1. What is business strategy?

A business strategy is the combination of all the decisions taken and actions
performed by the business to accomplish business goals and to secure a
competitive position in the market.
It is the backbone of the business as it is the roadmap which leads to the desired
goals. Any fault in this roadmap can result in the business getting lost in the crowd
of overwhelming competitors.

Importance of Business Strategy

A business objective without a strategy is just a dream. It is no less than a gamble
if you enter into the market without a well-planned strategy.
With the increase in the competition, the importance of business strategy is
becoming apparent and there’s a huge increase in the types of business strategies
used by the businesses. Here are five reasons why a strategy is necessary for your
business.
 Planning: Business strategy is a part of a business plan. While the business
plan sets the goals and objectives, the strategy gives you a way to fulfil
those goals. It is a plan to reach where you intend to.
 Strengths and Weaknesses: Most of the times, you get to know about
your real strengths and weaknesses while formulating a strategy.
Moreover, it also helps you capitalise on what you’re good at and use that
to overshadow your weaknesses (or eliminate them).
 Efficiency and Effectiveness: When every step is planned, every resource
is allocated, and everyone knows what is to be done, business activities
become more efficient and effective automatically.
 Competitive Advantage: A business strategy focuses on capitalising on
the strengths of the business and using it as a competitive advantage to
position the brand in a unique way. This gives an identity to business and
makes it unique in the eyes of the customer.
 Control: It also decides the path to be followed and interim goals to be
achieved. This makes it easy to control the activities and see if they are
going as planned.
2. What is strategic management?
Strategic management is the ongoing planning, monitoring, analysis and
assessment of all necessities an organization needs to meet its goals and
objectives. Changes in business environments will require organizations to
constantly assess their strategies for success. The strategic management
process helps organizations take stock of their present situation, chalk out
strategies, deploy them and analyze the effectiveness of the implemented
management strategies. Strategic management strategies consist of five basic
strategies and can differ in implementation depending on the surrounding
environment. Strategic management applies both to on-premise and mobile
platforms.

Benefits of strategic management

Strategic management offers many benefits to companies that use it, including:
 Competitive advantage: Strategic management gives businesses an
advantage over competitors because its proactive nature means your
company will always be aware of the changing market.
 Achieving goals: Strategic management helps keep goals achievable by
using a clear and dynamic process for formulating steps and
implementation.
 Sustainable growth: Strategic management has been shown to lead to
more efficient organizational performance, which leads to manageable
growth.
 Cohesive organization: Strategic management necessitates
communication and goal implementation company-wide. An organization
that is working in unison towards a goal is more likely to achieve that goal.
 Increased managerial awareness: Strategic management means looking
toward the company's future. If managers do this consistently, they will be
more aware of industry trends and challenges. By implementing strategic
planning and thinking, they will be better prepared to face future challenge
 3. What is corporate strategy?
A corporate strategy entails a clearly defined, long-term vision that organizations
set, seeking to create corporate value and motivate the workforce to implement
the proper actions to achieve customer satisfaction. In addition, corporate strategy
is a continuous process that requires a constant effort to engage investors in
trusting the company with their money, thereby increasing the company’s equity.
Organizations that manage to deliver customer value unfailingly are those that
revisit their corporate strategy regularly to improve areas that may not deliver the
aimed results.

The Main Components of Corporate Strategy are:

 Visioning
 Objective Setting
 Allocation of Resources
 Strategic Trade-offs (Prioritization)

Visioning involves setting the high-level direction of the organization - namely

the vision, mission, and potentially corporate values.
Objective Setting involves developing the visioning aspects created and turning
them into a series of high-level (sometimes still rather abstract) objectives for the
company, typically spanning 3-5 years in length.
Allocation of Resources refers to decisions which concern the most efficient
allocation of human and capital resources in the context of stated goals and aims.
Strategic Trade-Offs are at the core of corporate strategic planning. It's not
always possible to take advantage of all feasible opportunities. In addition,
business decisions almost always entail a degree of risk. Corporate-level
decisions need to take these factors into account in arriving at the optimal
strategic mix.

4. What is core- competency?

Core competencies are the resources and capabilities that comprise the strategic
advantages of a business. A modern management theory argues that a business
must define, cultivate, and exploit its core competencies in order to succeed
against the competition.
Core competency is an organization's defining strength, providing the foundation
from which the business will grow, seize upon new opportunities and deliver
value to customers. A company's core competency is not easily replicated by
other organizations, whether existing competitors or new entries into its market.
A company can have more than one core competency. Core competencies, which
are sometimes called core capabilities or distinctive competencies, help create a
sustained competitive advantage for organizations.

5. Define joint venture?

Joint Venture can be described as a business arrangement, wherein two or more
independent firms come together to form a legally independent undertaking, for
a stipulated period, to fulfil a specific purpose such as accomplishing a task,
activity or project. In other words, it is a temporary partnership, established
for a definite purpose, which may or may not uses a specific firm name.

Objectives of Joint Venture

 To enter foreign market and even new or emerging market.

 To reduce the risk factor for heavy investment.
 To make optimum utilisation of resources.
 To gain economies of scale.
 To achieve synergy.

Characteristics of a Joint Venture

1. Creates Synergy
A joint venture is entered between two or more parties to extract the qualities of
each other. One company may possess a special characteristic which another
company might lack with. Similarly, the other company has some advantage which
another company cannot achieve. These two companies can enter into a joint
venture to generate synergies between them for a greater good. These companies
can work on economies of large scale to give cost advantage.

2. Risk and Rewards can be Shared

In a typical joint venture agreement between two or more organization, may be of
the same country or different countries, there are many diversifications in culture,
technology, geographical advantage and disadvantage, target audience and many
more factors to overcome. So the risks and rewards pertaining to the activity for
which the joint venture is agreed upon can be shared between the parties as decided
and entered into the legal agreement.
3. No Separate Laws
As for joint venture, there is no separate governing body which regulates the
activities of the joint venture. Once they are into a corporate structure, then the
Ministry of Corporate Affairs in association with Registrar of Companies keep a
check on companies. Apart from that, there is no separate law for governing joint
ventures.

Advantages of Joint Venture

1. Economies of Scale
Joint Venture helps the organizations to scale up with their limited capacity. The
strength of one organization can be utilized by the other. This gives the competitive
advantage to both the organizations to generate economies of scalability.

2. Access to New Markets and Distribution Networks

When one organization enters into joint venture with another organization, it opens
a vast market which has a potential to grow and develop. For example, when an
organization of United States of America enters into a joint venture with another
organization based at India, then the company of United States has an advantage of
accessing vast Indian markets with various variants of paying capacity and
diversification of choice.

At the same time, the Indian company has the advantage to access the markets of
the United States which is geographically scattered and has good paying capacity
where the quality of the product is not compromised. Unique Indian products have
big markets across the globe.

3. Innovation
Joint ventures give an added advantage to upgrading the products and services with
respect to technology. Marketing can be done with various innovative platforms
and technological up gradation helps in making good products at efficient cost.
International companies can come up with new ideas and technology to reduce cost
and provide better quality products.
4. Low Cost of Production
When two or more companies join hands together, the main motive is to provide
the products at a most efficient price. And this can be done when the cost of
production can be reduced or cost of services can be managed. A genuine joint
venture aims at this only to provide best products and services to its consumers.

5. Brand Name
A separate brand name can be created for the Joint Venture. This helps in giving a
distinctive look and recognition to the brand. When two parties enter into a joint
venture, then goodwill of one company which is already established in the market
can be utilized by another organization for gaining a competitive advantage over
other players in the market.

For example, a big brand of Europe enters into a joint venture with an Indian
company will give a synergic advantage as the brand is already established across
the globe.

6. Access to Technology
Technology is an attractive reason for organizations to enter into a joint venture.
Advanced technology with one organization to produce superior quality of products
saves a lot of time, energy, and resources. Without the further investment of huge
amount again to create a technology which is already in existence, the access to
same technology can be done only when companies enter into joint venture and
give a competitive advantage.

