NMIMS

Strategic Management
Internal Assignment Applicable for June 2022 Examination

1. Strategic Management crucially define and determine the long term performance
of abusiness entity. This is with reference to, Nokia, who lost its pace in the
smartphonerace. As quoted by source: “Nokia has been long the market leader in
the mobile phone marketand with itsenormous reach and huge customer base,
had successfully created significantentrybarriers for any new player as such. Its
Symbian OS being the backbone of thewholesuccess story contributed to a great
deal in its higher perceived ease of use.Customersused to enjoy the features,
thanks to highly simplified GUI. It ruled the middleand low-end market for
long.But, Nokia did a blunder and lost its market share.”
(Source:https://www.marketing91.com/nokia-lost-market-share/)

In the context of above case, define the term strategic management, discuss,
whatarethe three major challenges to strategic management and specifically point
outin relationto Nokia among the three challenges, out of these challenges which
challenge hit hardto the Business Giant. (10 Marks)

Answer:

Strategic management is the process of setting goals, procedures, and objectives in

order to make a company or organization more competitive. Typically, strategic
management looks at effectively deploying staff and resources to achieve these
goals. Often, strategic management includes strategy evaluation, internal
organization analysis, and strategy execution throughout the company.

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 In business, strategic management is important because it allows a company to
analyze areas for operational improvement. In many cases, they can follow either an
analytical process, which identifies potential threats and opportunities, or simply
follow general guidelines.

THREE CHALLENGES TO STRATEGIC MANAGEMENT

GLOBALIZATION:

Globalization simplifies business management in the world. This is due to the

advancement in technology, transport, communication, education, and regulations
of trade that makes trade fair to all parties. This attracts more people to engage in
international business and international trade. Managers within the global face a lot
of challenges due to high competition in the industry, good decisions must be made
in order to satisfy and maintain their customers and attract more customers for their
products. Companies enjoy economies of scale in the business due to reduction of
cost in the management.
Outsourcing by companies brings jobs and technology to developing countries,
which help them to grow their economies. Trade initiatives increase cross-border
trading by removing supply-side and trade-related constraints.
Globalization has advanced social justice on an international scale as well,
and advocates report that it has focused attention on human rights worldwide that
might have otherwise been ignored on a large scale.

Nokia is a leading manufacturer of mobile devices, with a market share of 30% of all
mobile devices globally. Interestingly the company was founded in 1865 and started
its operations by manufacturing paper. The company later added electricity
generation to its business activities. In the beginning of the 20th century the
company started making rubber shoes along with other rubber products. Shortly
Nokia expanded to cable and electronics business. By the late 1960’s the company
was responsible for many different industries, hence producing many completely
different products. During the 1990s the company focused solely on the fastest

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 growing segments in telecommunications and divested itself of all of its non-
telecommunication businesses.
The profit fell by a staggering 40% in the second quarter of 2010. The company faces
strong competition in the smartphone segment, as Apple and Google recently
entered the smartphone sector with the iPhone and Google android phones
accordingly.

INNOVATION:

Strategic innovation is an organization's process of reinventing or redesigning its

corporate strategy to drive business growth, generate value for the company and its
customers, and create competitive advantage. This type of innovation is essential for
organizations to adapt to the speed of technology change.
Companies employing strategic innovation do not necessarily need to make changes
to the goods and services they sell to their customers, nor to the technologies that
support these products, to be successful. Strategic innovation often refers to
innovation projects that occur at the executive level.

Nokia’s lack of innovation was probably the most important reason on why it had a
tremendous market failure, the fact that Nokiajust did not grasp the new concept of
having a software with endless applications and new experiences and that hardware
did notactually matter as much as it did before brought Nokia to failure. Nokia was
always known to have invested morein its hardware, to the company producing
durablehardware was their main goal, they didn’t understand Apple’s concept of
50% onhardware and 50% on software because simply it was a hardware-oriented
company.All along, the hardware engineers alwaysdominated Nokia’s development
processes while software engineers marginalized. Apple and Android simply crushed
Nokia,whileNokia underestimated the power of a software. Surprisingly, Nokia
actually came up with its first smartphone earlier in 1996 it evenbuilt a prototype
that had a touch-screen and was internet-enabled it even spent tons of money on
research & development, however, Nokia was simply unable to convert all this
research & development work into products that people can actually buy.

