Long answer type questions

Q1. Explain the basic elements of Strategic Management process.

The strategic management process is made up of four elements: situation analysis,

strategy formulation, strategy implementation, and strategy evaluation. These
elements are steps that are performed, in order, when developing a new strategic
management plan. Existing businesses that have already developed a strategic
management plan will revisit these steps as the need arises, in order to make
necessary changes and improvements.
Situation Analysis. The situation analysis provides the information necessary to
create a company mission statement. Situation analysis involves "scanning and
evaluating the organizational context, the external environment, and the
organizational environment" (Coulter, 2005, p. 6). This analysis can be performed
using several techniques. Observation and communication are two very effective
methods.
To begin this process, organizations should observe the internal company
environment. This includes employee interaction with other employees, employee
interaction with management, manager interaction with other managers, and
management interaction with shareholders. In addition, discussions, interviews, and
surveys can be used to analyze the internal environment.
Organizations also need to analyze the external environment. This would
include customers, suppliers, creditors, and competitors. Several questions can be
asked which may help analyze the external environment. What is the relationship
between the company and its customers? What is the relationship between the
company and its suppliers? Does the company have a good rapport with its
creditors? Is the company actively trying to increase the value of the business for its
shareholders? Who is the competition? What advantages do competitors have over
the company?
Strategy Formulation. Strategy formulation involves designing and developing
the company strategies. Determining company strengths aids in the formulation of
strategies. Strategy formulation is generally broken down into three organizational
levels: operational, competitive, and corporate.
Operational strategies are short-term and are associated with the various
operational departments of the company, such as human resources, finance,
marketing, and production . These strategies are department specific. For example,
human resource strategies would be concerned with the act of hiring and training
employees with the goal of increasing human capital.
Competitive strategies are those associated with methods of competing in a
certain business or industry. Knowledge of competitors is required in order to
formulate a competitive strategy. The company must learn who its competitors are
and how they operate, as well as identify the strengths and weaknesses of the
competition. With this information, the company can develop a strategy to gain a
competitive advantage over these competitors.
Corporate strategies are long-term and are associated with "deciding the
optimal mix of businesses and the overall direction of the organization" (Coulter,
2005, p. 216). Operating as a sole business or operating as a business with several
divisions are both part of the corporate strategy.
Strategy Implementation. Strategy implementation involves putting the strategy into
practice. This includes developing steps, methods, and procedures to execute the
strategy. It also includes determining which strategies should be implemented first.
The strategies should be prioritized based on the seriousness of underlying issues.
The company should first focus on the worst problems, then move onto the other
problems once those have been addressed.
"The approaches to implementing the various strategies should be considered
as the strategies are formulated" (Coulter, 2005, p. 8). The company should consider
how the strategies will be put into effect at the same time that they are being created.
For example, while developing the human resources strategy involving employee
training, things that must be considered include how the training will be delivered,
when the training will take place, and how the cost of training will be covered.
Strategy Evaluation. Strategy evaluation involves "examining how the strategy has
been implemented as well as the outcomes of the strategy" (Coulter, 2005, p. 8).
This includes determining whether deadlines have been met, whether the
implementation steps and processes are working correctly, and whether the
expected results have been achieved. If it is determined that deadlines are not being
met, processes are not working, or results are not in line with the actual goal, then
the strategy can and should be modified or reformulated.
Both management and employees are involved in strategy evaluation,
because each is able to view the implemented strategy from different perspectives.
An employee may recognize a problem in a specific implementation step that
management would not be able to identify.
The strategy evaluation should include challenging metrics and timetables that are
achievable. If it is impossible to achieve the metrics and timetables, then the
expectations are unrealistic and the strategy is certain to fail.
Conclusion
The strategic management process is a continuous process. "As performance
results or outcomes are realized - at any level of the organization - organizational
members assess the implications and adjust the strategies as needed" (Coulter,
2005, p. 9). In addition, as the company grows and changes, so will the various
strategies. Existing strategies will change and new strategies will be developed. This
is all part of the continuous process of improving the business in an effort to succeed
and reach company goals.
Q2. Describe Michele porter’s five forces model of Industry Analysis.

