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ASSIGNMENT – 01 : : : : : : : : : : B.D.S.Anil Kumar 521020628 RAJARAJAN ACADEMY 00117 MBA Strategic Management and Business Policy IV MB0052 15-06-2012

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Directorate of Distance Education Sikkim Manipal University II Floor,Syndicate House Manipal – 576 104

The objective of a marketing company is to raise the sales by 20% by the end of the financial year. Goals cannot be put in a timeframe. planning and implementing the strategy in an organisation to ensure a continued success. For that we first need to understand the goals of business. Strategic management is a long term procedure which helps the organisation in achieving a long .1. distinction between goals and objectives. Objectives are lower level statements that describe the tangible products and deliverables that the project will deliver. In this section we will discuss the difference between goals and objectives. In this unit. Difference between Goals and Objectives In the previous section. Goals are indefinable and the achievement cannot be measured whereas the success of an objective can be easily measured. you studied objectives of business and how it is different from tactics. What are the types of strategies? Strategic management is a systematic approach of analysing. Goals are statements that provide an overview about what the project should achieve. Example . Writing clear goals is an essential section of planning the strategy. Differences between Organisational Goals and Objectives Goals Are long term Are general intentions with broad outcome Cannot be validated Are intangible – can be qualitative as well as quantitative Are abstract Objectives Are usually meant for short term Are precise statements with specific outcome Can be validated Are tangible – are usually quantitative and measurable Are concrete 2. It should align with the business goals. and abstract. Both goals and objectives are the tools for achieving the target. What is meant by ‘Strategy’? Differentiate between goals and objectives. A business cannot progress for a long term without a reliable strategy. Example . its conceptual evolution. but objectives are set with specific timelines.One of the goals of a company helpdesk is to increase the customer satisfaction for customers calling for support. analysing strategic intent through vision and mission statements and finding out the significance of core competencies of business and critical success factors. Define the term “Strategic Management”. Example . Objectives are the targets that an organisation wants to achieve over a period of time. scope and its importance. Strategy is the method by which an organisation systematically achieves its future objectives. Goals are hard to measure and do not have definite timeline.An automobile company has a Goal to become the leading manufacturer of a particular type of car with certain advanced technological features and the Objective is to manufacture 30. you will learn meaning of business strategies. The two concepts are different but related. Goals are indefinable.000 cars in 2011. Goals are long-term targets that should be achieved in a business. Goals are high level statements that provide overall framework about the purpose of the project.

marketing.term goal and its overall responsibility lies with the general management team. finance and personnel (employees). Decisions at functional level are often described as tactical decisions.Tactical of functional level The functional strategy mainly includes the strategies related to specific functional area in the organisation such as production. Business level strategy is more specific and action oriented. The aim of the functional strategy is “doing things right” whereas the corporate and business level strategy stresses on “doing the right thing”. The four grand strategies in a corporate level are: Stability and expansion strategy Retrenchment Corporate restructuring Combination strategies – concept of synergy 2. The basic function of this level is translating the strategic decisions into strategic actions. Business level Business level strategy relates to a unit within an organisation.Operational level Operational level is concerned with successful implementation of strategic decisions made at corporate and business level. It focuses on building a solid foundation that will be subsequently achieved by the combined efforts of each and every employee of the organisation. Mainly strategic business unit (SBU) managers are involved in this level. Considering tactical decisions in functional level strategy describes involving actions to specific functional area. The basic aspects in operational level are: Achieving cost and operational efficiency Optimal utilisation of resources Productivity . It is the process of formulating the objectives of the organisation and allocating the resources among various functional areas. The different types of strategies at functional level are: Procuring and managing Monitoring and directing resources towards the goal 4. pervasive and futuristic in nature. Types of Strategies 1 Corporate level The board of directors and chief executive officers are involved in developing strategies at corporate level. Corporate level strategies are innovative. Tactical decision means “involving or pertaining to actions for short term than those of a larger purpose”. The main aspects of business level strategies are related with: Business stakeholders Achieving cost leadership and differentiation Risk factors 3. It mainly relates to “how a strategy functions” rather than “what a strategy is” in corporate level.

