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AEREN FOUNDATION REG. NO. F/11724

INDIAN SCHOOL OF BUSINESS MANAGEMENT & ADMINISTRATION

MARKS: 80 COURSE: MBA 3rd sem

SUB: STRATEGIC MANAGEMENT

N. B.: 1) Answer any Eight

1. Define strategic intent, vision and mission. Write major

components of a mission statement. How do you define

corporate objectives? Distinguish between purpose,

mission, long-term objectives and goals.

"Strategic" is mainly used with long term and "Intent" is basically related to "intentions" that is "a plan to do something" is an intention. Mean that "a plan to do something in the long term. STRATEGIC INTENT" is - what an organization plans to strive for in future (long term), and it can be expressed in vague / broad terms as well as in specific terms. So, vision & mission of an organization expresses the strategic intent of the organization in broad terms and business definition, goals, objectives expresses the strategic intent of the organization in relatively specific terms.

The company has to define its Vision Statement, Mission Statement, Business Definition, and Objectives to form the Strategic Hierarchy.  A business strategy cannot be formulated unless the strategic hierarchy is clearly defined.

Vision serves the purpose of stating what an organization wishes to achieve in the long run. It is at the top in the hierarchy of strategic intent. It is what the firm would ultimately like to become.Mission relates an organization to society. The mission statements stage the role that organization plays in society. It is one of the popular philosophical issues which are being looked into business managers since last two decades.

Business explains the business of an organization in terms of customer needs, customer groups and alternative technologies. Defining business along the three dimensions of customer groups. Customer functions and alternative technologies. They are developed as follows:

i) Customer groups are created according to the identity of the customers.ii) Customer functions are based on provision of goods/services to customers.iii) Alternative Technologies describe the manner in which a particular function can be performed for a customer.

Objectives state what is to be achieved in a given time period. The strategic intent concept also encompasses an active management process that includes focussing the

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organization’s attention on the essence of winning. The concept of stretch and leverage is relevant in this context. Objectives refer to the ultimate end results which are to be accomplished by the overall plan over a specified period of time. The vision, mission and business definition determine the business philosophy to be adopted in the long run. The goals and objectives are set to achieve them.

The strategy statement of a firm sets the firm’s long-term strategic direction and broad policy directions. It gives the firm a clear sense of direction and a blueprint for the firm’s activities for the upcoming years. The main constituents of a strategic statement are as follows:

1. Strategic Intent

An organization’s strategic intent is the purpose that it exists and why it will continue to exist, providing it maintains a competitive advantage. Strategic intent gives a picture about what an organization must get into immediately in order to achieve the company’s vision. It motivates the people. It clarifies the vision of the vision of the company. Strategic intent helps management to emphasize and concentrate on the priorities. Strategic intent is, nothing but, the influencing of an organization’s resource potential and core competencies to achieve what at first may seem to be unachievable goals in the competitive environment. A well expressed strategic intent should guide/steer the development of strategic intent or the setting of goals and objectives that require that all of organization’s competencies be controlled to maximum value. Strategic intent includes directing organization’s attention on the need of winning; inspiring people by telling them that the targets are valuable; encouraging individual and team participation as well as contribution; and utilizing intent to direct allocation of resources. Strategic intent differs from strategic fit in a way that while strategic fit deals with harmonizing available resources and potentials to the external environment, strategic intent emphasizes on building new resources and potentials so as to create and exploit future opportunities.

2. Mission Statement

Mission statement is the statement of the role by which an organization intends to serve it’s stakeholders. It describes why an organization is operating and thus provides a framework within which strategies are formulated. It describes what the organization does (i.e., present capabilities), who all it serves (i.e., stakeholders) and what makes an organization unique (i.e., reason for existence). A mission statement differentiates an organization from others by explaining its broad scope of activities, its products, and technologies it uses to achieve its goals and objectives. It talks about an organization’s present (i.e., “about where we are”).For instance, Microsoft’s mission is to help people and businesses throughout the world to realize their full potential. Wal-Mart’s mission is “To give ordinary folk the chance to buy the same thing as rich people.” Mission statements always exist at top level of an organization, but may also be made for various organizational levels. Chief executive plays a significant role in formulation of mission statement. Once the mission statement is formulated, it serves the organization in long run, but it may become ambiguous with organizational growth and innovations. In today’s dynamic and competitive environment, mission may need to be redefined.

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However, care must be taken that the redefined mission statement should have original fundamentals/components. Mission statement has three main components-a statement of mission or vision of the company, a statement of the core values that shape the acts and behaviour of the employees, and a statement of the goals and objectives.

Features of a Missiona. Mission must be feasible and attainable. It should be possible to achieve

it. b. Mission should be clear enough so that any action can be taken. c. It should be inspiring for the management, staff and society at large. d. It should be precise enough, i.e., it should be neither too broad nor too

narrow. e. It should be unique and distinctive to leave an impact in everyone’s

mind. f. It should be analytical,i.e., it should analyze the key components of the

strategy. g. It should be credible, i.e., all stakeholders should be able to believe it.

