QUESTION ANSWERS BANK FOR SEMESTER 3RD YEAR STUDENTS

BUSINESS POLICY AND STRATEGIC MANAGEMENT

Q. 1 What is Business Policy? How does Business Policy make the Study of Management

more meaningful?

Ans. The term Business Policy may be used interchangeably with Strategic

Management, corporate planning etc. Primarily the term Business Policy means a long-

term planning for the total business – “as a whole.

Business Corporate/overall functioning

Policy planning/formulation of strategies

Thus Business policy means a long-term planning of any Organization for the

purpose of its – “GROWTH, SURVIVAL, EXPANSION, DIVERSIFICATION ETC.

The planning of the overall Business is done by the top-level managers who have the

relevant skills experience and knowledge to take a strategic decision for the overall

corporate.

According to Christensen:- “Business Policy is the study of the functions and

responsibilities of Senior Management, the crucial problems that affect success in the

total enterprise, and the decision that determine the direction of the Organization and

shape its future.”

From the above definition it may be understood that Business Policy attempts to study

what path the Organization is going to take in future.

According to Edmond and Gray “A business policy is nothing more than a well

developed statement of directions and goals. Goals involve definitions of precisely what

the business is or should be and the particular kind of company it should be. Direction

guides the action of the firm to accomplish these goals”.

According to Miller and Earnest “A policy is a statement or a commonly accepted

understanding of decision making criteria or formulate prepared or evolved to achieve

economy in operations by making decision; relatively routine or frequently occurring

problems and consequently facilitating the delegation of such decisions to lower

managerial levels.”

Nature of Business Policy:

1. Business Policy is a Study:-

It is a study of what the top level Managers do and what guides their activities.

2. Top-Management:-

Business Policy deals with the long term perspective of the Organization. These decision

are taken by the managers at the senior level of management. Therefore, Business Policy

attempts to Study the functions and responsibilities of the senior management which

primarily concerns itself to the crucial problems or decisions of the organization.

3. Future –Oriented:-

As the Study of Business Policy entails what should be done to take a desired future

course of position it is future-oriented. The senior level managers anticipate and predict

the future and take a policy decision in the present.

4. Choice of a Position:-

The study of a Business Policy involves evaluating Various courses of action and various

desired future positions and ultimately choosing one of the best suitable future position.

5. Choice of a Strategy:

It also involves an evaluation and choice of a Strategy to reach upto the desired future

position.

6. Mobilization of Resources:-

The study of Business Policy is also concerned with the optimum and mobilization of the

available and the required resources in an organisatio9n for the achievement of the :

Objectives of Business Policy:

In terms of knowledge.

The learner of business policy have to understand the various concepts involved

like strategy, policies, plans and programmes are encountered in the functional

area courses too.

A knowledge of the internal and external environment and how it affects the

functioning of an organization is vital to an understanding of business policy.

Information about environment helps in the determination of the mission,

objectives, and strategies of a firm.

The implementation of strategy is complex issue and through the knowledge

gained business policy enable the learner to visualize how the implementation of

strategic management can take place

In terms of skills

Attainment of knowledge should lead to the development of skills. Analysis of

case studies and interpretation and analysis of the business events.

The study of BP should enable a student to develop analytical ability and use it to

understand the situation in a given case or incident.

The study of business policy should lead to the skills of identifying the factors

relevant in decision making.

It increase the mental ability to the learners and enables them to link theory with

practice.

Case analysis leads to the development of oral as well as written communication

skills.

In terms of attitude

The attainment of the knowledge and skill objective should lead to the inculcation

of an appropriate attitude among the learners.

It developed a generalist attitude. The generalist attitude enables the learners to

approach and assess a situation fro all possible angles.

Evaluation of Business Policy:-

In the Initial days managers used to do with day to day planning methods. The first phase

in mid 1930‟s was the premise of ad-hoc policy-making mainly due to the nature of the

business of that period. The second phase in 1930‟s and 1940‟s was marked by the

increasing environmental changes. Planned Policy formulation replaced ad-hoc policy

making, which led to the emphasis shift to the integration of functional areas. The third

phase during 1960‟s was based on strategy paradigm. It was the effect and relationship of

the business with the environment, which guided the process of policy making. In the

early eighties, the patterns changed again companies went global and competition

increased Japanese Companies unleashed a force across the world along with other Asian

companies and posed threats for the U.S. and European Companies.

