Strategic Management

June 2022 Exams

Question 1:
Answer 1:
Introduction:
Strategic management is defined as the set of decisions and actions that leads to the enhance the
performance and long-term development of an organization. To achieve the objectives and goals of
the organization, effective and detailed strategies are developed for high-performance results.
Strategic management is the systematic application of a company's resources to achieve its goals and
objectives. Strategic management involves regular analysis of internal processes and procedures, as
well as external elements that may have an impact on how a company operates. Top-level projects and
choices should be guided by the strategic management process. The practice of strategic management
can assist businesses of all sizes and sectors.
Concept and Application:
Strategic planning is a continuous process that evaluates and controls the company's business and
industries. Strategic management earlier known as business policy, also assesses its competitors and
sets goals and strategies to meet all existing and potential competitors, and according to the reports
from various resources assesses each strategy annually or quarterly to determine how well it has been
implemented and whether it needs to be replaced by a new strategy to meet changed circumstances,
new technology, or new competitors.
Different ways, concepts, and techniques have been developed in strategic management for achieving
set parameters. For developing a strategy certain parameters must be under check such as
identification, analysis, formation, execution, and evaluation.

• Identification: This involves the identification of the current situation, goal, objective, and
overall business review of the organization. This helps in understanding about procedures and
policies followed by the organization and whether they are helpful or not for the growth of the
company.

• Analysis: based on the data gathered from the reports of different departments, analysis is
done for coming to conclusion about whether the current strategy needs to be replaced or not.
Generally, SWOT analysis is used here by asking various questions in terms of strengths,
weaknesses, opportunities, and threats.

• Formation: After analyzing the data, the formation of parameters and objectives are done
based on which activities need to be carried on. A set of regulations and guidelines is
prepared that should be clear and easy to understand for all in the team, so that desired output
can be seen once the strategy is implemented.

• Execution: Implementing the planned strategy by conveying the plan to all for collective
results. It is important everyone is aligned with the goals and tasks as per the developed
strategy.

• Evaluation: To review whether the planned strategy is successfully implemented or not,

whether and desired results are visible or not, regular evaluation is done.
Thus, strategic management helps to understand a long-running view of the business which
could be for three to five years. With continuous changes, an organization also needs to
evolve itself concerning the environment. Generally, a business entity evolves through four
Phases of Strategic Management:

Phase 1- Basic Financial Planning: For the budget forecasting for the coming year,
managers begin serious planning. Projects are suggested with little analysis, with the majority
of information coming from within the company. A small amount of environmental
information is shared by the sales force. However, it takes a long time for this process which
seems to be basic operational planning for strategic management. Normal business operations
are frequently halted for weeks as executives struggle to shoehorn ideas inside the planned
budget. Typically, the period is one year.

Phase 2- Forecast-based Planning: In this phase, the major focus is on formulating the
planning for a longer-run period could be for five years. Managers collect internal and
external environmental data and analyze the trend in the market. They try to compete for a
larger share of funds according to the schedule.

Phase3- Externally Oriented (Strategic) Planning: This phase involves the shift of strategy
management from lower level to higher managerial level. External consultants are higher for
external market data collection. Top management analyzes data collected from consultants
and plans the strategies for the future. However, they take less input from lower levels.

Phase 4- Strategic Management: This phase involves moving from planning to making
people aware of the strategies. Involving the teams and sharing details with them so that
desired strategy can be aligned with members of the team.

There are many challenges faced by a business in strategic management, such as technology,
quality, innovation, development, etc. These challenges are discussed in detail below:

1. Technological Changes in Strategic Management: With continuous change and

evolution in technology, strategic management becomes challenging. The rapid
advancements make the planning and finalizing of strategy quite difficult.

2. Innovation and Strategic Management: Technological breakthroughs and inventions,

combined with changes in consumer tastes and preferences, demands, and conveniences,
resulted in the constant production of new products and services. Enterprises with broadly
accepted new products/services have a distinct strategic advantage, whilst other firms in
the same industry have a strategic disadvantage. This increases competition and presents
new strategic management problems. While formulating their plans, strategic managers
are supposed to be aware of these industry advances and breakthroughs.

3. Globalization and Strategic Management: With the global expansion and liberal
government policies, foreign companies’ investment has given rise to ease of business for
other foreign companies. Since globalization has spread all over the world the companies
which are not up to that scale are also experiencing the impact of globalization. Because
this trend is projected to continue, practically all businesses, regardless of their size,
activities, or markets, will need to factor global challenges into their strategic planning.
Before determining how their strategic management process may most successfully
accommodate global environmental aspects, strategic managers must be completely
 informed of crucial foreign variables that may have a significant impact on their strategic
operations.