3. Vision

A vision statement identifies where the organization wants or intends to be in future or where it should be to best meet the needs of the stakeholders. It describes dreams and aspirations for future. For instance, Microsoft’s vision is “to empower people through great software, any time, any place, or any device.” Wal-Mart’s vision is to become worldwide leader in retailing. A vision is the potential to view things ahead of themselves. It answers the question “where we want to be”. It gives us a reminder about what we attempt to develop. A vision statement is for the organization and it’s members, unlike the mission statement which is for the customers/clients. It contributes in effective decision making as well as effective business planning. It incorporates a shared understanding about the nature and aim of the organization and utilizes this understanding to direct and guide the organization towards a better purpose. It describes that on achieving the mission, how the organizational future would appear to be.

An effective vision statement must have following features-

a. It must be unambiguous. b. It must be clear. c. It must harmonize with organization’s culture and values. d. The dreams and aspirations must be rational/realistic. e. Vision statements should be shorter so that they are easier to

memorize.

In order to realize the vision, it must be deeply instilled in the organization, being owned and shared by everyone involved in the organization.

4. Goals and objectives

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A goal is a desired future state or objective that an organization tries to achieve. Goals specify in particular what must be done if an organization is to attain mission or vision. Goals make mission more prominent and concrete. They co-ordinate and integrate various functional and departmental areas in an organization. Well made goals have following features-

a. These are precise and measurable. b. These look after critical and significant issues. c. These are realistic and challenging. d. These must be achieved within a specific time frame. e. These include both financial as well as non-financial components.

Objectives are defined as goals that organization wants to achieve over a period of time. These are the foundation of planning. Policies are developed in an organization so as to achieve these objectives. Formulation of objectives is the task of top level management. Effective objectives have following features-

f. These are not single for an organization, but multiple. g. Objectives should be both short-term as well as long-term. h. Objectives must respond and react to changes in environment, i.e., they

must be flexible. i. These must be feasible, realistic and operational.

2. Discuss the roles of the following in corporate governance.

a) Top management - The highest ranking executives (with titles such as chairman/chairwoman, chief executive officer, managing director, president, executive directors, executive vice-presidents, etc.) responsible for the entire enterprise.

Top management translates the policy (formulated by the board-of-directors) into goals, objectives, and strategies, and projects a shared-vision of the future. It makes decisions that affect everyone in the organization, and is held entirely responsible for the success or failure of the enterprise.

b) Audit Committees - A committee of the Board of Directors whose role typically focuses on aspects of financial reporting and on the entity's processes to manage business and financial risk, and for compliance with significant applicable legal, ethical, and regulatory requirements. The Audit Committee typically assists the Board with the oversight of (a) the integrity of the entity's financial statements, (b) the entity's compliance with legal and regulatory requirements, (c) the independent auditors' qualifications and independence, (d) the performance of the entity's internal audit function and that of the independent auditors and (e) compensation of company executives (in absence of a remuneration committee)."

An audit committee is an operating committee of the Board of Directors charged with oversight of financial reporting and disclosure. Committee members are drawn from members of the company's board of directors, with a Chairperson selected from among the committee members. Boards of Directors and their committees rely on management to run the daily operations of the

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business. The Board's role is better described as oversight or monitoring, rather than execution. Responsibilities of the audit committee typically include:

Overseeing the financial reporting and disclosure process.

A. Monitoring choice of accounting policies and principles.B. Overseeing hiring, performance and independence of the external

auditors.C. Oversight of regulatory compliance, ethics, and whistleblower hotlines.D. Monitoring the internal control process.E. Overseeing the performance of the internal audit function.F. Discussing risk management policies and practices with management.

c) Statutory Auditors - The external certified public accountant, i.e. external auditors, in most countries. He is an external service supplier; in charge of certifying the Financial Statements according to specific professional auditing standards.

Statutory Audit is a checking of accounts required by law. A municipality may be required by its own law to have an annual audit of financial records or a company which is governed by any Law, the Law may require the audit to be conducted and the manner in which audit should be conducted and to whom the report of auditors should be presented. Like in case of companies the Companies Act requires audit of accounts, its reporting and manner of audit report.

One conducted to meet the particular requirements of a governmental agency. Where such audits take place, the scope and audit programs are set by the governmental body. Banks, insurance companies, and brokerage firms have statutory audits. Since the auditor's report must conform to standards required by the governing agency, the statements and other financial data generated from these audits may not conform to Gaap.

The statutory auditors are elected by shareholders and hold a position in the hierarchy alongside the board of directors. A company must have at least one statutory auditor.

3. The organizational resources and behavior exercise a

significant influence on the environment of an organization.

Illustrate how strengths and weaknesses create synergistic

effects.

Organizational Behaviour (OB) is the study and application of knowledge about how people, individuals, and groups act in organizations. It does this by taking a system approach. That is, it interprets people-organization relationships in terms of the whole person, whole group, whole organization, and whole social system. Its purpose is to build better relationships by achieving human objectives, organizational objectives, and social objectives.

As you can see from the definition above, organizational behavior encompasses a wide range of topics, such as human behavior, change, leadership, teams, etc.

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The organization's base rests on management's philosophy, values, vision and goals. This in turn drives the organizational culture which is composed of the formal organization, informal organization, and the social environment. The culture determines the type of leadership, communication, and group dynamics within the organization. The workers perceive this as the quality of work life which directs their degree of motivation. The final outcomes are performance, individual satisfaction, and personal growth and development. All these elements combine to build the model or framework that the organization operates from.

