Q-1 Define the term strategy. Explain the concept of strategic window.

Ans- The word strategy comes from Greek strategies, which refers to a military general and
combines stratus (the army) and ago (to lead). The concept of strategic windows was introduce
by Abell (1978). The concept and practice of strategy and planning started in the military, and,
over time, it entered business and management. The key or common objective of both business
strategy and military strategy is the same, i.e., to secure competitive advantage over the rivals
or opponents.
Strategies exist at different levels in an organization. Three different levels of organizational
strategy can be clearly distinguished.
(a) Corporate level strategies are concerned with overall purpose or objective of the
organization; for example, diversification through joint venture, merger or acquisition.
(b) Business unit-level strategies address themselves to issues of a particular business unit or
product group of an organization-strategies for product development and/or identification and
exploitation of new market opportunities.
(c) Functional strategies concentrate on particular functional or operational areas like
manufacturing, marketing, logistics, etc.
Strategic Window
Companies need to evolve and adapt to changing situations. The basic idea behind the concept
of a strategic window is this: there are only limited periods during which the fit or the match
between the key requirements of a market and the particular competencies of the firm are at
the optimum. Companies should exploit such optimum opportunities or windows.
Strategic windows arise as a result of business or market evolution. Businesses and markets are
never static. They are constantly evolving. Businesses and markets may evolve because of
Development of new product (new demand)
Emergence of new competing technologies; and
Market redefinition or changes.
Due to such evolution, it is recommended that investment in a product line or market area
should be made to coincide with the period during which a strategic window is open. Companies
which do this, optimize returns. Strategic windows are also important for timing the exit from a
product or market. There are times when it is advisable, and also possible, to divert a business
which a company cannot operate profitability any longer. This means that the strategic window
for exit is open, that is, there are buyers or companies, who are willing to acquire the business,
and, the company should act on it.



Q-2 The essence of business continuity is that business need to be planned not only for today, but
also for tomorrow, that is, for the future.
Write the meaning and importance of business continuity planning. Explain any two strategies
for business continuity planning.
Ans- Business continuity planning means proactively working out a means or method of preventing
or mitigation the consequences of a disaster-natural or man-made-and managing it to limit to
the level or degree that a business unit can afford.
Importance of Business continuity planning- As indicated in the definition, businesses today can
be exposed to different types of threats-naturals or man-made. Major threats are:
Natural disasters such as floods or earthquakes or accidents
Man-made threats like sabotage or terrorism
Financial crisis or disaster can be partly man-made and partly due to environmental
factors.
BCP prepares companies to prevent or respond to such situations so that the damages or losses
are minimized and the business or company survives. Thus, BCP plays a critical role in a
business-its survival and sustainability.
Business continuity planning-
1. Prevention- Conventionally, prevention is the best strategy; this means taking steps or actions
to prevent or minimize the chances of occurring of a disaster. Companies can adopt many
preventive control measures as safeguards. Common prevention control measures are.
a) Security controls- These involve controls by setting up barriers to protect the site and prevent
unauthorized entry into the premises.
b) infrastructure controls- These include appropriate infrastructural facilities like UPS/back-up
power, smoke/fire detectors, fire extinguishers, weather forecasting system etc.
c) Personnel controls- Skilled/trained personnel are posted to man sensitive zones where key or
critical resources may be located.
d) Software controls- These involve modern methods of controls through computerized system
or software.
2. Response Prevention is a pre-emptive measure; response is a reactive step. If prevention is
not possible, fast response is the next best alternative strategy. After an interruption or damage
has taken place, the BCP team should immediately inform the management and the Damage
Assessment Team. Two other teams would also be involved; the Technical Team and the
Operations Team.
The damage Assessment Team would assess the nature and magnitude of the damage. More
specifically, the team should investigate into
The cause of disruption or damage
The scope for preventing additional damage
What can be salvaged
What repairs, restorations and replacements are required.
Based on the report of the Damage Assessment Team, the Technical Team and Operations Team
should get into action. The Technical Team is the key decision maker for further actions of the
BCP and the Operations Team executes the actual damage control operations of BCP.


