STRATEGIC MANAGEMENT

Q1. Every organization interacts with its external environment. Identify four external environmental influences
which can affect any organization and explain each?

A. The EXTERNAL FACTORS include all those factors which exists outside the firm and are often regarded as
uncontrollable. These external forces can further be categorized as MICRO ENVIRONMENT and MACRO
ENVIRONMENT.

MICRO ENVIRONMENT includes the following factors.

1. SUPPLIERS: Suppliers are those people who are responsible for supplying necessary inputs to the organization
and ensure the smooth flow of production.

2. COMPETITORS: Competitors can be called the close rivals and in order to survive the competition one has to
keep a close look in the market and formulate its policies and strategies as such to face the competition.

3. MARKETING INTERMEDIARIES: Marketing intermediaries aid the company in promoting, selling and
distribution of the goods and services to its final users. Therefore, marketing intermediaries are vital link between
the business and the consumers.

MACRO ENVIRONMENT includes the following factors.

1. ECONOMIC FACTORS: Economic factors includes economic conditions and economic policies that together
constitutes the economic environment. These includes growth rate, inflation, restrictive trade practices etc. Which
have a considerable impact on the business.

2. SOCIAL FACTORS : Social factors includes the society as a whole alongside its preferences and priorities like
the buying and consumption pattern, beliefs of people their purchasing power, educational background etc.

3. POLITICAL FACTORS: The political factors are related to the management of public affairs And their impact
on the business. It is important to have a political stability to maintain stability in the trade.

4. TECHNOLOGICAL FACTORS: Latest technologies helps in improving the marketability of the product plus
makes it more consumer friendly. Therefore, it is important for a business to keep a pace with the changing
technologies in order to survive in the long run.

Q 2. Efficient resource management is vital to control operational cost of an organization. Discuss what strategic
alliance is?

A. Resource management as part of project management is all about doing more with less. Nobody likes waste,
especially in business. Resource management is centered around optimization and efficiency. When you know what
you need to make a project successful, you can effectively plan out the optimal way to use those resources.

To some companies, optimum efficiency is so important that they hire someone solely devoted to resource
management; also known as a resource manager. What does a resource manager do? While project managers are
responsible for creating and assigning tasks to get the project done, resource managers are accountable for allocating
the resources needed to make the project a success.

A strategic alliance is an arrangement between two companies that have decided to share resources to undertake a
specific, mutually beneficial project. A strategic alliance is less involved and less binding than a joint venture, in
which two companies typically pool resources to create a separate business entity. In a strategic alliance, each
company maintains its autonomy while gaining a new opportunity.
3. Strategic control system is necessary to maximize the use of information for decision- making. Describe what
concurrent control is?

A. Since the purpose of control systems is to increase the probability of meeting organizational goals and standards,
most organizations use six major systems to boost their prospects for success.

These major control systems are: financial control, budgetary control, quality control, inventory control,
operations management, computer-based information systems.

Selecting the appropriate measurement techniques is obviously predicated directly on the performance factor to be
measured. The performance standard, if stated properly, should dictate the measurement technique. Although the
basis nature and purpose of management control do not change, a variety of tools and techniques have been used
over the years to help managers.

Concurrent control takes place while an activity is in progress. It involves the regulation of ongoing
activities that are part of transformation process to ensure that they conform to organizational standards. Concurrent
control is designed to ensure that employee work activities produce the correct results.

Since concurrent control involves regulating ongoing tasks, it requires a thorough understanding of the specific tasks
involved and their relationship to the desired and product.

Concurrent control sometimes is called screening or yes-no control, because it often involves checkpoints at which
determinations are made about whether to continue progress, take corrective action, or stop work altogether on
products or services.

4. Every organization interacts with its external environment. Identify four external environmental influences which
can affect any organization?

A. A business concept that looks perfect on paper may prove imperfect in the real world. Sometimes failure is due to
the internal environment – the company's finances, personnel or equipment. Sometimes it's the environment
surrounding the company. Knowing how internal and external environmental factors affect your company can help
your business thrive.

External: The Economy

In a bad economy, even a well-run business may not be able to survive. If customers lose their jobs or take jobs that
can barely support them, they'll spend less on sports, recreation, gifts, luxury goods and new cars. High interest rates
on credit cards can discourage customers from spending. You can't control the economy, but understanding it can
help you spot threats and opportunities.