There are four major models or frameworks that organizations operate out of, Autocratic, Custodial, Supportive, and Collegial

Autocratic — the basis of this model is power with a managerial orientation of authority. The employees in turn are oriented towards obedience and dependence on the boss. The employee need that is met is subsistence. The performance result is minimal.

Custodial — the basis of this model is economic resources with a managerial orientation of money. The employees in turn are oriented towards security and benefits and dependence on the organization. The employee need that is met is security. The performance result is passive cooperation.

Supportive — the basis of this model is leadership with a managerial orientation of support. The employees in turn are oriented towards job performance and participation. The employee need that is met is status and recognition. The performance result is awakened drives.

Collegial — the basis of this model is partnership with a managerial orientation of teamwork. The employees in turn are oriented towards responsible behavior and self-discipline. The employee need that is met is self-actualization. The performance result is moderate enthusiasm.

Organization Development (OD) is the systematic application of behavioral science knowledge at various levels, such as group, inter-group, organization, etc., to bring about planned change. ). Its objectives are a higher quality of work-life, productivity, adaptability, and effectiveness. It accomplishes this by changing attitudes, behaviours, values, strategies, procedures, and structures so that the organization can adapt to competitive actions, technological advances, and the fast pace of change within the environment.

There are seven characteristics of Organization Development (OD):

1. Humanistic Values: Positive beliefs about the potential of employees 2. Systems Orientation: All parts of the organization, to include structure,

technology, and people, must work together. 3. Experiential Learning: The learners' experiences in the training

environment should be the kind of human problems they encounter at work. The training should NOT be all theory and lecture.

4. Problem Solving: Problems are identified, data is gathered, corrective action is taken, progress is assessed, and adjustments in the problem

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solving process are made as needed. This process is known as Action Research.

5. Contingency Orientation: Actions are selected and adapted to fit the need.

6. Change Agent: Stimulate, facilitate, and coordinate change. 7. Levels of Interventions: Problems can occur at one or more level in the

organization so the strategy will require one or more interventions.

Synergistic approach can be used as a means for generating competitive advantage to an organisation if the managers are sufficiently aware about how synergistic effect is developed. Concept of synergy and its effect has been derived from systems appro^h which deals with the phenomenon of putting various elements of a system in such a way that each element contributes positively to other elements. The net result is that the sum total of combined contribution is greater than what the individual elements could have contributed independently. Ansoff has made invaluable contribution by demonstrating how a company can generate competitive advantage by creating synergistic effect.14 Synergy ^an be defined as follows:

Synergy is the process of putting two or more elements together to achieve a sum total greater than the sum total of individual elements separately. This effect is described as 2 + 2 = 5 effect.

Synergistic effect does not generate automatically by putting different elements together but depends on the complementarity of these elements. Thus, synergistic effect in the process of strategy formulation refers to the degree of complementarity between present skills and resources and the future skills and resources- which would be required for a strategy. The higher the degree of complementarity that exists between the present strategic posture and the contemplated posture, the greater is the opportunity for realising positive synergy. A simple example of synergistic effect may be of opening of a restaurant by motel owner in side-by area. In this case, the joint income of motel and restaurant may be much more than what they can earn individually if located at different places.

Areas of Synergistic Effect

There may be many possible areas of synergistic effect of an organisation depending on its strengths and weaknesses. Since the synergy depends on the complementarily of present and future strategic postures, this can best be understood by analyzing an organisation's strengths and taking suitable strategic actions in order to effect the result of the strengths. For this purpose, different types of synergistic effects in various functional areas of operations may be analyzed.

1. Production Synergy

Production synergy can be achieved if the present production facilities, processes, and skills can be used to produce the contemplated products. In this situation, some existing excess capacity can obviously result in decreased unit production costs because factory overhead will be spread over a larger volume. Moreover, the quality and efficiency will not be hampered as the existing work-force is capable of handling new product because of transferability of skills from the existing product to new one.

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The production synergy may best be achieved by merging the firms manufacturing same or substantially similar products. For example, many textile units have merged other textile units in order to take advantages of production synergy. The merger of Sidhpur Textiles with Reliance Textiles is a case in this context. In the case of internal growth, production synergy will occur to the extent the new products developed are compatible with existing skills and resources. For example, production synergy can best be identified in the cere of Associated Cement Company which operates many cement plants in the country using similar technology which provides the company greater flexibility in using its present capabilities. On the other hand, there is little chance for production synergy, if the .organisation takes over dissimilar product because the present production strength does not contribute in any way in the future product. For example, taking up of production of bearings by Metal Box which was primarily known as metal packaging manufacturer could not generate any synergistic effect. The result is that the company has lost substantial amount in its bearing division. Thus, it can be emphasised that production synergy can occur only when some 'common thread' between two operations can be found regardless of the degree of market congruence in so far as end uses of products are concerned. For example, this is reflected in the product range of an electronic manufacturing unit which produces electronic goods for entertainment as well as for commerical purpose. Though in botli these cases the end users are quite different and incomplementary, the company enjoys the common threads of production facilities.

