February 2011

Master of Business Administration-MBA Semester 4 MB0036 Strategic Management and Business Policy 3 Credits Assignment Set- 1 (60 Marks)
Note: Each question carries 10 Marks. Answer all the questions. Q1. Explain how strategies are formulated and implemented. Strategy Formulation and Implementation It is the crux of the strategic management process. Strategy refers to the course of action desired to achieve the objectives of the enterprise. Formulation, together with its implementation, constitutes an integral part of the management activity. Managers use strategies for different purposes such as to overcome competition, to increase sales, to increase production, to motivate the employees to provide their best, and so on. Implementation of a strategy is a crucial task as the formulation of it. There may be a lot of resistance during the implementation process. It is necessary for the manager to be very tactful to involve the members of his group in the formulation of strategy to facilitate the implementation process. Stages in Strategy Formulation and Implementation a) Identification of mission and objectives b) Environment scanning c) Generic strategy alternatives d) Strategy variations e) Strategic choice f) Allocation of resources and formulation of organisational structure g) Formulation of plans, policies, programmes and administration h) Evaluation and control Generic Strategy Alternatives They refer to the strategy alternatives in broader terms. After the nature of the business of the firm is defined, the next task is to focus on the type of strategic alternative, in general, the firm should pursue. The strategist seeks to identify the right alternative through questions such as: 1. Should we get out of this business entirely? 2. Should we try to expand? There are four strategy alternatives available to a firm or business: a) To expand b) To wind up or retrench c) To stabilize, and d) To continue its operations pertaining to its products, markets or functions.

a) Expansion strategy can be adopted in the case of highly competitive and volatile industries, particularly, if they are in the introduction stage of product / service life cycle. b) Stability strategy is a better choice when the firm is doing well, the environment is relatively less volatile, and the product / service has reached the stability or maturity stage of the life cycle. c) Retrenchment strategy is the obvious choice when the firm is not doing well in terms of sales and revenue and finds greater returns elsewhere, or the product / service is in the finishing stage of the product life cycle. d) Combination strategy is not a new strategy as it combines the other strategies. However, it is to be noted that it is better to evolve individual strategies and combine them rather than trying to evolve a complex combination strategy which could be cumbersome with loss of precious business time. It is best-suited to multiple SBU firms in times of economic transition and also when changes occur in the product / service life cycle. If a firm realises that some of its main product lines have outlived their lives, it may not be profitable to continue investment in the same product or SBU. The firm may choose to withdraw its resources from this area (or SBU) (Retrenchment strategy) and follow an Expansion strategy in a new product area. Combination strategy is best suited when the firm finds that its product-wise performance is uneven, or all or most of its products differ in their future potential. Generic Strategy Alternatives
Expand Business definition Products Add new products Pace Retrench Busine ss definiti on Drop old products Pace Stabilise Business definition maintain Pace Combinati on Definition or Pace Drop old while adding new products Drop old customers while finding new customers Increase capacity and improve efficiency

Find new ones

De-crease product development Reduce market share

Markets

Find new territories

Penetrate markets

Drop distrib ution channels Become cap-tive company

maintain

Function s

Forward, vertical integration

Increase capacity

De-crease process R&D

maintain

Make package changes, quality improvements Protect market shares, focus on market niches Improve production efficienc y

Sometimes, a combination of a few or all of these strategies may be necessary. Any change must be contemplated considering what is to be done (Business definition) and the speed (Pace) with which it is to be done. Each of these alternatives has to be evaluated on its merits.

Enterprise Strategists

Mission & objectives General Environment

General Environment

Industry and International Environment

Internal Factors

Generic Strategy Alternatives

Strategy Variations

Strategic Choice

Allocate Resources & Develop Organisational plans

Formulation of Plans, Policies, Programmes & Administration

Evaluation & Control Evaluation & Control

Examples of Strategic Alternatives: If the firm wants to grow substantially in terms of size, expansion is the obvious alternative. But in this process, other objectives may take a backseat, at least in the short run. In case of recession, retrenchment is the most preferred strategy, involving dropping of unviable products, reduction in non-performing assets, withdrawal from the markets, and reduces the scale of activity. In the process, the overhead costs are purposefully reduced to ensure that the expenditure continues to be productive. These efforts will ultimately enhance the profitability. At times, the company may realise more money by liquidating its operations than by continuing. In such a case, to achieve the goal of improving cash value, the strategy is to sell a part of its assets, realise the sale proceeds, and invest the same profitably elsewhere. If an entrepreneur wants to maintain control over a business, stability strategy may be a better strategy.

Q.2 Mr. Nandankumar wants to start a business of his own. He is seeking advice from a consultancy firm on how to go about it. If you were an employee of this consultancy firm, how would you guide him in preparing a business plan that would suit Nandankumars business? The Different Phases of a New Business A new business goes through phases in the business cycle (very similar to the stages of human life). The first phase - is the formation of an idea. A person - or a group of people join forces, centred around one exciting invention, process or service. These crystallizing ideas have a few hallmarks: They are oriented to fill the needs of a market niche (a small group of select consumers or customers), or to provide an innovative solution to a problem which bothers many, or to create a market for a totally new product or service, or to provide a better solution to a problem which is solved in a less efficient manner. At this stage, what the entrepreneurs need most is expertise. They need a marketing expert to tell them if their idea is marketable and viable. They need a Full answer after payment, visit for full answer www.studenthelp.tk

