MS-65

MMPC-017

Master of Business Administration/MBA(B&F)

ASSIGNMENT
For
January 2023 and July 2023 Sessions

MMPC-017: Advanced Strategic Management

(Last date of submission for January 2023 session is 30 th April, 2023
and for July 2023 sessions is 31st October, 2023)

School of Management Studies

INDIRA GANDHI NATIONAL OPEN UNIVERSITY
MAIDAN GARHI, NEW DELHI – 110 068
 ASSIGNMENT

Course Code : MMPC-017

Course Title : Advanced Strategic Management
Assignment Code : MMPC-017/TMA/JAN/2023
Coverage : All Blocks

Note: Attempt all the questions and submit this assignment to the coordinator of your
study centre. Last date of submission for January 2023 session is 30th April, 2023
and for July 2023 session is 31st October, 2023.

1. Briefly discuss the nature of stability strategy.

2. Discuss the benefits of strategic alliances.

3. Discuss the methods used by governments to protect their domestic business environment.

4. Explain in detail the use of IT in strategy implementation.

5. Discuss in detail the sources and types of knowledge.

6. Write short notes on the following:

a) Benefits of corporate planning
b) Scope of corporate policy
c) Innovation
d) Competitive advantage and R & D
 MMPM 17- : Advanced Strategic Management
Q1- Briefly discuss the nature of stability strategy.?
ANS- Nature of stability strategy - Stability strategy implies continuing the current activities of the
firm without any significant change in direction. If the environment is unstable and the firm is doing
well, then it may believe that it is better to make no changes. A firm is said to be following a
stability strategy if it is satisfied with the same consumer groups and maintaining the same market
share, satisfied with incremental improvements of functional performance and the management
does not want to take any risks that might be associated with expansion or growth. Stability
strategy is most likely to be pursued by small businesses or firms in a mature stage of development.
Stability strategies are implemented by ‘steady as it goes’ approaches to decisions. No major
functional changes are made in the product line, markets or functions.However, stability strategy is
not a ‘do nothing’ approach nor does it mean that goals such as profit growth are abandoned. The
stability strategy can be designed to increase profits through such approaches as improving
efficiency in current operations.
A firm following stability strategy maintains its current business and product portfolios; maintains
the existing level of effort; and is satisfied with incremental growth. It focuses on fine-tuning its
business operations and improving functional efficiencies through better deployment of resources.
In other words, a firm is said to follow stability/ consolidation strategy if:
1-- It decides to serve the same markets with the same products;
2-- It continues to pursue the same objectives with a strategic thrust on incremental improvement of
functional performances; and
3-- It concentrates its resources in a narrow product-market sphere for developing a meaningful
competitive advantage
Adopting a stability strategy does not mean that a firm lacks concern for business growth. It only
means that their growth targets are modest and that they wish to maintain a status quo. Since
products, markets and functions remain unchanged, stability strategy is basically a defensive
strategy. A stability strategy is ideal in stable business environments where an organization can
devote its efforts to improving its efficiency while not being threatened with external change. In
some cases, organizations are constrained by regulations or the expectations of key stakeholders
and hence they have no option except to follow stability strategy.
Generally large firms with a sizeable portfolio of businesses do not usually depend on the stability
strategy as a main route, though they may use it under certain special circumstances. They normally
use it in combination with the other generic strategies, adopting stability for some businesses while
pursuing expansion for the others. However, small firms find this a very useful approach since they
can reduce their risk and defend their positions by adopting this strategy. Niche players also prefer
this strategy for the same reasons.
Conditions Favoring Stability Strategy
Stability strategy does entail changing the way the business is run, however, the range of products
offered and the markets served remain unchanged or narrowly focused. Hence, the stability strategy
is perceived as a non-growth strategy. As a matter of fact, stability strategy does provide room for
growth, though to a limited extent, in the existing product-market area to achieve current business
objectives. Implementing stability strategy does not imply stagnation since the basic thrust is on
maintaining the current level of performance with incremental growth in ensuing periods. An
organization’s strategists might choose stability when:
1-- The industry or the economy is in turmoil or the environment is volatile. Uncertain conditions
might convince strategists to be conservative until they became more certain.
2-- Environmental turbulence is minimal and the firm does not foresee any major threat to itself and
the industry concerned as a whole.
3-- The organization just finished a period of rapid growth and needs to consolidate its gains before
pursuing more growth.
4-- The firm’s growth ambitions are very modest and it is content with incremental growth.
 5-- The industry is in a mature stage with few or no growth prospects and the firm is currently in a
comfortable position in the industry.

Rationale for Using Stability Strategy

There are a number of circumstances in which the most appropriate growth stance for a company is
stability rather than growth. Stability strategy is normally followed for a brief period to consolidate
the gains of its expansion and needs a breathing spell before embarking on the next round of
expansion. Organizations need to ‘cool off’ for a while after an aggressive phase of expansion and
must stabilize for a while or they will become inefficient and unmanageable.Managers pursue
stability strategy when they feel that the enterprise has been performing well and wish to maintain
the same trend in subsequent years. They would prefer to adopt the existing product-
market posture and avoid departing from it. Sometimes, the management is content with the status
quo because the company enjoys a distinct competitive advantage and hence does not perceive an
immediate threat.
Stability strategy is also adopted in a number of organizations because the management is not
interested in taking risks by venturing into unknown terrain. In fact they do not consider any other
option as long as the pursuit of existing business activity produces the desired results. Conservative
managers believe product development, market development or new ways of doing business entail
great risk and therefore, avoid taking decisions, which can endanger the company. A number of
managers also pursue consolidation strategy involuntarily. In fact, they do not react to
environmental changes and avoid drastic changes in the current strategy unless warranted by
extraordinary circumstances.
Sometimes environmental forces compel an organization to follow the strategy of status
quo. This is particularly true for bigger organizations, which have acquired dominant market
share. Such organizations are usually not permitted by the government to expand because it
may lead to monopolistic and restrictive trade practices detrimental to public interest.
Types of Stability Strategies

