Master of Business Administration - MBA Semester 4

MB 0052 – Strategic Management & Business Policy (4 credits)

(Book ID: B1699), WINTER 2016

Q1 Illustrate the Strategic Management Model (SMP) Explain the levels in SMP

Ans. Strategic management model refers to the pattern or mode of strategic management.
According to the strategic management model, a number of steps are taken to achieve the
objectives of a company. Different strategic management models are chosen by various
companies according to their conveniences.

Strategic management model is also known as strategic planning model. A strategic planning
model is selected for the purpose of formulating and implementing the strategic management
plan of a particular organization.

Nevertheless, it has been proved that no strategic planning model is perfect. Every company
designs its own strategic planning model frequently by choosing a model and transforming it
as the company advances into formulating its strategic management plan procedures.

Four different levels of strategic management, each building on the previous one:

 Level 1 — Articulated Plan: The plan has established the mission, vision, goals,
actions, and key performance indicators (KPIs) for the next 24 to 36 months.
 Level 2 — Strategic Differentiation: The plan has a strategic focus on delivering a
unique value proposition developed from a clear understanding of market position and
customer needs.
 Level 3 — Organizational Engagement: Everyone knows the strategic direction,
understands his role, and commits to accountability. An execution/governance process
is in place.
 Level 4 — Organizational Transformation: High-performing team, driven by
shared values, consistently drives decision making based on the agreed-upon strategy
with data, structure (organizational and process), and systems in place to support the
activity.

Q 2 “Business need to be planned not only for today but also for future. This implies the
continuity and the need for sustainability” Enumerate

Ans. Business Continuity Planning (BCP) is the part of the lifecycle that has the most public
face and is sometimes assumed to be the ‘be all and end all’ of Business Continuity
Management (BCM). However, on the assumption that a Business Impact Analysis (BIA) has
been done and a business continuity strategy agreed, then the creation of the BCP is a fairly
mechanistic process.

A BCP should contain at least two types of information:

1) The steps to be taken to restore/recover the critical processes.

2) Useful information during an incident.

Traditionally there used to be a single BCP for the whole organisation no matter how big or
complex its structure; more recently there would be a BCP for each location or building
occupied. These days BCP’s are often at departmental level with an overall organisational
BCP as a ‘gluing’ document.

The main reason for this evolution has been the need to make the plans increasingly useable.
Thus the information in each plan is very specific to a department, such as contact details of
staff, clients, suppliers etc. and useful details such as reference numbers. Some of this data
such as staff home numbers may be sensitive and should be restricted to as small a circulation
list as possible.

Many BCP’s are simply word documents containing a series of tables with all the relevant
information. Some have been designed in a format that they can be emailed to a mobile
device such a Blackberry and thus instantly be available in an emergency. Others have been
stored in a business continuity tool such as Strohl LDRPS or Office Shadow’s Shadow-
Planner.

There is no definitive list of the types of information that a department may find useful during
a crisis. The more details are included the more work to keep them up-to-date. When a
department has an alternative location to relocate to, it can usually store whatever it may need
there in the way of specialized equipment and paper documentation. This is often referred to
as a contingency box (or battle-box for the more military-metaphor minded). A list of its
contents, together with the last time they were checked/updated is a useful part of the BCP.

Q3 Explain the following:

(a) Core competence

(b) Value chain analysis

Ans. A )
Core competencies are the main strengths or strategic advantages of a business. Core competencies
are the combination of pooled knowledge and technical capacities that allow a business to be
competitive in the marketplace. Theoretically, a core competency should allow a company to expand
into new end markets as well as provide a significant benefit to customers. It should also be hard for
competitors to replicate.

A business just starting out will try to first identify - and then focus on - its core
competencies, allowing it to establish a footprint while gaining a solid reputation and brand
recognition. Using, and later leveraging, core competencies usually provides the best chance
for a company's continued growth and survival, as these factors are what differentiate the
company from competitors.

The term "core competency" is relatively new. It originated in a 1990 Harvard Business
Review article. In it, the authors suggest that business functions not enhanced by core
competencies should be outsourced if economically feasible.
B)

VCA is a strategy tool used to analyze internal firm activities. Its goal is to recognize, which
activities are the most valuable (i.e. are the source of cost or differentiation advantage) to the
firm and which ones could be improved to provide competitive advantage. In other words, by
looking into internal activities, the analysis reveals where a firm’s competitive advantages or
disadvantages are. The firm that competes through differentiation advantage will try to
perform its activities better than competitors would do. If it competes through cost advantage,
it will try to perform internal activities at lower costs than competitors would do. When a
company is capable of producing goods at lower costs than the market price or to provide
superior products, it earns profits.

