Professional Documents
Culture Documents
MANAGEMENT
ADMINISTRATION
Project file of :-
“Strategic management”
Prepared by:-Naveen Kumar
Course:-MBA 4th
Sem roll no:-R17MBAD0005
Q1.What are the characterstics of enviorment scanning and discuss its
various techniques?
Environment scanning helps the signals of potential changes in the environment. It also detects
the changes that are already under way. It normally reveals ambiguous, incomplete, or
unconnected data and information. It involves a detailed and micro study of the environment.
Hence, it is also called the X-ray of the environment. The environment uncertainty, complexity
and dynamism are studies to assess the trend of environment. It is the base of environment
analysis. It is normally done when there is high level of uncertainty in the environment. It is a
continuous process.
Dephi method:
This method is extension of expert opinion method. It involves forming a panel of experts
and questioning each member of the panel about the future environmental trend. Later, the
responses and summarized and returned to the members for assessment. This process
continues till the acceptable consensus is achieved.
Extrapolating method:
Under this method, the past information is used to predict the future. Different methods
used to extrapolate the future are time series, trend analysis and regression analysis.
Historical analogy:
Under this, the environmental trends are analyzed with the help of other trends which are
parallel to historical trend.
Intuitive reasoning:
Under this, rational and unbiased intuition is used for environmental scanning.
Environmental dynamics are guessed individual judgement. Reliability of this method is
questionable.
Scenario building:
Scenarios are the pictures of possible future. They are built on the basis of time ordered
sequence of events that have logical cause and effect relationship with each other.
Scenarios are built to address future contingencies.
Cross-impact matrix:
Under this, environmental forecasts through various methods are combined to form and
integrated and consistent description of future. Cross impact matrix is used to assess the
internal consistency of the forecasts.
2. Trait Theory
Early research on leadership was based on the psychological focus of the day, which was of
people having inherited characteristics or traits. Attention was thus put on discovering these
traits, often by studying successful leaders, but with the underlying assumption that if other
people could also be found with these traits, then they, too, could also become great leaders.
There have been many different studies of leadership traits and they agree only in the general
saintly qualities needed to be a leader.
For a long period, inherited traits were sidelined as learned and situational factors were
considered to be far more realistic as reasons for people acquiring leadership positions.
Paradoxically, the research into twins who were separated at birth along with new sciences such
as Behavioral Genetics have shown that far more is inherited than was previously supposed.
Perhaps one day they will find a 'leadership gene'.
LEADERSHIP STYLES
Cherry (2009) notes that Kurt Lewin model gives three basic leadership styles
including:
. Authoritarian leadership, also known as autocratic leaders, provide clear
expectations for what needs to be done, when it should be done, and how it
should be done. There is also a clear division between the leader and the
followers. Authoritarian leaders make decisions independently with little or no
input from the rest of the group. Abuse of this style is usually viewed as
controlling, bossy, and dictatorial. Authoritarian leadership is best applied to
situations where there is little time for group decision-making or where the
leader is the most knowledgeable.
Example
The bargaining power of suppliers in the airline industry can be considered very high. When looking
at the major inputs that airline companies need, we see that they are especially dependent on fuel and
aircrafts. These inputs however are very much affected by the external environment over which the
airline companies themselves have little control. The price of aviation fuel is subject to the
fluctuations in the global market for oil, which can change wildly because of geopolitical and other
factors.
Bargaining power of buyers
The bargaining power of buyers is also described as the market of outputs. This force analyzes to
what extent the customers are able to put the company under pressure, which also affects the
customer’s sensitivity to price changes. The customers have a lot of power when there aren’t many of
them and when the customers have many alternatives to buy from. Moreover, it should be easy for
them to switch from one company to another. Buying power is low however when customers
purchase products in small amounts, act independently and when the seller’s product is very different
from any of its competitors.
Example
Bargaining power of buyers in the airline industry is high. Customers are able to check prices of
different airline companies fast through the many online price comparisons websites such as
Skyscanner and Expedia. In addition, there aren’t any switching costs involved in the process.
Customers nowadays are likely to fly with different carriers to and from their destination if that
would lower the costs. Brand loyalty therefore doesn’t seem to be that high.
