Business strategic management

ASSIGNMEMT

SUBMITTED TO
MRS. DIVYA SHARMA

Submitted by:

Karmdeep

01290201817

BBA (B&I)1st Shift

Q1 Write a short note on the following;

1. Strategic control
Strategic control is the process used by organizations to control the formation
and execution of strategic plans; it is a specialize form of management control,
and differs from other forms of management control (in particular from
operational control) in respects of its need to handle uncertainty and ambiguity
at various points in the control process.

Strategic control is concerned with tracking the strategy as it is being

implemented, detecting problems or changes in the premises and making
necessary adjustments. In contrast to post- action control, strategic control is
concerned with controlling and guiding efforts on behalf of the strategy as
action is taking place.

2. Core competencies
Core competency is an organization's defining strength, providing the
foundation from which the business will grow, seize upon new opportunities
and deliver value to customers. A company's core competency is not easily
replicated by other organizations, whether existing competitors or new entries
into its market.
A company can have more than one core competency. Core competencies,
which are sometimes called core capabilities or distinctive competencies, help
create a sustained competitive advantage for organizations.
The concept of identifying and nurturing core competencies to drive competitive
advantages and future growth applies to companies across industries.

3. Business policy vs Strategic management

The following are the major differences between strategy and policy;
 • The strategy is the best plan opted from a number of plans, in order to
achieve the organisational goals and objectives. The policy is a set of
common rules and regulations, which forms as a base to take the day to
day decisions.
• The strategy is a plan of action while the policy is a principle of action.
• Strategies can be modified as per the situation, so they are dynamic in
nature. Conversely, Policies are uniform in nature. However, relaxations
can be made for unexpected situations.
• Strategies are associated with the organizational moves and decisions
for the situations and conditions which are not encountered or
experienced earlier. On the contrary. Policies define the rules for routine
activities, which are repetitive in nature.
• Strategies are concentrated toward actions, whereas Policies are
decision-oriented.
• The top management always frames strategies, but sub-strategies are
formulated at the middle level. In contrast to Policy, they are, in general,
made by the top management.
• Strategies deal with external environmental factors. On the other hand,
Policies are made for the internal environment of business.
• Strategies often contain methodologies used to achieve the set target. In
contrast, Policies determine what is to be done and what should not be
done in specific circumstances.

4. Categorization of environmental factors

Environment analysis is described as the process which examines all the
components internal or external, that has an influence on the performance of
the company. The internal components indicate the strengths and weaknesses
of the business entity whereas the external components represent the
opportunity and threats. Internal Environment:

Internal environment:
Survival of a business depends upon its strengths and adaptability to the
environment. The internal strengths represent its internal environment. It
consists of financial, physical, human and technological resources. Financial
resources represent financial strength of the company. Funds are allocated
over activities that maximize output at minimum cost, that is, optimum allocation
of financial resources.

The operative and managerial decisions are taken by the human resources.
Technological resources represent the technical know-how used to
manufacture goods and services. Internal environment consists of controllable
factors that can be modified according to needs of the external environment.
External Environment:
The external environment consists of legal, political, socio-cultural,
demographic factors etc. These are uncontrollable factors and firms adapt
tothis environment. They adjust internal environment with the external
environment to take advantage of the environmental opportunities and strive
against environmental threats. Business decisions are affected by both internal
and external environment.

