solve them. Example: .the sportswear giant Nike formed co-branding agreements with Philips consumer electronic products.  activities that should be followed in a particular situation. Strategic alliance is the process of mutual agreement between the organizations to achieve objectives of common interest.Transocean and Global Santafe. Policies contribute in building coordination in larger organizations. Effective control. mobile handset maker is getting into an agreement with the Reliance Communications Ltd(RCOm) to launch its new mobile. Mergers and acquisitions Merger is the process of combining two or more organizations to form a single organisation and achieve greater efficiencies of scale and productivity. Collaborations and Co-branding:. Q4. The required managerial procedures can be derived from the given policies. merged to consolidate their position in a fast growing market. Massive growth can only be achieved in less time by buying other organizations. encryption. Strategic alliance involves the individual organizations to modify its basic business activities and join in agreement with similar organizations to reduce duplication of manufacturing products and improve performance. Example:.Google acquired postini to introduce service of message security. The main reason to involve into mergers is to join with other company and reap the rewards obtained by the combined strengths of two organizations.Collaborations is the process of cooperative agreement of two or more organizations which may or may not have previous relationship of working together to achieve common goal. the top oil drilling companies. In a joint venture. Acquisition is the process of purchasing an organization by another organization.well defined policies help in decentralization as the executive roles and responsibility are clearly identified. They ensure that the activities are synchronized with the objectives of the organization. Policies are derived objectives and provide the outline for procedures. Decentralization. . Types of strategic alliance Joint Venture: .the chine wireless Technologies.

Sharing R &D :. The function being outsourced is considered as noncore to the organizations. they cannot serve as day-to-day guides to the General Manager. the actual expenditures are compared to the budget in a feedback loop. the cash flow statement. Daily Financial Statements: The Manager should have access to continuously updated statements of income.it is a quick process of achieving a successful objective nationwide. what his real cash situation is – as opposed to the theoretical cash situation which includes accounts payable and account receivable in the form of expenses and income. Explain the concept. During the year.the organizations set up strategic alliances to venture into research field. The most important statement is that of the cash flow. The manager should be able to know. Example:-Tatvasoft is an Indian outsourcing company that offers software development services to its clients in United States. Technology Licensing: it is the contractual agreements where trademarks intellectual property and trade secrets are licensed to an external organization. Canada and Australia. need for and importance of a Decision support system. Other Methods:Affiliate marketing: . The budget allocates amounts of money to every activity and/or department of the firm. at each and every stage. As time passes. Outsourcing: . the balance sheet. Infosys Technologies Ltd. Distributors:. Product Licensing: . . and a balance sheet.it is the process of revenue sharing between the website owner and the online merchant.Technological Partnering: . the firm generates its financial statements: the income statement. Has entered into partnership with US based NVIDIA. The two organizations work as co-owners in business and share the profit and losses. However.The Software giant.it is the process of agreement with specific terms between two or more organizations which guarantee in performing a specific task in return for a valuable benefit. GPU inventor and the world’s visual technologies giant. or at the end of the fiscal year.it is the process of entering into a contract with an organizations or a person to perform a particular function. 2. Most of the organizations outsource the work in numerous ways. Following are the three components of a Decision Support System 1. When putting together. these four documents are the formal edifice of the firm’s financ es.this is similar to Technology Licensing Franchising: .it is the process of associating the technologies of two different companies to achieve a common goal. Example: . Annual Budget: It is really a business plan. Q5.most of the organizations market their products by outsourcing it to various companies. cash flow. Contractual agreements: .

So. It forces the management to rationalize the depreciation. It warns the management against impending crises and problems in the company. The management knows exactly how much credit it could take.The Manager can review these financial and production ratios. A decision system allows for careful financial planning and tax planning. b. other firms in his branch and to the overall performance of the industry that he is operating in. tax liabilities are minimized and cash flows are maintained positive throughout. It also allows him to compare the performance of his company to the performance of his competitors. Profits group. managers tend to take too much credit and burden the cash flow of their companies. The Daily Ratios Report: This is the most important part of the decision support system. It enables the Manager to instantly analyze dozens of important aspects of the functioning of his company. for how long (for which maturities) and in which interest rate. non-cash outlays are controlled. quick ratio. how efficiently assets are used io. interest coverage ratio and other liquidity and coverage ratios others decision system has great impact on the profits of the company. It is completely compatible with western accounting methods and derives all the data that it needs from information extant in the company. It has been proven that without proper feedback. Examples of the Ratios to be Included in the Decision System – deviation of actual profits from expected profits – the return on the adjusted equity capital – the return on the assets – the profit margin on the sales – asset turnover. Where there is a strong deviation from historical patterns. It specially helps in following areas: a.3. The decision system is an integral part of financial management in the West. or where the ratios warn about problems in the future – management intervention may be required. It allows him to compare the behavior of these parameters to historical data and to simulate the future functioning of his company under different scenarios. the establishment of a decision system does not hinder the functioning of . inventory and inflation policies.