6. What is conglomerate diversification? (Unrelated Diversification)

When an organization adopts a strategy which requires taking of those activities

which are unrelated to the existing businesses definition of one or more of its
businesses either in terms of their respective customer groups, customer functions
or alternative technologies, it is called conglomerate diversification.

Conglomerate diversification is growth strategy that involves adding new

products or services that are significantly different from the organization's present
products or services. Conglomerate diversification occurs when the firm
diversifies into an area(s) totally unrelated to the organization current business.
 Examples of Conglomerate Diversification

Example of Indian company which have adopted apart of growth and expansion
through conglomerate diversification the classic examples is of ITC, a cigarette
company diversifying into the hotel industry.

7. What are barriers to Entry?

Barrier to entry is a high cost or other type of barrier that prevents a business
startup from entering a market and competing with other businesses. Barriers to
entry can include government regulations, the need for licenses, and having to
compete with a large corporation as a small business startup.

As an example, the large company is able to produce a large amount of products

efficiently and more cost-effectively than a company with fewer resources. They
have lower costs because they are able to purchase materials in bulk, and they
have lower overhead because they are able to produce more under one roof. The
smaller company would simply have a hard time keeping up with that, which can
result in them avoiding entering the market altogether.

Some businesses want there to be high barriers to entry in their market because
they want to limit competition or hold on to their place at the top. Therefore, they
will try to maintain their competitive advantage any way they can, which can
make entry even more difficult for new businesses. They might do something like
spend an excessive amount of money on advertising (in other words, on product
differentiation), because they have it and they can, and any new entrant would
not be able to do that, giving them a significant disadvantage.

Sources of Barriers to Entry

Barriers to entry come from seven sources:

 Economies of scale: the decline in the cost of operations due to higher

production volume
 Product differentiation: the brand strength of the product as a result of effective
communication of its benefits to the target market
 Capital requirements: financial resources required for operating the business
 Switching costs: one-time costs the buyer must incur for making the switch to
a different product
 Access to distribution channels: does one business control all of them, or are
they open?
 Cost disadvantages independent of scale: when a company has advantages that
cannot be replicated by the competition, such as proprietary technology
 Government policy: controls the government has placed on the market, such as
licensing requirements

8. What is Horizontal Expansion?

Growth of a company in which it purchases new facilities, tools and/or other

asets to increase the volume of the product it makes. That is, horizontal expans
ion allows a company to make more of a product, but does not diversify its prod
uct line or the company's place in the supply chain.
Horizontal integration is when a company increases the number of products or
services it sells in one part of the supply chain. The supply chain is the series of
steps it takes to produce a good or service. The supply chain for the widget
industry,for example, is:
1) companies source the raw materials needed for the widget,
2) they send the raw material to assemblers who turn the raw materials into
finished goods, and
3) the finished goods are sold either directly to the customers or through
wholesalers. If a widget assembler decided to horizontally integrate, it would add
more products to assemble in addition to the widget. It could expand, for example,
into shoe buttons, or screws. There are several reasons why a company like a
widget assembler or a pizza parlor would decide to horizontally integrate.

9. Define corporate governance

Corporate Governance refers to the way a corporation is governed. It is the

technique by which companies are directed and managed. It means carrying the
business as per the stakeholders’ desires. It is actually conducted by the board of
Directors and the concerned committees for the company’s stakeholder’s benefit.
It is all about balancing individual and societal goals, as well as, economic and
social goals.
Corporate Governance is the interaction between various participants
(shareholders, board of directors, and company’s management) in shaping
corporation’s performance and the way it is proceeding towards. The relationship
between the owners and the managers in an organization must be healthy and
there should be no conflict between the two. The owners must see that
individual’s actual performance is according to the standard performance.

Benefits of Corporate Governance

1. Good corporate governance ensures corporate success and economic

growth.
2. Strong corporate governance maintains investors’ confidence, as a result
of which, company can raise capital efficiently and effectively.
3. It lowers the capital cost.
4. There is a positive impact on the share price.
5. It provides proper inducement to the owners as well as managers to achieve
objectives that are in interests of the shareholders and the organization.
6. Good corporate governance also minimizes wastages, corruption, risks and
mismanagement.
7. It helps in brand formation and development.
8. It ensures organization in managed in a manner that fits the best interests
of all.

10. What is backward integration?

Backward integration is a process in which a company acquires or merges with
other businesses that supply raw materials needed in the production of its finished
product. Businesses pursue backward integration with the expectation that the
process will result in cost savings, increased revenues, and improved efficiency
in the production process. Companies also use backward integration as a way of
gaining competitive advantage and creating barriers to entry to new industry
entrants.

A business that implements backward integration attempts to move backward in

the supply chain to the control of raw materials. The supply chain process starts
with the sourcing and delivery of raw materials to the manufacturer’s warehouse
and ends when the final product gets to the end consumer. Raw materials are
scarce resources that every business attempts to control, and lacking access to
such resources may cripple the operations of the business. In industries with high
competition, manufacturers often make attempts to buy suppliers as a way of
cutting out the middlemen and managing the increasing competition for scarce
resources.

Example:

An example is a wine manufacturer that seeks to acquire a wine bottle

manufacturing company that owns the rights and technologies of manufacturing
glass. By acquiring the wine glass manufacturing company, the wine
manufacturer will be in a position to control the quality of the manufactured glass,
cost of production, as well as the quality of raw materials used in the
manufacturing process. This will limit other wine manufacturers from buying
wine bottles from that supplier. Also, it will allow the acquirer to differentiate its
wine bottles from those of the other competitors. Since the raw materials for the
manufacture of glass are scarce in nature, the wine manufacturer will be in a
position to manage the resource to make sure they are effectively used to produce
high-quality bottles.

11. Distinguish between programs and procedures.

Ans. A program is a document explaining a goal; who is responsible for achieving

the goal, any legal or binding requirements, and what the result will be. Programs
might be tied to legal regulations. They explain the overall system to both the
employees and the outside governing agency about what is done to address a
topic. A program will outline how outside agencies or other departments/people
interface with your company. Programs state the goal and then point to policy and
procedure documents used to address the goal. If the program were responding to
a law, the text of the law should be included in the program document. A program
does not cover the small details. The program simply outlines who does what and
why. An example might be a Heat Illness Program.

While a procedure describes the process of getting the work done or achieving a
goal. Procedures are described in training materials, such as guides, handbooks,
checklists, on-the-job training memos, etc. Procedures are normally instructions
to employees describing exactly how to implement policies or programs by
stating precise steps that need to be followed. A heat illness policy states that a
manager must provide shade for employees, and a procedure would state exactly
how that shade is provided.
12. What is Adaptive mode?

Modes of strategic management are the actual kinds of approaches taken by

managers in formulating and implementing strategies. They address the issues of
who has the major influence in the strategic management process and how the
process is carried out. Research indicates that managers tend to use one of three
major approaches to, or modes of strategic management: entrepreneurial,
adaptive, and planning

“Adaptive mode is an approach to strategy formulation that emphasizes taking

small incremental steps, reacting to problems rather than seeking opportunities,
and attempting to satisfy a number of organizational power groups”
(Management, Kathryn M. Bartol & David C. Martin). The adaptive mode is most
likely to be used by managers in established organizations that face a rapidly
changing environment and yet have several coalitions, or power blocks, that make
it difficult to obtain agreement on clear strategic goals and associated long-term
plans. For example, before London-based Grand Metropolitan PLC purchased
Pillsbury, including the Burger King Chain, the chain was plagued by constant
turnover, marketing problems, inconsistent service, and angry franchisees who
frequently told Pillsbury what to do. Grand Metropolitan is now working to put
the chain back on track through a strategy that emphasizes, doing “whatever it
takes to create a positive, memorable experience.” Concrete measures include
increasing the number of field representatives who visit Burger King stores,
highlighting cleanliness, and rewarding employees who take the initiative in
improving service by doing things differently.