Q.3. a. What is the purpose of business continuity plan? b. Give a short note on mitigation strategies. Ans: a) Purpose of Business Continuity Plan Recent world events have challenged us to prepare to manage previously unthinkable situations that may threaten an organizations future. This new challenge goes beyond the mere emergency response plan or disaster management activities that we previously employed. Organizations now must engage in a comprehensive process best described generically as Business Continuity. It is no longer enough to draft a response plan that anticipates naturally, accidentally, or intentionally caused disaster or emergency scenarios. Todays threats require the creation of an on-going, interactive process that serves to assure the continuation of an organizations core activities before, during, and most importantly, after a major crisis event. In the simplest of terms, it is good business for a company to secure its assets. CEOs and shareholders must be prepared to budget for and secure the necessary resources to make this happen. It is necessary that an appropriate administrative structure be put in place to effectively deal with crisis management. This will ensure that all concerned understand who makes decisions, how the decisions are implemented, and what the roles and responsibilities of participants are. Personnel used for crisis management should be assigned to perform these roles as part of their normal duties and not be expected to perform them on a voluntary basis. Regardless of the organization for profit, not for profit, faithbased, nongovernmental its leadership has a duty to stakeholders to plan for its survival. The vast majority of the national critical infrastructure is owned and operated by private sector organizations, and it is largely for these organizations that this guideline is intended. ASIS, the worlds largest organization of security professionals, recognizes these facts and believes the BC Guideline offers the reader a user-friendly method to enhance infrastructure protection. Key Words Business Continuity Plan, Business Impact Analysis, Crisis Management Team, Critical Functions, Damage Assessment, Disaster, Evaluation and Maintenance, Mitigation Strategies, Mutual Aid Agreement, Prevention, Readiness, Recovery/Resumption, Resource Management, Response, Risk Assessment, Testing and Training. Terminology Alternate Worksite A work location, other than the primary location, to be used when the primary location is not accessible. Business Continuity A comprehensively managed effort to prioritize key business processes, identify significant threats to normal operation, and plan Full answer after payment, visit for full answer www.studenthelp.tk

Q.4. Distinguish between financial investor and strategic investor. Difference between a Financial Investor and a Strategic Investor In the not so distant past, there was little difference between financial and strategic investors. Investors of all colours sought to safeguard their investment by taking over as many management functions as they could. Additionally, investments were small and shareholders few. A firm resembled a household and the number of people involved in ownership and in management was correspondingly limited. People invested in industries they were acquainted with first hand. As markets grew, the scales of industrial production (and of service provision) expanded. A single investor (or a small group of investors) could no longer accommodate the needs even of a single firm. As knowledge increased and specialization ensued it was no longer feasible or possible to micro-manage a firm one invested in. Actually, separate businesses of money making and business management emerged. An investor was expected to excel in obtaining high yields on his capital not in industrial management or in marketing. A manager was expected to manage, not to be capable of personally tackling the various and varying tasks of the business that he managed. Thus, two classes of investors emerged. One type supplied firms with capital. The other type supplied them with know-how, technology, management skills, marketing techniques, intellectual property, clientele and a vision, a sense of direction. In many cases, the strategic investor also provided the necessary funding. But, more and more, a separation was maintained. Venture capital and risk capital funds, for instance, are purely financial investors. So are, to a growing extent, investment banks and other financial institutions. The financial investor represents the past. Its money is the result of past - right and wrong - decisions. Its orientation is short term: an "exit strategy" is sought as soon as feasible. For exit strategy read quick profits. The financial investor is always on the lookout, searching for willing buyers for his stake. The stock exchange is a popular exit strategy. The financial investor has little interest in the company's management. Optimally, his money buys for him not only a good product and a good market, but also a good management. But his interpretation of the rolls and functions of "good management" are very different to that offered by the strategic investor. The financial investor is satisfied with a management team which maximizes value. The price of his shares is the most important indication of success. This is "bottom line" short termism which also characterizes operators in the capital markets. Invested in so many ventures and companies, the financial investor has no interest, nor the resources to get seriously involved in any one of them. Micro-management is left to others - but, in many cases, so is macro-management. The financial investor participates in quarterly or annual general shareholders meetings. This is the extent of its

involvement. The strategic investor, on the other hand, represents the real long term accumulator of value. Paradoxically, it is the strategic investor that has the greater influence on the value of the company's shares. The quality of management, the rate of the introduction of new products, the success or failure of marketing strategies, the level of customer satisfaction, the education of the workforce - all depend on the strategic investor. That there is a strong relationship between the quality and decisions of the strategic investor and the share price is small wonder. The strategic investor represents a discounted future in the same manner that shares do. Indeed, gradually, the balance between financial investors and strategic investors is shifting in favour of the latter. People understand that money is abundant and what is in short supply is good management. Given the ability to create a brand, to generate profits, to issue new products and to acquire new clients - money is abundant. The financial investor is expected to take over the financial management of the firm and to directly appoint the senior management and, especially, the management echelons, which directly deal with the finances of the firm. 1. To regulate, supervise and implement a timely, full and accurate set of accounting books of the firm reflecting all its activities in a manner commensurate with the relevant legislation and regulation in the territories of operations of the firm and with internal guidelines set from time to time by the Board of Directors of the firm. This is usually achieved both during a Due Diligence process and later, as financial management is implemented. 2. To implement continuous financial audit and control systems to monitor the performance of the firm, its flow of funds, the adherence to the budget, the expenditures, the income, the cost of sales and other budgetary items. 3. To timely, regularly and duly prepare and present to the Board of Directors financial statements and reports as required by all pertinent laws and regulations in the territories of the operations of the firm and as deemed necessary and demanded from time to time by the Board of Directors of the Firm. Full answer after payment, visit for full answer www.studenthelp.tk