Example
In terms of the airline industry, it can be said that the general need of its customers is traveling. It
may be clear that there are many alternatives for traveling besides going by airplane. Depending on
the urgency and distance, customers could take the train or go by car. Especially in Asia, more and
more people make use of highspeed trains such as Bullet Trains and Maglev Trains. Furthermore, the
airline industry might get some serious future competition from Elon Musk’s Hyperloop concept in
which passengers will be traveling in capsules through a vacuum tube reaching speed limits of 1200
km/h.
This approach is used when organizations try to compete The firms that strive to create
on costs and want to understand the sources of their cost superior products or services use
advantage or disadvantage and what factors drive those differentiation advantage approach.
costs.(good examples: Amazon.com, Wal- (good
Mart, McDonald's, Ford, Toyota) examples: Apple, Google, Samsung
Electronics, Starbucks)
Step 1. Identify the firm’s primary and support activities. Step 1. Identify the customers’
Step 2. Establish the relative importance of each activity value-creating activities.
in the total cost of the product. Step 2. Evaluate the differentiation
Step 3. Identify cost drivers for each activity. strategies for improving customer
Step 4. Identify links between activities. value.
Step 5. Identify opportunities for reducing costs. Step 3. Identify the best sustainable
differentiation
Cost advantage
To gain cost advantage a firm has to go through 5 analysis steps:
Step 1. Identify the firm’s primary and support activities. All the activities (from
receiving and storing materials to marketing, selling and after sales support) that are
undertaken to produce goods or services have to be clearly identified and separated
from each other. This requires an adequate knowledge of company’s operations
because value chain activities are not organized in the same way as the company itself.
The managers who identify value chain activities have to look into how work is done to
deliver customer value.
Step 2. Establish the relative importance of each activity in the total cost of the
product.The total costs of producing a product or service must be broken down and
assigned to each activity. Activity based costing is used to calculate costs for each
process. Activities that are the major sources of cost or done inefficiently (when
benchmarked against competitors) must be addressed first.
Step 3. Identify cost drivers for each activity. Only by understanding what factors
drive the costs, managers can focus on improving them. Costs for labor-intensive
activities will be driven by work hours, work speed, wage rate, etc. Different activities
will have different cost drivers.
Step 4. Identify links between activities. Reduction of costs in one activity may lead
to further cost reductions in subsequent activities. For example, fewer components in
the product design may lead to less faulty parts and lower service costs. Therefore
identifying the links between activities will lead to better understanding how cost
improvements would affect he whole value chain. Sometimes, cost reductions in one
activity lead to higher costs for other activities.
Step 5. Identify opportunities for reducing costs. When the company knows its
inefficient activities and cost drivers, it can plan on how to improve them. Too high wage
rates can be dealt with by increasing production speed, outsourcing jobs to low wage
countries or installing more automated processes.
competing)
A firm's relative position within its industry determines whether a firm's profitability is above or
below the industry average. The fundamental basis of above average profitability in the long run is
sustainable competitive advantage. There are two basic types of competitive advantage a firm can
possess: low cost or differentiation. The two basic types of competitive advantage combined with
the scope of activities for which a firm seeks to achieve them, lead to three generic strategies for
achieving above average performance in an industry: cost leadership, differentiation, and focus.
The focus strategy has two variants, cost focus and differentiation focus.
1. Cost Leadership
In cost leadership, a firm sets out to become the low cost producer in its industry. The sources of
cost advantage are varied and depend on the structure of the industry. They may include the
pursuit of economies of scale, proprietary technology, preferential access to raw materials and
other factors. A low cost producer must find and exploit all sources of cost advantage. if a firm can
achieve and sustain overall cost leadership, then it will be an above average performer in its
industry, provided it can command prices at or near the industry average.
2. Differentiation
In a differentiation strategy a firm seeks to be unique in its industry along some dimensions that are
widely valued by buyers. It selects one or more attributes that many buyers in an industry perceive
as important, and uniquely positions itself to meet those needs. It is rewarded for its uniqueness
with a premium price.
3. Focus
The generic strategy of focus rests on the choice of a narrow competitive scope within an industry.