5. Role of business environment in strategic decision making

A business enterprise is a part of society and changes in environment influence its
functioning and performance. The environment may pose constraints on the enterprise as
well as open new opportunities for it. The impact of different elements of macro environment
on business decision-making may be summarized as follows:
The economic system prevailing in a country determines the scope for private
enterprises. The structure of the economy in terms of contributions of agriculture,
industry and services indicates the prospects for different types of business. The
economic environment exercises most significant influence on business because
business itself is an economic institution.
Social and cultural forces exercise significant influence on business For example,
social consciousness among public requires more responsible behavior on the part
of business in the matter of environment, customer service and labour welfare.
The political and legal environment provides the framework within which business has
to function. The viability of a business firm depends upon its ability for meeting the
challenges arising out of political and legal change. No business can succeed without
understanding the dynamics of the country’s political system and without the support
of public opinion. A stable, efficient and honest political system serves as a boost for
growth of business, political instability due to terrorism, fall of Government, civil war,
etc. restricts business growth. Political decisions have serious economic and
business implications. In fact major economic policies such as industrial policy, fiscal
policy and foreign trade policy are political decisions.
Technological, physical and natural environment also affect business. For example,
cable TV has adversely affected radio and cinema. Xerography has example, cable
TV has adversely affected radio and cinema. Xerography has damaged carbon paper
business. Digital watches destroyed business prospects of traditional watches.
Information technology and telecommunications have given rise to a global market
which requires better system of production (robots controlling factories) and
distribution (internet marketing).

• Long range planning vs strategic planning.

For people working outside of strategy departments the difference between strategic
planning and long term planning might not be apparent. There is however a marked contrast
between the two, with both serving critical functions in the continued success of an
organisation.

Strategic planning is normally conducted by an organisation's most senior executives, with

emphasis placed on determining the companies mission, vision and overarching strategy.
Strategic planning is also an ongoing process, where management continuously appropriate
resources to initiatives that need to be prioritised.

Long term planning is about setting the process by which the strategic plan will be achieved.
It's about aligning your project to fit in with your strategic goals and coordinating departments
so that they're in sync and ready to hit the organisations' targets. In contrast to Strategic
planning, Long term planning is normally given a timeframe, often over five years depending
on the strategic objective it is trying to accomplish.

Above all, strategic planning is about defining policy and a mission that the company wants
to promote, like sustainability for example. Strategic Planning is about allocating resources
to meet these demands. Both strategies are imperative, and both aid growth and profitability,
so it's important that companies get them right.

Q2 Differentiate between vision and mission of a business firm. How vision and
mission statement of business firm are made?
Definition of vision and mission: A vision statement focuses on tomorrow and what an
organization wants to ultimately become. A mission statement focuses on today and what
an organization does to achieve it. Both are vital in directing goals.

Key Differences Between Mission Statement and Vision Statement

1. The vision statement discusses the desired position of the company in future. On the
contrary mission statement talks about the company’s business, purpose and the
approach to pursue them.
2. The Vision Statement remains same till the company survives. Conversely, the
Mission Statement may change if required by the company.
3. The Vision Statement is made to inspire. On the other hand, the Mission Statement
is made to inform.
4. The Vision Statement shows the company’s future aspirations whereas the Mission
Statement explains the company’s core purpose.
5. The Vision Statement is shorter than Mission Statement.

The vision statement What is

a vision statement?
Your vision statement gives the company direction. It is the future of the business, which
then provides the purpose.
The vision statement is about what you want to become. It’s aspirational. Vision
statement questions look like:
What are our hopes and dreams?
What problem are we solving for the greater good?
Who and what are we inspiring to change?
The vision statement promotes growth, both internally and externally. A strong vision
helps teams focus on what matters the most for their company. It also invites innovation.
A purpose-driven company envisions success as a whole, because they know what
success means for their company.
On the flip side, a lack of vision is a road to nowhere for a business. Imagine this:
stagnation, outdated processes, moving without purpose, feeling uninspired. Can a
company even survive without a clear vision? You know the answer to that one.
The Mission Statement What
is a mission statement?
Your mission statement drives the company. It is what you do/the core of the business, and
from it come the objectives and finally, what it takes to reach those objectives. It also shapes
your company’s culture.
Mission statement questions look like:
What do we do?
Whom do we serve?
How do we serve them?
This trickle-down effect of a mission statement confirms its value at any company. Just by
its definition, you can quickly see how a solid mission motivates a team to advance toward
a common goal, because they started at the same place and they are working together to
reach the same end-goal.
The vision statement and mission statement are often confused, and many companies use
the terms interchangeably. However, they each have a different purpose. The vision
statement describes where the organization wants to be in the future; the mission statement
describes what the organization needs to do now to achieve the vision. The vision and
mission statements must support each other, but the mission statement is more specific. It
defines how the organization will be different from other organizations in its industry.

