Question 1 : What is strategy? Explain some of the major reasons for lack of strategic management in some companies?

Answer : Strategy : Chandler (1962): The determination of the basic long-Term goals and objectives of an enterprise and the adoption of the courses of action and the allocation of resources necessary for carrying of these goals. Andrews (1962) : The pattern of objectives, purpose, goals and the major policies and plans for achieving these goals stated in such a way so as to define what business the company is or is to be and the kind of company it is or is to be. Glueck (1972)-A unified , comprehensive and integrated plan designed to assure that the basic objective of the enterprise are achieved. Ansoff (1984) - Basically , a strategy is a set of decision-making rules for the guidance of organisational behaviour Major reasons for Lack of Strategic Management in some companies : 1. Poor reward structure : When an organization achieve success, it often fails to reward its managers or planners. But when failure occurs, the company may punish the managers concerned. In such a situation , it is better for individual managers to do nothing than to risk trying to achieve something , fail and be punished. 2. Content with success : If an organization is generally successful , the top management or individual managers may feel that there is no need to plan and strategize because everything is fine. However, they forget that success today does not guarantee success tomorrow. 3.Overconfidence : As managers gain experience, they may rely less on formalised planning and more on individual initiative and decisions. But this is overconfidence and not appropriate way , it can lead to complacency and ultimately can bring downfall. 4. Fire-Fighting: An organization may be so deeply engrossed in crisis management and fire fighting that it may not have to plan and strategize. 5. Waste of time: Some organizations view planning as a waste of time because no tangible marketable produced through planning .But they forget that time spent on planning is an investment, and there would be returns, both tangible, in due course. 6. Too expensive : Some organizations are culturally opposed to spending resources on matters like planning which do not produce instant or immediate results.
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7. Previous bad experience: Mangers may have had previous bad experience with planning, that is, cases in which plans have been cumbersome, impractical or inflexible. 8. Honest difference of opinion : Some managers may sincerely think that a plan is not correct, there are some differences in opinion of the people as everyone has their own perception and this may lead to difference of opinions and eventually to lack of planning due to lack of consensus. 9. Self-Interest: When management has achieved status, privilege or self-esteem through effectively using an old system, it often sees a new plan or a new system as unnecessary or a threat. 10. Fear of the unknown: Managers may not be sure of their abilities to learn new skills or take on new roles or adapt to new system. 11. Fear of failure: Whenever something new or different is attempted, there is a chance of success, but , there is also some risk of failure .Many mangers & companies may like to avoid management for fear of failure. 12. Suspicion: Employees may not trust management, or the management may not have enough confidence in the managers .This gives rise to mutual suspicion.

Question 2 : Explain the following: (a) Core competence (b) Value chain analysis Answer 2 : Core Competence: Core competence of a company is one of its special or unique internal competences. Core competence is not just a single strength or skill or capability of a company; it is "interwoven resources, technology and skill or synergy culminating into a special or core competence. Core competence gives a company a clear competitive advantage over its competitors. Sony has a core competence in miniaturization: Xerox core competence in photocopying etc. Hamel and Prahalad, two of the greatest exponents of core competence, argue in 'The Core Competence of the Corporation that the central building block of the corporate strategy is core competence. Hamel and prahalad defined core competence as the combination of individual technologies and production skills that underlie a company's product lines. To achieve competence, a particular competence level of company should satisfy three criteria: a) It should relate to an activity or process that inherently underlies the value in the product or service as perceived by the customer. This is important because

managers often take an interval view of value and either miss or deliberately overlook the customer perspective. b) It should lead to a level of performance in a product or process which is significantly better than those of competitors. Benchmarking is a good way and is generally recommended for undertaking performance standard and also for differentiating between good and bad performance . c)It should be robust, i.e., difficult for competitors to imitate. In a fast charging world, many advantages gained in different ways are not robust and are likely to be short lived. Core competence is not such incremental changes or improvements , but, about the whole process through which continuous change and improvement take place which lead to or sustain clearly differentiated advantage.