Importance of Business Policy:

The study of Business Policy makes the study of management more meaningful. It

completes the study of management for the students, as it puts together the information of

all the functional areas and gives a complete picture of the organization for determining a

comprehensive future policy of an organization.

For Students:-

a) Business Policy seeks to integrate the knowledge gained in various functional areas of

management i.e. Finance, Production, Marketing, and Human Relations etc.

b) All the constraints and complexities of the real life business are studied in the subject

of Business Policy.

c) The study & practice of management becomes more meaning with the integration of

all the functional sub-systems.

For Executives:-

d) Business Policy helps to create an understanding of how policies are formulated

e) The study makes the executives more receptive to the developments in the

environment to pick ideas and suggestion for implementation purpose.

f) Business Policy prepares the executives at middle-level of management for the

understanding of strategic decision – making.

g) It offers a unique perspective to executives to understand the senior management’s

viewpoint.

The purpose of business policy:

1. To integrate the knowledge gained in various functional areas of management.

2. To adopt a generalist approach to problem-solving .

3. To understand the complex interlink ages operating within an organization

through the use of a systems approach to decision making and relating these to the

changes taking place in the external environment.

CONCLUSIONS:

The purpose of the business policy course is to integrate the knowledge gained in various

functional areas, to adopt a generalist approach and to comprehend the complex

interaction taking place within the organization. It is a core subject that integrates all the

knowledge & experience gained for future of the organization.

Q.2 Describe the process of strategic management. Draw a neat chart showing

comprehensively the different elements in the strategic management Process?

Ans. An Overview of Strategic Management

Business policy and strategic management is about decision making and it deals

with actions which determine whether an enterprise excels, survives or dies. This

process is called “Strategic Management”

The job of the strategic managers is to make the best use of firm’s resources in a

changing environment.

We use terms “Enterprise”. “organization”, “Company”, and “firm”

interchangeably. Some are profit-seeking, others not-for-profit; but all utilize a

strategic management process. Similarly, terms such as “manager”, “strategist”,

and Executives” are substitutes for variety.

Why Change is Essential:

Change occurs due to outside pressures such as from Govt. Competitors and

consumers.

Others developed because the employees and management made decisions to

change the nature of business.

Definition of strategic management:

Strategic management is defined -as the dynamic process, Formulation Implementation,

evaluation Control of strategies to realize the organization's strategic intent.

Four Phases in Strategic Management Process

Strategic Control

Elements in Strategic Management Process:

A. Establishing the hierarchy of strategic intent.

1. Creating and communicating a vision.

2. Designing a mission statement.

3. Defining the business.

4. Adopting the business model.

5. Setting objectives.

B. Formulation of strategies.

1. Performing environmental appraisal

2. Doing organizational appraisal

3. Formulating corporate-level strategies.

4. Formulating business-level strategies.

5. Undertaking strategic analysis.

6. Exercising strategic choice.

7. Preparing strategic plan.

Establishment of strategic intent

Formulation of strategies

Implementation of strategies

Strategic evaluation

C. Implementation of strategies.

8. Activating strategies.

9. Designing the structure, systems and processes.

10. Managing behavioral implementation.

11. Managing functional implementation.

12. Operational strategies.

D. Performing strategic evaluation and control.

13. Performing strategic evaluation.

14. Exercising strategic control.

15. Reformulating strategies.

Strategic Control

Q. 3 what do you understand by strategic decision making. Explain its process and

approaches for decision making. Discuss the issues that are relevant for strategic

decision making?

Ans. Strategic decision making: Decision making is the most important function of any

manager. Strategic decision making is the primary task of the senior management. The

difference lies in the levels at which they operates, while decision making pertains to all

Strategic Intent Vision Mission Business DefinitionBusiness model Objectives

Strategy FormulationEnvironmental Organizational Appraisal Appraisal SWOT Analysis Corporate-level strategies Business level strategies Strategic analysis and choice Strategic plan

Strategic Evaluation

Strategy Implementation Project Procedural Resource allocation Structural Behavioral Functional & Operational

managerial functions, strategic decision making largely relates to the responsibilities of the

senior management.