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 For instance, Nokia depended on “Symbian” (its device operator)for far too long until
it finally decided to enter a partnership with Microsoft in 2011. However even this
hugeshift in Nokia hadn’treally succeeded as expected due to the fact that it was
simply too late whereas Apple and Samsung were already dominating theirmarket
and relatively their operating systems, iOS and Android, just did not leave any much
role for Windows

SUSTAINABILITY:

Sustainability refers to the ability of something to maintain or "sustain" itself over

time.

The idea is often broken down into three pillars: economic, environmental, and
social—also known informally as profits, planet, and people.
Sustainability in business is not reducible to environmentalism. Harvard Business
School lists two categories of sustainable business practices: the effect a business
has on the environment, and the effect a business has on society, with the goal of
sustainable practice being to have a positive impact on at least one of those
areas.This view of responsibility encourages businesses to balance long-term
benefits with immediate returns, with the goal of pursuing inclusive and
environmentally sound objectives. This covers a broad array of possible practices.
Cutting emissions, lowering energy usage, sourcing products from fair-trade
organizations, and ensuring their physical waste is disposed of properly and with as
small a carbon footprint as possible would qualify as moves toward sustainability.
By designing durable phones made from high-quality materials, Nokia phones are
not devices that need replacing frequently. In fact, their phones keep getting better.
They deliver software upgrades for 2 years and security patches for 3 years.They
believe that a phone that lasts is a simple, yet highly-effective way to reduce the
ecological footprint.

Environmental features

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 Materials and substances:
 Free of brominated and chlorinated compounds and antimony trioxide, as
defined in Nokia Technologies
 Substance List 2016
 Free of PVC
 Free of nickel on the product surface

Strategic Management gives a broader perspective to the employees of an

organization and they can better understand how their job fits into the entire
organizational plan and how it is co-related to other organizational members. It is
nothing but the art of managing employees in a manner which maximizes the ability
of achieving business objectives.

2. Reliance Industries Limited is a Fortune 500 company and the largest private
sectorcorporation in India.RIL, have evolved from being a textiles and polyester
company toan integrated playeracross energy, materials, retail, entertainment and
digital services. In each of theseareas, they are committed to innovation-led,
exponential growth. It’sclearly evidentthat RIL has adopted parenting strategy.
Discuss the concept of corporate parenting.Discuss the analytical steps which are
crucial in developing corporate parent strategy.Conclude how Corporate parenting
or parenting strategy is more beneficialwhencompared against portfolio based
corporate strategy (10 Marks)

Answer:

The complexity of transitional business conditions creates a need for creating value
through aggregation of different businesses in complex corporate enterprise, which
gives it the character of a multi-business firm. Businesses could be defined as being
whatever the enterprise chooses to operate as organizationally separate profit-
responsible units. Such business entities are often referred to as Strategic Business

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 Units (SBUs) and they are organized as largely separable businesses with control over
the main strategic levers that affect their performance.

Besides this organizational definition, the businesses could be defined in economic

sense relating to Strategic Business Opportunities (SBOs), which are clusters of
product-market transactions able to sustain a successful focused business, with
financial independence. Processes of merger, acquisition, divestment, and the
other processes of transformation continually create new challenges to corporate
management towards providing better performance of aggregated businesses than
they would achieve if they were independent, stand-alone entities. It is corporate
strategy that should guide key decisions in the businesses and coordinate
their business strategies. But, for most corporate enterprises, the corporate strategy
is simply the sum of business strategies, with some broad objectives and statement
of business mission. Therefore, senior managers who are responsible for defining the
overall corporate strategy, often recognize that something in their strategies is
wrong. They may conceptually change strategy through offering some financial
guidelines, and determine which businesses are “core”.