2. Marketing Synergy

Marketing synergy refers to the situation when the organisation can take the advantages of its present marketing facilities— sales force, distribution channel, physical'facilities, promotional techniques —for the ensuing product though the product may be substantially different from the present one. For example, a soap manufacturer may take the marketing of hair oil. In this case, the company can take the advantages of its present marketing facilities because, in both the cases, the same type of marketing facilities will be required although there is no production synergy if the production of hair oil is taken up because of the difference in production process and consequently the requirement of different production facilities.

Thus, in this case, there is marketing synergy because of the overlap in marketing efforts but the same overlap is not available so far as production is concerned. In order to take the advantages of marketing synergy, Colgate Palmolive India Limited decided to enter the new field of toilet soap though it is better known for toothpaste, toothbrush, shaving cream, and shampoo. Since the company can utilise its present marketing facilities for soaps, it can take the advantage of its marketing, synergy.

3. Research and Development Synergy

The research and\ development synergy will be achieved if the company's technologies supporting the development of both the present and the contemplated product lines are substantially similar. The potential in this area usually emanates either from similar research skills or from similar functional characteristics of the products. For example, the research and development at Hindustan Lever Limited offers unique synergy because it contributes to the development of chemical products of different types for different end users. It has discovered the raw materials from minor seed oils for synthetic detergent which is claimed to be much cheaper and effective than the present raw material linear alkyl benzene (LAB). In its research and development efforts, the company has undertaken simultaneous functions of

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developing hea\y chemicals also which has enabled the company to enter in this field too. Since the basic research and development facilities are common for bo minor seed oils and heavy chemicals, the company enjoys the research and development synergy.

4. Financial Synergy

The financial synergy is virtually unrelated to the degree of similarity between the present and the contemplated strategic postures because the skills and techniques of financial management have a high degree of transferability across both industry and organisational lines. The possible synergy which lies in this area is the extent to which the organisation can raise the funds for investment througn larger capital base, increased borrowing power, and greater earning through the spreading of administration overheads over a larger volume of operations. In fact, this synergy has been used by several companies to take over other companies or diversify in those areas which were unknown to them. However, the success of such strategy may be doubtful if other considerations are not taken into account.

5. General Management Synergy

General management synergy occurs when the skills, experience, and knowledge of managers are transferable from the present strategy to the contemplated one. The transferability of these elements of management depends on how these elements are acquired. Basically knowledge requirements for managers are twofold: (i) general knowledge of the processes and techniques of management which can be learned through management education; and (ii) technical knowledge about the specific industry or organisation which can be learned through experience in a particular industry or organisation. The first category of knowledge is easily transferable to all types of organisations and industries as these are methodological. The second type of knowledge, however, is not as freely transferable because it requires certain learning period on the part of the managers, Thus, while moving from one organisation to another or from one industry to another, managers have to devote time for learning the requirements of those which may be different from what they must have learned previously. Thus, if the movement is from one organisation to another which is similar, the knowledge can be transferred easily. However, if the movement is from one industry to another, the transferability is limited in that it requires more time in understanding the requirements of the new industry. Thus, further away a manager moves in terms of organisation and industry characteristics, the longer is the learning period and lower is the synergy. This aspect is very important for achieving growth through.

4. Define strategic management and bring out the main

elements of strategic management. Explain with

appropriate diagram the strategic management model and

its major components.

Strategic management is a field that deals with the major intended and emergent initiatives taken by general managers on behalf of owners, involving utilization of resources, to enhance the performance of firms in their external environments.[1] It entails specifying the organization's mission, vision and objectives, developing policies and plans, often in terms of projects and programs, which are designed to achieve these objectives, and then allocating resources to implement the policies and plans, projects and programs. A balanced scorecard is often used to evaluate the overall performance of the

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business and its progress towards objectives. Recent studies and leading management theorists have advocated that strategy needs to start with stakeholders expectations and use a modified balanced scorecard which includes all stakeholders.

Strategic management is a level of managerial activity under setting goals and over Tactics. Strategic management provides overall direction to the enterprise and is closely related to the field of Organization Studies. In the field of business administration it is useful to talk about "strategic alignment" between the organization and its environment or "strategic consistency." According to Arieu , "there is strategic consistency when the actions of an organization are consistent with the expectations of management, and these in turn are with the market and the context." Strategic management includes not only the management team but can also include the Board of Directors and other stakeholders of the organization. It depends on the organizational structure.

“Strategic management is an ongoing process that evaluates and controls the business and the industries in which the company is involved; assesses its competitors and sets goals and strategies to meet all existing and potential competitors; and then reassesses each strategy annually or quarterly [i.e. regularly] to determine how it has been implemented and whether it has succeeded or needs replacement by a new strategy to meet changed circumstances, new technology, new competitors, a new economic environment., or a new social, financial, or political environment.”

The strategic management process is made up of four elements: situation analysis, strategy formulation, strategy implementation, and strategy evaluation. These elements are steps that are performed, in order, when developing a new strategic management plan. Existing businesses that have already developed a strategic management plan will revisit these steps as the need arises, in order to make necessary changes and improvements.

1- Situation Analysis - Situation analysis is the first step in the strategic management process. The situation analysis provides the information necessary to create a company mission statement. Situation analysis involves "scanning and evaluating the organizational context, the external environment, and the organizational environment" (Coulter, 2005, p. 6). This analysis can be performed using several techniques. Observation and communication are two very effective methods.