1. Pause/Process with caution strategy — Some organizations pursue stability

strategy for a temporary period of time until the particular environmental situation changes,
especially if they have been growing too fast in the previous period. Stability strategies
enable a company to consolidate its resources after prolonged rapid growth. Sometimes,
firms that wish to test the ground before moving ahead with a full-fledged grand strategy
employ stability strategy first.
2. No change strategy — No change strategy is a decision to do nothing new i.e
continue current operations and policies for the foreseeable future. If there are no significant
opportunities or threats operating in the environment, or if there are no major new strengths
and weaknesses within the organization or if there are no new competitors or threat of
substitutes, the firm may decide not to do anything new.
3. Profit strategy — Profit strategy is an attempt to artificially maintain profits by
reducing investments and short-term expenditures. Rather than announcing the company’s
poor position to shareholders and other investors at large, top management may be
tempted to follow this strategy. Obviously, the profit strategy is useful to get over a
temporary difficulty, but if continued for long, it will lead to a serious deterioration in the
company’s position. The profit strategy is thus usually the top management’s short term and
often self serving response to the situation.

In general, stability strategies can be very useful in the short run, but they can be dangerous if
followed for too long.Some organizations successfully employ stability strategy, but most do not get
the press that companies using other strategies get. One reason might be that no change means no
news. Another might be that the company itself wants to keep a low profile; stakeholders may
consider the status quo to be inappropriate, or the strategy may be indication of rigidity of the
planning process.

The stability strategy is most often used by companies but it presents a very confused picture. Most
companies strive for growth and do not look for stability in their strategy formulation. A stability
strategy implies that the company looks for stability in its strategy and does not affect too many
changes. The basic philosophy of a stability strategy is "maintain the present course of action and be
steady".
It is a strategy which looks for status quo. In the stability strategy, the company maintains status quo
and continues with channelizing resources to where it has been doing in the past. It thus limits its
competitive advantage in the narrowest product market configuration given the resources and
capabilities of the company. The good thing about a stability strategy is that it is safe. The majority of
new products or new initiatives of a company fail. The company can only go in for additional
ventures if its existing businesses are faltering or if the opportunities outside are very good. The risk
increases with the size of the company. A stability strategy can also evolve from lethargy on the part
of management to explore new avenues or opportunities. This was a problem with many public
sector undertakings in India in the past. Such companies only react to happenings in their external
environment and are not proactive.
Reasons to Adopt Stability Strategy

Sometimes a stability strategy is preferred by management for various reasons. These are:

1) Satisfactory Performance :
Management often do not want to change when the performance of the business is satisfactory.
This familiarity often leads to a state where additional risk is not taken. Management is also not
aware how the success is being achieved or what combination of the resources of the company have
led to its success. In this situation, they would not want to change. The way things are being done
and instead continue with the past.
2) Minor Environmental Change :
There is no major threat in the company's external environment. Also there is no big opportunity
beckons. In this situation, the company has no incentive to change.
3) Low risk :
There are often situations in which maintaining status quo is less risky than changing the product
specifications and market positions. Change is often a very risky and uncertain proposition. The
threats in the company's external environment may also not be that damaging and the opportunities
not that attractive to warrant change.
4) Strategic Advantage :
The company's strategic position may be more suited to the present situation. In other words, its
competences and capabilities may be more suited to the present situation. In this position, it does
not make sense to change.
 Types of Stability Strategy

There are following three Types of stability strategy with example:

1) Paused/Proceed with Caution Strategy
2) No-Change Strategy
3) Profit Strategies
1) Paused/Proceed with Caution Strategy :

Strategy Stability as a pause strategy is often used by firms having a complete growth history of past
performance. Such companies tend to maintain their stability for a limited period of time in order to
take benefits of future growth opportunities. The strategy is also used as a sort of break from the
routine to make resources of the firm more productive and functional, thereby increase cost
efficiency. The strategy is also adopted by large corporations who after a spree of profit years want
to consolidate their position. As such, it is also referred to as "breathing spell" strategy. An
organisation adopts the stability grand strategy when it make efforts to enhance its functional
performance by marginally altering one or more business units in terms of their technologies,
customer functions and customer groups.
The purpose of caution strategy is to carefully analyse the situation so as to act accordingly. Many a
time market situation is not what it is perceived. Such situations increase the risks and losses
emanating from bad decisions. Hence, management must tread with caution.
For example, Hindustan Unilevers. popularly known for its FMCG products, started producing
considerable quantities of shoes and shoe uppers for overseas markets in the late 2000 as an act to
compete with rising businesses of Bata, Liberty, Nike, Adidas etc. The adopted strategy was a
proceed-with-caution strategy before the company again decided to focus on Ponds Exports as it
realized that shoe-manufacturing was not its area of business. Following factors play a decisive role
in selecting caution strategy :
 When the market situation is still developing.
 When the market situation is ambiguous or incapable of precise definition.
 When the firm wants to consolidate its past performances.
 When the firm needs some time to improve upon its internal functioning and
performance.
 When actions of competitors have larger ramifications.

2) No-Change Strategy :
As the name itself suggests, no change strategy is a conscious decision by the management to
continue with the existing business operations and perform nothing new. One can characterize this
strategy as a non-existence of any strategy since it does not let company to do anything new, but
taking no decision at all is also a decision.
As such, so as not to disturb the status-quo, the firm decides not to try anything new which may
affect its present position. The success of this strategy depends upon the absence of significant
change in the situation of the enterprise. The company gets motivated to stay on its current position
by the relative strategy developed by the company's uncertain competitive position under an
industry experiencing no growth. The success of this strategy depends upon number of factors. They
are :

 The firm has a relative good market base.