Many feel that corporate social policy should be articulated during strategy formulation. greater good of the external stakeholders. that is. Write Short Notes on: Corporate Social responsibility Business Plan Corporate Social Responsibility As mentioned above.the company in any way and does not interfere with the authority and functioning of the financial department. waste disposals. on the other hand. A solid business plan describes who you are. a good business plan describes to others and to your own board of directors. your capacity to do it. Some feel that this is the most problematic issue in deciding company responsibility. Strong exponents of CSR also talk of social policy for companies. technology. This is corporate social responsibility (CSR). administered during strategy implementation and reaffirmed or changed during strategy evaluation. and how you intend to secure those resources. what you do. how you will do it. This implies that organizations should be socially responsible. management and staff the details of how you intend to operate and expand your business. objectives and profitability. external stakeholders of an organization are too many and varied and many of them represent different sections or social groups. a good business plan will help to attract necessary financing by demonstrating the feasibility of your venture and the level of thought and professionalism you . what financial resources are necessary to carry it out. The conflict between internal and external stakeholders can go much further than mentioned so far. markets. in addition to the interests of the shareholders. think that the competing or social claims of external stakeholders should be balanced in such a way that it protects the company mission. customers and self -image. And most important. They feel that social responsibilities of companies should be clearly enunciated and declared as social policy. Internal stakeholders. The debate continues. According to these thinkers. External stakeholders argue that internal stakeholders’ demand be made secondary to the greater need of the society. Q6. Social policies may directly affect a company’s products and services. Whether the business is housing. And most important. an organization’s social policy should be integrated into all management activities including the mission statement and objectives. Corporate social responsibility can be defined as the alignment of business operations with social values. A well-written plan will serve as a guide through the start-up phase of the business. environmental safety and conservation of natural resources should be the overriding considerations for formulation of policy and strategic decision making. It can also establish benchmarks to measure the performance of your business venture in comparison with expectations and industry standards. but in fact helps the manager to take quick decisions and make profit to the company. a good business plan will help to attract necessary financing by demonstrating the feasibility of your venture and the level of thought and professionalism you bring to the task. It can also establish benchmarks to measure the performance of your business venture in comparison with expectations and industry standards. Business Plan A business plan is a detailed description of how an organization intends to produce market and sell a product or service. businesses or companies should also serve the society. that is. A well-written plan will serve as a guide through the start-up phase of the business. Many of them feel that issues like pollution. commercial or some other enterprise.

Business opportunities may have been dropped at your doorstep. Establish Goals: Once you have identified goals for a new business venture. the organization frequently purchases a particular service or product. 5. attract additional businesses to the area and fill a gap in existing retail services. You may be able to identify which business or industrial sectors are growing or declining in your city. Internal Capacity: The board. you should conduct a local market study. this may present a business opportunity. with potentially disastrous results for the organization as a whole. Employment Creation – A new business venture may create job opportunities for community residents or the constituency served by your organization. the next step in the business planning process is to identify and select the right business. 6. Revenue Generation –Your organization may hope to create a business that will generate sufficient net income or profit to finance other programs. Local Market Study: Whether your goal is to revitalize or fill space in a neighborhood commercial district or to rehabilitate vacant housing stock. staff or membership of your organization may possess knowledge and skills in a particular business sector or industry. metropolitan area or region. Analysis of Local and Regional Industry Trends: Another method of investigating potential business opportunities is to research local and regional business and industry trends. Internal purchasing needs / Collaborative Procurement: Perhaps. -------------------------------------------------------------- . 7. activities or services provided by your organization. and assess the capacity of the area to support existing and additional commercial or home-ownership activity. If nearby affiliate organizations also use this service or product. 8. A good business plan serves the following purposes: 1. Your organization may wish to draw upon this internal expertise in selecting potential business opportunities. Neighborhood Development Strategy – A new business venture might serve asan anchor to a deteriorating neighborhood commercial area. 3. A bad or insufficient market study could encourage your organization to pursue a business destined to fail. A good market study will measure the level of existing goods and services provided in the area. A good business plan will help attract necessary financing by demonstrating the feasibility of your venture and the level of thought and professionalism you bring to the task. Many organizations may find themselves starting at this point in the process.bring to the task. 4. 2.