To begin this process, organizations should observe the internal company environment. This includes employee interaction with other employees, employee interaction with management, manager interaction with other managers, and management interaction with shareholders. In addition, discussions, interviews, and surveys can be used to analyze the internal environment.

Organizations also need to analyze the external environment. This would include customers, suppliers, creditors, and competitors. Several questions can be asked which may help analyze the external environment. What is the relationship between the company and its customers? What is the relationship between the company and its suppliers? Does the company have a good rapport

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with its creditors? Is the company actively trying to increase the value of the business for its shareholders? Who is the competition? What advantages do competitors have over the company?

2- Strategy Formulation - Strategy formulation involves designing and developing the company strategies. Determining company strengths aids in the formulation of strategies. Strategy formulation is generally broken down into three organizational levels: operational, competitive, and corporate.

Operational strategies are short-term and are associated with the various operational departments of the company, such as human resources, finance, marketing, and production (Coulter, 2005, p. 7). These strategies are department specific. For example, human resource strategies would be concerned with the act of hiring and training employees with the goal of increasing human capital.

Competitive strategies are those associated with methods of competing in a certain business or industry. Knowledge of competitors is required in order to formulate a competitive strategy. The company must learn who its competitors are and how they operate, as well as identify the strengths and weaknesses of the competition. With this information, the company can develop a strategy to gain a competitive advantage over these competitors.

3- Strategy Implementation - Strategy implementation involves putting the strategy into practice. This includes developing steps, methods, and procedures to execute the strategy. It also includes determining which strategies should be implemented first. The strategies should be prioritized based on the seriousness of underlying issues. The company should first focus on the worst problems, then move onto the other problems once those have been addressed.

The approaches to implementing the various strategies should be considered as the strategies are formulated" (Coulter, 2005, p. 8). The company should consider how the strategies will be put into effect at the same time that they are being created. For example, while developing the human resources strategy involving employee training, things that must be considered include how the training will be delivered, when the training will take place, and how the cost of training will be covered.

4- Strategy Evaluation - Strategy evaluation involves "examining how the strategy has been implemented as well as the outcomes of the strategy" (Coulter, 2005, p. 8). This includes determining whether deadlines have been met, whether the implementation steps and processes are working correctly, and whether the expected results have been achieved. If it is determined that deadlines are not being met, processes are not working, or results are not in line with the actual goal, then the strategy can and should be modified or reformulated.

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Both management and employees are involved in strategy evaluation, because each is able to view the implemented strategy from different perspectives. An employee may recognize a problem in a specific implementation step that management would not be able to identify.

The strategy evaluation should include challenging metrics and timetables that are achievable. If it is impossible to achieve the metrics and timetables, then the expectations are unrealistic and the strategy is certain to fail.

5. Discuss the global challenge facing Indian firms. Explain

important techniques for environmental analysis.

The challenges facing the Indian organized retail sector are various and these are stopping the Indian retail industry from reaching its full potential. The behaviour pattern of the Indian consumer has undergone a major change. This has happened for the Indian consumer is earning more now, western influences, women working force is increasing, desire for luxury items and better quality. He now wants to eat, shop, and get entertained under the same roof. All these have lead the Indian organized retail sector to give more in order to satisfy the Indian customer.

The biggest challenge facing the Indian organized retail sector is the lack of retail space. With real estate prices escalating due to increase in demand from the Indian organized retail sector, it is posing a challenge to its growth. With Indian retailers having to shell out more for retail space it is effecting there overall profitability in retail.

Trained manpower shortage is a challenge facing the organized retail sector in India. The Indian retailers have difficulty in finding trained person and also have to pay more in order to retain them. This again brings down the Indian retailers profit levels.

The Indian government have allowed 51% foreign direct investment (FDI) in the India retail sector to one brand shops only. This has made the entry of global retail giants to organized retail sector in India difficult. This is a challenge being faced by the Indian organized retail sector. But the global retail giants like Tesco, Wal-Mart, and Metro AG are entering the organized retail sector in India indirectly through franchisee agreement and cash and carry wholesale trading. Many Indian companies are also entering the Indian organized retail sector like Reliance Industries Limited, Pantaloons, and Bharti Telecoms. But they are facing stiff competition from these global retail giants. As a result discounting is becoming an accepted practice. This too bring down the profit of the Indian retailers. All these are posing as challenges facing the Indian organized retail sector.

The challenges facing the Indian organized retail sector are there but it will have to be dealt with and only then this sector can prosper.