 The firm faces minimal competition from its competitors.
 The firm has a well-established loyal and stable target group.
Q2- Discuss the benefits of strategic alliances..?
ANS- Benefits of strategic alliances - A strategic alliance in business is a relationship between two or
more businesses that enables each to achieve certain strategic objectives neither would be able to
achieve on their own. The strategic partners maintain their status as independent and separate
entities, share the benefits and control over the partnership, and continue to make contributions to
the alliance until it is terminated. Strategic alliances are often formed in the global marketplace
between businesses that are based in different regions of the world
Advantages of Strategic Alliances
Strategic alliances usually are only formed if they provide an advantage to all the parties in the
alliance. These advantages can be broken down to four broad categories.
The first category is organizational advantages. You may wish to form a strategic alliance to learn
necessary skills and obtain certain capabilities from your strategic partner. Strategic partners may
also help you enhance your productive capacity, provide a distribution system, or extend your supply
chain. Your strategic partner may provide a good or service that complements a good or service you
provide, thereby creating a synergy. If you are relatively new or untried in a certain industry, having
a strategic partner who is well known and respected will help add legitimacy and credibility to your
venture.
A second category is economic advantage. You can reduce costs and risks by distributing them across
the members of the alliance. You can also obtain greater economies of scale in an alliance, as
production volume can increase, causing the cost per unit to decline. Finally, you and your partners
can take advantage of co-specialization, where you bundle your specializations together, creating
additional value, such as when a leading computer manufacturer bundles its desktop with a leading
monitor manufacturer's monitor.
Another category includes strategic advantages. You may join with your rivals to cooperate instead
of compete. You can also create alliances to create vertical integration where your partners are part
of your supply chain. Strategic alliances may also be useful to create a competitive advantage by the
pooling of resources and skills. This may also help with future business opportunities and the
development of new products and technologies. Strategic alliances may also be used to get access to
new technologies or to pursue joint research and development.
Lastly is the category of political advantages. Sometimes you need to form a strategic alliance with a
local foreign business to gain entry into a foreign market either because of local prejudices or legal
barriers to entry. Forming strategic alliances with politically-influential partners may also help
improve your own influence and position.
Strategic alliances are becoming more and more prominent in the global economy. According to
Peter F. Drucker, the management guru, the greatest change in corporate culture, and the way
business is being conducted, is the accelerating growth of relationships based not on ownership, but
on partnership (Drucker, 1996). He also observed that there is not just a surge in alliances but a
worldwide restructuring of companies in the shape of alliances and partnerships. His views are
endorsed by the fact that even a cursory search for strategic alliances in business dailies produces
numerous press releases about companies forming alliances. According to a recent survey by the
global consulting major, Booz, Allen and Hamilton, strategic alliances are spreading in every industry
and are becoming an essential driver of superior growth. The number of alliances in the world is
surging — for instance, more than 20,000 new alliances were formed in the U.S. between 1987 and
1992, compared with 5100 between 1980 and 1987 and 750 during the 1970s. The firm also predicts
that within the next five years, the value of alliances is projected to range between $30 trillion to
$50 trillion. The survey also reveals that more than 20% of the revenue generated from the top
2,000 U.S. and European companies now comes from alliances, with more predicted in the near
future. These same companies also earned higher return on investment (ROl) and return on equity
(ROE) on their alliances than from their core businesses. The report also concludes that leading edge
alliance companies are creating a string of interconnected relationships, which allows them to
overpower the competition (www.boozeallen.com).
TYPES OF STRATEGIC ALLIANCES
Firms can enter into a number of different types of strategic alliances. These could include
comparatively simple, more “distant” arrangements in which firms work with one another on a
short-term or a contractually defined basis where the two parties effectively do not combine their
managers, value chains, core technologies, or other skill sets. Examples of such simpler alliance
vehicles include licensing, crossmarketing deals, limited forms of outsourcing, and loosely configured
customersupply arrangements. On the other hand, companies may seek to partner more closely in
their cooperative ventures, combining managers, technologies, products, processes, and other
value-adding assets in varying ways to bring the companies more closely together. Examples of
alliance modes in this league include technology development pacts, coproduction arrangements,
and formal joint ventures in which the partners contribute a defined amount of capital to form a
third party entity. Finally, in even more complex strategic alliance arrangements, partners can take
significant equitystake holdings in one another, thus approximating many organizational and
strategic characteristics of an outright merger or acquisition.

Technology Associates and Alliances, suggests that alliances can be hybrids between these different
types. For example, an R&D alliance may be a cross between a product and manufacturing alliance
and a technology and know-how alliance, and a collaborative marketing agreement is a cross
between a marketing and sales alliance and a product and manufacturing alliance. The important
thing to remember is that there are various types of alliances, and they may range from simple
licensing arrangement, ad hoc alliance, joint operations, joint venture, consortia, distribution, and
value-chain partnership alliances to more complex hybrid alliances.
The simplest form of strategic alliance is a contractual arrangement. Contractualbased strategic
alliances generally are short-term arrangements that are appropriate when a formal management
structure is not required. While the specific provisions of the contract will depend upon the business
arrangement, the contract should address: (i) the duties and responsibilities of each party; (ii)
confidentiality and noncompetition; (iii) payment terms; (iv) scientific or technical milestones; (v)
ownership of intellectual property; (vi) remedies for breach; and (vii) termination. Examples of
contractual strategic alliances are license agreements, marketing, promotion, and distribution
agreements, development agreements, and service agreements.
The most complex form of strategic alliance is a joint venture. A joint venture involves creating a
separate legal entity (generally a corporation, limited liability company, or partnership) through
which the business of the alliance is conducted. A joint venture may be appropriate if: (i) the parties
intend a long-term alliance; (ii) the alliance will require a significant commitment of resources by
each party; (iii) the alliance will require significant interaction between the parties; (iv) the alliance
will require a separate management structure; or (v) if the business of the alliance may be subject to
unique regulatory issues. In addition, a joint venture will be appropriate if the parties expect that the
alliance ultimately may be able to function as a separate business that could be sold or taken public
Historically, information technology and life sciences companies have sought minority equity
investments from strategic commercial partners. This form of strategic alliance has gained increased
popularity in the current economic climate. In many cases, the equity investment will also be
accompanied by a contractual arrangement between the parties such as a license agreement or a
distribution agreement. From the company’s perspective, an equity investment from a strategic
commercial partner may be structured on more favorable terms than those obtained from venture
capitalists, and it may increase the company’s valuation and enhance the company’s ability to secure
future rounds of funding. Venture capitalists and underwriters generally view these types of
strategic alliances as validating an early stage company’s technology and business model. In some
cases, they have even become a condition to an underwriter taking a life science company public.
The strategic commercial partner may desire this form of alliance to gain a competitive advantage
through access to new technologies and to share in the upside of the other party’s business through
equity ownership. The following section will focus on three broad types of strategic alliances:
licensing arrangements, joint ventures, and cross-holding arrangements that include equity stakes
and consortia among firms. Each broad type of strategic alliance is implemented differently and
imposes its own set of managerial skills, constraints, and coordination requirements needed to build
competitive advantage.