1. A change in any of the forces normally requires a business unit to re-assess the market place given the overall change in industry information. business model or network to achieve a profit above the industry average. Describe Porter’s five forces Model. Porter’s five forces Model This five forces analysis. It has been applied to a diverse range of problems. and the threat of new entrants. from helping businesses become more profitable to helping governments stabilize industries. A clear example of this is the airline industry. profitability is low and yet individual companies. is just one part of the complete Porter strategic models.three forces from 'horizontal' competition: threat of substitute products. which he found unrigorous and ad hoc. Firms are able to apply their core competencies. Porter's five forces is based on the StructureConduct-Performance paradigm in industrial organizational economics. The overall industry attractiveness does not imply that every firm in the industry will return the same profitability. As an industry. The remainder are internal threats. Porter's five forces include . They consist of those forces close to a company that affect its ability to serve its customers and make a profit. Porter referred to these forces as the micro environment. Porter developed his Five Forces analysis in reaction to the then-popular SWOT analysis. Threat of new competition . and two forces from 'vertical' competition: the bargaining power of suppliers and the bargaining power of customers. to contrast it with the more general term macro environment. the threat of established rivals.3. Three of Porter's five forces refer to competition from external sources. by applying unique business models. The other elements are the value chain and the generic strategies. have been able to make a return in excess of the industry average.

It enhances a manager’s abilities to obtain insight of strategic decision making problems and to do justice by extracting their decision making skills. The existence of barriers to entry (patents.) The most attractive segment is one in which entry barriers are high and exit barriers are low.g.Profitable markets that yield high returns will attract new firms. 4. An individual takes the first step towards decision making by . e. 2. if the price of Coke were to rise above the price of Pepsi. Bargaining power of suppliers The bargaining power of suppliers is also described as the market of inputs. the intensity of competitive rivalry is the major determinant of the competitiveness of the industry. it is possible that the Coke drinker would substitute Pepsi for Coke. The following are the features of strategy formulation: Defining the corporate mission and goals Specifying achievable objectives Developing strategies Setting company policy guidelines Systematic approach to strategic decision making process Strategic decision making is a tool to do business in a smarter way. Pepsi is a substitute for coke as. For example. or. Suppliers may refuse to work with the firm. which also affects the customer's sensitivity to price changes. Few new firms can enter and non-performing firms can exit easily. which eventually will decrease profitability for all firms in the industry. It is used for the effective management of environmental opportunities and for the threats which weaken corporate management. components. the abnormal profit rate will tend towards zero (perfect competition).. charge excessively high prices for unique resources. Intensity of competitive rivalry For most industries. 5. 4. and services (such as expertise) to the firm can be a source of power over the firm. etc. Note that this should not be confused with competitors' similar products but entirely different ones instead. rights. Unless the entry of new firms can be blocked by incumbents. when there are few substitutes. Bargaining power of customers (buyers) The bargaining power of customers is also described as the market of outputs: the ability of customers to put the firm under pressure. Threat of substitute products or services The existence of products outside of the realm of the common product boundaries increases the propensity of customers to switch to alternatives. This results in many new entrants. Suppliers of raw materials. labor. Its objective is to express strategical information to achieve a definite goal. 3. What is strategic formulation and what are its processes? Strategy formulation is the development of long term plans.

you can determine whether the risk is manageable or not. When you are satisfied with your collection of realistic alternatives.dividing decision problems into more manageable fragments and explicitly considering the possible options. Few factors that need to be considered when the alternatives are explored are as follows: i. there is usually some degree of uncertainty. By evaluating it. ii. debates and analyse. iii. iii. Implications – Another way to look at your options is to consider the potential consequences of each alternative. ii. iv. Agree on the process – You must focus on the final decision. Brainstorming – It is an effective process which develops creative solutions to problems and enhances the productivity of the organisation. which in turn gives you effective results. Establish the objectives – Define what you want to achieve. When you generate alternatives. Take your valuable time to do so. You must be sure that common errors have not crept into the decision making process. Need to ask the right question – Ask yourself whether you are questioning the right issue or not. After you have evaluated the alternatives. irrespective of the person’s position or power within the organisation. Use creativity tools from the beginning – Apply creativity by thinking from a different perspective and angle. 2) Generating good alternatives 3) Exploring the chosen alternatives 4) Choosing the best alternative 5) Checking and confirming your decision 6) Communicate your decision and move to action . choose the best among the available choices. Inviting others – Asking outsiders to join the discussion. you force yourself to view the problem from different angles. which is made after establishing the objective. you must do the following to create a constructive environment: i. Risk – In decision making. Some of the techniques are as follows: i. Effective decision making involves the following six steps Steps of Strategic Decision Making Process 1) Creating a constructive environment As a strategist. Validation – Exploring the resources leads to a validity check of the product. iii. it is important to explain it to others and start implementing it. which leads to risk. risk and the implications of each choice. vi. Generating ideas from a large number of people – Everybody’s ideas must be heard and given equal weightage. Involve the right people – Make sure you have the right team of people. Allow opinions to be heard – Encourage participants to contribute in discussions. This includes methodical testing of the assumptions and thoroughly reviewing the same. ii. After you have made your decision. v. you can evaluate the feasibility. so check your decisions properly.