Most people agree that decision making is the process of selecting a course of action

from among many alternatives. The process works somewhat like this:

Objectives to be achieved are determined.

Alternative ways of achieving the objectives are identified.

Each alternative is evaluated in terms of its objective-achieving ability.

The best alternative is chosen.

The basic thrust of strategic decision making, in the process of strategic management, is

to make a choice regarding the courses of action to adopt.

The fundamental strategic decision relates to the choice of a Mission. In other words, the

answer to such question as:

• What is our business?

• What will it be?

• What should it be?

Process of decision making:

Any applied field that combines art and science, you are likely to find two approaches:

• Prescriptive: tell you how things ought to be done.

• Descriptive: tell you how things are done.

Approaches for decision making:

1. Rational-analytical decision making

• Oldest decision making theory.

• Decision maker is unique actor.

• Behavior is intelligent and rational.

• The actor makes decision in full awareness of all available feasible

alternatives in order to maximize advantages.

2. Intuitive-emotional decision making:

• Opposite of the rational decision maker is intuitive decision maker.

• Decision maker prefers habit or experience, gut-feeling, reflective thinking

and instinct using the unconscious mental processes.

• Consider a number of alternatives and options simultaneously jumping

from one step in analysis or search to another and back again.

3. Political-behavioral decision making:

Recognizing the problem

Analyzing the problem

Generating alternatives

Evaluating the alternatives

Choosing the best alternative

Implementing & verifying the decision

• Real decision maker must consider a variety of pressures form other

people affected by their decision.

• Organization interacts with a variety of stakeholders in a series of

interdependent exchange relationships.

• Unions exchange labour for decent wages and job security. Customers

exchange money for products and services.

• Decisions are made when most of the people involved in the process agree

that they have found a solution. They do this by mutual adjustment and

negotiations following the rules of the game.

A synthesis on Decision making:

The human being is a mix of the rational and the emotional.

We also know that the environment is a mix of the analyzable and of

chaotic changes and pressures.

Strategic management decisions are made in a typically human way- using

the rationally conscious analysis and intuitively unconscious “Gut” in the

light of political realities.

Components of strategic decision-processes

Issues in strategic decision making:

1. Criteria for decision making.

2. Rationality in decision making.

3. Creativity in decision-making.

4. Variability in decision making.

5. Person-related factors in decision-making.

6. Individual versus Group decision-making.

Q. 4 Differentiate between Vision and a Mission‟ Mention the characteristics of a good

mission statement.

Ans. VISION : The promoters of an organization, normally have some aspirations which

guide them in the structuring and functioning of the organization. These aspirations are

expressed in strategic intent means intention. A strategic intent should lead to on end. That

end is the Vision of an organization. It is what the firm or person would ultimately like to

become in the future. A vision is more dreamt of than it is articulated. Many a times it

may not be evident what vision does the top management holds for its organization. A

vision could be as hazy & vague as a dream. Yet it is a powerful motivator to action.

Defining Vision:

“Description of something (an organization, corporate culture, a business, a technology,

an activity) in the future”. - Kotter (1990)

“Mental perception of the kind of environment an individual, or an organization, aspires

to create within a broad time horizon and the underlying conditions for the actualization

of this perception”.

-El- Namaki (1992)

“Category of intentions that are broad , all-inclusive, and forward thinking”.

-Miller and Dess (1996)

Benefits of Having a Vision:

– Good vision are inspiring and exhilarating.

– Visions represent a discontinuity.

– Good visions help in the creation of a common identity and a shared sense of

purpose.

– Good visions are competitive, original and unique.

– Good visions foster risk-taking and experimentation.

– Good visions foster long-term thinking.

– Good vision represents integrity.

Thus good Visions may be inspiring & motivating to the management. It may guide the

working of a dream i. e. a Vision. A vision articulates the position that a firm would like

to attain in the distant future. E.g. :-IOC‟s Vision “Indian Oil aims to achieve

international standards of excellence in all aspects of energy an diversified business with

focus on customer delight through quality products and services.” Thus Vision constitutes

future aspirations that lead to an inspiration to be the best in one’s field of activity.

Mission:

The essence of vision is forward-looking view “what an organization whishes to

become”.

Mission is “what an organization is and why it exists”.

Peter F. Drucker raised important philosophical questions related to business:

– What is our business?

– what will it be?

– what should it be?