4. Quality Issues and Strategic Management: Maintaining quality along with an aligned
budget is a hard nut to crack especially when the marginal cost is low. However, quality
now is just not a quality product, it also includes the service at the time of product gets
sold or service post-purchase of the product.

5. Economic Progress and Recession: The strategic management process is affected by

both economic booms and recessions. Economic growth creates chances for increased
demand as well as corporate operations, whereas economic recession creates challenges
in general. Companies should anticipate recessionary patterns and prepare plans
accordingly.

6. Social Issues and Strategic Management: Since the organization is an integral element
of society, most organizations believe that social responsibility is the managerial
commitment to act, preserve, and promote both organizational and societal objectives.
Recognizing this commitment will have an impact on an organization's strategic
management approach.

However, in the case of Nokia from rising to falling, it can be understood that they fail to see the
future and did not plan the strategies as per growing market trends. They were ruling the world with
their mobile phone, moreover, they launched the first smart mobile phone as well. However, they did
not notice their competitors and ignored where the technology is getting evolved. They were too busy
to think they have mastered the innovation and technology, which was untrue. The strategic planning
went wrong to analyze the upcoming market trend and change consumer behavior and their needs.
They realized their mistake when the other players such as Apple, and Samsung were all over the
place in the market. Also launching of android by Google has turned the tables completely for them.
The lack of innovation management and indulging only in internal affairs made them slow. However,
they tried to new series of phones and with a new CEO, they tried to rise again. But the impact was
hard, their market share was highly reduced.

Conclusion:
As above discussed, strategic management is very important for a healthy and sustainable business.
Even if you are number one in the market today, someone else can beat you down and take your
position, if you do not analyze and evolve continuously. Strategic management is not a process that
has to be performed once and let go. It is a continuous effort in a focused direction that brings
innovation, planning, and techniques to the organization.
Question 2.
Answer 2.
Introduction:
Mergers, acquisitions, divestitures, and other transformation activities continually present new
difficulties to corporate management in terms of improving the performance of aggregated firms over
that of independent, stand-alone entities. The complexity of transitional business conditions
necessitates the creation of value through the aggregation of several enterprises in a complex
corporate organization, giving it the identity of a multi-business firm. There are different strategies
that can be implemented in the prospect of growth, investment, and expansion of a firm. One of those
strategies is the Corporate Parenting Strategy or Parenting Strategy.
The Corporate Parenting Strategy involves building a nurturing relationship between the companies
and utilizing the resources and capabilities for overall business development.
Concept and Application:
The Corporate Parenting Strategy is the kind of strategy wherein the parent organization focuses on
building bonds, and relationships and influencing the other companies they own. This helps in the
growth of the entire organization since this is based on value creation. The parent company serves as a
link between investors and firms. It competes with other parent companies as well as other
intermediaries such as investment trusts and mutual funds. Corporate-level strategies are thus justified
to the extent that the parent company generates enough value to compete with other intermediaries.
This happens when the parent companies’ abilities and resources are a good match for the company's
requirements and potential. If the two are compatible, the parent is likely to add value. If there isn't a
good fit, the parent is prone to devalue the child company. The major focus is on core competencies
and value addition for business by utilizing the power held by the parent company.
To develop an effective and sustainable corporate parenting strategy there are three major steps
involved, same are mentioned in detail below:
1. Assessing the business entities in terms of strategic factor / Financial Control: In
organization units, to generate business strategies certain strategic factors are identified. One
of the approaches is the center of excellence, wherein a company that embodies a set of
capabilities that has been clearly identified by the firm as a resource of value creation. All
factors which affect strategy formation are identified and acquire viable assets and business.
The important success elements are typically defined as part of the justification for the
activities outlined in most business-level strategies. As a result, a detailed examination of
crucial success elements is rarely required when formulating a company strategy. It's a good
idea, though, to summarise essential success elements, confirm their importance with
business-level management, and verify whether the business's conditions have changed—for
example, whether its costs have increased.

2. Examine the areas of improvement in the business/ Strategic Planning: This is part
where the parent company expands its influence over the child company. The parent company
extends its support and common goals and targets are identified. The parent company helps in
providing suitable prospects for the firm and shares its expertise. People from one entity to
another entity get transferred so that they share their skills in the areas where high
improvement is required. Most companies could benefit from having a parent company with
the necessary skills and experience. A parenting-opportunity analysis' goal is to document
 those changes and assess their importance. However, the study might be difficult because the
parent frequently needs extensive commercial knowledge to find chances.