Q3 Briefly discuss the major strategic options available to forms for

stability, expansion, and retrenchment.
Ans: Strategies used to make decisions regarding the allocation of resources or pursuing
an operational strategy are often categorized as stability strategies, expansion (growth)
strategies, retrenchment strategies, or combination strategies. Each is dealt with below.

1. STABILITY STRATEGY
Stability strategy is a strategy in which the organization retains its present strategy at the
corporate level and continues focusing on its present products and markets. The firm stays
with its current business and product markets; maintains the existing level of effort; and is
satisfied with incremental growth. It does not seek to invest in new factories and capital
assets, gain market share, or invade new geographical territories. Organizations choose this
strategy when the industry in which it operates or the state of the economy is in turmoil or
when the industry faces slow or no growth prospects. They also choose this strategy when
they go through a period of rapid expansion and need to consolidate their operations before
going for another bout of expansion.

2. EXPANSION STRATEGY
Firms choose expansion strategy when their perceptions of resource availability and past
financial performance are both high. The most common growth strategies are diversification
at the corporate level and concentration at the business level. Reliance Industry, a vertically
integrated company covering the complete textile value chain has been repositioning itself
to be a diversified conglomerate by entering into a range of business such as power
generation and distribution, insurance, telecommunication, and information and
communication technology services.

Diversification is defined as the entry of a firm into new lines of activity, through internal or
external modes. The primary reason a firm pursues increased diversification are value
creation through economies of scale and scope, or market dominance. In some cases firms
choose diversification because of government policy, performance problems and
uncertainty about future cash flow. In one sense, diversification is a risk management tool,
in that its successful use reduces a firm’s vulnerability to the consequences of competing in
a single market or industry. Risk plays a very vital role in selecting a strategy and hence,
continuous evaluation of risk is linked with a firm’s ability to achieve strategic advantage
(Simons, 1999). Internal development can take the form of investments in new products,
services, customer segments, or geographic markets including international expansion.
Diversification is accomplished through external modes through acquisitions and joint
ventures. Concentration can be achieved through vertical or horizontal growth. Vertical
growth occurs when a firm takes over a function previously provided by a supplier or a
distributor. Horizontal growth occurs when the firm expands products into new geographic
areas or increases the range of products and services in current markets.

3. RETRENCHMENT STRATEGY
Many firms experience deteriorating financial performance resulting from market erosion
and wrong decisions by management. Managers respond by selecting corporate strategies
that redirect their attempt to turnaround the company by improving their firm’s competitive
position or divest or wind up the business if a turnaround is not possible. Turnaround strategy
is a form of retrenchment strategy, which focuses on operational improvement when the
state of decline is not severe. Other possible corporate level strategic responses to decline
include growth and stability.

Q4. Discuss the BCG and Spotlight strategic model. What role they play
in choice of strategy. Also differentiate between the two.

Ans. The Boston Consulting Group's Growth Share Matrix, the BCG Model is a method of
analysis that businesses and other organizations and use to focus on strategy, cash flow
and profitability.
1. Dog- (LOW GROWTH RATE /LOW MARKET SHARE) competitive disadvantage. Cost
cutting, divestment or even liquidation (unless there are strong reasons for keeping them)
So as to maximize short term cash flows.
2. Cash cows- (LOW GROWTH/ HIGH MARKET SHARE) strong competitive position but
with low growth potential. control the investment and increase the cash flows to be used
in high growth segments.
3. Question marks or wildcats- (HIGH GROWTH/LOW MARKET SHARE)
Business units in this category operating at a competitive disadvantage but having a high
growth market potential may BCG market growth potential. But cash demand Being high
and ca generation low, it may not be possible to improve competitive position and increase
market share. It would be thus desired withdraw from the business.
4. Star (HIGH GROWTH/ HIGH MARKET SHARE)
Most favorable position. Resources should be allocated to the units to grow faster than
competitors.