The answers are based on the analysis of the

– Underlying needs of the society that any organization serves to fulfill.

– Satisfaction of that need.

– The business of the organization.

Understanding Mission:

Mission is a statement which defines the role that an organization plays in a society.

It refers to the particular needs of the society, for instance, its information needs.

Defining Mission:

“Essential purpose of the organization, concerning particularly why it is in existence, the

nature of the business (es) it is in, and the customers it seeks to serve and satisfy”.

-Thompson (1997)

Mission is the “Purpose or reason for the organization existence”.

-Hunger and Wheelen (1999)

How are Mission Statements Formulated?

– a particular set of tasks they are called upon to perform in the light of their

individual, national or global priorities.

Characteristics of a Mission Statement:

1. It should be feasible.

2. It should be precise.

3. It should be clear.

4. It should be motivating.

5. It should be distinctive.

6. It should indicate major components of strategy.

7. It should indicate how objectives are to be accomplished.

Q.5 what is the concept of Environment in Strategic Management? What aspects does

Environmental Appraisal deal with?

Ans. Environment: The term basically means the surroundings: external objectives,

variables, events and circumstances under which someone or something exists. In terms

of Business, Environment refers to the culmination of all conditions, events,

circumstances and situations and the various pressures and influences and surround and

directly and indirectly affects the organization.

Characteristics of Environment:-

a) Complex: The environment consists of a number of factors and variables directly or

indirectly influencing the operations of any business organization. All the factors and

conditions which form a part of the environment are interrelated and interdependent. One

factor influences or get influenced by another factor. Thus environment is a very complex

phenomenon whose parts may be easily understood in isolation but a total picture may

require sufficient understanding and knowledge.

b) Dynamic: Due to so many forces operating in the environment the nature of

environment is constantly changing and is thus dynamic in nature.

c) Multi-Faceted: The character of the environment is understood by the person who is

observing it. It has got many angles. It ultimately depends upon the perception of the

observer, what he derives out of the development of the events. For example the de-

licensing of the industries may be considered as an opportunity by some who want to

enter the business. However the same may be considered as a threat by those who were

earlier having a monopoly in a particular business.

d) Far-reaching impact: The developments and events shaping the environment have a

far reaching influence on the operations of a business. For example any change in the

tastes & linking of customers affect the growth & profitability of a firm. For any business

organization the study of environment is of utmost important to be able to adjust itself to

the latest developments and to be able to reap the benefits of the opportunities arising in

the market. The complexities of any environment may be understood by dividing it into

different categories.

Types of Environment:

A) INTERNAL ENVIRONMENT: The internal environment of a business consists of

various factors existing within an organization which results into building its strengths &

weaknesses. It includes:- Employees & their skill base. Level of Technology available

Availability of various resources like finance, infrastructure etc. Process Organizational

design and structure Organizational work culture- Procedures – policies.

B) EXTERNAL ENVIRONMENT: - The external environment of a business includes

all the factors outside the organization. It is this set of factors which provide an

opportunity or pose threats to the organization. It includes

i) Market Environment: Customers needs preferences, attitudes, perception,

bargaining & purchasing power, satisfaction etc. Product: features, functions,

ingredients, image, price, differentiation, availability, substitutes, services etc.

Marketing intermediary: Channel, levels, costs, logistics, delivery, service & financial

schemes etc. Competitor related factors: types & number of competitors, entry & exit

of competitors, nature & strategy of competition.

ii) Technological Environment: Sources of technology cost of technology

acquisition, Technological development, stages of development change & rate of change,

research & development. Impact of technology on human beings and environmental

effort. Communication & infrastructural technology.

iii) Supplier Environment:- Cost, availability & continuity of supply of raw

materials, parts & components. Cost & availability of finance, energy, human resources,

machinery, spare parts & after sales service. Infrastructural support & ease of

availability. Bargaining power of suppliers & existence of substitutes.

iv) Economic Environment:- Stage of economic development of the country.

Structure of economy- Capitalist/Socialist/Mixed Economic policies- industrial, monetary

& fiscal Economic planning Economic indicates like national income, GNP per capita

income, savings & investment. Balance of payments, value of exports & investment.

v) Regulatory Environment:- Constitutional framework, Directive principles,

fundamental rights, division of powers. Policies related to licensing, monopoly, foreign

investment, financing etc. Policies related to distribution & pricing Policies related to

imports & exports other policies related to the public sector, small scale industries,

environmental pollution, consumer protection etc.

vi) Political Environment: The political system and its features, political parties.