Porter's Five Forces Analysis is an important tool for understanding the forces that
shape competition within an industry. It is also useful for helping you to adjust your
strategy to suit your competitive environment, and to improve your potential profit.
Michael Porter suggested that managers must understand the underlying economic
and technical characteristics of the industry or strategic group in which their firms
operate.
Porter believed that the key determinant of a firm’s profitability was industry
attractiveness. As a result of the way a specific industry operates, some industries
are inherently more profitable than other industries.
The Five Forces Model assumes that industry attractiveness and the firm’s
competitive position in an industry are influenced by five competitive forces.

The tool was created by Harvard Business School professor Michael Porter, to
analyze an industry's attractiveness and likely profitability. Since its publication in
1979, it has become one of the most popular and highly regarded business strategy
tools.
Porter recognized that organizations likely keep a close watch on their rivals, but he
encouraged them to look beyond the actions of their competitors and examine what
other factors could impact the business environment. He identified five forces that
make up the competitive environment, and which can erode your profitability. These
are:
1. Competitive Rivalry. This looks at the number and strength of your
competitors. How many rivals do you have? Who are they, and how does the quality
of their products and services compare with yours?
Where rivalry is intense, companies can attract customers with aggressive price cuts
and high-impact marketing campaigns. Also, in markets with lots of rivals, your
suppliers and buyers can go elsewhere if they feel that they're not getting a good
deal from you.
On the other hand, where competitive rivalry is minimal, and no one else is doing
what you do, then you'll likely have tremendous strength and healthy profits.
2. Supplier Power. This is determined by how easy it is for your suppliers to
increase their prices. How many potential suppliers do you have? How unique is the
product or service that they provide, and how expensive would it be to switch from
one supplier to another?
The more you have to choose from, the easier it will be to switch to a cheaper
alternative. But the fewer suppliers there are, and the more you need their help, the
stronger their position and their ability to charge you more. That can impact your
profit.
3. Buyer Power. Here, you ask yourself how easy it is for buyers to drive your
prices down. How many buyers are there, and how big are their orders? How much
would it cost them to switch from your products and services to those of a rival? Are
your buyers strong enough to dictate terms to you?
When you deal with only a few savvy customers, they have more power, but your
power increases if you have many customers.
4. Threat of Substitution. This refers to the likelihood of your customers finding
a different way of doing what you do. For example, if you supply a unique software
product that automates an important process, people may substitute it by doing the
process manually or by outsourcing it. A substitution that is easy and cheap to make
can weaken your position and threaten your profitability.
5. Threat of New Entry. Your position can be affected by people's ability to
enter your market. So, think about how easily this could be done. How easy is it to
get a foothold in your industry or market? How much would it cost, and how tightly is
your sector regulated?
If it takes little money and effort to enter your market and compete effectively, or if
you have little protection for your key technologies, then rivals can quickly enter your
market and weaken your position. If you have strong and durable barriers to entry,
then you can preserve a favorable position and take fair advantage of it.
Q3. What is relevance of the resource-based view of the firm to strategic
management in a global environment?

RBV is an approach to achieving competitive advantage that emerged in

1980s and 1990s, after the major works published by Wernerfelt, B. (“The Resource-
Based View of the Firm”), Prahalad and Hamel (“The Core Competence of The
Corporation”), Barney, J. (“Firm resources and sustained competitive advantage”)
and others. The supporters of this view argue that organizations should look inside
the company to find the sources of competitive advantage instead of looking at
competitive environment for it.

The following model explains RBV and emphasizes the key points of it.

Strategic global management is concerned with issues affecting the

relationship between the organisation and its global environment. The resource-
based view (RBV) holds that firms can earn sustainable supra-normal returns if and
only if they have superior resources and some form of isolating mechanism
preventing their diffusion throughout the industry protects those resources. In other
words, RBV is relevant to the global environment, for analysing performance in
international markets
Q4. Differentiate between BCG Matrix and GE 9 Cell model.