With the adaptive approach, the degree of innovation fostered by the strategic
management process is likely to depend on the ability of managers to agree on at
least some major goals and basic strategies that set essential directions. In
addition, lower-level managers must have some flexibility in carrying out the
basic strategy rather than being given extremely detailed plans to follow; this
approach might be effective in a more stable environment or one in which
agreement among coalitions is easy to obtain. Without at least some agreement
among high-level managers on major goals and directions, however the adaptive
mode may be ineffective in moving the organization in viable strategic directions.
13. Describe the Social Responsibility of business.

Social responsibility can be said to be the obligation on the part of business

enterprises to protect and promote society’s welfare. The activities of businesses
should be organized in such a way that the society is benefited and not affected.

Business enterprises exist to satisfy needs of the society. It is the society that
provides them the inputs and serves as the market for their produce. In other
words, all business enterprises are dependent on the society. Therefore they
should ensure that they keep the interest of the society as their most important
consideration in all their decisions and actions. The basic requisites expected in
this regard are trust, honesty, integrity, transparency and compliance with the
laws of the land. The concept of social responsibility has been in practice in India
for over several decades.

Need for Social Responsibility of Businesses

Businesses need to be socially responsible because of the following reasons:
1. Rationale for existence: The rationale for the existence of any business is
satisfying consumer needs in a profitable manner. Consumers are part of the
society and any business that needs to survive in the long run must respond and
provide for society’s needs.
2. Symbiotic relationship: The society provides the inputs and serves as the
market for the output of business. Business rewards the inputs provided by the
society in the form of interest, rent, wages etc., and earns profits by selling the
output to the society. Business and society enjoy a symbiotic relationship.
Business has to protect and promote society’s welfare if it wishes to survive and
prosper. A prosperous society is a necessary condition for profitable business.

3. Availability of resources: Modern businesses have huge amount of resources

at their disposal. The profits earned by some of the multinational companies are
more than the national income of certain countries. With such large resources,
businesses are in a better position to further society’s interests.
4. Reputation: Businesses spend huge amount of resources in brand building and
strengthening their image. A socially responsible company enjoys a good
reputation in the society. It results in increased sales, profitability, attraction of
talent and sustained growth.
5. Society’s expectations: Society’s expectations from business firms have
undergone a sea change over the years. In the early days, businesses were viewed
only as provider of goods and services. But today, society expects business to be
a responsible citizen and contribute towards social welfare.
6. To ensure business growth: A healthy and prosperous society enjoys higher
purchasing power. The higher purchasing power translates into higher demand
for products and services. This increased demand translates to higher sales and
profit growth for businesses.
7. To avoid government regulation: If businesses are exploitative and do not
take society’s interests into account, the government has to step in. It would lay
down restrictive rules and regulations. Such restrictive rules would hinder
freedom and growth of businesses. In order to avoid government regulation,
businesses have to be socially responsive.
8. To solve problems created: Problems such as environmental pollution,
contamination of water resources, depletion of the ozone layer have been caused
by businesses. These have resulted in poor health of the community and placed a
question mark on the survival of human species. Therefore businesses should take
measures to solve the problems which have been their creation. They need to
ensure that their activities do not lead to such problems in the future.

14. What is strategic Business unit?

A Strategic Business Unit (SBU) is an operating division of firm which serves a

distinct product-market segment or a well-defined set of customers or a
geographic area. The SBU is given the authority to make its own strategic
decisions within corporate guidelines as long as it meets corporate objectives.

Strategic Business Unit or SBU is understood as a business unit within the overall
corporate identity which is distinguishable from other business because it serves
a defined external market where management can conduct strategic planning in
relation to products and markets. The unique small business unit benefits that a
firm aggressively promotes in a consistent manner. When companies become
really large, they are best thought of as being composed of a number of businesses
(or SBUs).
Following are the needs of SBUs:

1) To ensure that each product or product line of the hundreds offered by the
company would receive the same attention as if it were developed, produced and
marketed by an independent company.

2) To provide assurance that a product will not get lost among other products
(usually those with larger sales & profits) in a large company.

3) SBU's makes the organization in organized form. The first principle of time
management is to get organized. Similarly, one of the first things an owner got to
do is to see his organization clearly.

4) To ensure that a certain product or product line is promoted and handled as

though it were an independent business.

5) Dividing products into SBU's helps you stay in touch of the market separately
for each and every product. Thus a marketing manager/sales manager may be
assigned one product at a time and will be responsible for that product itself.
Thereby he may give valuable contribution in maintaining the STP of a product
in the target market.

6) SBUs propogates the correct decision making. The decisions can be at the
micro level (managing STP, strategies) or it can be at the macro level

7) By micro managing each and every product and dividing it into SBU's, an
owner can obtain a holistic view of the organization. This view is also used in
preparing the financial statements as well as to keep tabs on the investments and
returns for the organization from each SBU. Thus the overall profitability of the
firm can be decided.

15. Define Tactics.

Tactics are the concrete things you’re going to do to achieve the goals you set
out in your strategy. They’re the specific plans and resources that you will use
to achieve your goals. Your tactics include your marketing and sales plan, the
team who will execute your plans, and any other partners and resources you
may need along the way.
Tactics are the activities that take place to achieve the strategy, allowing the
strategic plan to progress from milestone to milestone.
 A good tactic has a clear purpose that aids your strategy. It has a finite timeline
during which specific activities will be completed and their impacts measured.

A tactic for the furniture company would be to analyze manufacturing

processes to minimize waste and inefficiencies, thereby decreasing cost and,
by extension, prices for customers. The company can clearly measure the
success of the tactic by comparing their costs before and after the analysis.

16. What is industry Analysis?

Industry analysis is a market assessment tool used by businesses and analysts to

understand the competitive dynamics of an industry. It helps them get a sense of
what is happening in an industry, e.g., demand-supply statistics, degree of
competition within the industry, state of competition of the industry with other
emerging industries, future prospects of the industry taking into account
technological changes, credit system within the industry, and the influence
of external factors on the industry.

Industry analysis, for an entrepreneur or a company, is a method that helps to

understand a company’s position relative to other participants in the industry. It
helps them to identify both the opportunities and threats coming their way and
gives them a strong idea of the present and future scenario of the industry.

17. What is environment scanning?

Environmental scanning refers to the collection and utilization of information

regarding events, relationships, and trends in an organization's industry, and the
use of the acquired knowledge in shaping the organization's future strategies and
objectives. Environmental scanning requires people in an organization to search
for opportunities, important lessons, trends, and weaknesses or threats outside of
their organization which can affect the success of the company. Identifying these
variables enables the organization to develop strategies to either exploit or
counter the effects of these external industry forces. The basic purpose of
environmental scanning is to help management determine the future direction of
the organization.
18. What is societal Environment?

Ans. The social environment refers to the immediate physical and social setting
in which people live or in which something happens or develops. The social
environment consists of the sum total of a society's beliefs, customs, practices
and behaviours. It is, to a large extent, an artificial construct that can be contrasted
with the natural environment in which we live. It includes the culture that the
individual was educated or lives in, and the people and institutions with whom
they interact. The interaction may be in person or through communication media,
even anonymous or one-way, and may not imply equality of social status.
Therefore, the social environment is a broader concept than that of social class or
social circle.

20. Define Policy?

A policy in Management is a general statement which is formulated by an

organization for the guidance of its personnel. The objectives are first formulated
and then policies are planned to achieve them.

Policies are a mode of thought and the principles underlying the activities of an
organization or an institution.

According to Koontz & O ‘Donnel, “Policies were identified as guides to thinking

in decision-making. They assume that when decisions are made, these will fall
within certain boundaries.”

21. What is strategy formulation?

Definition: Strategy Formulation is an analytical process of selection of the best

suitable course of action to meet the organizational objectives and vision. It is one
of the steps of the strategic management process. The strategic plan allows an
organization to examine its resources, provides a financial plan and establishes
the most appropriate action plan for increasing profits.
Steps of Strategy Formulation

The steps of strategy formulation include the following:

22. What is a Mission?

A mission statement is used by a company to explain, in simple and concise terms,

its purpose(s) for being. The statement is generally short, either a single sentence
or a short paragraph.