External: Competition from other Businesses

Unless your company is unique, you'll have to deal with competition. When you start your company, you fight
against established, more experienced businesses in the same industry. After you establish yourself, you'll eventually
have to face newer firms that try to slice away your customers. Competition can make or break you – look at how
many brick-and-mortar bookstores crashed and burned competing with Amazon.

External: Politics and Government Policy

Changes in government policy can have a huge effect on your business. The tobacco industry is a classic example.
Since the 1950s, cigarette companies have been required to place warning labels on their products, and they lost the
right to advertise on television. Smokers have fewer and fewer places they can smoke legally.

The percentage of Americans who smoke has dropped by more than half, with a corresponding effect on industry
revenues.
External: Customers and Suppliers

Next to your employees, your customers and suppliers may be the most important people you deal with. Suppliers
have a huge impact on your costs. The clout of any given supplier depends on scarcity: If you can't buy anywhere
else, your negotiating room is limited. The power of your customers depends on how fierce the competition for their
dollars is, how good your products are, and whether you’re advertising makes customers want to buy from you,
among other things.

5. Identify at least 5 and give examples of the different partnering techniques?

A. A strategic partnership is an agreed-upon collaboration between businesses with common missions. Although
partnerships can take on a number of objectives and levels of formality depending upon the nature of the agreement,
the overall goal of strategic partnerships is to share resources in a way that promotes growth for all partners.

Below find Partnerships can such as take place between businesses in the same industry or even across industries.

Types of Strategic Partnerships

Type Function

Businesses in the same area (i.e. competitors) agree to collaborate in a way that will improve their
Horizontal
market position.

A business collaborates with companies in its supply chain (its suppliers and/or distributors). Vertical
Vertical partnerships often allow businesses to minimize risk in the supply chain and obtain lower prices in
exchange for long-term commitment. Also known as channel partnerships [LINK] or supply chain
partnerships.

Intersectional Businesses from different areas agree to share their special knowledge for the advancement of all
partners.

Joint Venture Two or more businesses form a new company. The new company is its own legal entity, and its
profits are split according to terms spelled out in a formal contract.

Equity A company acquires a minor equity stake in another business in exchange for a monetary investment.
Such exchanges can accompany other types of collaboration and, to a certain extent, agreed-upon
access to decision making.

6. Discuss and provide examples of conditions that create advantages for nations?

A. http://www.quickmba.com/strategy/global/diamond/

7. Identify and discuss the different types of strategic control system?

A. The four types of strategic control are premise control, implementation control, special alert control and strategic
surveillance. Each one provides a different perspective and method of analysis to maximize the effectiveness of your
business strategy.
Premise Control

Your business strategy is based on an assumed premise of how things will occur in the future. Premise controls
allow you to examine whether this assumption still holds true once you actually put your ideas into action. Premises
may be affected by environmental factors such as inflation, interest rates and social changes or by industry factors
such as competitors, suppliers and barriers to entry. These controls will help you recognize changes in the premise
so you can adapt your strategy accordingly.

Implementation Control

Once you design a strategy for your business, you will need to implement it. As you take the steps necessary to put
your plan into action, use implementation controls to ensure no adjustments to your strategy are necessary. Two
basic types of implementation controls are monitoring strategic thrusts and doing milestone reviews. The former
means you analyze the tactics you're using to gain market share. The latter allows you to conduct a full-scale
assessment of your business at designated points in your strategy.

Special Alert Control

You will need mechanisms in place to assess the position of your business in the case of sudden events, such as
natural disasters, product recalls or market spikes. Special alert controls allow you to reconsider the relevancy of
your strategy in light of these new events. Prepare how you will handle these special alerts with procedures to be
followed, priorities to keep and tools to be used.

Strategic Surveillance Controls

As a small-business owner, you need to protect your business from external threats that may hinder the success of
your strategy. Strategic surveillance controls allow you to monitor multiple sources for these threats. Continually
safeguard your strategy by following trade journals, attending conferences and keeping awareness of industry trends
to meet these risks as they arise.

8. Explain what is Unrelated Diversification?

Unrelated Diversification is a outward appearance of diversification when the trade adds original or distinct /
unrelated product position and penetrates new marketplace.

For example, if a shoe manufacturer enters the industry of garments manufacturing. In this case around is no direct
relationship with the business´s live industry - this diversification is classified as unrelated.