Q4 Write a brief note on Turnaround strategy.

ANS. Turnaround management is a process dedicated to corporate renewal. It uses analysis and
planning to save troubled companies and returns them to solvency, and to identify the reasons for
failing performance in the market, and rectify them. Turnaround management involves management
review, root failure causes analysis, and SWOT analysis to determine why the company is failing.
Once analysis is completed, a long term strategic plan and restructuring plan are created. These
plans may or may not involve a bankruptcy filing. Once approved, turnaround professionals begin to
implement the plan, continually reviewing its progress and make changes to the plan as needed to
ensure the company returns to solvency. Turnaround Managers are also called Turnaround
Practitioners , and often are interim managers who only stay as long as it takes to achieve the
turnaround. Assignments can take anything from 3 to 24 months depending on the size of the
organization and the complexity of the job. Turnaround management does not only apply to
distressed companies, it in fact can help in any situation where direction, strategy or a general
change of the ways of working needs to be implemented. Therefore turnaround management is
closely related to change management, transformation management and post-merger-integration
management. High growth situation for example are one typical scenario where turnaround experts
also help. More and more turnaround managers are becoming a one-stop-shop and provide help
with corporate funding (working closely with banks and the Private Equity community) and with
professional services firms (such as lawyers and insolvency practitioners) to have access to a full
range of services that are typically needed in a turnaround process. Most turnaround managers are
freelancers and work on day rates. The job often involves frequent travel. Others work for large
corporations and have permanent positions.

Q 5 What is Stability Strategy?

Explain the BCG (Boston Consulting Group) Portfolio Model

ANS.

Stability strategy implies continuing the current activities of the firm without any significant
change in direction. If the environment is unstable and the firm is doing well, then it may
believe that it is better to make no changes. A firm is said to be following a stability strategy
if it is satisfied with the same consumer groups and maintaining the same market share,
satisfied with incremental improvements of functional performance and the management does
not want to take any risks that might be associated with expansion or growth.

Stability strategy is most likely to be pursued by small businesses or firms in a mature stage
of development.

Stability strategies are implemented by ‘steady as it goes’ approaches to decisions. No major

functional changes are made in the product line, markets or functions..

BCG PORTOFOLIO MODEL

 Dogs: The usual marketing advice is to remove any dogs from your product portfolio
as they are a drain on resources.

However, some can generate ongoing revenue with little cost.

For example, in the automotive sector, when a car line ends, there is still a need for
spare parts. As SAAB ceased trading and producing new cars, a whole business has
emerged providing SAAB parts.

 Question marks: Named this, as it’s not known if they will become a star or drop
into the dog quadrant. These products often require significant investment to push
them into the star quadrant. The challenge is that a lot of investment may be required
to get a return. For example, Rovio, creators of the very successful Angry Birds game
has developed many other games you may not have heard of. Computer games
companies often develop hundreds of games before gaining one successful game. It’s
not always easy to spot the future star and this can result in potentially wasted funds.
 Stars: Can be the market leader though require ongoing investment to sustain. They
generate more ROI than other product categories.

 Cash cows: ‘Milk these products as much as possible without killing the cow!. Often
mature, well established products.The company Procter & Gamble which
manufactures Pampers nappies to Lynx deodorants has often been described as a
‘cash cow company

Q6 Define the term ‘Strategic alliance’. Enumerate its characteristics and objectives

Ans. “Strategic” may be one of the most over-used words in business today. This
observation is especially valid in the world of alliances, where managers must distinguish
between those alliances that are merely conventional and those that are truly strategic. This
author outlines the five factors that make an alliance “strategic.” As companies gain
experience in building alliances, they often find their portfolios ballooning with partnerships.
While these partnerships may contribute value to the firm, not all alliances are in fact
strategic to an organization. This is a critical point, since, as this article will explain, those
alliances that are truly strategic must be identified clearly and managed differently than more
conventional business relationships.Due to the levels of organizational commitment and
investment required, not all partner relationships can be given the same degree of attention as
truly strategic alliances. The impact of mismanaging a strategic alliance or permitting it to
fall apart can materially impact the firm’s ability to achieve its core business objectives.

The five criteria of a “strategic” alliance

What is it that makes an alliance truly strategic to a particular company? Is it possible for an
alliance to be strategic to only one of the parties in a relationship? Many alliances default to
some form of revenue generation—which is certainly important— but revenue alone may not
be truly strategic to the objectives of the business. There are five general criteria that
differentiate strategic alliances from conventional alliances. An alliance meeting any one of
these criteria is strategic and should be managed accordingly.

1. Critical to the success of a core business goal or objective.

2. Critical to the development or maintenance of a core competency or other source of

competitive advantage.