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Business analysis as a discipline has a heavy overlap with requirements analysis sometimes also called requirements engineering, but focuses on identifying the changes to an organization that are required for it to achieve strategic goals. These changes include changes to strategies, structures, policies, processes, and information systems. Examples of business analysis include:

Enterprise analysis or company analysis - Focuses on understanding the needs of the business as a whole, its strategic direction, and identifying initiatives that will allow a business to meet those strategic goals. It also includes:

Creating and maintaining the business architecture Conducting feasibility studies Identifying new business opportunities Scoping and defining new business opportunities Preparing the business case Conducting the initial risk assessment

There are a number of generic business techniques that a Business Analyst will use when facilitating business change. Some of these techniques include:

PESTLE

This is used to perform an external environmental analysis by examining the many different external factors affecting an organization.The six attributes of PESTLE:

Political (Current and potential influences from political pressures)

Economic (The local, national and world economy impact) Sociological (The ways in which a society can affect an

organization) Technological (The effect of new and emerging technology) Legal (The effect of national and world legislation) Environmental (The local, national and world environmental

issues)

HEPTALYSIS

This is used to perform an in-depth analysis of early stage businesses/ventures on seven important categories:

Market Opportunity Product/Solution Execution Plan Financial Engine Human Capital Potential Return Margin of Safety

MOST

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This is used to perform an internal environmental analysis by defining the attributes of MOST to ensure that the project you are working on is aligned to each of the 4 attributes.The four attributes of MOST[4]

Mission (where the business intends to go) Objectives (the key goals which will help achieve the mission) Strategies (options for moving forward) Tactics (how strategies are put into action)

SWOT

This is used to help focus activities into areas of strength and where the greatest opportunities lie. This is used to identify the dangers that take the form of weaknesses and both internal and external threats.The four attributes of SWOT:

Strengths - What are the advantages? What is currently done well? (e.g. key area of best-performing activities of your company)

Weaknesses - What could be improved? What is done badly? (e.g. key area where you are performing poorly)

Opportunities - What good opportunities face the organization? (e.g. key area where your competitors are performing poorly)

Threats - What obstacles does the organization face? (e.g. key area where your competitor will perform well)

CATWOE

This is used to prompt thinking about what the business is trying to achieve. Business perspectives help the business analyst to consider the impact of any proposed solution on the people involved.There are six elements of CATWOE

Customers - Who are the beneficiaries of the highest level business process and how does the issue affect them?

Actors - Who is involved in the situation, who will be involved in implementing solutions and what will impact their success?

Transformation Process - What processes or systems are affected by the issue?

World View - What is the big picture and what are the wider impacts of the issue?

Owner - Who owns the process or situation being investigated and what role will they play in the solution?

Environmental Constraints - What are the constraints and limitations that will impact the solution and its success?

A business process improvement (BPI) typically involves six steps:

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1. Selection of process teams and leader - Process teams, comprising 2-4 employees from various departments that are involved in the particular process, are set up. Each team selects a process team leader, typically the person who is responsible for running the respective process.

2. Process analysis training - The selected process team members are trained in process analysis and documentation techniques.

3. Process analysis interview - The members of the process teams conduct several interviews with people working along the processes. During the interview, they gather information about process structure, as well as process performance data.

4. Process documentation - The interview results are used to draw a first process map. Previously existing process descriptions are reviewed and integrated, wherever possible. Possible process improvements, discussed during the interview, are integrated into the process maps.

5. Review cycle - The draft documentation is then reviewed by the employees working in the process. Additional review cycles may be necessary in order to achieve a common view (mental image) of the process with all concerned employees. This stage is an iterative process.

6. Problem analysis - A thorough analysis of process problems can then be conducted, based on the process map, and information gathered about the process. At this time of the project, process goal information from the strategy audit is available as well, and is used to derive measures for process improvement.

6. What are generic Strategies? Discuss the reasons for

adopting stability and expansion strategies.

Generic strategies were used initially in the early 1980s, and seem to be even more popular today. They outline the three main strategic options open to organization that wish to achieve a sustainable competitive advantage. Each of the three options are considered within the context of two aspects of the competitive environment:

Sources of competitive advantage - are the products differentiated in any way, or are they the lowest cost producer in an industry? Competitive scope of the market - does the company target a wide market, or does it focus on a very narrow, niche market?

The generic strategies are:

1. Cost leadership,

2. Differentiation, and

3. Focus.

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Cost leadership - The companies that attempt to become the lowest-cost producers in an industry can be referred to as those following a cost leadership strategy. The company with the lowest costs would earn the highest profits in the event when the competing products are essentially undifferentiated, and selling at a standard market price. Companies following this strategy place emphasis on cost reduction in every activity in the value chain. It is important to note that a company might be a cost leader but that does not necessarily imply that the company's products would have a low price. In certain instances, the company can for instance charge an average price while following the low cost leadership strategy and reinvest the extra profits into the business (Lynch, 2003). Examples of companies following a cost leadership strategy include RyanAir, and easyJet, in airlines, and ASDA and Tesco, in superstores.

The risk of following the cost leadership strategy is that the company's focus on reducing costs, even sometimes at the expense of other vital factors, may become so dominant that the company loses vision of why it embarked on one such strategy in the first place.

Differentiation - When a company differentiates its products, it is often able to charge a premium price for its products or services in the market. Some general examples of differentiation include better service levels to customers, better product performance etc. in comparison with the existing competitors. Porter (1980) has argued that for a company employing a differentiation strategy, there would be extra costs that the company would have to incur. Such extra costs may include high advertising spending to promote a differentiated brand image for the product, which in fact can be considered as a cost and an investment. McDonalds , for example, is differentiated by its very brand name and brand images of Big Mac and Ronald McDonald.

Differentiation has many advantages for the firm which makes use of the strategy. Some problematic areas include the difficulty on part of the firm to estimate if the extra costs entailed in differentiation can actually be recovered from the customer through premium pricing. Moreover, successful differentiation strategy of a firm may attract competitors to enter the company's market segment and copy the differentiated product (Lynch, 2003).