Value chain analysis : Various competences and resources of an organization can be integrated into a chain of activities which an organization performs to meet customer demand. Since each of these activities is expected to create a value when it is performed , the chain can approximately be called a value chain. Michael Porter (1985) introduced the concept of value chain analysis. Value analysis help in understanding how value is created in organizations through various activities. These activities can be divided into two broad categories : Primary activities and support activities. Primary activities are directly concerned with the creation or delivery of a product or service or customer value .Support activities, as the name indicates ,support the primary activities , or more , correctly, help to improve the effectiveness or efficiency of primary activities. Primary activities can be divided into 5 major areas: Inbound logistics : These are activities concerned with receiving, storing and distributing raw materials and inputs to the production or service division. It includes materials handling, stock control, transportation of inputs, etc. Operations : These are activities involved in transforming various inputs into final product or service. Outbound Logistics : These includes collecting , storing and distributing or delivering final products to customers. It includes warehousing, transportation etc. Marketing and sales : These comprise activities such as advertising, sales, promotion , selling, channel management etc.

Service : These include activities which maintain or enhance value of a product or service such as installation, repair, training , supply of spares and prompt after-sales service , etc. Support Services can be divided into four categories : Procurement : This relates to the processes for acquiring or purchasing various resource input like raw materials , intermediate inputs, equipment , machinery etc. Procurement primarily supports inbound logistics and operations. Technology Development : Technology is involved in all value creations. Key technologies are concerned directly with the product or with processes. Technology development is fundamental to the innovative capacity of an organization. Human resource management : This provides support to all primary activities in the value chain. It is concerned with recruiting , managing , training and developing people within the organisation. Infrastructure : This is the organizational system including finance , MIS general management, strategic planning , etc. Competences or activities in the value chain can contribute to customer value in two ways. First is competences in individual activities, Second is the competence in linking activities together. Organization can effectively use value chain analysis to identify the weak links in the chain for further analysis, review and necessary action.

Question 3 : Describe in brief the following environmental factors which a business strategist considers: (a) Political factors (b) Technology Political Factors : Political factors or political conditions can have significant impact on industry, business and the corporates. Political stability improves business environment and encourages economic and business activities. Political instability produces the opposite effects.Political factors donot refer to only national political conditions or relations , but also to international relation. Improved relations between the US and China in the mid 70s resulted in trade agreement between the two countries. The trade agreement provided opportunities to US electronics manufactures to commence operations in China.Rubock has developed an analytical framework for identifying and assessing political risks which may affect business conditions.Sources of political risks can be many.Major risk factors : electoral majority of the party in power, internal dissensions within the ruling party ; strengths of the parliamentry opposite parties; conflicting political ideologies ; insurgencies in border areas , international power ailgnments and alliances , etc.
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Two contrasting Indian examples of the impact of political environment on business. The progressive political philosophy of Chandrababu Naidu during his tenures as the chief minister of Andhra Pradesh led to the creation of ' Cyberabad'. IT companies have found Hyderabad , nicknamed by the media as ' Cyberabad', to be the most hospitable location for development of IT , mostly because of highly supportive political climate. Chandrababu had taken keen personal interest in IT ;and had encouraged and ensured use of IT in governance by simplifying rules and procedures , offering concessions and building good supportive infrastructure. The Ayodhya-Babri Masjid episode became a political issue and provoked violence in different parts of the country , and caused serious law and order problems during December 1992 and January 1993 . Apart from the apprehensions of political instability , the events disrupted transport , slowed down industrial production and growth of exports , and , also reduced government revenue. Technology : Technology , as an environmental factor , influence strategic planning and management in number of ways.Technology changes lead to the shortening of product life cycles and create new sets of consumer expectations .Electronic products are a good example. This sector is experiencing the most rapid changes today.One can clearly see the technological revolution in the colour Tv market. Sometimes advance signals on technological developments are available through research and development and industry /trade journals and magazines.In a different way , Technological developments affect a company's raw material , packaging , operations , products and services. For exmaple , developments in the plastics and packaging industry have brought in new packaging in the form of tetrapacks , pet bottles, cellophane , etc. This has made the packaging more attractive , carrying of the product more convenient and has definitely reduced the cost of packaging and the product. Technological development also provides an opportunity to companies to develop new products.On the other hand , companies which ignore these developments face a crisis and eventually may even face extinction.The indian automobile industry is a good example. With the introduction of Maruti 800 which caught the imagination of consumers. Hindustan Motors and premier Automobiles had to improve their vehicle performances in terms of fuel efficiency , driver comfort , aesthetic appeal etc. But what they did was to bring in peripheral changes only and those were not enough. The result : Padmani is extinct today with Ambassador following suit.