new implementation procedures are introduced. If performance results are beyond the tolerance range.A number of questions arising during utilisation and transfer of information have to be solved The questions that arise during utilisation and transfer of information are the following: 3. After the evaluation.Identifying useful information like planning for strategic management. when necessary. One of the obstacles to effective strategic control is the difficulty in developing appropriate measures for important activities. 2. The top management needs to be updated about the performance to take corrective actions for controlling the undesired performance. Explain strategic evaluation and its significance.Process in Strategy Formulation The main processes involved in strategy formulation are as follows: 1. planning or implementation of the strategies will result in negative performance of the organisation. How can we transfer the information? 5. What is the relationship between the partners who holds the requested information? 5. . Stimulate the identification . strategists may see less need for frequent evaluation of their long-range plans. Success today does not guarantee success tomorrow! However. Improper analysis. Lindsay and Rue concluded that forecasting is more difficult under complex and unstable environmental conditions. Utilisation and transfer of useful information as per the business strategies . Strategic evaluation consists of performance and activity reports. What is the nature of the requested information? 6. Strategic control stimulates the strategic managers to investigate the use of strategic planning and implementation. Frequent strategic evaluation activities can control the negative consequences of the environmental complexity and instability issues. Who has the requested information? 4. significance of effective strategic evaluation The strategic-evaluation process with constantly updated corrective actions results in significant and long-lasting consequences. the manager will have knowledge about the cause of the problem and the corrective actions. Strategy evaluation is vital to an organisation‟s well-being as timely evaluations can alert the management about potential problems before the situation becomes critical. objectives to achieve the goals of the employees and the stakeholders. Strategic evaluation and control consists of data and reports about the performance of the organisation. Successful strategists combine patience with a willingness to take corrective actions promptly. the frequencies of strategic evaluation performed were surprisingly found to be vice-versa in stable and unstable industries. Management in dynamic industries seems to have performed fewer strategic evaluation activities when compared to those in stable industries. So.

Explain its importance. It is important to formulate policies to achieve the organisational objectives. It identifies the fundamental activities and provides strategic ways to handle different issues. Policies provide guidelines to the executives to help . Quick decisions – Policies help subordinates to take prompt action and quick decisions." Importance of Business Policies A company operates consistently. It prevents divergence from the planned course of action. The management tends to deviate from the objective if policies are not defined precisely. Policies are derived objectives and provide the outline for procedures. Policies encourage cooperation and promote initiative. The limits within which the decisions are made are well defined. Policies serve as a guidance to administer activities that are repetitive in nature. The complete process of management is organised by business policies. It authorises the lower level management to resolve their issues and take decisions without consulting the top level management repeatedly. Business policies should be set up before hiring the first employee in the organisation. Authority is delegated to the executives who refer the policies to work efficiently. Business policies are the instructions laid by an organisation to manage its activities. They demarcate the section within which decisions are to be taken. "A Business Policy is a predefined course of action set up by top level management to provide guidance towards business strategies and objectives. Business policy analyses roles and responsibilities of top level management and the decisions affecting the organisation in the long-run. It channels the thinking and action in decision making. It saves time by predicting frequent problems and providing ways to solve them. It identifies the range within which the subordinates can take decisions in an organisation. This affects the overall efficiency of the organisation. The policies are articulated by the management. It is a mechanism adopted by the top management to ensure that the activities are performed in the desired way. It deals with the constraints of real-life business. It recommends the manner in which the objectives are achieved. Business policies are important due to the following reasons: Coordination – Reliable policies coordinate the purpose by focusing on organisational activities. They help subordinates to take decisions with confidence without consulting their superiors every time. Business policy involves the acquirement of resources through which the organisational goals can be achieved. This helps in ensuring uniformity of action throughout the organisation. both internally and externally when the policies are established. They ensure that the activities are synchronised with the objectives of the organisation. Decentralisation – Well defined policies help in decentralisation as the executive roles and responsibility are clearly identified. The required managerial procedures can be derived from the given policies. Define the term “Business policy”. Effective control – Policies provide logical basis for assessing performance. Every policy is a guide to activities that should be followed in a particular situation. It also deals with the major issues that affect the success of the organisation.6.

them in determining the suitable actions which are within the limits of the stated policies. . Policies contribute in building coordination in larger organisations.

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