GE nine-box matrix or Spotlight strategy mode

GE nine-box matrix is a strategy tool that offers a systematic approach for the multi business
enterprises to prioritize their investments among the various business units. It is a framework
that evaluates business portfolio and provides further strategic implications.
Each business is appraised in terms of two major dimensions – Market Attractiveness and
Business Strength. If one of these factors is missing, then the business will not produce
desired results. Neither a strong company operating in an unattractive market, nor a weak
company operating in an attractive market will do very well.

The vertical axis denotes industry attractiveness, which is a weighted composite rating
based on eight different factors. They are:

• Market size and growth rate

• Industry profit margins
• Intensity of Competition
• Seasonality
• Product Life Cycle Changes
• Economies of scale
• Technology
• Social, Environmental, Legal and Human Impacts

What does the horizontal axis represent?

It indicates business strength or in other words competitive position, which is again a
weighted composite rating based on seven factors as listed below:
• Relative market share
• Profit margins
• Ability to compete on price and quality
• Knowledge of customer and market
• Competitive strength and weakness
• Technological capability
• Caliber of management
The two composite values for industry attractiveness and competitive position are plotted for
each strategic business unit (SBU) in a COMPANY’S PORTFOLIO. The PIE chart (circles)
denotes the proportional size of the industry and the dark segments denote the company’s
respective market share.

The nine cells of the GE matrix are grouped on the basis of low to high industry
attractiveness, and weak to strong business strength. Three zones of three cells each are
made, indicating different combinations represented by green, yellow and red colors. So it
is also called ‘Stoplight Strategy Matrix’, similar to the traffic signal.

• The green zone suggests you to ‘go ahead’, to grow and build, pushing you through
expansion strategies. Businesses in the green zone attract major investment.

• Yellow cautions you to ‘wait and see’ indicating hold and maintain type of strategies
aimed at stability.

• Red indicates that you have to adopt turnover strategies of divestment and liquidation
or rebuilding approach.

This matrix offers some advantages over BCG matrix in that, it offers intermediate
classification of medium and average ratings. It also integrates a larger variety of strategic
variables like the market share and industry size.

Advantages
• Helps to prioritize the limited resources in order to achieve the best returns.
• The performance of products or business units becomes evident.
• It’s more sophisticated business portfolio framework than the BCG matrix.
• Determines the strategic steps the company needs to adopt to improve the
performance of its business portfolio.

Disadvantages
• Needs a consultant or an expert to determine industry’s attractiveness and business
unit strength as accurately as possible.
• It is expensive to conduct.
• It doesn’t consider the harmony that could exist between two or more business units.

BASIS FOR COMPARISON BCG MATRIX GE MATRIX

 Meaning BCG Matrix, is a growth GE Matrix implies
share model, representing multifactor portfolio matrix,
growth of business and the that assist firm in making
market share enjoyed by the strategic choices for product
firm. lines based on their position
in the grid.
Number of cells Four Nine
Factors Market share and Market Industry attractiveness and
growth Business strengths
Objective To help companies deploy To prioritize investment
their resources among among various business
various business units. units.
Measures used Single measure is used. Multiple measures are used.
Classification Classified into two degrees Classified into three degrees

Q5. Explain various techniques of environment scanning such in detail.

Environmental Threat and Opportunity Profile Analysis (ETOP) 1. Environmental
Threat and Opportunity Profile Analysis (ETOP)
ETOP is considered as a useful device that facilitates an assessment of information related
to the environment and also in determining the relative significance of external environment
threats and opportunities to systematically evaluate environmental scanning. By dividing the
environment into different sections, the ETOP analysis helps in analyzing its impact on the
organization. The analysis is based on threats and opportunities in the environment.
2. Quick Environmental Scanning Technique Analysis (QUEST)
QUEST is an environmental scanning technique that is designed to assist with
organizational strategies by keeping adheres to change and its implications. Different steps
involved in this technique are as follows:
• The process of environmental scanning starts with the observation of the
organization’s events and trends by strategists.
• After observation, important issues that may impact the organization are considered
using environment appraisal.
• A report is created by making a summary of these issues and their impact.
• In the final step, planners who are responsible for deciding the feasibility of the
proposed strategy, review reports.
3. SWOT Analysis
SWOT analysis stands for strengths, weaknesses, opportunities and threats analysis of a
business environment. Strengths and weaknesses are an organization’s internal factor while
threats and opportunities are considered as external factors. So, the process of SWOT
analysis includes the systematic analysis of these factors to determine an effective
marketing strategy. It is a tool that is used by the organization for auditing purposes to find
its different key problems and issues.
These are identified through internal and external environmental analysis.