Mission statements serve a dual purpose by helping employees remain focused

on the tasks at hand, and encouraging them to find innovative ways of moving
toward increasing their productivity with the eye to achieving company goals.

A company’s mission statement defines its culture, values, ethics, fundamental

goals, and agenda.

23. What are objectives?

Objective is defined as someone or something that is real or not imagined. An

example of objective is an actual tree, rather than a painting of a tree. ... Objective
means someone or something that is without bias. An example of objective is a
juror who doesn't know anything about the case they're assigned to.

24. What are the Responsibilities of the Board of Directors?

The seven points below outline the major responsibilities of the board of
directors.
1) Recruit, supervise, retain, evaluate and compensate the manager. Recruiting,
supervising, retaining, evaluating and compensating the CEO or general manager
are probably the most important functions of the board of directors
2) Provide direction for the organization. The board has a strategic function in
providing the vision, mission and goals of the organization. These are often
determined in combination with the CEO or general manager of the business.
3) Establish a policy based governance system. The board has the responsibility
of developing a governance system for the business. The articles of governance
provide a framework but the board develops a series of policies. This refers to the
board as a group and focuses on defining the rules of the group and how it will
function. In a sense, it’s no different than a club. The rules that the board
establishes for the company should be policy based.
4) Govern the organization and the relationship with the CEO. Another
responsibility of the board is to develop a governance system. The governance
system involves how the board interacts with the general manager or CEO.
Periodically the board interacts with the CEO during meetings of the board of
directors.
5) Fiduciary duty to protect the organization’s assets and member’s investment.
The board has a fiduciary responsibility to represent and protect the
member’s/investor’s interest in the company. So the board has to make sure the
assets of the company are kept in good order.
6) Monitor and control function. The board of directors has a monitoring and
control function. The board is in charge of the auditing process and hires the
auditor. It is in charge of making sure the audit is done in a timely manner each
year.
25. What is SWOT analysis? Explain in detail.

SWOT stands for Strengths, Weaknesses, Opportunities, and Threats, and so a

SWOT Analysis is a technique for assessing these four aspects of your business.

You can use SWOT Analysis to make the most of what you've got, to your
organization's best advantage. And you can reduce the chances of failure, by
understanding what you're lacking, and eliminating hazards that would otherwise
catch you unawares.

Strengths

Strengths are things that your organization does particularly well, or in a way that
distinguishes you from your competitors. Think about the advantages your
organization has over other organizations. These might be the motivation of your
staff, access to certain materials, or a strong set of manufacturing processes.

Weaknesses

Now it's time to consider your organization's weaknesses. Be honest! A SWOT

Analysis will only be valuable if you gather all the information you need.

Opportunities

Opportunities are openings or chances for something positive to happen, but

you'll need to claim them for yourself!

Threats

Threats include anything that can negatively affect your business from the
outside, such as supply chain problems, shifts in market requirements, or a
shortage of recruits.
How to Use a SWOT Analysis

Once you've examined all four aspects of SWOT, you'll likely be faced with a
long list of potential actions to take. You'll want to build on your strengths, boost
your weaker areas, head off any threats, and exploit every opportunity.

26. Discuss Strategic choice in detail.

What is Strategic Choice

Strategic Choice involves a whole process through which a decision is taken to
choose a particular option from various alternatives. There can be various
methods through which the final choice can be selected upon. Managers and
decision makers keep both the external and internal environment in mind before
narrowing it down to one.
Importance of Strategic Choice
Some of the strategic choices make up a part of bigger strategic policies of the
company. Hence, important emphasis is given to them and decision makers
follows due diligence before coming up with a final strategic choice. At times,
majority shareholder uses his influence for the final strategic choice benefiting
his agendas.
In nutshell, we can summarize that, it’s a combination of intent, analysis and
options available.
Strategic Choice Parameters
The initial process involves identifying the problem completely. Once, we have
the clear picture of the problem in hand, and then the process of short listing
various solutions is undertaken. Then comes up the strategic choice process
where decision for final choice is taken considering the various parameters in
mind.
Some of these parameters could be:
1. Feasibility
2. Prudence
3. Consensus
4. Acceptability
26. Discuss Strategic choice in detail.
Strategic Choice involves a whole process through which a decision is taken to
choose a particular option from various alternatives. There can be various
methods through which the final choice can be selected upon. Managers and
decision makers keep both the external and internal environment in mind before
narrowing it down to one.
Importance of Strategic Choice
Some of the strategic choices make up a part of bigger strategic policies of the
company. Hence, important emphasis is given to them and decision makers
follows due diligence before coming up with a final strategic choice. At times,
majority shareholder uses his influence for the final strategic choice benefiting
his agendas.
In nutshell, we can summarize that, it’s a combination of intent, analysis and
options available.
Strategic Choice Parameters
The initial process involves identifying the problem completely. Once, we have
the clear picture of the problem in hand, and then the process of short listing
various solutions is undertaken. Then comes up the strategic choice process
where decision for final choice is taken considering the various parameters in
mind.
Some of these parameters could be:
1. Feasibility
2. Prudence
3. Consensus
4. Acceptability
Strategic Choice Example
Following example best describe the Strategic Choice:
Suppose a company has a dilemma in front of it of whether or not to invest in a
new inorganic growth process. There are multiple options available for
overtaking purpose. Now the process involved would be observing pros and cons
of the companies being overtaken. Then after short listing few of them considered
the business, their advantages, and their value addition to parent company.
After having the list of few, now the final narrowing down to a single company
would be a strategic choice on the factors mentioned above. Many stakes would
be considered considering both internal and external situations.
27. What is Value –Chain?
A value chain is a business model that describes the full range of activities needed
to create a product or service. For companies that produce goods, a value chain
comprises the steps that involve bringing a product from conception to
distribution, and everything in between—such as procuring raw materials,
manufacturing functions, and marketing activities.
A company conducts a value-chain analysis by evaluating the detailed procedures
involved in each step of its business. The purpose of a value-chain analysis is to
increase production efficiency so that a company can deliver maximum value for
the least possible cost.

28. Differentiate between economics of scope and economics of scale?

29. What is Economics of Scale?

Economies of scale is a concept of Economics that suggests that when a company
reaches a point where the production cost is decreasing due to bulk production.
30. What is customer switching cost?
Switching costs are the costs that a consumer incurs as a result of changing
brands, suppliers, or products. Although most prevalent switching costs are
monetary in nature, there are also psychological, effort-based, and time-based
switching costs.
A switching cost can manifest itself in the form of significant time and effort
necessary to change suppliers, the risk of disrupting normal operations of a
business during a transition period, high cancellation fees, or a failure to obtain
similar replacements of products or services.
Successful companies typically try to employ strategies that incur high switching
costs on the part of consumers to dissuade them from switching to a competitor's
product, brand, or services.

31. What is Bargaining power of buyers?

The Bargaining Power of Buyers, one of the forces in Porter’s Five Forces
Industry Analysis framework, refers to the pressure that customers/consumers
can put on businesses to get them to provide higher quality products, better
customer service, and/or lower prices.

It is important to keep in mind that the bargaining power of buyers analysis is

conducted from the perspective of the seller (the company). The bargaining
power of buyers would refer to customers/consumers who use the
products/services of the company.

32. What is bargaining power of suppliers?

The Bargaining Power of Suppliers, one of the forces in Porter’s Five Forces
Industry Analysis Framework, is the mirror image of the bargaining power of
buyers and refers to the pressure that suppliers can put on companies by raising
their prices, lowering their quality, or reducing the availability of their products.
This framework is a standard part of business strategy.
The bargaining power of the supplier in an industry affects the competitive
environment and profit potential of the buyers. The buyers are the companies and
the suppliers are those who supply the companies.
The bargaining power of suppliers is one of the forces that shape the competitive
landscape of an industry and help determine the attractiveness of an industry. The
other forces include competitive rivalry, bargaining power of buyers, the threat
of substitutes, and the threat of new entrants.