BCG Matrix or otherwise known as Boston Consulting Group growth share

matrix is used to represent the company’s investment portfolio.
Large corporations usually face problems in allocating resources amongst various
units and product lines. To cope with this problem, in 1970, Bruce
Henderson designed a matrix for the Group called as BCG matrix. It is based on two
factors which are:
 The growth rate of the product-market.
 Market share held by the company in the respective market, in comparison to
its competitors.
BCG Matrix helps the corporation in analyzing the product lines or business units, for
prioritizing them and allocating resources. The model aims at identifying the problem
of resource deployment, among different business segments. In this approach,
various businesses of a company are classified on a two-dimensional grid.

BCG – Growth Share matrix

 The vertical axis shows market growth rate, which is a measure of how
attractive the market is?
 The horizontal axis indicates relative market shares, which is an indicator of
how strong the company’s position is?
With the help of this matrix, the company can ascertain four kind of strategic
business unit or products as follows:
  Stars: It represents those products which are growing at a faster rate and
requires the huge investment to maintain their position in the market.
 Cash Cows: The products whose growth is low but holds high market share.
They reap a lot of cash for the company and do not require finance for
expansion.
 Question Marks: It indicates those products which possess a low market
share in a high-growth market and so need heavy investment to hold their
share in the market, but do not generate cash in the same proportion.
 Dogs: Dogs represents those products, which neither have a high growth rate
nor high market share. Such products generate enough cash to maintain
themselves but will not survive in the long term.

Definition of GE Matrix GE matrix, alternately known as General Electric Model

is a business planning matrix. The model is inspired by traffic lights which are
used to manage traffic at crossings, wherein green light says go, yellow says caution
and Red say stop.

The matrix comprises of nine cells, with two major dimensions, i.e. business
strength and industry attractiveness. Business strength is influenced by market
share, brand image, profit margins, customer loyalty, technological capability and so
on. On the other hand, industry attractiveness is influenced by drivers such as
pricing trends, economies of scale, market size, market growth rate, segmentation,
distribution structure, etc.

GE – Portfolio matrix

When various product lines or business units are drawn on the matrix, strategic
choices can be made, on the basis of their position in the matrix. Product falling into
green section reflects the business is in the good position, but product lying into
yellow section needs the managerial decision for making choices and the product in
the red zone, are dangerous as they will lead the company to losses.

The points depicted below, elaborate the fundamental differences between BCG and
GE matrices:
1. BCG matrix can be understood as the growth-share model, that reflects a
growth of business and the market share possessed by the firm. On the other
hand, GE matrix is also termed as multifactor portfolio matrix, which
 businesses use in making strategic choices for product lines or business units
based on their position in the grid.
2. BCG matrix is simpler in comparison to GE matrix, as the former is easy to
draw and consist of only four cells, while the latter consist of nine cells.
3. The two dimensions on which BCG matrix is based are market growth and
market share. Conversely, industry attractiveness and business strengths are
two factors of GE matrix.
4. BCG matrix is used by the companies to deploy their resources among
various business units. On the contrary, firms use GE matrix to prioritize
investment among various business units.
5. In BCG matrix only a single measure is used, whereas in GE matrix multiple
measures are used.
6. BCG matrix represents two degrees of market growth and market share, i.e.
high and low. In contrast, in GE matrix there are three degrees of business
strength, i.e. strong, average and weak, and industry attractiveness, are high,
medium and low.
Conclusion
To sum up, we can say that the two models are similar, but have some differences
that cannot be ignored. While BCG matrix is simpler to plot and easier to understand,
GE matrix is a bit difficult to draw and interpret. However, it is free from certain
limitations of BCG matrix.

Comparison Chart

BASIS FOR
BCG MATRIX GE MATRIX
COMPARISON

Meaning BCG Martrix, is a growth GE Matrix implies multifactor

share model, representing portfolio matrix, that assist firm in
growth of business and the making strategic choices for
market share enjoyed by the product lines based on their
firm. position in the grid.

Number of cells Four Nine

Factors Market share and Market Industry attractiveness and

growth Business strengths

Objective To help companies deploy To prioritize investment among

their resources among various business units.
various business units.
 BASIS FOR
BCG MATRIX GE MATRIX
COMPARISON

Measures used Single measure is used. Multiple measures are used.

Classification Classified into two degrees Classified into three degrees

Q5. “Joint Ventures are emerging as the best tool for reaching new markets”. -
Comment.