3. Assessing the fit / Strategic Control: Business entities evaluate their own terms, strengths,
and weakness to review the strategy built being a parent company. Whether they are able to
achieve the target or not. To understands if they are able to seize the opportunities as desired.
Few corporate-level executives find it simple to assess the fit between the main company and
its subsidiaries. Part of the problem is that they rarely publicly confront the issue. Even if they
do, answering the question is difficult. It's similar to determining whether a specific manager
is suitable for a specific position.

Thus, from above we can say that corporate parenting is more focused on enhancing the
growth possibilities. However, in the Portfolio-based corporate strategy method, they are
unable to answer the below questions:
1. What business should this company own and why?
2. What organizational structure, managerial procedures, and philosophy will foster
superior performance from the company’s business units?

In the case of portfolio corporate strategy, it examines the attractiveness of companies based
on their cash flow. As the major focus of analysis is based on financial reserves, portfolio
strategy fails to answer the above questions. However, in the case of Parenting corporate
strategy, the major focus is on planning and building relationships which will increase for
both companies.
Some benefits of Parenting Corporate Strategy are listed below:
• The concept of parenting strategy is based on guiding the business units for increasing
their capabilities.
• Aggregated evaluation of the business strategy helps to understand the find out the
scope of improvement in business units.
• Controlling the way strategy moves further with business firms. Continuous
evaluation to know if a particular business is reaching set goals.
• Parenting strategy helps to build a link between investors and business units, for
further expansion of business.
• The core of parenting strategy is competence and creating value for the parent and the
business units.

Conclusion:
Hence, facilitated with collective strategy factors, and guiding strategy, parenting corporate
strategy will be similar to competitive advantage Parenting advantage influences not only
planning but also decision-making. The intricacy of transitional business conditions
necessitates the creation of value by combining various firms into a single corporate entity.
Transformational processes provide some obstacles in terms of establishing a competitive
advantage through parenting or providing aggregated enterprises with higher performance
than they would accomplish as independent entities. The concept of parental advantage serves
as a litmus test for potential corporate initiatives, guiding them toward better market prospects
and improved corporate performance.
Question 3
Answer 3(a):

Introduction:
A company seeking success and profit in the market always analyses and scans the
environment. However, this scanning and analyzing are done in internal and external ways to
have a broad view. The internal analysis majorly covers the strengths and weaknesses which
can be very helpful for understanding the scale and capability of the business. This internal
scanning is also known as organizational analysis. There are certain fixed terms which part of
the system such as resources, capabilities, competency, core competency, and distinctive
competency.

Concept and Application:

Resources are the assets owned by a business used for further activities and processing for
business purposes. Resources can be created within the organization or can be outsourced.
They can be specific and Non-specific resources. Specific resources are those that can only be
used for very specific purposes and are important to the company in terms of providing value
to goods and services. Tangible resources refer to a company's physical assets. This category
encompasses physical, human, and financial resources.
Intangible resources are made up of intellectual, technological, and organizational prestige.
Intellectual resources include the company's patents and copyrights, for example. Examples of
technological resources include innovation capability and speed.

Capabilities: Capabilities are considered the ability of an organization to utilize its resources
resulting growth and success of the organization. It contains the procedure and schedule to
manage transactions among the resources and transform inputs into outputs. Because they can
produce a competitive advantage, capabilities can help a company operate better in a
competitive business climate. This is determined by how the company mitigates challenges
and capitalizes on opportunities in the current and future business environment while
maximizing its strengths and minimizing its shortcomings. Capabilities are functionality
based such as marketing capabilities, manufacturing capabilities, and human resources
capabilities. However, when capabilities tend to transform frequently and try to adjust with
surrounding then it is known as Dynamic Capabilities.

Competency: When an organization utilizes its resources and enhances capabilities for
increasing growth in the market and increasing its value compared to others, this is termed as
competency. To compete in the marketplace, a business must possess certain traits. The
organization's competencies are defined by these traits. Competencies are required for every
company to survive in this industry. Competencies, on the other hand, cannot be of service to
an organization if they are used in isolation. They assist the organization in achieving a
competitive advantage when they combine appropriately. Take, for example, an IT company.
To succeed in the software sector, it must have the skills to build programs and design tools
that must be coupled to provide it a competitive edge.

Distinctive Competencies:

Distinctive competencies are a collection of capabilities that are unique to a company and
allow it to achieve a competitive advantage over its competitors in the market. Distinctive
competencies are the characteristics that set a company apart from its competitors. This is a
remarkable attribute or quality that allows a company to stand out from the competition.
 A company's distinguishing feature could be anything. It might be an idea it comes up with, a
skill it possesses, or a one-of-a-kind design. Alternatively, a company's distinguishing skill
could be its brand awareness, marketing strategies used, being the first in a certain field, or
customer acceptability.