The unrelated diversification is foundation on the conception that any novel business or corporation, which can be
bought under constructive financial surroundings and has the latency for soaring revenues, is appropriate for
diversification. This is fundamentally a financial move towards; it is implemented when the study concludes that this
unrelated diversification in a totally new pasture would bring considerably higher revenues against the related
diversification on the foundation of alike merchandise, services, and markets or go together strategies. A fine
example of this kind of diversification, that brought elevated profits for a certain stage of period, is that for the
duration of modern years of expansion many companies entered the construction industry despite their significantly
diverse field of foremost trade activity. In this case, however, deficient in of knowledge, expertise and experience,
and the inadequate knowledge of the trade can lead to serious problems.

Unrelated diversification can be proficient using one of the subsequent methods:

1. Using the existing basic competences of the business and increasing from existing market into fresh ones and
opening new position of production.
Penetrating totally new markets. Usually such occasion can be identified as a consequence of the most important
company trade. For example a car dealer might begin offering financial services by building a car leasing plan and
selling cars through rental.

2. Developing new competences to use innovative trade opportunities.

9. Explain and discuss how Financial Strategies help in the decision making of a manager?

A. Having clear financial goals and metrics allow firms to implement strategy and track success.  Business leaders
daily make important financial decisions such as scheduling operations, hiring and firing personnel, preparing a
budget, approving a capital investment, or sending an invoice for payment. However, very often those managers do
not have the necessary skills to understand the financial implications of their decisions. This can lead to negative
consequences: resources are wasted, poor decisions get made, and the financial performance of the organization
suffers.

Here are some of the financial metrics which can significantly help in this process:

1. Cash Flow

The cash flow helps to measure of the firm’s financial position and shows how efficiently its financial resources are
being utilized to generate additional cash for future investments. It gives a clear indication of the net cash available
after deducting the investments and working capital increases from the firm’s operating cash flow. This metric can
be used when they anticipate substantial capital expenditures in the near future or follow-through for implemented
projects.

2. Economic Value

Management has the responsibility to make efficient and timely decisions to expand businesses that increase the
firm’s economic value and to implement remedial actions in those that are destroying its value. This can be
determined by deducting the operating capital cost from the net income. Organizations usually set economic value-
added goals to measure their businesses’ value contributions and enhance the resource allocation process.

3. Asset Management

This involves the proper management of current assets and current liabilities, turnovers and the enhanced
management of its working capital and cash conversion cycle. This practice can be used by companies mostly when
their operating performance falls behind industry benchmarks or benchmarked companies.

4. Profitability Ratios

Profitability ratios are a measure of the operational efficiency of a firm and also indicate inefficient areas that
require corrective actions by management. Basically, they measure profit relationships with sales, total assets and
net worth. It is a good thing for companies to set profitability ratio goals when they need to operate more effectively
and pursue improvements in their value-chain activities.

5. Growth

Growth indices help in evaluating sales and market share growth and determine the acceptable trade-off of growth
with respect to reductions in cash flows, profit margins and returns on investment. Usually, growth drains cash and
reserve borrowing funds, and sometimes, aggressive asset management is required to ensure sufficient cash and
limited borrowing. Hence, companies must set growth index goals when growth rates have lagged behind the
industry norms or when they have high operating leverage.
 6. Risk Assessment and Management

One of the major concerns of companies is to address key uncertainties by identifying, measuring, and controlling its
existing risks in corporate governance and regulatory compliance, the likelihood of their occurrence, and their
economic impact. From there, a process must be implemented to mitigate the causes and effects of those risks. These
assessments should be made when companies anticipate greater uncertainty in their business or when there is a need
to enhance their risk culture.

7. Optimizing Tax

It is important for business units to manage the level of tax liability undertaken in conducting business and to
understand that mitigating risk also reduces expected taxes. Besides, new initiatives, acquisitions, and product
development projects must be weighed against their tax implications and net after-tax contribution to the firm’s
value. Generally, performance must, whenever possible, be measured on an after-tax basis. It is wise for global
companies to adopt this measure especially when operating in different tax environments, where they are able to
take advantage of inconsistencies in tax regulations.

8. Corporate Training as a means to improve skills:

Based on the above financial metrics, it is certain that finance plays a vital role for strategic planning and decision
making. Managing the finances effectively starts with a good training and development program. Through an
innovative and engaging training, employees are more likely to understand the implications of good financial
decisions and strategies.