Spring 2015

MBA Semester 4
MB0052: Strategic Management and Business Policy

Q1. What is strategy? Explain some of the major reasons for lack of strategic
management in some companies?
Seven definitions of strategy are given below which have evolved over a period of more than
30 years (196296). During this evolutionary process, different authors have focused on
different aspects of the definition of strategy. Let us see these definitions.
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 out these goals.
Lack of Strategic Management in Some Companies
1. Poor reward structure: When an organization achieves 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 formalized
planning and more on individual initiative and decisions. But, this is not appropriate.
Overconfidence or overestimating experience leads to complacency and ultimately can bring
downfall. Forethought and planning are the right virtues and are signs of professionalism.
4. Fire-fighting: An organization may be so deeply engrossed in crisis management and
firefighting that it may not have time to plan and strategize. This happens with many
companies and is a clear sign of non-professionalization.
5. Waste of time: Some organizations view planning as a waste of time because no tangible
marketable products are produced through planning. But they forget that time spent on
planning is an investment, and there would be returns, both tangible and intangible, 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. They feel that
spending on planning is a wasteful expenditure.
7. Previous bad experience: Managers may have had previous bad experience with
planning, that is, cases in which plans have been cumbersome, impractical or inflexible.
There could be experience of failures also. They would like to avoid recurrence of this.
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Q2. Explain the following:

(a) Core competence
(b) Value chain analysis
(a) Core competence
Core competence of a company is one of its special or unique internal competence. 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 accompany a clear competitive advantage over its competitors.
Sony has a core competence in miniaturization; Xeroxs core competence is in
photocopying; Canons core competence lies in optics, imaging and laser control; Hondas
core competence is in engines (for cars and motorcycles); 3Ms core competencies in sticky
tape technology; JVCs in video tape technology; ITCs in tobacco and cigarettes and
Godrejs in locks and storewels.
To achieve core competence, a particular competence level of a 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
internal 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 insignificantly
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.
(b) Value chain analysis
Various competences and resources of an organization can be integrated into chain of
activities which an organization performs to meet customer demand. Since each of these
activities is expected to create value when it is performed, the chain can appropriately be
called a value chain. Michael Porter (1985)introduced the concept of value chain analysis.
Now, it has become common for professional companies to do this analysis.
Value chain analysis helps 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 five major areas: inbound logistics, operations,
outbound logistics, marketing and sales and service. Inbound logistics: These are activities
concerned with receiving, storing and distributing raw materials and inputs to the production
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or service division. Inbound logistics also include materials handling, stock control,
transportation of inputs, etc.
Operations: These are activities involved in transforming various inputs into final product or
service. Operations also include machinery, packaging, assembly, testing, etc.

Q3. Describe in brief the following environmental factors which a business strategist
considers:
(a) Political factors
(b) Technology
Q4. Write a brief note on Turnaround strategy.
Q5. Define the term strategic alliance. What are its characteristics and objectives?
Q6. Write short notes on the following:
a) Competitive advantage
b) Porters Competitive threat model

Remaining answers are available in the full assignments.

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