3. Blocks a competitive threat.

4. Creates or maintains strategic choices for the firm.

5. Mitigates a significant risk to the business.

The essential issue when developing a strategic alliance is to understand which of these
criteria the other party views as strategic. If either partner misunderstands the other’s
expectation of the alliance, it is likely to fall apart. For example, if one partner believes the
other is looking for revenue generation to achieve a core business goal, when in reality the
objective is to keep a strategic option open, the alliance is not likely to survive.

Examining each of the five strategic criteria in depth provides insight into how the strategic
value of alliances can be leveraged.

characteristics

We have argued frequently that researchers are in the best position to provide strategic
guidance to their organization. As researchers we think about things like how you can get
more folks to benefit from insight by sharing our foundational knowledge and how to embed
customer knowledge in a way that fits executive decision-making processes. That’s
right…STRATEGIC thinking!

Innovation Excellence recently published a blog on 5 characteristics of the best strategic

thinkers, and I think many of these will be familiar to your daily research lives:

1. Open yourself to perspectives from multiple sources—this isn’t about having more data
points than others, it’s about putting them together properly. We’ve done the analysis, and
know that decision makers feel more confident in their decisions if they used more data
points to get to them. But we also found that decision makers struggle to make the best
 decisions without help with interpreting the data. Researcher synthesis skills can give you a
real leg-up in the strategic decision-making process.
2. Incorporate BOTH logic and emotion into your thinking—emotional drivers matter,
especially when you’re trying to get the organization to take action. We have found that the
most successful way to re-educate executives when their assumptions are wrong is by
engineering learning moments: using multi-sensory experiences that make the decision
makers feel the emotion that comes with new, convention-breaking insights.
3. Seek options beyond today’s reality—don’t let the current state of affairs have too much
impact on future decisions. A great Research example of this is the trends trend. Decision
makers like to ask for trends to try to identify “the next big thing.” But we’ve seen
companies have much more success growing their company when they shift Research’s
focus from megatrends tracking to opportunity identification.
4. Question both the familiar and the to-be-determined—in other words, be curious. As the
Science channel promo goes: Question Everything. We’ve done the quant on this too, and
have confirmed that intellectually curious people provide significantly better insights to the
organization.
5. Accept open issues—this may be the most difficult for us. As researchers, by nature we are
looking for answers. But the most successful Research departments are the ones that
encourage principled risk-taking. Waiting for all of the facts to come in to make the “right
decision” will keep you waiting around forever. Use your judgment when guiding the
organization: it’s how true insights are made.

Strategic Objective
Strategic business objectives are goals deemed most important to the current and future
health of a business. Objectives are prioritized by an organization through a thorough analysis
of business practices such as a SWOT analysis. SWOT stands for strengths, weaknesses,
opportunities and threats. Though prioritization of strategic objectives is unique to each
business, common objectives exist. Six of the most common areas to focus strategic business
goals are in the areas of market share, financial resources, physical resources, productivity,
innovation and action planning.

Increase Market Share

In order to grow a business needs to increase their share of competitive markets. Marketing
plans start with the overall strategic business plan of a company, but explain further how
specific aims will be carried out. Marketing plans address this through defining product or
service offerings, researching target markets, analysis of competition, then strategically
placing, pricing and promoting the company offering.

Strengthening Financial Resources

Included in the growth objectives of an organization is the availability of capital resources to

invest in future expansion projects. If a company's financial resources are strong, capital
could conceivably come from cash reserves. For many organizations, strengthening financial
resources means to build cash flow or increase assets in order to attract investors and court
creditors to fund expansion.
Physical Resources

To companies that produce tangible products, physical resources could mean the plant,
machinery and other equipment integral to producing a product. Service businesses could
define physical resources as office space or computer equipment to enhance customer service
and other business processes. In either respect, the goal of increasing physical resources deals
with using equipment or machinery to better produce a product, or offer a service.

Productivity

Productivity for any organization means fine tuning a business process to achieve the best
result for a customer while increasing profit. A manufacturing organization that fine tunes a
process could reduce waste, reduce production time, and in the end, make a better product
that gets to the customer faster. A service business that changes the way customers are
handled can decrease call times and increase customer satisfaction and loyalty.

Innovation

Innovation is a goal that helps a business stay ahead of the competition. Placing resources
into research and development to create a new product, or into offering a better service, can
pay dividends by entering a new and unique product or service into the marketplace.

Action Planning

A business cannot move forward without defining specific action steps to take them toward
their goals and identified business objectives. Action planning involves identifying the top
objectives for an organization, then developing SMART goals -- goals are specific,
measurable, achievable, realistic and timely. By setting and meeting SMART goals, an
organization will meet specific business objectives along the way.