BENEFITS OF STRATEGIC ALLIANCES

In the new economy, strategic alliances enable business to gain competitive advantage through
access to a partner’s resources, including markets, technologies, capital and people. Teaming up
with others adds complementary resources and capabilities, Strategic Alliances enabling participants
to grow and expand more quickly and efficiently. Strategic alliances also benefit companies by
reducing manufacturing costs, and developing and diffusing new technologies rapidly. Alliances are
also used to accelerate product introduction and overcome legal and trade barriers expeditiously. In
this era of rapid tecnological changes and global markets forming alliances is often the fastest, most
effective method of achieving growth objectives. However, companies must ensure that the
objectives of the alliance are compatible and in tune with their existing businesses so their expertise
is transferable to the alliance.
Many fast-growth technology companies use strategic alliances to benefit from moreestablished
channels of distribution, marketing, or brand reputation of bigger, betterknown players. However,
more-traditional businesses tend to enter alliances for reasons such as geographic expansion, cost
reduction, manufacturing, and other supply-chain synergies. As global market opens up and
competition grows, midsize companies need to be increasingly creative about how and with whom
they align themselves to go to the market. Firms often enter into alliances based on opportunity
rather than linkage with their overall goals. This risk is greatest when a company has a surplus of
cash. In recent years, Mercedes-Benz and Toyota Motor Corporation have been investing surplus
funds into seemingly unrelated businesses, with Benz already facing difficulties as a result.Especially
fast-growing companies rely heavily on alliances to extend their technical and operational resources.
In the process, they save time and boost productivity by not having to develop their own, from
scratch. They are thus freed to concentrate on innovation and their core business.
Entering New Markets
The Coopers & Lybrand study rates growth strategies and entering new markets among the top
reasons for forming strategic alliances (Coopers and Lybrand, 1997). As Ohmae (1992) points out,
(companies) simply do not have the time to establish new markets one-by one. In today’s fast-paced
world economy, this is increasingly true. Therefore, forming an alliance with an existing company
already in that marketplace is a very appealing alternative. Partnering with an international company
can make the expansion into unfamiliar territory a lot easier and less stressful for a company.
According to the Coopers & Lybrand (1997) study, 50 percent of firms involved in alliances market
their goods and services internationally versus 30 percent of nonallied participants. For instance,
Tata Motors has short listed Brilliance Automotive Holdings of China to set up a joint venture for
producing cars. Tata Motors, which recently acquired the commercial truck facility of Daewoo
Motors in South Korea for Rs.465 crore, is also reported to be scouting for another joint venture in
Northern China in order to have a full-fledged presence in China
Often a company that has a successful product or service has a desire to introduce it into a new
market. Yet perhaps the company recognizes that it lacks the necessary marketing expertise because
it does not fully understand customer needs, does not know how to promote the product or service
effectively, or does not understand or have access to the proper distribution channels. Rather than
painstakingly trying to develop this expertise internally, the company may identify another
organization that possesses those desired marketing skills. Then, by capitalizing on the product
development skills of one company and the marketing skills of the other, the resulting alliance can
serve the market quickly and effectively. Alliances may be particularly helpful when entering a
foreign market for the first time because of the extensive cultural differences that may abound. They
may also be effective domestically when entering regional or ethnic markets. Asian Paints, the
largest paint-maker in India, acquired a strategic stake in Singapore-based Berger International in
2002. Asian Paints now appears to be trying to gain control over the Berger brand in some key
regional markets like Pakistan. Berger International, which is now a subsidiary of Asian Paints, has
entered into a strategic alliance with Karachi-based Berger Paints Pakistan, which is owned by the
Mahmood family. Berger International will provide technical consultancy and strategic advice to
Berger Pakistan, which is the secondlargest paints company in Pakistan. Berger Pakistan will also
have the right to import products from Asian Paints.
Reducing Manufacturing Costs
Strategic alliances may allow companies to pool capital or existing facilities to gain economies of
scale or increase the use of facilities, thereby reducing manufacturing costs. In the increasingly
competitive European automobile market, when the Japanese are seeking to gain market share as
they did in the U.S. during the 1980s, many European companies have formed joint ventures to
reduce manufacturing costs. Ford and Volkswagan are jointly planning to make four-wheel-drive
vehicles in Portugal, and Nissan and Ford intent to build a plant in Spain to produce vans. These
companies will benefit from cost sharing and will reduce expenses by building and operating facilties
in relatively low-cost countries, at least by West European standards. Companies may also reduce
costs throug strategic alliances with suppliers or customer reaching agreements to supply products
or services for longer periods and working together, meet customers’ needs, each partner may apply
its expertise, and benefits may be shared in the form of lower costs or new products.
Developing and Diffusing Technology
Alliances may also be used to build jointly on the technical expertise of two or more companies in
developing products technologically beyond the capability of the companies acting independently.
Not all companies can provide the technology that they need to effectively compete in their markets
on their own. Therefore, they are teaming up with other companies who do have the resources to
provide the technology or who can pool their resources so that together they can provide the
needed technology. Both sides receive benefit from the partnership. Technology transfer is not only
viewed as being significant to the success of a strategic alliance, according to Hsieh (1997): “host
countries now demand more in the way of technology transfer”. As evidence of this growing trend,
Hsieh cites China as a prime example. For example, Tata Consultancy Services (TCS) and ANSYS Inc, a
global innovator of simulation software and product development technology, have entered into an
alliance that will help their clients accelerate product development dramatically and simultaneously
enhance the quality and reliability of their designs through integrated digital prototyping. The
industries that will benefit include automotive, power, heavy machinery, consumer products and
electronics. Customers will derive increased productivity in the design and production processes by
70-90 percent. By pooling resources to develop software products built upon the expertise of each
company, TCS and ANSYS Inc intend to create a new market and reap the associated benefits.
Reduce Financial Risk and Share Costs of Research and Development
Some companies may find that the financial risk that is involved in pursuing a new product or
production method is too great for a single company to undertake. In such cases, two or more
companies come together and agree to spread the risk among all of them. One example of this is
found in strategic alliance between the Rs.235-crore Elder Pharma, which has 25 international
partners for strategic alliances, has entered into a tie-up with Reliance Life Sciences. The company is
focusing on dermatology and the tie-up with Reliance is to obtain aloe vera extracts for cosmetics.
Elder has Strategic Alliances launched a dedicated skincare division with products under El-Dermis
brand and plans to launch a number of over the counter products in the skincare segment.
Achieve or Ensure Competitive Advantage
Alliances are particularly alluring to small businesses because they provide the tools businesses need
to be competitive. For many small companies the only way they can stay competitive and even
survive in today’s technologically advanced, ever-changing business world is to form an alliance with
another company. Small companies can realize the mutual benefits they can derive from strategic
alliances in areas such as marketing, distribution, production, research and development, and
outsourcing. By forming alliances with other companies, small businesses are able to accomplish
bigger projects more quickly and profitably, than if they tried to do it on their own. According to
Booz, Allen and Hamilton the world has entered a new age - an age of collaboration - and that only
through allying can companies obtain the capabilities and resources necessary to win in the changing
global marketplace. Self-reliance is an option few companies will be able to afford.