33. What is Diversification?

Diversification is a risk management strategy that mixes a wide variety of
investments within a portfolio. A diversified portfolio contains a mix of distinct
asset types and investment vehicles in an attempt at limiting exposure to any
single asset or risk. The rationale behind this technique is that a portfolio
constructed of different kinds of assets will, on average, yield higher long-term
returns and lower the risk of any individual holding or security.

34. What is Economics of Scope?

Economies of scope is an economic concept that suggests that production of
various products can lead to reduction in cost.

35. What do you mean by stakeholder?

A stakeholder is a party that has an interest in a company and can either affect or
be affected by the business. The primary stakeholders in a typical corporation are
its investors, employees, customers, and suppliers.

36. Give any two examples of Conglomerate Diversification.

Examples of conglomerate diversification include General Electric, Virgin Group
Ltd. and The Walt Disney Company. Initially a lighting business, General
Electric diversified into medical devices and household appliances. Virgin
expanded from a record label to transport and healthcare, while Disney’s
operations range from film studios to entertainment parks.

37. Explain the Porter‘s Five Forces Model to analyze competitive forces in
an industry environment.
Porter's Five Forces is a model that identifies and analyzes five competitive forces
that shape every industry and helps determine an industry's weaknesses and
strengths. Five Forces analysis is frequently used to identify an industry's
structure to determine corporate strategy. Porter's model can be applied to any
segment of the economy to understand the level of competition within the
industry and enhance a company's long-term profitability. The Five Forces model
is named after Harvard Business School professor, Michael E. Porter.
Porter's five forces are:
1. Competition in the industry
2. Potential of new entrants into the industry
3. Power of suppliers
4. Power of customers
5. Threat of substitute products

Competition in the Industry

The first of the five forces refers to the number of competitors and their ability to
undercut a company. The larger the number of competitors, along with the
number of equivalent products and services they offer, the lesser the power of a
company. Suppliers and buyers seek out a company's competition if they are able
to offer a better deal or lower prices. Conversely, when competitive rivalry is low,
a company has greater power to charge higher prices and set the terms of deals to
achieve higher sales and profits.

Potential of New Entrants Into an Industry

A company's power is also affected by the force of new entrants into its market.
The less time and money it costs for a competitor to enter a company's market
and be an effective competitor, the more an established company's position could
be significantly weakened. An industry with strong barriers to entry is ideal for
existing companies within that industry since the company would be able to
charge higher prices and negotiate better terms.
Power of Suppliers
The next factor in the five forces model addresses how easily suppliers can drive
up the cost of inputs. It is affected by the number of suppliers of key inputs of a
good or service, how unique these inputs are, and how much it would cost a
company to switch to another supplier. The fewer suppliers to an industry, the
more a company would depend on a supplier. As a result, the supplier has more
power and can drive up input costs and push for other advantages in trade. On the
other hand, when there are many suppliers or low switching costs between rival
suppliers, a company can keep its input costs lower and enhance its profits.
Power of Customers
The ability that customers have to drive prices lower or their level of power is
one of the five forces. It is affected by how many buyers or customers a company
has, how significant each customer is, and how much it would cost a company to
find new customers or markets for its output. A smaller and more powerful client
base means that each customer has more power to negotiate for lower prices and
better deals. A company that has many, smaller, independent customers will have
an easier time charging higher prices to increase profitability.
Threat of Substitutes
The last of the five forces focuses on substitutes. Substitute goods or services that
can be used in place of a company's products or services pose a threat. Companies
that produce goods or services for which there are no close substitutes will have
more power to increase prices and lock in favorable terms. When close substitutes
are available, customers will have the option to forgo buying a company's
product, and a company's power can be weakened.

38. What is Corporate Social Responsibility?

Corporate social responsibility (CSR) is a self-regulating business model that
helps a company be socially accountable—to itself, its stakeholders, and the
public. By practicing corporate social responsibility, also called corporate
citizenship, companies can be conscious of the kind of impact they are having on
all aspects of society, including economic, social, and environmental.

To engage in CSR means that, in the ordinary course of business, a company is

operating in ways that enhance society and the environment, instead of
contributing negatively to them.

39. What are the 3 forms of diversification? State the means and mode of
diversification?
There are three types of diversification techniques:
1. Concentric diversification
Concentric diversification involves adding similar products or services to the
existing business. For example, when a computer company that primarily
produces desktop computers starts manufacturing laptops, it is pursuing a
concentric diversification strategy.
2. Horizontal diversification
Horizontal diversification involves providing new and unrelated products or
services to existing consumers. For example, a notebook manufacturer that enters
the pen market is pursuing a horizontal diversification strategy.
3. Conglomerate diversification
Conglomerate diversification involves adding new products or services that are
significantly unrelated and with no technological or commercial similarities. For
example, if a computer company decides to produce notebooks, the company is
pursuing a conglomerate diversification strategy.

Of the three types of diversification techniques, conglomerate diversification is

the riskiest strategy. Conglomerate diversification requires the company to enter
a new market and sell products or services to a new consumer base. A company
incurs higher research and development costs and advertising costs. Additionally,
the probability of failure is much greater in a conglomerate diversification
strategy

40. What is PEST analysis?

Definition: PEST Analysis is a measurement tool which is used to assess markets
for a particular product or a business at a given time frame. PEST stands for
Political, Economic, Social, and Technological factors. Once these factors are
analysed organisations can take better business decisions.

Description: PEST Analysis helps organizations take better business decisions

and improve efficiency by studying various factors which might influence a
business such as political, economic, social, and technology.

PEST analysis helps in making strategic business decisions, planning marketing

activities, product development and research. It is similar to SWOT analysis,
which stands for Strength, Weakness, Opportunities, and Threats.

41) What is grand strategies? Explain the various retrenchment strategies a

firm may follow?

Grand strategy or high strategy is the long-term strategy pursued at the highest
levels by a nation to further its interests. Issues of grand strategy typically include
the choice of primary versus secondary theaters in war, distribution of resources
among the various services, the general types of armaments manufacturing to
favor, and which international alliances best suit national goals. With
considerable overlap with foreign policy, grand strategy focuses primarily on the
military implications of policy. A country's political leadership typically directs
grand strategy with input from the most senior military officials. Development of
a nation's grand strategy may extend across many years or even multiple
generations.
The concept of grand strategy has been extended to describe multi-tiered
strategies in general, including strategic thinking at the level of corporations and
political parties. In business, a grand strategy is a general term for a broad
statement of strategic action. A grand strategy states the means that will be used
to achieve long-term objectives. Examples of business grand strategies that can
be customized for a specific firm include: market concentration, market
development, product development, innovation, horizontal integration,
divestiture.

Retrenchment strategy is a corporate level strategy that aims to reduce the

size or diversity of organizational operations. At times, it also becomes a
means to ensure an organization’s financial stability. This is done by
reducing the expenditure. A retrenchment strategy is a design to fortify an
organization’s basic distinctive competence.

Turnaround
The term ‘turnaround’ refers to the measures which reverse the negative trends in
the performance indicators of the company. It refers to the management measures
which turn a sick company back to a healthy one or those measures which reverse
the deteriorating trends of performance indicators such as falling market share,
falling sales, decreasing profitability, increase in costs, worsening debt equity
ratio, getting negative cash flow, severe working capital problems etc. The
strategies adopted to come out of crisis vary from case to case and from company
to company.