Q-3 Write a brief note on a strategic audit
Ans- Donaldson has suggested strategic audit as a new tool for systematic review of strategic by
board members without directly involving themselves with management of companies.
Strategic audit is a formal strategic-review process, which imposes its own discipline on both the
board and the management very much like the financial audit process. But, it is different from
management audit, which is undertaken in many companies by the senior/top management on
the progress and outcome of important corporate activities. To understand strategic audit in the
correct perspective, one needs to analyse this in terms of its various elements. Donaldson has
specified five elements of strategic audit. These are
Establishing crieteria for performance
Database design and maintenance
Strategic audit committee
Relationship with the CEO
Alert to duty
The performance criteria should be simple, well-understood and well-accepted measures of
financial performance. A number of measures of financial performance are available. To
calculate different performance ratios and monitor performance criteria a proper database is
essential. This involves both database design and maintenance. This has to be a regular and an
ongoing process. Data on financial performance can sometimes be sensitive to the
mangers/employees of a company. It is, therefore suggested that financial and related data
design, maintenance and analyses should be entrusted to the auditors of the company or
outside consultants.
For effective strategic audit, a strategic audit committee should be constituted. According to
Donaldson, outside directors should select three of their own members to form the committee.
This will impart regularity and more commitment to the strategic audit process. The committee
would decide on the frequency of their meeting periodicity of interaction with the CEO or top
management of the company and also when they should make presentation to or hold
discussion with the full board.
The strategic audit committee and also the board should always be alert and vigilant to ensure
that there are no slippages. Business cycles indicate that period of success may be followed by a
period of slump. The strategic audit committee and the board should be alert enough to get
signals so that they can act in time. This is necessary because complacence develops after
success both in the board and in the management.
If properly conceived, designed and conducted, strategic audit, more than management audit,
can be a powerful tool for monitoring the strategic process of a company and also strike a good
balance between corporate strategy and corporate governance.


Q-4 Price or market competitiveness of a product or business depends on its cost competitiveness.
Cost competitiveness implies two things: Cost efficiency and cost effectiveness. Explain the
concept of cost efficiency of an organization. Analyze the major factors of cost efficiency.
Ans- Cost Efficiency- Various factors contribute to cost efficiency in an organization. These may even
include factors which are not directly related to cost or cost management like general work
environment or culture in the organization, motivation levels of managers, approach of the top
management, etc. Four major factors may be identified: economies of scale, supply cost or cost
of raw materials and inputs, product or process design, and experience or experience effect.
Economies of scale- Economics of scale are the most conventional and, also a very important
source of cost efficiency. In manufacturing organizations, fixed cost, which initially remains very
high, starts going down progressively as output increases. Because of this, average cost of
output decreases as output increases, or the scale of operations increases. This also means
increase in capacity utilization of plant and machinery.
Supply Cost- Costs of raw materials and various inputs constitute supply cost. Inputs generally
include raw material inputs or intermediate inputs and energy inputs. In an extended sense,
these inputs can include factor inputs like labour also. In highly raw material-intensive industries
like steel, cement and non-ferrous metals, supply costs constitute a very high proportion of total
cost of the product and, therefore, become a very important determinant of the level of cost
efficiency. In these industries, location influences supply cost because transportation becomes a
significant component of total raw material cost. This is the reason why, in these industries,
many plants are located near the raw material source or mines. This gives cost advantage to
companies.
Product/process design- Product design starts at the R&D stage even if it is an imitation. Many
feel that product design is the first step in efficient cost management, because the nature of the
product determines, to a large extent, the raw material and other input requirements and
supply cost. Cost efficiency in production processes can be achieved through better process
engineering increase in productivity and better working capital management. Many companies
have achieved cost efficiency through these method.
Experience- Experience in any activity in an organization can be an important source of cost
advantage or cost efficiency- be it manufacturing or any other functional area. Many studies
have been conducted to establish the relationship between cumulative experience gained in an
organization and its unit cost. The relationship is generally expressed as an inverse relationship
between cumulative output and unit cost-unit cost decreases as cumulative output increase.