The focuser selects a segment or group of segments in the industry and tailors its strategy to serving
them to the exclusion of others.
The focus strategy has two variants.
(a) In cost focus a firm seeks a cost advantage in its target segment, while in (b) differentiation focus
a firm seeks differentiation in its target segment. Both variants of the focus strategy rest on
differences between a focuser's target segment and other segments in the industry. The target
segments must either have buyers with unusual needs or else the production and delivery system
that best serves the target segment must differ from that of other industry segments. Cost focus
exploits differences in cost behaviour in some segments, while differentiation focus exploits the
special needs of buyers in certain segments.
Growth Strategy
This strategy comes into picture when the business is doing well yet the revenues
are static. You want to grow your business – it could be either by adding new
products, new product lines, improvising the existing product or selling the same
product beyond the current geographical reach. You may also consider merger
and acquisition strategy – you could either buy a new business or let another
business acquire yours.
Now, if you are wondering which strategy is best, the answer is none. Each of
these strategies can be used independently or holistically depending on your
business goals and circumstances.
Q7.Explain various types of expansion strategies?
Ans Types of Expansion Strategies
There are several other ways of business growth strategies. They are as
follows:
Expansion via concentration: This is the type of expansion strategy
where businesses invest in resources towards a particular product
line with proven technology facilitation. Using market penetration
strategies, the firm may focus on existing market or existing
products may be offered new segments of customers. Moreover it
can also be done by offering new products for the existing customer
database.
Expansion with the help of integration: This is done by expanding the
scope of the business by serving the same set of customers.
Expansion through mergers, acquisition and strategic alliances: In this
way two companies syndicate their core competencies, resources
and capabilities to look forward for the mutual benefits.
Begin a chain: There are some businesses that can be easily
replicated and turned in to a chain. For example retail stores,
restaurant, bars etc. Take a close look at what made your original
store successful and follow the same rules for your chain. New
campaign can be initiated every time you open a new branch.
Q8.Explain any three corporate level analysis technique in detail?
Ans: Business Diversification Strategy
Diversification strategy looks at the company's products and services, and then develops a strategy
for successful marketing and sales. Two main diversification strategies exist: a single-business
strategy and a dominant-business diversification strategy. The single-business strategy limits the
number of products or services to a few, if not one. A company using this strategy seeks to be the
leader in the niche.
An example of single-business strategy is a carpet cleaner that exclusively markets services for
carpet cleaning to homeowners and restoration services. This single-business strategy could
transition to a dominant-business diversification strategy by also offering restoration services. The
transition might involve other cleaning and general contracting services, along with the primary
carpet cleaning services.
It is possible for a company to reach its optimal market share goals. Rather than scale up, company
leaders might choose a stability strategy that takes the existing success under existing platforms to
maintain market share. Methods include making processes more cost efficient through automation,
cutting costs where possible and negotiating better costs on materials or distribution margins.
This strategy also requires leaders to focus on customer retention. This is a popular strategy during
adverse economic periods. However, there are times when this strategy makes sense for a small
business, regardless of the external business environment. A dentist who doesn't have the space or
time to take on additional patients but who needs to keep his existing patients happy and to also
develop a list of new patients as his base, would fall off via natural attrition and would benefit by
using a stability strategy.
Business owners need targeted corporate level strategies to position themselves for success.
Corporate-level strategies define a plan to hit a specific target needed to achieve business goals.
Strategies tend to be long-term in nature, but allow for dynamic adjustments, based on uncertainty
and changing market conditions.
Q9.What do you mean by stregic management.Discuss its
nature,importance,benefits and scope?
Corporate Strategy
The first level of strategy in the business world is corporate strategy, which sits at the
‘top of the heap’. Before you dive into deeper, more specific strategy, you need to
outline a general strategy that is going to oversee everything else that you do. At a most
basic level, corporate strategy will outline exactly what businesses you are going to
engage in, and how you plan to enter and win in those markets. It is easy to overlook
this planning stage when getting started with a new business, but you will pay the price
in the long run for skipping this step. It is crucially important that you have an overall
corporate strategy in place, as that strategy is going to direct all of the smaller decisions
that you make.