Divestiture
In divestitures, the company who has acquired assets and divisions will make an
examination to determine whether the assets or divisions fit into overall corporate
strategy in value maximization. If it does not serve the purpose, such assets or
divisions are hived-off.
Selling a division or part of an organization is called ‘divestiture’. It is often used
to raise capital for further strategic acquisitions or investments. It is also used rid
business units that are unprofitable.
Liquidation:
A business may go into decline when losses are made over several years. The
losses are setoff against past profits retained in the business (reserves), but clearly
the situation cannot continue for very long. In such case liquidation may be
imminent.
In case of technological obsolescence, lack of market for the company’s products,
financial losses, cash shortages, lack of managerial skills, the owners may decide
to liquidate the business to stop further aggravation of losses. With a strategic
motive also, a business unit may be liquidated. This strategic option is exercised
in a situation where the firm finds the business as unattractive to revive the firm.
42) Strategic intent
Delivering strategy is enabled through the use of projects, programmes and
portfolios. Portfolios structure investments in line with strategic objectives,
whilst balancing, aligning and scrutinising capacity and resources.

Programmes combine business-as-usual with projects and steady state activity

dictated by strategic priorities. Projects are transient endeavours that bring about
change and achieve planned objectives.Together, they combine to deliver the
beneficial change required to implement, enable and satisfy the strategic intent of
the organisation. Strategic intent drives organisations to maintain competitive
advantage or seek a new one (i.e. change). The strategic intent leads to the
development of specific change initiatives within a portfolio structure.

43)VALUE CHAIN ANALYSIS 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.M.
Porter introduced the generic value chain model in 1985. Value chain represents
all the internal activities a firm engages in to produce goods and services. VC is
formed of primary activities that add value to the final product directly and
support activities that add value indirectly.
Although, primary activities add value directly to the production process, they are
not necessarily more important than support activities. Nowadays, competitive
advantage mainly derives from technological improvements or innovations in
business models or processes. Therefore, such support activities as ‘information
systems’, ‘R&D’ or ‘general management’ are usually the most important source
of differentiation advantage. On the other hand, primary activities are usually the
source of cost advantage, where costs can be easily identified for each activity
and properly managed.

44) Explain Michael porters five forces model along with 3 generic
strategies?
These three approaches are examples of "generic strategies," because they can be
applied to products or services in all industries, and to organizations of all sizes.
They were first set out by Michael Porter in 1985 in his book, "Competitive
Advantage: Creating and Sustaining Superior Performance."
Porter called the generic strategies "Cost Leadership" (no frills), "Differentiation"
(creating uniquely desirable products and services) and "Focus" (offering a
specialized service in a niche market). He then subdivided the Focus strategy into
two parts: "Cost Focus" and "Differentiation Focus." These are shown in figure 1
below.
The Cost Leadership Strategy

Porter's generic strategies are ways of gaining competitive advantage – in other

words, developing the "edge" that gets you the sale and takes it away from your
competitors. There are two main ways of achieving this within a Cost Leadership
strategy:

 Increasing profits by reducing costs, while charging industry-average

prices.

 Increasing market share by charging lower prices, while still making a

reasonable profit on each sale because you've reduced costs.

The Differentiation Strategy

Differentiation involves making your products or services different from and

more attractive than those of your competitors. How you do this depends on the
exact nature of your industry and of the products and services themselves, but
will typically involve features, functionality, durability, support, and also brand
image that your customers value.

To make a success of a Differentiation strategy, organizations need:

 Good research, development and innovation.

 The ability to deliver high-quality products or services.

 Effective sales and marketing, so that the market understands the

benefits offered by the differentiated offerings.

The Focus Strategy

Companies that use Focus strategies concentrate on particular niche markets and,
by understanding the dynamics of that market and the unique needs of customers
within it, develop uniquely low-cost or well-specified products for the market.
Because they serve customers in their market uniquely well, they tend to build
strong brand loyalty amongst their customers. This makes their particular market
segment less attractive to competitors.
As with broad market strategies, it is still essential to decide whether you will
pursue Cost Leadership or Differentiation once you have selected a Focus
strategy as your main approach: Focus is not normally enough on its own.

Differentiation Focus Strategy

An approach to competitive advantage in which a company attempts to

outperform its rivals by offering a product that is perceived by consumers to be
superior to that of competitors even though its price is higher; in adopting a
differentiation focus strategy, the company focuses on narrow market coverage,
seeking only to attract a small, specialised segment.

OR

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.

46) What is conglomerate diversification?

Answer: Conglomerate diversification is growth strategy that involves adding

new products or services that are significantly different from the organization's
present products or services. Conglomerate diversification occurs when the firm
diversifies into an area(s) totally unrelated to the organization current business.
Conglomerate diversification is growth strategy that involves adding new
products or services that are significantly different from the organization’s
present products or services. Conglomerate diversification occurs when the firm
diversifies into an area(s) totally unrelated to the organization current business.

Typically, corporate strategists screen candidate companies using such criteria as:

 Whether the business can meet corporate targets for profitability and return
on investment.
 Whether the new business will require substantial infusions of capital to
replace fixed assets, fund expansion, and provide working capital.
 Whether the business is in industry with significant growth potential.
 Whether the business is big enough to contribute significantly to the parent
firm’s bottom line.
 The potential for union difficulties or adverse government regulations
concerning product safety or the environment.
 Industry vulnerability to recession, inflation, high interest rates, or shifts in
government policy.
Three types of companies make particularly attractive acquisition targets:

 Companies whose assets are “undervalued” – opportunities may exist to

acquire such companies’ for less than full market value and make
substantial capital gains by reselling their assets and businesses for more
than their acquired costs.
 Companies that are financially distressed.
 Companies that have bright growth prospects but are short on investment
capital.
Unrelated diversification has appeal from several financial angles:

 Business risk is scattered over a variety of industries, making the company

less dependent on any one business.
 Capital resources can be invested in whatever industries offer the best
profit prospects; cash from businesses with lower profit prospects can be
diverted to acquiring and expanding businesses with higher growth and
profit potentials. Corporate financial resources are thus employed to
maximum advantage.
 Company profitability is somewhat more stable because hard times in one
industry may be partially offset by good time in another.
 To the extent that corporate managers are astute at spotting bargain-priced
companies with big upside profit potential, shareholder wealth can be
enhanced.
However, there are two biggest drawbacks to unrelated diversification: the
difficulties of managing broad diversification and the absence of strategic
opportunities to turn diversification into competitive advantage.

Despite these drawbacks, unrelated diversification can be a desirable corporate

strategy.

47) What is Mergers and Acquisitions with example?

Answer: Mergers and acquisitions, or M&A for short, involves the process of
combining two companies into one. The goal of combining two or more
businesses is to try and achieve synergy – where the whole (new company) is
greater than the sum of its parts (the former two separate entities). Mergers occur
when two companies join forces. Such transactions typically happen between two
businesses that are about the same size and which recognize advantages the other
offers in terms of increasing sales, efficiencies, and capabilities. The terms of the
merger are often fairly friendly and mutually agreed to and the two companies
become equal partners in the new venture. Acquisitions occur when one company
buys another company and folds it into its operations. Sometimes the purchase is
friendly and sometimes it is hostile, depending on whether the company being
acquired believes it is better off as an operating unit of a larger venture. The end
result of both processes is the same, but the relationship between the two
companies differs based on whether a merger or acquisition occurred.

Benefits of Combining Forces

Some of the benefits of M&A deals have to do with efficiencies and others have
to do with capabilities, such as:

 Improved economies of scale. By being able to purchase raw materials in

greater quantities, for example, costs can be reduced.
 Increased market share. Assuming the two companies are in the same
industry, bringing their resources together may result in larger market
share.
 Increased distribution capabilities. By expanding geographically,
companies may be able to add to their distribution network or expand its
geographic service area.
 Reduced labor costs. Eliminating staffing redundancies can help reduce
costs.
 Improved labor talent. Expanding the labor pool from which the new,
larger company can draw can aid in growth and development.
 Enhanced financial resources. The financial wherewithal of two companies
is generally greater than one alone, making new investments possible.
Potential Drawbacks

Although mergers and acquisitions are expensive undertakings, there are

potential rewards. And there are disadvantages, or reasons not to purchase an
acquisition, including:

 Large expenses associated with buying a company, especially if it does not

want to be acquired. (If an investor has a controlling interest in another
company, however, it may not have a choice regarding whether it is
acquired.)
  Higher legal costs, which can be exorbitant if a company does not want to
be acquired.
 The opportunity cost of having to forego other deals in order to focus on
bringing two companies together.
 The possibility of a negative reaction to a merger or acquisition, which
drives the company’s stock price lower.