Q3- Discuss the methods used by governments to protect their domestic business environment?
ANS- Methods used by governments to protect their domestic business environment -
International business as a discipline is of a recent origin. It is hard to imagine a world without
international business. Virtually every nation, howsoever small it may be, has firms involved in
various types of international business activities. It is through these activities that nations enjoy the
benefits of international business by trading in a variety of goods and services produced around the
world and made available locally. International business, conventionally called as international trade,
has been known to exist ever since man learned to live in an organized manner. India, for instance, is
well known for spices. Egyptians had a significant foreign trade. The fundamental basis of
international trade lies in the fact that countries are endowed by nature with different resources.
These differences arise from geographical, physical or climatic features. Some countries have a
monopoly of certain crops, for example, Bengal (India) and have high jute production, and Punjab
(Pakistan) produces best quality of basmati rice. International business is thus inevitable when there
are marked differences in the countries regarding material, natural vegetation, climate, soils and
other physical and geographical conditions. It is also affected by several other factors besides natural
and geographical factors, such as stage of economic development, accumulation of capital by a
nation and its foreign investments, technological progress, trade and financial regulations, political
affiliations, education and special skills of the population (for example, software skills of India), and
so on.
Though international business, as a discipline, as stated earlier, is of a recent origin, international
trade is claimed to be as old as the history of mankind itself (Monye, 1993). Even at the most tribal
level, communities found it in their interest to trade, albeit in a very primitive manner and involving
the exchange of simple objects mostly for immediate consumption (Harrison, Dalkiran, and Elsey,
2000, 3-4). Historically trade was in the form of barter and was undertaken both for social as well as
economic reasons. Even though modern trade is conducted in far more advanced forms and for
more complex reasons than ever before, the basic human need for trade remains the same.
However, unlike ancient times during which trade was devised and undertaken by communities for
the benefit of communities themselves, over 90 per cent of modern trade is undertaken by private
firms in pursuit of their own aims and objectives (Harrison et al., 2000, 4). The growth of modern
trade coincided, to a large extent, with the emergence of the modern nation state and with the
consequent formation of national borders. The clear recognition and appreciation of the mutual
benefits of free trade (trade without barriers and based on the principle of comparative advantage)
provided sufficient incentives for nation states to seek greater opportunities in each others’
domestic markets and thus to increase the volume of trade among themselves. Such mutual benefits
have been largely responsible for the growth of alliances and regional integration around the world,
as evidenced by the establishment of a considerable number of trading areas, such as the European
Union (EU) and North American Free Trade Agreement (NAFTA). Over the years, nations have been
promoting trade and international business activities by attempting to create suitable business and
investment environments within their borders, not only out of political and strategic necessity but
also out of a desire to attract business and foreign investment, often in competition with other
nations. For example, the recent spate of liberalization, deregulation, and privatization programmes
by governments around the world, in particular by those of the former Soviet republics and Eastern
Europe, has given special impetus to the growth of foreign direct investment (FDI). Many countries
around the world have witnessed substantial growth in the economy in the past two decades. There
has been faster growth in the international transactions especially in the form of FDIs (prathi, 2011).
Not only has the total stock of capital grown rapidly, but more significantly, there has been growth in
the number of subsidiaries of Multi National Companies (MNCs). There has also been growth in the
number of countries in which specific firms were active.
As both, international trade and investment grew rapidly, international competition became more
intense, and many national industries became global industries. Similarity of markets in different
countries and intense global competition drove international competitors to coordinate their
marketing and competitive strategies between countries more actively. The relevant scope of
strategy thus shifted from discrete national markets to global markets. The coordination of
worldwide competitive actions among the various subsidiaries of MNCs became more important.
The removal of trade barriers, especially in the last decade of the previous millennium and the
growing similarity of the national markets created the potential for globalization of markets and
competition. The development of global networks brought about by MNCs and alliances between
independent firms on the one hand and the technology of cheap, effective transportation and global
communication networks on the other hand provided the practical means necessary for the
integration of supply. These conditions were necessary, though not sufficient. Intense competition in
most industries was the driving force necessary for integration and globalization.
Globalization is a process by which a business looks at the world market as one single market
without the barriers of social, cultural, economic, political or commercial factors which separate
different country markets. For example, India and USA can be different in terms of economic factors
such as the per capita income and purchasing power of the consumers, the stage of economic
development etc. Since these barriers are less effective in a global scenario, it leads to the increased
movement of goods and services across boundaries, namely, trade and investment, often of people
through migration.
The basic principles of business concerning tasks, functions, and processes that apply to
international business are the same as that of domestic business. However, the environment in
which domestic and international firms operate varies considerably and therefore requires an
international firm to modify and adapt its business practices country by country. Unlike a domestic
business manager, an international manager faces greater difficulties, greater uncertainties, and
more importantly, much greater risks. The tasks of an international business executive are clearly
much more challenging. These difficulties, uncertainties, and risks originate from differences in the
political, economic, legal and cultural environment, and from differences in foreign exchange
markets and exchange rate systems. In most cases, these problems manifest themselves as
constraints which render the process of decision-making and its implementation in international
business more difficult (and in some cases, more hazardous) than in domestic business. More
importantly, culturally insensitive decisions often result in conflicts which are more difficult (and
costly) to resolve without seriously affecting the performance of the firm, its future operations, and
the effectiveness of its management. The dynamic nature of constant changes in business,
economic, political, and legal environments in the host country adds still more difficulties with which
the international business executive must deal on an almost daily basis.
In today's global economy, companies have to compete on an international playing field. Because every
country has different laws and regulations, some businesses may have an advantage when producing
certain types of goods. If a government wants to help protect one of its industries from international
competitors, it can use protectionist policies to do so. Things like tariffs, taxes, subsidies, and import
restrictions can all help protect domestic businesses from global competition. Protectionism is often
complicated and can have both positive and negative effects depending on how and why a government
implements its policies.
Imagine Country A has many domestic businesses that focus on making clothing, but Country B also
produces and exports clothes internationally. Country B has lower minimum wages and access to
cheaper materials than Country A, making its products more affordable.To protect its clothing industry,
Country A implements a tariff on clothing imports, making imported clothes 25% more expensive. This
makes domestic clothing comparably priced to imported clothing, helping protect local clothes makers'
revenue.
In a game of hockey or soccer, a team has to defend its net (domestic businesses) from the other side
(foreign exporters). There are a lot of ways to play defense: focus on stealing the ball away, getting in the
way of the opposition, or forcing the other team to take bad shots on the net. Similarly, there are a lot of
policies governments can use to protect their industries. Focusing on protectionism also has a danger. If a
team plays too much defense, it will never have the chance to score a goal of its own. In the same way,
some protectionist policies can have drawbacks and ultimately weaken domestic industry.