Question 4 : Write a brief note on Turnaround Strategy : Turnaround Strategy : Corporate turnaround may be defined as organizational recovery from business decline or crisis. Business decline for a company means continuous fall in turnover or revenue , eroding profit, or accrual or accumulation of losses. So , business or organizational decline , like business performance , is understood in relative terms , that is, compared with the past . But , some strategy analysts describe busines decline in terms of current comparisons also; for example relative to industry rates or averages or even relative to economic growth of the country. Corporate crisis means deeopening or perpetuation of a decline . Turnaround strategies are usually required for crisis situation . It organizational decline is not continuous or severe , corporate restructuring can provide the solutions. That is why turnaround strategy may be said to be an extention of restructuring strategy. When restructuring is very comprehensive and leads to corporate recovery, it almost becomes a turnaround strategy as mentioned above in the case of voltas. Corporate or business decline manifests itself in many forms or symptoms , including profitability . These symptoms are actually different performance criteria of companies . Major symptoms or criteria or situations which signal towards the need for a turnaround strategy are : Steadily declining market share. Continuous negative cash flow. Negative profit or accumulating losses. Mismanagement and low morale. With some or all these symptoms becoming clearly visible for a company , a turnaround or recovery become high imperative. But the situation should be carefully reviewed to assess the extent of recovery possible before undertaking any such programmes. Slatter (1984) contends that there are four recovery situations in terms of feasibility or success : a) Realistically non-recoverable situation. b) Temporary recovery situation c) Sustained survival situation d) Sustained recovery situation Realistically non-recoverable situation is one in which chances of survival are very little , because the company is not competitive , the potential for improvement is low , clear cost disadvantage exists and demand for the company's product is in decline stage.
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Temporary recovery situation exists when there can be intial successful recovery, but, sustained turnaround is not possible .This can happen because repositioning of the product is possible. Sustained survival situation means that recovery is possible but potential for future growth does not exist . This may happen primarily because the industry is in a declining phase. Sustained recovery situation is one in which successful turnaround is possible for sustained growth. In such cases , business decline might have been caused by internal organizational factors or external or environmental conditions which the company is able to deal with effectively .

Generally there are two methods of corporate turnaround :Surgical and nonsurgical turnaround : Surgical Turnaround : It is most practiced in West,involves sweeping changes like firing of staff , managers , closingdown operations etc. Some call it bloodbath or bloodshed. Non-Surgical Turnaround : adopts the opposite approach , that is, peaceful means - revamping or through meetings, discussion , persuasions , consensus, etc. Turnaround management of the human type may involve negotiated and humane layoffs and divestiture, but not a bloodbath. This type of turnaround also is generally brought about by the new helmsman.