Internal environment analysis/ scanning

Different factors are considered while analyzing the internal environment of an organization
like the structure of the organization, physical location, the operational capacity and
efficiency of the organization, market share, financial resources, skills and expertise of
employees, etc.

i. Strengths: The strength of any organization is related to its core competencies i.e.
efficient resources or technology or skills or advantages over its competitors. For
example, the marketing expertise of a firm can be its strength. Apart from this, an
organization’s strength can be:
• Strong customer relations
• Market leader in its product or services
• Sound market image and reputation
• Smooth cash-flows

i. Weaknesses: A weakness or limitation of an organization is related to the scarcity of its

resources or skill-set of staff or capabilities that creates an adverse effect on its
performance. For example, limited cash-flow and high cost are considered as a
financial weakness of the organization. Similarly, other weaknesses can be:
• Poor product quality
• Low productivity
• Unrecognized brand name or poor brand image

External environment analysis/scanning

Different factors that are considered while scanning the external environment of the
organization like Competitors, customers, suppliers, technology, social and economic
factors, political and legal issues, market trends, etc.

ii. Opportunities: An opportunity of the organization’s environment is considered as its

most favorable situation. These are the circumstances that are external to the
business and can become an advantage to the organization. For example, different
opportunities for a firm can be:
• Social media marketing
• Mergers & acquisitions
 • Tapping new markets
• Expansion in International market
• New product development

iv. Threats: Threats of an organization are current or future unfavorable situations that
may occur in its external environment. For example, below are a few major threats
for a firm:
• A new competitor in the market
• The slow growth of the market
• Changing customer preferences
• Increase in the bargaining power of consumers
• Change in regulations or major technical changes

4. PEST Analysis
PEST technique for a firm’s environmental scanning includes analysis of political, economic,
social, and technical factors of the environment.

a) Political/ Legal factors: Different factors like changes in tax policy, availability of raw
material, etc. creates a direct effect on a business. So organizations are required to
constantly monitor tax-related policy changes as an increase in tax may increase the heavy
financial burden on them. Similarly, different laws like “Consumer protection act” also play
an important role in an organization’s operation activities as it is important to abide by the
act.

More examples can be foreign trade policy, political changes, regulations in competition,
trade restrictions, etc. also considered as different political/ legal factors that exist in the
external business environment.

b) Economic factors: Different economical Factors like the unemployment rate,

inflation, cost of labor, economic trends, disposable income of consumers, monetary
policies, etc. play an important role in environmental scanning.

For example, in the case of high unemployment, a company may decrease the prices of its
products or services and in opposite situation i.e. when the unemployment rate is low then
prices can be high. This happens because if more customers are unemployed then by
lowering the prices, an organization can attract them.

c) Social / Cultural factors: Attitude, trends, and behavioral aspects of society also
create an impact on the functioning of the organization. Studying and understanding the
lifestyle of consumers is very much required to target the right audience and to offer the right
product or services based on their preferences.
For example, Issues and policies related to the environment like pollution control are also
being considered by organizations to ensure that it operates in an environment-friendly
atmosphere. Taking care of the cultural aspect of different countries while doing business at
the international level, is also an important factor.

d) Technological Factors: Technological factors affect the way firms produce products
and services as well as market them. Like, “processes based on new technologies” is one
of the important factors of a technological environment. To maximize profits, production
should be handled most cost-effectively and this, technology has an important contribution.

For example, an increase in computer and internet-based technology is playing a major role
in the way organizations are distributing and marketing their products and services. Also,
different advancements in technologies like automation of the manual process and use of
machinery based on more advanced and latest technologies, more investment in research
& development by organizations have increased their efficiency by increasing production in
less time, cost-reduction and better investment in the long run.