All the above factors are very important for the growth of any organization. When the
resources and capabilities are used in an optimum way then they could yield great outputs
Hence, research and analysis become crucial to get an overall understanding. For this, the
analytical approach that is used is known as the VRIO framework of analysis.
The VRIO framework is a strategic planning tool that aids firms in identifying and
safeguarding the resources and capabilities that provide them a long-term competitive edge.
This framework includes four questions to understand the competencies of the organization:
1. Valuable: Does the final offering by the firm is adding value to the customer and does it
have a competitive advantage?
2. Rareness: Do you have command over limited resources or abilities? Do you have
anything in your possession that is difficult to come by but in high demand?
3. Imitability: Is it costly to replicate a resource or capability in your company? Is it difficult
to discover a comparable alternative to compete with your services?
4. Organization: Does your company has an organized system to monetize the resources and
capabilities?
Conclusion:
Hence, as discussed above it is understood that research and analysis are key factors for a sustainable
business. It is mandatory to have a hold over the understanding of resources, capabilities, and
competencies. Moreover, the VRIO framework is also very helpful to understand the whereabouts of
the key factors and areas of improvement. Thus, it can be said that any business can benefit from the
VRIO framework as a strategic planning tool.

Answer 3(b):
Introduction:
GE is a well-known organization with a remarkable expansion in the fields of technology, science,
and healthcare. GE is considered an organization with well-developed systems, and management
teams. Created by Jay B Barney, the VRIO framework assesses the relative significance of resources
to a business. Value of the resource, Rareness of the resource, Imitation Risk, and Organizational
Competence are the acronyms for VRIO. VRIO is a strategic analysis tool focusing on resources. By
better understanding, the role of resources in Ge Spin's overall business model, leaders at Ge Spin can
use VRIO to establish a long-term competitive advantage.

• Valuable: According to the GE VRIO Analysis, GE's financial resources are extremely
significant since they enable the company to invest in external prospects. These aid GE in the
fight against external threats as well. GE's patents are a valuable resource since they allow the
company to sell its products without competing. For GE, this means more revenue. When GE
licenses these patents to other manufacturers, it earns licensing revenue. Moreover,
employees at GE are valued resources. A major section of the personnel is highly trained,
resulting in increased productivity for the company. Employees are also loyal, and the
company's retention rates are excellent. All of this adds value to GE's products for its end
users. With a strong distribution network, GE is able to reach customers effectively and also
increase its revenue. This efficient distribution network is also a valuable resource for GE.
 • Rare: By VRIO analysis, has depicted that GE has rare patents which are possessed by other
competitors. This makes GE stronger in its field. Even the financial resources of GE are very
much strong giving the company a sustainable backing. Moreover, the distribution network of
GE is rare, and it will take a lot of time and money for other competitors to evolve with a
better distribution network than GE. Also, the highly skilled human resource of GE is rare
since they have distinctive training programs and high employee retention rates, which makes
them stronger, it will take time and effort for other competitors to reach the same level.

• Imitable: The financial resource gathered by the organization are costly to imitate for other
competitors. Since these resources are acquired by GE with profits earned over a long time.
Moreover, the patents possessed by the company are not easy to imitate. Since it is illegal to
have a similar kind of product and also it is not allowed by the law. However, human
resources can be developed by other competitors if they want to excel in the market, by giving
high salary packages and facilities. Even they can develop skills in their employees with well-
defined training programs. Similarly, a distribution network can also be developed by
investing money, time, and effort.

• Organization: As per the VRIO analysis, GE’s financial resources are very well organized
and strategically invested considering the various opportunities. As a result, these assets
continue to provide GE with a competitive advantage. However, GE's patents are not
adequately organized. This indicates that the organization is not fully exploiting these patents.
If GE starts selling patented items before the patents expire, it can turn an underutilized
competitive advantage into a sustainable competitive advantage. The VRIO Analysis of GE
identified how the distribution network of GE is organized. GE uses this network to connect
with customers by ensuring that items are available across all of its locations. As a result,
these resources provide GE with a long-term competitive edge.

Conclusion:
Hence from above the discussion, it can be concluded that the financial resources and distribution
network of GE, according to the VRIO Analysis, provide a sustainable competitive advantage. Patents
are an untapped source of competitive advantage. Employees benefit from a momentary competitive
advantage.