Protectionist policies are typically focused on imports but may also involve other aspects of
international trade such as product standards and government subsidies. The merits of
protectionism are the subject of fierce debate.Critics argue that over the long term, protectionism
often hurts the people and entities it is intended to protect by slowing economic growth and
increasing price inflation, making free trade a better alternative. Proponents of protectionism argue
that the policies can help to create domestic jobs, increase gross domestic product (GDP), and make
a domestic economy more competitive globally.

Import tariffs are one of the top tools a government uses when seeking to enact protectionist
policies. There are three main import tariff concepts that can be theorized for protective measures.
In general, all forms of import tariffs are charged to the importing country and documented at
government customs. Import tariffs raise the price of imports for a country.Scientific tariffs are
import tariffs imposed on an item-by-item basis, raising the price of goods for the importer and
passing on higher prices to the end buyer. Peril point import tariffs are focused on a specific
industry.
These tariffs involve the calculation of the levels at which point tariff decreases or increases would
cause significant harm to an industry overall, potentially leading to the jeopardy of closure due to an
inability to compete. Retaliatory tariffs are tariffs enacted primarily as a response to excessive duties
being charged by trading partners.
Q4- Explain in detail the use of IT in strategy implementation?
ANS- Use of IT in strategy implementation - Information technology (IT) in every organization
normally evolves from a means to improve the efficiency and effectiveness of as organization to a
means to influence the strategic position of the company. The way in which management controls IT
has changed simultaneously. In the first stage of IT implementation, efficiency is the primary goal
and the attention of management is mainly focused on technology. In this stage, the IT professional
is generally an outside consultant, who decides what is best for the organization. In subsequent
stages, the effective functioning of the organization becomes as important a goal as efficiency. The
management then becomes conscious of the fact that, next to technology, the design and structure
of the organization is a decisive factor. User participation, information planning and the
appointment of steering committees are indications of this. These organizations increasingly
recognize the need for a methodical approach to IT planning, as a result of disruptions in
management, reorganization, cost increase, or new usage possibilities.
To a large extent, organizations which have more experience with automation realize that IT can, not
only improve the efficiency and effectiveness, but also that it is of decisive importance to the
company's success. IT planning, subsequently, acquires a strategic quality in these organizations and,
in fact, functions as a catalyst in all this. These organizations set up business architecture and IT
architecture, based on an objective, qualitative and quantitative analysis into the current use of
information technology. A good strategy cannot easily be copied by competitors, because of the
organizational, financial, social and technical cost and the trial period involved in attaining the
strategy. Every organization has its own profile, environment and aims. Strategy indicates how the
organizational structure should be designed and what the use of IT should be and should, therefore,
be sufficiently concrete and specific. A specific strategy leads to a unique interpretation of the
architecture and the infrastructure. A good strategy focuses less on the product or the service itself
and more on the delivery of services, reputation, etc. This is especially important for products that
have been "commoditized". That is the reason why strategies differ in the same sector to a high
degree. For example, difference in strategy arises when the focus of a company is either the top or
the bottom of the market. For instance, quality, product features and product innovation are applied
in a very different ways in different segments of the same market. This leads to very different
information needs and to a unique use of IT within the same sector. For example, quality,
customization and product innovation are of vital importance to a premium car such as Mercedes
while standardization, quality and low cost/price are vital to a budget car such as Maruti 800. In both
cases, IT should strongly support these business processes and constantly provide the management
with appropriate information.
Competitive Strategy and IT
Competitive strategy is an organization’s approach to achieving sustainable competitive advantage
over, or reducing the competitive advantage of, its competitors. Porter (1980; 1985) suggests that
the success of organizations depends on how well they cope with and manage the five key "forces”,
namely, the bargaining power of suppliers; the bargaining power of buyer; the threat of new
entrants; the threat of substitute products; and rivalry among existing firms, which shape an
industry. Successful organizations both react to, and influence, the five forces and by doing so,
influence the nature and shape of their own industry - to their own advantage, naturally in
promoting growth. To fuel this growth, there are two basic commercial strategies that organizations
can adopt: product differentiation (directly related to a number of the options above); and low
cost/price. These two basic strategies rely for their success on a whole platform of "second order"
strategies concerned with, for example, product range and distribution. They are: cost leadership;
differentiation; cost focus; and focused differentiation.
Strategic cost measures which result in cost leadership are aimed at:
1-- Reducing the total costs of the organization by reducing or avoiding specific costs;
2-- Working with suppliers, distribution channels, or customers to reduce or avoid some of their
costs so that the organization establishes a "preferential partnership"; or
3-- Increasing the cost-profiles of competitors.
If these are the activities, resulting in strategic advantage, they must be supported by appropriate