A joint venture (JV) is a commercial enterprise in which two or more unrelated

organizations combine their resources to gain a tactical and strategic edge in the
market. Companies often enter into a joint venture to pursue specific projects. The
JV may be a new project with similar products or services or it may involve creating
an entirely new firm with different core business activities.

Companies initiate a JV through a contractual agreement between all concerned

parties. The profit and loss from the venture are shared by the participants.

Example The joint venture between the taxi giant UBER and the heavy vehicle
manufacturer Volvo. The joint venture goal was to produce driverless cars The ratio
of the ownership is 50%-50%. The business worth was $350 million as per the
agreement in the joint venture.

A joint venture offers several advantages to its participants. It can help a business
grow faster, increase productivity, and generate additional profits.

 1. Shared investment. Each party in the venture contributes a certain amount of
initial capital to the project, depending upon the terms of the partnership
arrangement, thus alleviating some of the financial burden placed on each company.

 2. Shared expenses. Each party shares a common pool of resources, which can
bring down costs on an overall basis.

 3. Technical expertise and know-how. Each party to the business often brings
specialized expertise and knowledge, which helps make the joint venture strong
enough to move aggressively in a specified direction.

 4. New market penetration, A joint venture may enable companies to enter a new
market very quickly, as all relevant regulations and logistics are taken care of by the
local player. A common joint venture arrangement is one between a company
headquartered in country “A” and a company headquartered in country “B” that
wants to obtain access to the marketplace in country “A”. With the formation of the
joint venture, the companies are able to expand their product portfolio and market
size, and the country B company obtains easy access to the marketplace in country
A.

 5. New revenue streams, Small businesses often face having limited resources
and access to capital for growth projects. By entering into a joint venture with a
larger company with more financial resources, the small business can expand more
quickly. The larger company’s extensive distribution channels may also provide the
smaller firm with larger and/or more diversified revenue streams.

 6. Intellectual property gains. Advanced technology is often difficult for businesses
to create in-house. Therefore, companies often enter into joint ventures with
technology-rich firms to gain access to such assets without having to spend the time
and money to develop the assets for themselves in-house. A large firm with good
access to financing may contribute their working capital strength to a joint venture
with a firm that has only limited financing capabilities but that can provide key
technology for the development of products or services.

7. Synergy benefits. Joint ventures can offer the same type of synergy benefits that
companies often look for in mergers and acquisitions – either financial synergy which
lowers the cost of capital, or operational synergy where two firms working together
increases operational efficiency.

 8. Enhanced credibility. It typically takes some significant period of time for a
young business to build market credibility and a strong customer base. For such
companies, forming a joint venture with a larger, well-known brand can help them
achieve enhanced marketplace visibility and credibility more quickly.

 9. Barriers to competition. One of the reasons for forming a joint venture is also to
avoid competition and pricing pressure. Through collaboration with other companies,
businesses can sometimes effectively erect barriers for competitors that make it
difficult for them to penetrate the marketplace.

 10. Improved economies of scale. A bigger company always enjoy the economies

of scale, which again is enjoyed by all the parties in the JV. This refers back to the
notion of operational synergy.

Conclusion. Any two businesses can enter into a new joint venture agreement to
prospect and make a profit which diversifies the product line of the company and
makes them competitive among their peers. Joint ventures as a business alliance
are growing rapidly and it has gained its importance in the market. Joint venture is
similar to a partnership agreement and that is what makes it unique in the market
and also at the end of a specific business objective the joint venture can be seized or
liquidated at once and the partners can take home their share of profit.
 Q6. Explain in detail the corporate strategy in terms of directional strategies such as
Growth, Stability and Retrenchment strategies.

According to Chandler, “Strategy is the determination of the basic long-term

goals and objectives of an enterprise and the adoption of courses of action and the
allocation of resources necessary to carry out these goals and objectives”.