Business Strategy
It is best to think of this level of strategy as a ‘step down’ from the corporate strategy
level. In other words, the strategies that you outline at this level are slightly more
specific and they usually relate to the smaller businesses within the larger organization.
Carrying over our previous example, you would be outlining separate strategies for
selling cookies and selling cookie-making equipment at this level. You may be going
after convenience stores and grocery stores to sell your cookies, while you may be
looking at department stores and the internet to sell your equipment. Those are
dramatically different strategies, so they will be broken out at this level.
Functional Strategy
This is the day-to-day strategy that is going to keep your organization moving in the
right direction. Just as some businesses fail to plan from a top-level perspective, other
businesses fail to plan at this bottom-level. This level of strategy is perhaps the most
important of all, as without a daily plan you are going to be stuck in neutral while your
competition continues to drive forward. As you work on putting together your functional
strategies, remember to keep in mind your higher level goals so that everything is
coordinated and working toward the same end. It is at this bottom-level of strategy
where you should start to think about the various departments within your business and
how they will work together to reach goals. Your marketing, finance, operations, IT and
other departments will all have responsibilities to handle, and it is your job as an owner
or manager to oversee them all to ensure satisfactory results in the end.
Ans: An industry analysis is a business function completed by business owners and other
individuals to assess the current business environment. This analysis helps businesses understand
various economic pieces of the marketplace and how these various pieces may be used to gain a
competitive advantage. Although business owners may conduct an industry analysis according to
their specific needs, a few basic standards exist for conducting this important business function.
ENVIRONMENTAL SCANNING
Environmental Scanning can be defined as the process by which organizations monitor their
relevant environment to identify opportunities and threats affecting their business for the purpose
of taking strategic decisions.
Events are important and specific occurrences taking place in different environmental sectors.
Trends are the general tendencies of the courses of action along which events
These approaches may range from an informal assessment of the environmental factors to a highly
systematic and formal procedure. Informal assessment may be adopted as a reactive measure to a
crisis and ad hoc studies may be undertaken occasionally. A highly systematic and formal
procedure may be used as a proactive measure in anticipation of changes in environmental factors
and structured data collection and processing system may be used continuously.
The range of methods and techniques available for environmental scanning is wide. There are
formal and systematic techniques as well as intuitive methods available. Strategists may choose
from among these methods and techniques, those which suit their needs in terms of the quantity,
quality, availability, timeliness, relevance and cost of environmental information.
Various authors have mentioned the methods and techniques used for environmental scanning.
LeBell and Krasner outline nine groups of techniques: single-variable extrapolation, theoretical
limit envelopes, dynamic modes, mapping, multivariable interaction analysis, unstructured expert
opinion, structured expert opinion, structured inexpert opinion and unstructured inexpert
speculation.
Fahey, King and Narayanan have included ten techniques in their survey of environmental
scanning
Initial Assessment
Components: Vision statement & Mission statement
Tools used: Creating a Vision and Mission statements.
The starting point of the process is initial assessment of the firm. At this phase
managers must clearly identify the company’s vision and mission statements.
Business' vision answers the question: What does an organization want to become?
Without visualizing the company’s future, managers wouldn’t know where they want to
go and what they have to achieve. Vision is the ultimate goal for the firm and the
direction for its employees.
Situation Analysis
Components: Internal environment analysis, External environment analysis and
Competitor analysis
Tools used: PEST, SWOT, Core Competencies, Critical Success Factors, Unique
Selling Proposition, Porter's 5 Forces, Competitor Profile Matrix, External Factor
Evaluation Matrix, Internal Factor Evaluation Matrix, Benchmarking, Financial Ratios,
Scenarios Forecasting, Market Segmentation, Value Chain Analysis, VRIO Framework
When the company identifies its vision and mission it must assess its current situation in
the market. This includes evaluating an organization’s external and internal
environments and analyzing its competitors.
During an external environment analysis managers look into the key external forces:
macro & micro environments and competition. PEST or PESTEL frameworks represent
all the macro environment factors that influence the organization in the global
environment. Micro environment affects the company in its industry. It is analyzed using
Porter’s 5 Forces Framework.