Focus - Porter initially presented focus as one of the three generic strategies, but later identified focus as a moderator of the two strategies. Companies employ this strategy by focusing on the areas in a market where there is the least amount of competition (Pearson, 1999). Organisations can make use of the focus strategy by focusing on a specific niche in the market and offering specialised products for that niche. This is why the focus strategy is also sometimes referred to as the niche strategy (Lynch, 2003). Therefore, competitive advantage can be achieved only in the company's target segments by employing the focus strategy. The company can make use of the cost leadership or differentiation approach with regard to the focus strategy. In that, a company using the cost focus approach would aim for a cost advantage in its target segment only. If a company is using the differentiation focus approach, it would aim for differentiation in its target segment only, and not the overall market.

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This strategy provides the company the possibility to charge a premium price for superior quality (differentiation focus) or by offering a low price product to a small and specialised group of buyers (cost focus). Ferrari and Rolls-Royce are classic examples of niche players in the automobile industry. Both these companies have a niche of premium products available at a premium price. Moreover, they have a small percentage of the worldwide market, which is a trait characteristic of niche players. The downside of the focus strategy, however, is that the niche characteristically is small and may not be significant or large enough to justify a company's attention. The focus on costs can be difficult in industries where economies of scale play an important role. There is the evident danger that the niche may disappear over time, as the business environment and customer preferences change over time.

According to Porter (1980), a company's failure to make a choice between cost leadership and differentiation essentially implies that the company is stuck in the middle. There is no competitive advantage for a company that is stuck in the middle and the result is often poor financial performance (Porter, 1980). However, there is disagreement between scholars on this aspect of the analysis. Kay (1993) and Miller (1992) have cited empirical examples of successful companies like Toyota and Benetton, which have adopted more than one generic strategy. Both these companies used the generic strategies of differentiation and low cost simultaneously, which led to the success of the companies.

Choosing the Right Generic Strategy - Your choice of which generic strategy to pursue underpins every other strategic decision you make, so it's worth spending time to get it right.

But you do need to make a decision: Porter specifically warns against trying to "hedge your bets" by following more than one strategy. One of the most important reasons why this is wise advice is that the things you need to do to make each type of strategy work appeal to different types of people. Cost Leadership requires a very detailed internal focus on processes. Differentiation, on the other hand, demands an outward-facing, highly creative approach.

So, when you come to choose which of the three generic strategies is for you, it's vital that you take your organization's competencies and strengths into account.

Use the following steps to help you choose.

Step 1: For each generic strategy, carry out a SWOT Analysis of your strengths and weaknesses, and the opportunities and threats you would face, if you adopted that strategy.

Having done this, it may be clear that your organization is unlikely to be able to make a success of some of the generic strategies.

Step 2: Use Five Forces Analysis to understand the nature of the industry you are in.

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Step 3: Compare the SWOT Analyses of the viable strategic options with the results of your Five Forces analysis. For each strategic option, ask yourself how you could use that strategy to:

Reduce or manage supplier power. Reduce or manage buyer/customer power. Come out on top of the competitive rivalry. Reduce or eliminate the threat of substitution. Reduce or eliminate the threat of new entry.

Select the generic strategy that gives you the strongest set of options.

7. What do you understand by industry environment? Discuss

main components of industry environment.

Strategic Management is a systematic process of achieving desired objectives of an organization by proper allocation of its resources.

Strategic Management process starts with deciding objectives, allocating resources, and implementing planned programme to achieve desired objective. Environmental scanning is preliminary step for effective implementation of strategy. Environmental Scanning is the process of accessing the influence environmental factors in which organization is operating. One must prepare strategy keeping in mind these factors. For Example, if someone is planning to develop a production plant, he must choose the site in legislative permissible area, where access to raw materials, market is easy and other infrastructure like power, transport, labor are available.

Environment in which an organization is operating can be broadly divided into two categories, viz., Micro Environment (Industry) and Macro Environment. Macro environment is broader concept. It represents Political, Economical, Social, Technological, Legal factors acting in the environment of organizational setup. Micro Environment deals with Industry specific environment of an organization which includes labor supply, material supply and other infrastructure. MACRO ENVIRONMENT:- Let us discuss how Macro environment factors affecting organizational strategies. Political Factors: Changes in political scenario of an area (say, country or state) like change in governing party where an organization is working may result in changes in certain policies regulating the organization as every political party have its own views regarding economical development and they tend to change the policies as per their views when they get governing position, and thus it affect the strategy of an organization.

Economical Factors: Economic trends in the country, business cycles are the economic factors which may affect organization. For Example, during depression demand for products may fall which will affect organizational

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production. Hence, strategy should be made keeping in mind such economic trends and tools to cope with them.

Social Factors: Educational level, population size, income levels, etc. are some of the social factors which affect the business strategies. Higher income level shows high potential of consumption.

Technological Factors: Now a day, technology is very volatile. Technological development may make organizational process outdated which may cause less production capacity in comparison to new technology and thus affect business strategy.

Legal Factors: Changes in Laws governing organization, changes in labor laws can increase organizational expenses, may change working hours, etc. affecting its strategy.