This affirms creating advantage through parenting (Parenting Advantage), which, as

a principle, should guide decisions about the nature of the businesses in the portfolio
and about its structure. Namely, multi-business corporate enterprises consist of
businesses and a corporate hierarchy of line managers, functions, and staffs outside
these businesses, which refers to as the corporate parent that is responsible for
making corporate decisions. Parent could be defined as all those levels of
management that are not part of customer-facing, profit-responsible business units,
or, simply, whatever is left outside the business units but within the enterprise. The
role of parent is multiple and, among other things, includes making decisions about
new businesses to support or acquisitions to make, determining the structure of
enterprise, defining budgeting and capital expenditure processes, setting the
corporate values and attitudes. The businesses better perform in aggregate under
the parent’s ownership than they would if they were independent entities. Also, the
parent must add more value than cost to the businesses in the portfolio.

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 Financial control. Under this style the role of the corporate parent is to monitor
and evaluate the financial performance of investment portfolio of the respective
business units. The corporate managers act as agents on behalf of shareholders and
financial markets to identify and acquireviable assets and businesses.  The business
unit managers are given the autonomy to carry out business activities and make
decisions at their level. However, the corporate parent sets performance
standards for control purposes.

Strategic planning. Under this style the role of the corporate parent is to enhance
synergies across the business units. This may be achieved through: envisioning to
build a common purpose, facilitating cooperation across businesses and providing
central services and resources.

Strategic control. Under this style the corporate parent leverages its resources
and competences to build value for its businesses. For example,a corporatecould
have a valuable brand or a specialist skill. The corporate parent uses its parenting
capabilities to seize opportunities for growth.

Corporate strategy should clarify how and where the enterprise can
achieve parenting advantage. The link between parenting advantage and corporate
strategy therefore parallels the link between competitive advantage and business
strategy. Competitive advantage is in the heart of successful business strategies. It
guides strategic analysis and provides a basis for assessing alternative action plans.
The concept of parenting advantage plays a similar role at the corporate level. It
should be the fundamental test for judging corporate strategies and the guiding
principle in corporate-level decisions, guiding the decisions towards better market
opportunities and higher corporate performance.

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 Horizontal strategy is mostly corporate strategy which makes the business units in an
organization work together so as to improve their competitive position. It is also
used by businesses that want to sell their products in various markets.

Multi-point competition refers to when multi business corporations compete in

different markets. The responsible corporate parent helps its business unit to
improve its competitive position in each specific market.A horizontal strategy mostly
coordinates the strategies and the goals of related business units and hence exploits
any cooperation that might exist among these ventures. It is said that when two
businesses cooperate, their strength is bigger than if when the parts were separate.
Porter Michael argues that when two competitors like BIC and Gillette compete in
several businesses i.e. disposable razors and ball point pens, it makes the strategy to
be horizontal and this strategy becomes more important than ever before. He calls
this multipoint competition. Horizontal strategy is very important in the success of
an organization since it enables the competing businesses to have good relations and
also give the business a good competitive advantage.

Effective communication, data collection and organizational culture also play an

important part in the strategic management process -- especially at large, complex
companies. Lack of communication and a negative corporate culture can result in a
misalignment of the organization's strategic management plan and the activities
undertaken by its various business units and departments. Thus, strategy
management includes analyzing cross-functional business decisions prior to
implementing them to ensure they are aligned with strategic plans.

3. General Electric (GE) is well known for its extraordinary competency in

managementdevelopment.

a. Discuss how the terms capabilities, competency and distinctive competency

differsfrom each other.Also, with reference to the VRIO Framework of analysis,

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 highlight thefour questionswhich any strategist might have examined in relation to
GE for evaluatingitsextraordinary competency in management development. (5
Marks)

Answer:

“Capability” is the term that describes the quality of being capable. It is the condition
that permits an individual to acquire the power and ability to learn and do
something within their capacity. “Capability” is also known as implied abilities, or
abilities that are not yet developed.
With time and practice, capabilities can develop into competence. Capabilities serve
as the starting point of being able to do something and gradually becoming more
adept in performing the task.