M&A is a growth strategy corporations often use to quickly increase its size,
service area, talent pool, customer base, and resources in one fell swoop. The
process is costly, however, so the businesses need to be sure the advantage to be
gained is substantial.

48) Explain the concept of BCG Matrix GE Business screen.

Answer: The BCG Matrix (Growth-Share Matrix) was created in the late 1960s
by the founder of the Boston Consulting Group, Bruce Henderson, as a tool to
help his clients with efficient allocation of resources among different business
units. It has since been used as a portfolio planning and analysis tool for
marketing, brand management and strategy development. In order to ensure
successful long-term operation, every business organization should have a
portfolio of products/services rather than just one product or service. This
portfolio should contain both high-growth and low-growth products/services.
High-growth products have the potential to generate lots of cash but also require
substantial amounts of investment. Low-growth products with high market share,
on the other hand, generate lots of cash while needing minimal investment.

How it Works?

The BCG Matrix helps a company with multiple business units/products by

determining the strengths of each business unit/product and the course of action
for each business unit/product. An understanding of these factors will give the
company the highest probability of winning against its competitors, since the
intelligence generated can be used to develop portfolio management strategiesby
following criteria:

1. Relative market share (strength of a business unit’s position in that market)

2. Market growth rate (attractiveness of the market in which a business unit
operates) Relative market share (RMS) is the percentage of the total market that
is being controlled by the company being analyzed.

This classification places business units/products in the following four categories:

1. Stars – BUs/products characterized by high-growth and high- market share.

They often require heavy external investment to sustain their rapid growth as they
may not be producing any positive cash flow. Eventually, their growth will slow,
and they will turn into cash cows.

2. Cash Cows – BUs/products characterized by low-growth, high-market share.

These are well established and successful BUs that do not require substantial
investment to keep their market share. They produce a lot of cash to be used for
other business units (Stars and Question Marks) of the company.

3. Question Marks – BUs/products characterized by low-market share in high-

growth markets. They require a lot of financial resources to increase their share
since they cannot generate enough cash themselves. The crucial decision is to
decide which Question Marks to phase out and which ones to grow into Stars.

4. Dogs – BUs/products with low-growth, low-market share. In addition, they

often have poor profitability. The business strategy for a Dog is most often to
divest. However, occasionally management might make a decision to hold a Dog
for possible strategic repositioning as a Question Mark or Cash Cow. The BCG
model follows the following major steps:

1. Identify major organizational business units (BUs) and identify RMS and MGR
for each BU

2. Plot the BUs on the BCG Matrix

3. Classify the BUs as Question Marks, Stars, Cash Cows and Dogs

4. Develop strategies for each BU based on their position and movement trends
within the matrix.
Strengths of the BCG Model:

The BCG Matrix allows for a visual presentation of the competitive position of
all units in a business portfolio.

The BCG model allows companies to develop a customized strategy for each
product or business unit instead of having a one-size-fits-all approach.

Simple and easy to understand.

It works well for companies with multiple divisions and products

Allows for quick and simple screening of business opportunities in order to

determine investment priorities in the portfolio of products/business units.

It is used to identify how corporate cash resources can be best allocated to

maximize a company’s future growth and profitability.

Useful for the development of investment, marketing and operating

decisions:

a. Investment in the business unit in order to build its market share

b. Sufficient investment to maintain the business unit’s market share at the current
level

c. Determine which business unit/product will function as a cash cow to provide

necessary cash flow for the other business units/products

d. Divest a business unit

Weaknesses of the BCG Model:

The BCG model assumes that high market share and market growth are the only
success factors. Based on numerous real life examples, we can conclude that high
market share does not always lead to profitability. Businesses with low market
share can be highly profitable as well. Relative market strength is also determined
by the following factors which the BCG does not take into account:

a. Technological competence

b. Ability to maintain low manufacturing costs

c. Financial strength of competition

d. Distribution capabilities

e. Human resources.

 The BCG model focuses on major competitors when analyzing the relative
market share of a company. However, it neglects some small competitors
with fast growing market shares
 It is a rather short-term model that doesn’t fully show how characteristics
of business units change over the long term.
 The BCG model is more focused on business units than individual products
 Assumes that high rates of profit are directly related to high market share
 The BCG model looks at a business unit in isolation without taking into
consideration the possible cooperation among various business units within
the organization
 BCG is a primarily qualitative model
 The Y axis represents the annual market growth which fails to see the full
picture that goes beyond a one year span
 It does not take into consideration other important factors such as: market
barriers/restrictions, market density, profitability, politics
 With this or any other such analytical tool, ranking business units has a
subjective element involving guesswork about the future, particularly with
respect to growth rates.
GE/McKinsey Matrix

The GE/McKinsey Matrix was developed jointly by McKinsey and General

Electric in the early 1970s as a derivation of the BCG Matrix. GE, by that time,
had approximately 150 different business units and was disappointed with the
profits derived from its investments. This raised internal concerns about the
approach the organization had to investment decision making. While exploring
new models to implement, GE started to be interested in visual strategic
frameworks like the Growth-Share Matrix created by the Boston Consulting
Group (BCG) a few years before. However, the BCG Matrix showed to have
some limitations. It was considered not flexible enough to include all the broader
issues that a company was facing while operating in a fast changing global
environment. The GE/McKinsey Matrix solves most of the issues of the BCG
model and proposes a more sophisticated and comprehensive approach to
investment decision making.
How it Works

The GE/McKinsey Matrix is a nine-cell (3 by 3) matrix and it is primary used to

perform business portfolio analysis on the strategic business units (SBU) of a
corporation. A business portfolio is the collection of all the business units within
a corporation and a large corporation has normally many SBUs. Each SBU is a
distinctive and unique unit that falls under the same strategic hat. A well balanced
portfolio is one of the top priorities of a large organization. The strategic business
units are the basic blocks that compose a business portfolio. A unit can be a
divisions or even a whole company owned by the parent organization.

The nine-box matrix provides decision makers with a systematic and effective
framework for a decentralized corporation to make better supported investment
decisions and for developing strategies for future product development or new
market segment entries. Instead of looking solely at each unit’s future prospects,
a corporation can adopt a multi-dimensional approach based on two components
that will indicate how well the unit will perform in the future. The two
components used to evaluate businesses, which also serve as the axes of the
matrix, are the ‘attractiveness’ of the relevant industry and the unit’s ‘competitive
strength’ within the same industry. Each axis is then divided into Low, Medium
and High.

50) Explain the steps involved in strategic planning process.

Answer: In the simplest terms, the strategic planning process is the method that
organizations use to develop plans to achieve overall, long-term goals. This
process differs from the project planning process, which is used to scope and
assign tasks for individual projects, or strategy mapping, which helps you
determine your mission, vision, and goals. The strategic planning process is
broader—it helps you create a roadmap for which strategic objectives you should
put effort into achieving and which initiatives will be less helpful to the business.
The strategic planning process steps are outlined below.
Strategic planning process steps

1. Determine your strategic position

This preparation phase sets the stage for all work going forward. You need to
know where you are to determine where you need to go and how you will get
there.

Get the right stakeholders involved from the start, considering both internal and
external sources. Identify key strategic issues by talking with executives at your
company, pulling in customer insights, and collecting industry and market data
to get a clear picture of your position in the market and in the minds of your
customers.

It can also be helpful to review—or create if you don’t have them already—your
company’s mission and vision statements to give yourself and your team a clear
image of what success looks like for your business. In addition, you should review
your company’s core values to remind yourself about how your company will go
about achieving these objectives.