Question 5 : Define the term strategic alliance. What are its characteristics and objectives? Answers : Strategic alliance may be defined as cooperation between two or more organizations with a common objective , shared control and contributions by the partners for mutual benefit.There are essential features or charactersterstics of strategic alliance. .A typical strategic alliance exhibits five essential features : a) Two or more organizations join together to pursue a defined objective or goal during a specified period , but , remain organizationally independent entities ; b) The organizations pool their resources and investments and also share risks for their mutual ( and not individual ) interest/benefit.
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c) The alliance partners contribute , on a continuing basis , in one or more strategic areas like technology , process, product, design etc. d) The relationship among the partners is reciprocal with partners sharing specific individual strengths or capabilities to render power to the alliance. e) The partners jointly exercise control over the performance or progress of the arrangement with regard to the defined goal or objective and share the benefits or results collectively. Objectives The basic objective behind all strategic alliance is to secure competitive or strategic advantage in the market . All strategic alliances have long - term objective or purpose. Many companies realize that they do not possess adequate resources - financial and managerial - to pursue an innovation, develop a new product or technology .They look towards other organization to supplement or augment their resources or capabilities for the fulfilment of their objective.It can also be a functional area where they have very little expertise.Six objectives or purposes are observed : a) Develpoment of a new product : In the pharmaceutical industry,new product development takes place on a continuous basis and in this, many strategic alliances are formed between pharmaceutical companies and research laboratories and institutions for R&D. b) Development of a new technology : Development of new technology is a long term process , and , also many times, involves considerable cost. c) Reducing manufacturing cost : Co- production , common in the pharmaceutical industry, is a good form of strategic alliances to reduce manufacturing cost through economies of scale. d) Entering new markets : This is often the objective in international business. Many foreign companies enter into strategic alliances with some local companies to enter into and establish themselves in that country. e) Marketing and sales : This is common in both national and international business. Many manufacturers in India have marketing and sales arrangements with companies Like MMTC and Tata exports for both domestic and international marketing.
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f) Distribution : In pharmaceutical and other industries where distribution represents high fixed cost , potential competitors swap their products for distribution in the respective markets where they have well-established distribution systems. Strategic alliance are non-equity based , i.e. none of the parties invest any equity capital in such alliances..But,funding is involved and funding can be by one of the parties or all of them.The nature of funding depends on the type of strategic alliance i.e. whether new product development , technology development or transfer ,marketing or sales etc. and also the parties involved.

Que 6 :Write short notes on : Answer : Competative Advantage : Competative Advantage also called strategic advantage , is essentially a position of superiority of an organization in relation to its competitors.Competitive advantage exists when there is a match between the distinctive competences of a firm and the factors critical for success within its industry that permits the firms to outperfom competitors.The definitions shows that superiority of a company over its comoetitors exists because the company has developed some unique competence - core competence or distinctive competence - which matches the environmental factors or success factors in the Industry in a better way than the capabilities of competitors. The process of strategic management is coming to be defined , in fact , as the management of competitive advantage , that is , a process of identifying, developing and taking advantage of enclaves in which a tangible and preservable business advantage can be achieved.

Porter's Competition Threat Model : A vital task of a strategist is to anticipate and / or recognize the nature of competition and potential threat from competitors and to develop appropriate response strategies. The most difficult task in this is to properly assess the magnitude of existing competition and correctly foresee the threat from new and emerged competitors. Porter (1980) in his pioneering work on competitive strategy had identified five major types of competitive threats.

1.Industry Competitors : Various degrees or intensities of competitive rivalry exist in the market for a product.This is the battle for market share and is the most immediate concern of a company,Particularly if it is a market leader or challenger.Ongoing battles of coca - cola and pepsi.

2.Threat of substitutes : Substitute products reduce demand for a particular product or a category of products because some customers switch over to the alternatives . Substitution depends on whether an alternative product offers higher perceived value to the customers. Substitution may take three different forms : Product -for-product substitution , substitution of need and generic substitution. Substitution of need means a new product or service makes an existing product or service reduntant, Generic substitution takes place when different products or service compete for a share in the same family income or household income. 3.Bargaining Power of buyers : Buyers are generally in a better bargaining position. But, they can become stronger bargainers or create competition among suppliers under certain specific condition. Some of these conditions are ; the buyer purchase a very significant proportion of total output of the supplier-can happen typically in industrial products. 4.Bargaining power of suppliers : Suppliers, or sellers , generally in a weak bargaining position , can be strong bargainers under certain conditions . Such market conditions are : no close substitutes available for the product offered by the supplier,2) the products sold by the suppliers is an important or critical input in the buyer's product. 5. Threat of new entrants : Many times new entrants pose a major threat to the existing market players. Examples of entry of Toyota and Honda in the US car market.

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