Some of the types of strategies are:-

1. Corporate Strategies
2. Directional Strategy
3. Functional Strategies
4. Operating Strategy
5. Defensive Strategy
6. Expansion Strategy.
Directional strategy is the game plan a company decides on and implements
to grow business, increase profits, and accomplish goals and objectives. Small
businesses to large corporations can create their own types of directional strategies
that work for the focus and scope of each individual business. For example, certain
companies may find that a directional portfolio strategy works best, while other
businesses may choose to follow a parenting directional strategy.Some of the
directional strategies are:-
1. Growth Strategy
2. Stability Strategy 
3. Retrenchment Strategy 
4. Combination Strategy.

Growth Strategy: Growth strategy signifies decisions of management to lift up from

the existing level of operations. Various decisions of the company reflecting the
adoption of growth strategy are increasing the market share, raising the standards or
levels of objectives, increasing the sales revenue, increasing the market of
operations, expanding the existing product line or expanding business through
mergers and acquisitions. Adoption of growth strategy is an indicator of
organisational prosperity and success.

The basic reasons underlying adoption of growth strategies are given below:

1. Source of Strength – A company which is consistently growing is often perceived

to be a preferable company vis-a-vis a company which is not expanding. It is a
vicious cycle, growing company attracting better management which in return
bringing growth for the company.

2. Necessary for Survival – Stagnancy is only short-lived. In a volatile and

competitive environment where changes are very radical, survival of companies is
possible only if they pace up with the environmental changes. Companies should be
very prompt in tapping up the opportunities and overcoming the threats.
3. Rewarding Phenomenon – Growth strategy is adopted when company foresees
the possibility of progress. This in turn leads to fetching of higher returns and
increased pay packages.

4. Motivational Factor – Being an employee of a growing company gives a lot of

motivation and satisfaction to the employees. Growth of the company takes due care
of basic and recognition needs of the personnel. Besides, growth is perceived as a
source of inspiration to work more as it is rewarding.

example Coca Cola introducing “Sugar Free” drinks to their customers

Stability Strategy: This strategy indicates that management would continue with the
same level of operations, utilise its present resources and stick to the current
objectives. The focus under this strategy is on maintenance of existing level of
operations. A stability strategy is based on the maintenance of status quo and
making minimuminterruptions in the organizational system. Companies tend to
follow this strategy when they have a riskaverse profile and want to earn a reliable
profit margin this regard. Expansion is not an optimal optionwhen one talks about the
stability strategy and the focus is to keep the things in the direction in whichthey are
going while relying on existing products and services as the company doesn’t want
any exposure to the risk

The features of this strategy are:

(a) No major change in product or service composition of the company;

(b) Focus is on maintaining current competitive level;

(c) Ensure the rate of improvement observed in the past is sustained.

Example. In the India shoe market dominated by Bata and Liberty, Hindustan Levers
better known for soaps and detergents, produces substantial quantity of shoes and
shoe uppers for the export market. In late 2000, it started selling a few thousand
pairs in the cities to find out the market reaction. This is a pause proceed with
caution strategy before it goes full steam into another FMCG sector that has a lot of
potential

Retrenchment Strategy: The third type of strategy is the retrenchment strategy

which is focused on reducing costs, cutting back on existing products and reducing
the company's workforce. A temporary cut off is implemented in a company in order
to preserve the resources in order to bounce back when things will get favourable for
that particular organization. Companies may opt for a retrenchment strategy due to
economic downturns, industry-wide problems or internal issues. In the times
of Great Economic Recession of 1930s and that of 2008, several companies have
opted the retrenchment strategy by cutting off labour costs and laying off employees
in this regard (Aguilera, 2018).

Example: Nokia is one good example when they changed their direction and they
have reduced 30,000 jobs during past decade. Another example is the Starbucks
which left Australia in 2008 due to poor competitive advantage and similarly Tesco
also left Japan after business failure (Aguilera, 2018).This strategy involves
reduction from the existing level of operations. Retrenchment strategy is defensive in
nature as it is taken as an outcome of operational problems stemming either from
internal conditions or external environment factors.
Q7. Explain the Mc Kinsey’s 7s framework in corporate strategy.

Q 8. Explain the primary measures of corporate performance in strategic evaluation.

Q 9. "Sustainable development is a broad concept that balances the need for

economic growth with environmental protection and social equity.'' Elucidate this
statement.

Q 10. Illustrate the principles of blue ocean strategy.” How does it is different than
red ocean strategy”.