10. Explain Cost leadership strategy, its strategic choices, and

advantages and disadvantages of cost leadership. Define

Differentiation Strategy. Discuss is advantages and

disadvantages.

The Cost Leadership Strategy - Porter's generic strategies are ways of gaining competitive advantage – in other words, developing the "edge" that gets you the sale and takes it away from your competitors. There are two main ways of achieving this within a Cost Leadership strategy:

- Increasing profits by reducing costs, while charging industry-average prices.

- Increasing market share through charging lower prices, while still making a reasonable profit on each sale because you've reduced costs.

The Cost Leadership strategy is exactly that – it involves being the leader in terms of cost in your industry or market. Simply being amongst the lowest-cost producers is not good enough, as you leave yourself wide open to attack by other low cost producers who may undercut your prices and therefore block your attempts to increase market share.

You therefore need to be confident that you can achieve and maintain the number one position before choosing the Cost Leadership route. Companies that are successful in achieving Cost Leadership usually have:

- Access to the capital needed to invest in technology that will bring costs down.

- Very efficient logistics.- A low cost base (labor, materials, facilities), and a way of sustainably cutting

costs below those of other competitors.

The greatest risk in pursuing a Cost Leadership strategy is that these sources of cost reduction are not unique to you, and that other competitors copy your cost

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reduction strategies. This is why it's important to continuously find ways of reducing every cost. One successful way of doing this is by adopting the Japanese Kaizen philosophy of "continuous improvement".

Overall cost leadership strategy is based on a company's position as the industry's least cost producer in broadly defined markets or a wide mix of products. There are two essential features of overall cost leadership:

1. The company pursuing overall cost leadership must aggressively pursue a position of cost leadership by constructing the rnost efficient Sc~ate" tacilities and must be godoTin engineering, manufacturing, and physical distribution.

2. The company has a large market share so that its per unit cost is the lowest. Overall cost leadership generates competitive advantage in the form of offering products to customers at lower prices which helps in achieving large market share. For example, Reliance Industries has created huge capacity in polyster, polymers, and fibre intermediaries and in all these segments, it is the lowest cost producer thereby capturing the largest market share. In fact, in the present competitive environment, most companies adopt cost as the basis of competition. Though many of them may be low cost producing companies, but everyone may not enjoy cost leadership. Those with the least cost enjoy cost leadership. For example, in detergent and toilet soap, Hindustan Lever and Nirma, both emphasize on low cost but Nirma enjoys the cost leadership position. While Nirma competes on price basis due to low cost, Hindustan Lever competes on product differentiation basis coupled with cost.

A basic question in adopting overall cost leadership strategy without some kind of differentiation is: is it a sustainable source of competitive advantage? It can be sustained only if barriers exist that prevents competitors from achieving the same low cost. However, in an era of technological development, manufacturers constantly leapfrog over one other in pursuit of lower cost. With decreasing national and international barriers to entry, sustaining overall cost leadership strategy requires continuous efforts for being cost effective.

The Differentiation Strategy - Differentiation involves making your products or services different from and more attractive those of your competitors. How you do this depends on the exact nature of your industry and of the products and services themselves, but will typically involve features, functionality, durability, support and also brand image that your customers value.

- To make a success of a Differentiation strategy, organizations need:- Good research, development and innovation.- The ability to deliver high-quality products or services.

Effective sales and marketing, so that the market understands the benefits offered by the differentiated offerings.

Large organizations pursuing a differentiation strategy need to stay agile with their new product development processes. Otherwise, they risk attack on several fronts by competitors pursuing Focus Differentiation strategies in different market segments.

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generic strategies may be developed on the basis of differentiation. Kotler has defined differentiation as "the act of designing a set of meaningful differences to distinguish the company's offerings from competitors' offerings."7 Thus, the product offered by a company is perceived by customers as being different from other companies offering the similar product. The product, being perceived as distinct, may attract higher price which results into higher profitability. For example, shaving blades offered by Gillette India Limited command much higher prices as compared to its competitors' blades. In differentiation, perception of customers about a product being unique is important and not the officer’s perception. A product can be differentiated on several bases: product characteristics— form, features, performance quality, conformance quality, durability, reliability, reparability, style, design; services—ordering ease, delivery, installation, customer training, customer consulting, maintenance and repair, etc.; personnel—competence, courtesy, credibility, reliability, responsiveness and communication; channel—coverage, expertise, and performance; image—symbols, media, atmosphere, and events.8 Since there are serveral bases of differentiation, the question arises; which differences should be pronounced? The answer lies in the competitors' analysis which will reveal their competitive differentiation. A company can differentiate those areas which are weak points of the competitors, particularly the nearest one or the areas which have been left by them. Differentiation strategy is comparatively more sustainable as compared to overall cost leadership. However, it requires constant analysis of competitors and their likely moves for differentiation.

Focused Differentiation - While differentiation of general nature has width, focused differentiation is undertaken to achieve advantage in a narrowly defined market/customer segment. This strategy generates advantage based on the ability to create more customer value for a narrowly tareeted segment and results from a better understanding of customer neea^. For example, various types of hotels adopt focused differentiation strategies as each class of hotels has different customer segments. Further, depending on the class of hotels, each of them emphasizes on some specific but few bases of differentiation. Unlike toothpaste market or other personal products, customer segmentation for hotel industry is narrowly focused.