Strategy Formulation
Components: Objectives, Business level, Corporate level and Global Strategy Selection
Tools used: Scenario Planning, SPACE Matrix, Boston Consulting Group Matrix, GE-
McKinsey Matrix, Porter’s Generic Strategies, Bowman’s Strategy Clock, Porter’s
Diamond, Game Theory, QSP Matrix.
Business level strategy. This type of strategy is used when strategic business
units (SBU), divisions or small and medium enterprises select strategies for only
one product that is sold in only one market. The example of business level
strategy is well illustrated by Royal Enfield firms. They sell their Bullet motorcycle
(one product) in United Kingdom and India (different markets) but focus on
different market segments and sell at very different prices (different strategies).
Firms may select between Porter’s 3 generic strategies: cost leadership,
differentiation and focus strategies. Alternatively strategies from Bowman’s
strategy clock may be chosen (Johnson, Scholes, & Whittington, p. 224 [6]).
Corporate level strategy. At this level, executives at top parent companies
choose which products to sell, which market to enter and whether to acquire a
competitor or merge with it. They select between integration, intensive,
diversification and defensive strategies.
Global/International strategy. The main questions to answer: Which new markets
to develop and how to enter them? How far to diversify? (Thompson and Martin,
p. 557[2], Johnson, Scholes, & Whittington, p. 294[6])
Managers may choose between many strategic alternatives. That depends on a
company’s objectives, results of situation analysis and the level for which the strategy is
selected.
Strategy Implementation
Components: Annual Objectives, Policies, Resource Allocation, Change Management,
Organizational chart, Linking Performance and Reward
Tools used: Policies, Motivation, Resistance management, Leadership, Stakeholder
Impact Analysis, Changing organizational structure, Performance management
Even the best strategic plans must be implemented and only well executed strategies
create competitive advantage for a company.
At this stage managerial skills are more important than using analysis. Communication
in strategy implementation is essential as new strategies must get support all over
organization for effective implementation. The example of the strategy implementation
that is used here is taken from David’s book, chapter 7 on implementation[5]. It consists
of the following 6 steps:
The first point in strategy implementation is setting annual objectives for the company’s
functional areas. These smaller objectives are specifically designed to achieve financial,
marketing, operations, human resources and other functional goals. To meet these
goals managers revise existing policies and introduce new ones which act as the
directions for successful objectives implementation.
Strategy Monitoring
Components: Internal and External Factors Review, Measuring Company’s
Performance
Tools used: Strategy Evaluation Framework, Balanced Scorecard, Benchmarking
Usually, tactics rather than strategies are changed to meet the new conditions, unless
firms are faced with such severe external changes as the 2007 credit crunch.
The key element in strategy monitoring is to get the relevant and timely information on
changing environment and the company’s performance and if necessary take corrective
actions.
Ans.
Goals Objectives
Broad in scope Narrow in scope
General intention or direction Specific/ Precise
Intangible or “soft” Tangible
Abstract Solid/ Concrete
Can’t be easily measured/ validated Can be easily measured/ validated
Large in size Chunks
The end Ends in themselves
The result The means to the end
The whole Part of the whole, often with
milestones
Longer term Shorter term
4.BCG Matrix
BCG matrix (or growth-share matrix) is a corporate planning tool, which is used to
portray firm’s brand portfolio or SBUs on a quadrant along relative market share axis
(horizontal axis) and speed of market growth (vertical axis) axis.
Growth-share matrix is a business tool, which uses relative market share and industry
growth rate factors to evaluate the potential of business brand portfolio and suggest
further investment strategies.
5.Bench Marking:
Benchmarking is a process of measuring the performance of a company’s products,
services, or processes against those of another business considered to be the best in the
industry, aka “best in class.” The point of benchmarking is to identify internal
opportunities for improvement. By studying companies with superior performance,
breaking down what makes such superior performance possible, and then comparing
those processes to how your business operates, you can implement changes that will
yield significant improvements.
5. GE 9 cell Matrix
GE-McKinsey nine-box matrix is a strategy tool that offers a systematic approach for
the multi business corporation to prioritize its investments among its business units.