To get started, use industry and market data, including customer insights and
current/future demands, to identify the issues that need to be addressed.
Document your organization’s internal strengths and weaknesses, along with
external opportunities (ways your organization can grow in order to fill needs that
the market does not currently fill) and threats (your competition).

As a framework for your initial analysis, use a SWOT diagram. With input from
executives, customers, and external market data, you can quickly categorize your
findings as Strengths, Weaknesses, Opportunities, and Threats (SWOT) to clarify
your current position.

2. Prioritize your objectives

Once you have identified your current position in the market, it is time to
determine objectives that will help you achieve your goals. Your objectives
should be in line with your company mission and vision.

Prioritize your objectives by asking important questions such as:

 Which of these initiatives will have the greatest impact when it comes to
achieving our company mission/vision and improving our position in the
market?
  What types of impact are most important (e.g. customer acquisition vs.
revenue)?
 How will the competition react?
 Which initiatives are most urgent?
 What will we need to do to accomplish our goals?
 How will we measure our progress and determine whether we achieved our
goals?

Objectives should be distinct and measurable to help you reach your long-term
strategic goals and initiatives outlined in step one. Potential objectives can be
updating website content, improving email open rates, and new leads in the
pipeline.

3. Develop a plan
Now it’s time to create a strategic plan to successfully reach your goals. This step
requires determining the tactics necessary to attain your objectives and
designating a timeline and clear communication of responsibilities.

Strategy mapping is an effective tool to visualize your entire plan. Working from
the top-down, strategy maps make it simple to view business processes and
identify gaps for improvement.

Truly strategic choices usually involve a trade-off in opportunity cost. For

example, your company may decide to not put as much funding behind customer
support, so that it can put more funding into creating an intuitive user experience.

Be prepared to use your values, mission statement, and established priorities to

say “no” to initiatives that won’t enhance your long-term strategic position.

4. And manage the plan

Once you have the plan, you’re ready to implement it. First, communicate the
plan to the organization by sharing relevant documentation. Then, the actual work
begins.

Turn your broader strategy into a concrete plan by mapping your processes. Use
KPI dashboards to clearly communicate team responsibilities. This granular
approach illustrates the completion process and ownership for each step of the
way.

Set up regular reviews with individual contributors and their superiors and
determine check-in points to make sure you’re on track.

5. Review and revise the plan

The final stage of the plan—to review and revise—gives you an opportunity to
reevaluate your priorities and course-correct based on past successes or failures.

On a quarterly basis, determine which KPIs your team has met and how you can
continue to meet them, adapting your plan as necessary. On an annual basis, it’s
important to reevaluate your priorities and strategic position to ensure that you
stay on track for success in the long run.

Track your progress using balanced scorecards to provide a comprehensive

understanding of your business’s performance and execute strategic goals.

CASE STUDY SOLUTIONS

Defining what a premium brand is can be difficult because it depends on whom

you ask. Each individual has their own set of values and priorities. Therefore,
what matters to one person may not matter to another.

A premium brand is an individual, company, product, or service generally

perceived to have an elevated status, unique quality, or exceptional value in the
eyes of its target market.
Premium Brand are the ones that give you the best features at the best value. They
operate with a close to one ratio of functionality and price. So since they are providing
the best features and quality, consumers pay them high price for that. They feel it’s
worth it.

A premium brand is a brand that is positioned to have high quality and price. The
company launched it to give an impression of exclusivity, notably to differentiate it
from other mass-market brands.

Aims and objectives

Aim = what you hope to achieve.

Objective = the action(s) you will take in order to
achieve the aim.

Aims are statements of intent. They are usually

written in broad terms. They set out what you hope
to achieve at the end of the project.

Objectives, on the other hand, should be specific

statements that define measurable outcomes, e.g.
what steps will be taken to achieve the desired
outcome.
When writing your objectives try to use strong
positive statements

The word aim is often misconstrued with objective, as they talk about what an
individual or entity may want to achieve. Both are the desired result of the work
performed by an individual, however, they entail different concepts. The aim is
the general statement of the expected outcome.

In contrast, objectives are the steps taken to accomplish the long-term goals of
the company. So, when these terms are used in the right context, then only their
correct implication is possible. And, to do so, take a look at the given article to
know the difference between aim and objective

1. The term aim is described as the ultimate goal, which an individual or the
entity strive to achieve. The objective is something a person/entity seeks to
achieve, by continuously chasing it.
 2. The aim of the entity reflects its long-term outcomes while its objectives
indicate the short term targets of the entity.
3. Aim refers to the general direction or intent of an individual/company. On
the other hand, the objective is the specific goal of an individual or
company.
4. .The aim is related to the company’s mission and purpose whereas
objectives are concerned with the achievements of the company.
5. Aim answers the question, what is to be achieved? Unlike objective which
answers, How it is to be achieved?
6. Aims are not time bound, i.e. there is no time frame within which the aim
of the entity must be achieved as it is hard to say accurately, how much
time it will take to achieve. On the other hand, objectives are always
accompanied with a time frame, within which it must be achieved.
7. Last but not the least difference between these two is on measurability, i.e.
objectives are measurable in nature while aims lack measurability.

3. Outline the purpose of kellogs work with the ASA.

Kellogs set some aim and to fulfill the aim they created some objectives. As for
them they tried to encourage people to take more physical activity. In their
packaging they started showing the recommended daily level of nutrients served
through kellogs. And physical activity requires more nutrients, and for this they
started encouraging people to take more physical activity. So they started working
with amateur swimming association or ASA as far as back 1997. Now kellogs
choose ASA because of various reasons like, more than 12 million people swim
in the UK regularly. Also swimming is a life skill and everyone can do this with
their family. And ASA tries to ensure that everyone has the opportunity to enjoy
swimming as a part of healthy lifestyle. ASA’s objectives matches the objectives
of kellogs and for this purpose kellogs started working with ASA. This
relationship helps kellogs to contribute in a recognizable way how a individual
can achieve a an active healthy lifestyle with the help of kellogs. This reinforced
kellogs brand position.

4. kellogs used both internal and external communication. And both this helped
them to be enforced into the brand position. In external communication to
communicate with the customers and to attract the children they used cartoon
characters by the name of jack and amiee. These characters promoted the
importance of exercise to both parents and children. Also they sponsored the
swimming competition and worked with ASA to promote physical exercise.
And to communicate with the employees kellogs introduced house magazines to
reach the employees and to communicate well with them. And both this helped
to gain more loyal customer and great employees. And this helped their branding
and brand position.

1. The main elements of the control system created by rae kroc is universal rules
and regulations for all the outlet to provide the best and same type of quality
all over the world. All the rules and regulations are all same for franchise
owners managers and employees to follow in running each restaurant. To
control the quality system kroc created a aim and objectives to reach the goal.
Kroc planned a training system to train the franchise owner and managers and
after the completion they trained their subordinates. It created a centralized
control system where everyone is trained in the same way and provides service
and food and do all the work in same way in all the outlets. And by this kroc
maintained the quality and keep control off all the outlets.

2. Kroc’s planning and process helps macdonalds global expansion and with
krocs way they are maintaining and controlling the total global outlets. Every
where they follow the same rules and regulations like, cooking burgers,
making fries, greeting customers, or cleaning tables all were written by krocs
as rules. Next all the francise owners have to take training from hamburger
university, and they were expected to train the work force and make sure that
employees understand the operating procedures as per the guidelines set by
kroc. The main goal is to give the customer whatever they want, the best
quality in both product and service in all the outlets as same. Also he knew
manager of any outlet plays a vital role so a proper reward and incentive
scheme was build to motivate the manager it helped them in expanding. Also
day to day sales and other reports and send to headquarters and the scrutinize
the report, and by the help of the report they easily can monitor and control
the outlet. all the outlets trained their employees accornding to the macdonalds
culture, they learn about the concepts of efficiency,quality, and customer
service. Also acknowledge customers satisfaction needs, by providing happy
meals, celebrating birthdays etc. etc. all this helped macdonald to control and
and facilitate macdonalds global expansion.