On the other hand, “competence” is the state or quality of an individual’s work. A

person and their work can be evaluated as competent if the performance is
considered “satisfactory” but not “outstanding.” Competence can also be applied to
the improvement or development of one’s abilities and skills for the benefit of the
person and the group or institution they represent. The improved skills and abilities
are applied to tasks or jobs.

As the term implies, ‘distinctive’ competencies highlight the characteristic of

‘uniqueness.’ The notion of distinctive competencies is relatively easy to identify.
This means that a core competency that facilitates to attain competitive advantages
for a firm is considered as possessing distinctive competencies. Therefore, a core
competency can only be considered as a distinctive competency only if a
competitive advantage is achieved. 

VRIO QUESTIONS:

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 The VRIO framework is a strategic planning tool designed to help organizations
uncover and protect the resources and capabilities that give them a long-term
competitive advantage.
 Value: Do you offer a resource that adds value for customers? Are you able
to exploit an opportunity or neutralize competition with an internal
capability?
 Rarity: Do you control scarce resources or capabilities? Do you own
something that’s hard to find yet in demand?
 Imitability: Is it expensive to duplicate your organization’s resource or
capability? Is it difficult to find an equivalent substitute to compete with your
offerings?
 Organization: Does your company have organized management systems,
processes, structures, and culture to capitalize on resources and capabilities?

Whether you have one or many sustainable competitive advantages, a VRIO analysis
will help you identify and leverage them as part of your strategic plan. 

b. Describing VRIO Framework with reference to GE: (5 Marks)

- Valuable
- Rareness
- Imitability
- Organization

Answer:

In order to understand the sources of competitive advantage firms are using many
tools to analyse their external (Porter’s 5 Forces, PEST analysis) and internal (Value
Chain analysis, BCG Matrix) environments. One of such tools that analyze firm’s
internal resources is VRIO analysis. The tool was originally developed by Barney, J. B.
(1991) in his work ‘Firm Resources and Sustained Competitive Advantage’, where the
author identified four attributes that firm’s resources must possess in order to

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 become a source of sustained competitive advantage. According to him, the
resources must be valuable, rare, imperfectly imitable and non-substitutable.

VALUE:The General Electric Company VRIO Analysis shows that the financial
resources of General Electric Company are highly valuable as these help in investing
into external opportunities that arise. These also help General Electric Company in
combating external threats.

RARE:The financial resources of General Electric Company are found to be rare

according to the VRIO Analysis of General Electric Company. Strong financial
resources are only possessed by a few companies in the industry.
The employees of General Electric Company are a rare resource as identified by the
VRIO Analysis of General Electric Company. These employees are highly trained and
skilled, which is not the case with employees in other firms. The better
compensation and work environment ensure that these employees do not leave for
other firms.

IMITABLE:The financial resources of General Electric Company are costly to imitate

as identified by the General Electric Company VRIO Analysis. These resources have
been acquired by the company through prolonged profits over the years. New
entrants and competitors would require similar profits for a long period of time to
accumulate these amounts of financial resources.

ORGANISATION: The financial resources of General Electric Company are organised

to capture value as identified by the VRIO Analysis of General Electric Company.
These resources are used strategically to invest in the right places; making use of
opportunities and combatting threats. Therefore, these resources prove to be a
source of sustained competitive advantage for General Electric Company.

the VRIO framework is a very effective tool when analysing the competitive
advantage your business has compared to the rest of the ecosystem. It can help

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 prioritize the allocation of business resources to highlight your unique value.It can
highlight internal resources and advantages that would otherwise be hard to
recognize and helpsin highlighting the most important factors to create and maintain
a competitive advantage over similar organizations.
 

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