technology and IT. All activities, which form part of “differentiation strategy” and which is a variant
of the competitive strategy should be supported by appropriate IT. Traditional data processing
relates to accounting, order processing and other administrative responsibilities. Things are now
starting to change - partly as a result of changes in technology and partly because senior managers
are beginning to understand the nature of their businesses and the importance of a few core
processes and key tasks. Thus IT is being aimed at the frontline, customer- oriented processes and
activities relating to the production, marketing, delivery, and servicing of the product.
The Value Chain and IT
All components of the value chain are interrelated. When addressing IT, it should be designed to cut
across the functional boundaries and integrate the various elements of the chain. This should lead to
both cheaper systems - and, much more importantly, higher quality, more strategic information
through improved linkages in the chain. IT can be used to redesign and reconfigure the system by
reordering, regrouping, and restructuring the activities within the value chain.
Value Systems and IT
This value chain of an individual organization, which is competing in a particular industry, is
embedded in a larger stream of activities that Porter terms it "value system". This relates to the
external relationships with suppliers at one end, distributors at the other and competitors in the
middle. Again, competitive advantage stems from an ability to manage these relationships more
effectively than competitors. Certainly, in these days of extensive - if not ubiquitous and total -
networking, interoperability of systems is vital. This extends outside of the organization so that it is
certainly preferable for suppliers to share common EDI systems - and even data structures - to
facilitate simpler data interchange with them. Again, this can lead to co-operative purchasing and
economies of scale. It may even extend to risk management and disaster recovery agreements
between organizations with similar standards and similar-sized technical installations.
For many organizations - especially small- and medium-sized enterprises (SMEs) - competitors may
be a source of assistance. In many industries, co-operation with competitors is very common -
through trade organizations, for example. Sometimes, small organizations have to group together in
alliances to compete against a dominant large player. This cooperation may include a shared
approach to, or at least experience exchange in relation to, IT.
Cooperation among organizations in relation to IT usually takes the form of (a) vertical integration,
(b) outsourcing, and (c) quasi-diversification, whereby organizations cooperate across markets or
across industries in order to better exploit their key resources. Adopting parallel or compatible IT
means that relationships with other organizations that were previously not possible due to high
coordination costs or high transaction risk may become feasible. Occasionally, there is very wide co-
operation on IT within a sector or industry. This normally relates to infrastructure components such
as networking and messaging but can apply to transaction-based IT. Such co-operation may be to
the benefit of all if it produces lower costs or better quality service. EDI is an example of a shared
technology - offering economy of information. Few firms have investigated the issue of shared IT -
though the use of packaged software is obviously a form of this. All the strategies discussed above
require the organization to change. IT can be a supportive facilitator of change - extending and
enhancing organization choice and improving the quality of decision making.
Q5- Discuss in detail the sources and types of knowledge.?
ANS- The sources and types of knowledge - Present day’s organizations, large or small, gather vast
amount of knowledge during the course of regular their normal operations. This knowledge remains
in the ‘minds’ of organizational members conducting the operations- be it research, design,
development, manufacturing, or services. This wealth of organizational knowledge (generally
referred to as knowledge assets, knowledge capital, intellectual capital etc.) disappears, when these
persons leave the organization. The effects of losing organizational knowledge is especially
noticeable and can have far reaching implications when people occupying important positions such
as Chief of Designs or Chief of Marketing leave since all the knowledge they gathered over long years
of experience is lost permanently to the organization, along with them. A significant amount of time
must be invested in relearning and reinventing the work processes. Most organizations do have
some manual system of compiling knowledge to create a corporate memory but they have not been
effective mainly due to difficulties in careful organization and accessing of the compiled knowledge.
Computers have not played a significant role in this area, till recently, having mainly concentrated in
the data processing field: obviously due to the faster pay back period for the money invested.
However, things are changing and this field is receiving due attention from developers and
organizations.
Sources of Knowledge
The two sources of Knowledge are:
Internal sources emerging from the operations of the organization- internal sources include the
organizational operations such as design, development, engineering, sales, marketing,
manufacturing, customer contact, etc. This is the basic source of organizational information, which is
controllable and can be easily canalized to KR. In the absence of any formal mechanism, this
knowledge remains in the minds of organization members and usually, disappears with them.

External sources such as Industry/Professional Associations, Commercial web sites etc.- there are
many professional bodies such as IEEE, academic bodies such as universities, research institutions,
industry associations such as NEMA, and commercial organizations. These sources usually make the
knowledge available through web sites and some times through publications. Some of them could be
free services and some could be for a fee. A well-designed KM should be able to take advantage of
both the sources to create and maintain a KR and allow members to easily access the knowledge
stored inside it.