Q-5 Write the short notes on the following:
1) Explanation of Divestment strategy
2) Explanation of Liquidation strategy
Ans- 1. Divestment strategy- Divestment, also called divestiture, means selling a part of a company- a
major division or an SBU. Divestment can be part of an overall downsizing or retrenchment
strategy of an organization to get rid of businesses which are unprofitable or which require too
much capital of which do not fit well with the companys other existing businesses or activities.
Divestment can be done in two ways: selling a business outright or spinning it off as an
independent company. Selling a business outright is the more commonly used form of
divestment. A business becomes a good candidate for spinning off as an independent company
if it possesses sufficient resource strength to compete successfully on its own. Spinning off
business into a separate company may be done because of some strategic reason; may be; it
does not fit well with the core business of the company. If a company decides to spin off a
business, one important decision the corporate parent has to take is whether to retain partial
ownership in the divested business. Retaining partial control is generally recommended if the
business to be divested has good profit prospects. Spinning off a business, with or without
partial ownership, may be done either by selling shares to the public through an initial public
through an initial public offering or by distributing shares of the new company to the existing
shareholders of the corporate parent.
2. Liquidation strategy- Liquidation means closing down a company and selling its assets.
Liquidation can also be defined as selling of a companys assets, in parts, for their tangible
worth. This should be the strategy of last resort when on other alternatives like turnaround,
restructuring or divestment are applicable or workable. Liquidation is actually a recognition of
defeat. But, at some stage of the organizational life cycle, it is advisable to cease operating than
continue to operate and accumulate losses.
Liquidation should be planned. Liquidation may be the toughest decision for a company, but, if it
is unavoidable/inevitable, it should be done at the right time and, in a planned manner. Planned
liquidation involves a systematic process for maximum benefits for the company and its
shareholders. If liquidation is unplanned or haphazard, the company may incur avoidable or
unnecessary losses. In India, liquidation is governed by the Companies Act, 1956. In the
Companies Act, liquidation is officially termed as winding







Q-6 Describe the different approaches to business ethics.
Ans- According to Rossouw and Vuuren approaches adopted by various companies to deal with
business ethics may take one of four forms.
1) Unconcerned or ethical non-issue approach- This approach is adopted by companies whose
managers are either immoral or amoral. Such companies believe that organizational objectives
and business target are the foremost. Business must grow; profit should be generated and
maximized. These companies plan and adopt strategies which may follow general legal and
business principles, but may be ethically unsound. They are not really concerned with the ethical
issues in the conventional sense.
2) Ethical damage control approach- In companies in this category, managers are generally
amoral, but, they fear adverse publicity or scandal. The objective in this approach is to protect
to company for adverse publicity which may be made by unhappy stakeholders, external
investigation agencies, threats of litigation, punitive government action etc. To avoid such a
contingent situation, there is a need for rejecting unethical behavior and introducing corporate
governance safeguards through window-dressing ethics. A company may generally ignore or
condone questionable methods or actions which may help to achieve business targets or
improve its market position so long as it does not publicly tarnish the image of the company.
3) Ethics compliance approach- In this approach, companies are conscious that they should
comply with ethical standards and requirements. The managers are either moral and view
strong compliance to prescribed norms or methods as the best way to enforce ethical practices;
or, are unintentionally amoral but are highly concerned about their ethical reputation,
companies which adopt a compliance approach adhere to certain practices to demonstrate their
commitment to ethical conduct: make the code of ethics committees to give guidance on ethical
matters, introduce ethics training programmes, lay down formal procedures for investigating
alleged ethical violations, conduct ethics audit to measure and monitor compliance and institute
ethics awards for employees for outstanding efforts for creating an ethical environment and
improving ethical performance.
4) Ethical culture approach- In companies with this approach, ethical business practices are
rooted in the organizational culture itself. The top management believes that high ethical
principles embedded in the corporate culture should guide the mangers and staff. The ethical
principles contained in the companys code of ethics and/or corporate values are seen as
integral to the companys identity and image. The prevalence and success of the ethical culture
approach depends heavily on the personal integrity of the individual managers who create and
nurture the culture.