Types of Knowledge

There are two kinds of knowledge- explicit knowledge and tacit knowledge.
Explicit knowledge can be expressed in words and numbers and shared in the form of data, scientific
formulae, specifications, manuals and the like. This kind of knowledge can be readily transmitted
across individuals formally and systematically. Tacit knowledge, or the other hand, is highly personal
and hard to formalize, making it difficult to communicate or share with others. Subjective insights,
intuitions, and hunches fall into this category of knowledge. Difficult to. verbalize, such tacit
knowledge is deeply rooted in an individual’s actions and experience, as well as in the ideals, values,
or emotions he or she embraces.

These two types of knowledge are complementary to each other, and both are crucial to knowledge
creation. They interact with and change into each other in the creative activities of human beings.
Understanding this reciprocal relationship between explicit knowledge and tacit knowledge is the
key to understanding the knowledge-creating process. The interaction between the two types of
knowledge can also be called as the knowledge conversion. Knowledge is created through such
interactions among individuals with different types and contents of knowledge.
Knowledge creation in organizations takes place primarily through the dynamic process of four
different modes of conversion between the two dimensions of knowledge.
Q6- Write short notes on the following:.?
A-- Benefits of corporate planning
ANS- Benefits of corporate planning –

B-- Scope of corporate policy

ANS- Scope of corporate policy- Corporate policies are statements of guidelines for corporate
thinking and action. They lay down the approach before the management to deal with the
challenges in the environment. They cover the following broad areas that affect the decisions of the
organization.
C-- Innovation
ANS- Innovation - The concepts of creativity and innovation are often used interchangeably in the
literature. Consequently, it is important to analyze these concepts in the context of this research.
Some definitions of creativity focus on the nature of thought processes and intellectual activity used
to generate new insights or solutions to problems. Other definitions focus on the personal
characteristics and intellectual abilities of individuals, and still others focus on the product with
regard to the different qualities and outcomes of creative attempts
Creativity as a context-specific evaluation can vary from one group, one organization Innovation and
one culture to another and it can also change over time. Evaluating creativity should, therefore, be
considered at the level of a person, organization, industry, profession, etc. (Ford, 1995). In this unit,
the context of creativity is discussed at the level of the organization and hence, the concept of
creativity can be defined as the generation of new and useful/valuable ideas for products, services,
processes and procedures by individuals or groups in a specific organizational context. Definitions of
innovation found in the literature vary according to the level of analysis, which is used. The more
macro the approach (e.g., social, cultural) the more varied the definitions seem to be (West and Farr,
1990). Some definitions are general and broad, while others focus on specific innovations like the
implementation of an idea for a new product or service. In an organizational environment, examples
of innovation are the implementation of ideas for restructuring, or saving of costs, improved
communication, new technology for production processes, new organizational structures and new
personnel plans or programmes.
West and Farr (1990) define innovation as follows: “the intentional introduction and application
within a role, group or organization of ideas, processes, products or procedures, new to the relevant
unit of adoption, designed to significantly benefit the individual, the group, organization or wider
society”. It appears that the context in which a new idea, product, service or activity is implemented
determines whether it can be regarded as an innovation within that specific context. Innovation is
often associated with change. Innovation is regarded as something new, which leads to change.
However, change cannot always be regarded as innovation since it does not always involve new
ideas or does not always lead to improvement in an organization (CIMA Study Text, 1996; West and
Farr, 1990). An example of change that cannot be regarded as an innovation is changing office hours
in an exceptionally hot summer season.
Although innovation is intangible, it is probably best described as a pervasive attitude that allows
business to see beyond the present and create the future. In short, innovation is the engine of
change and in today’s fiercely competitive environment resisting change is dangerous. Companies
cannot protect themselves from change regardless of their excellence or the vastness of their
current resource base. Change, while it brings uncertainty and risk, also creates opportunity. The key
driver of the organization’s ability to change is innovation. However, simply deciding that the
organization has to be innovative is not sufficient. That decision must be backed by actions that
create an environment in which people are so comfortable with innovation that they create it.
Culture is a primary determinant of innovation. Possession of positive cultural characteristics
provides the organization with necessary ingredients to innovate. Culture has multiple elements that
can serve to enhance or inhibit the tendency to innovate. Moreover the culture of innovation needs
to be matched against the appropriate organizational context. To examine culture in isolation is a
mistake and to simply identify one type of culture and propose it as the panacea to an organization’s
lack of innovation is to compound that mistake

D-- Competitive advantage and R & D

ANS- Competitive advantage and R & D - A firm can enjoy competitive advantage in several ways.
For instance, a firm may gain competitive advantage because:

In practice, customers shop around amongst competitive alternatives by setting parameters for
some of these advantages and then making the final choice on the basis of the key or critical
advantage. Customers today expect high reliability and low prices and these are mutually reinforcing
attributes that a supplier is expected to achieve just to be in the competition. But these are not
often enough. The winning competitor must have both the lowest price and highest reliability or
achieve one of the other competitive advantages that customers value. A firm, which has a strong
R&D programme, can influence all these factors positively and contribute to the competitive
advantage of a firm. Competitive advantage views R&D activities as a way of improving a process,
thus reducing costs, or providing customers with a best-of-class benefits.
Porter defined and discussed three types of generic strategies: cost leadership, differentiation, and
focus. Low cost leadership means essentially what it says ; achieving the lowest-cost position
possible in each operation of the firm, not just manufacturing, through such means as vigorous cost
reduction programmes, strict cost and overhead controls, economies of scale, and learning curve
efficiencies. Differentiation refers to unique feature of a product or service as perceived by a
customer, which directs the customer to prefer it over competing alternatives. A differentiating
uniqueness is typically achieved through such means as design features, establishing a brand-name
identity, or offering superior customer service. The linkage between the earlier list of competitive
advantages and Porter's strategies should be obvious; low-cost leadership corresponds to a potential
competitive advantage; differentiation corresponds to uniqueness in terms of quality, sooner
availability, better customer service, etc.