The political structure Political processes like party system, elections, economic &

industrial promotion & regulation. Political philosophy, governments’ role in business

etc.

vii) Socio-cultural Environment:- Demographic characteristics e.g. Population

and its density, distribution, change, age composition, interstate, migration, rural-urban

mobility & income distribution. Environmental pollution, consumerism, corruption, use

of mass media etc. Family, family values & family structure. Role and position of men,

women, children etc. Educational level, work ethics, role of minority etc.

viii) International environment:- Globalization, global blocks Global HR, Global

information system Global markets & competitiveness Global legal system

C) General Environment: A wider perception of the environment includes all the

aspects of the external environment e.g. National/ international Economic Social/

Demographic Technological Political etc. together constitute the general environment.

The general environment affects the business someway or the other and thus all business

houses are concerned about it. The general environment offers a common set of

opportunities and poses a common set of threats to all the players in the industry.

However, the organization may not be influenced by each factor of the general

environment.

D) Relevant Environment:- Every business organization is concerned with a set of

environment aspects, which have a direct, or an immediate affect on the business. This

part of the general environment which is of an immediate concern to the business is

termed as relevant environment. What constitutes a relevant environment depends upon

the perception & working of the business and the industry a firm is in.

Q6. Write a Detail note on strategic planning?

Ans. Strategic Planning:

– In simple terms, strategic planning is planning for strategies and implementing

them to achieve organizational goals.

– It starts by asking oneself simple questions like:

• What are we doing?

• Should we continue to do it or change either our product line or the way of

working?

• What is the impact of social, political, technological and other

environmental factors on our operations?

• Are we prepared to accept these changes?

• What will be the impact of these changes on our operations?

Strategic planning aims at knowing what we are and where we want to go so that

environmental threats and opportunities can be exploited, given the strengths and

weaknesses of an organization.

Features of Strategic Planning:

1. It is a process of questioning.

2. Time horizon.

3. Pervasive process.

4. Focus of attention.

5. Continuous process.

Benefits of Strategic Planning:

1. Financial benefits.

2. Guide to organizational activities.

3. Competitive advantage.

4. Minimizes risk.

5. Promotes motivation and innovation.

Limitations of Strategic Planning:

1. Lack of knowledge.

2. Problem of co-ordination.

3. Interdependence of different units.

4. Managerial perception.

5. Financial considerations.

Process of Strategic Planning:

1. Objectives formulation.

2. Identify the current objectives and strategies.

3. Analysis the available information.

4. Analysis the impact of environment.

5. Analysis the resource position of the firm.

6. Establishment of alternative strategies.

7. Evaluation of alternative strategies.

8. Choice of strategy.

9. Implementation of strategy.

10. Measurement and control of strategy.

Q.7 Define SWOT. What is the rationale of performing SWOT?

Ans. SWOT: Any Business organization for its survival and growth undertakes a

detailed SWOT analysis. SWOT is the stand for Strength, Weaknesses, and Opportunities

& Threats. In the cut-throat competition faced by the business today a detailed

environmental scanning is a must. The study of Internal & External Environment,

General & Relevant environment makes a business house adopt itself to the ever

changing and ever demanding surroundings in which the business operates.

The strengths & Weaknesses of any organization are inherent and reside in the internal

environment of a business. The Opportunities & Threats are the development or events

which exist in the external environment and are open to all the players in the industry.

a) Strengths: the strength of a business is its capacity or ability to perform or to

possess any resource relevant for the success or otherwise of a firm, which may

not be possessed by a rival player in the industry. For e.g. skilled manpower Level

of technology Economy of Scales or availability of cheap finance Intense

distribution channels Raw materials/ components at least cost. Efficient suppliers

etc. The strengths possessed by a firm gives it a strategic advantage over the other

firms either in the short run or in the long run business can take a risk based on

one of its strengths. This strength, if realized can help strategic planning of a firm.

b) Weaknesses: A weakness of a business is its shortcoming or inability to do

something or to possess something which a rival firm may have. This weakness

determines the level of strategic advantage gained by a competitive firm over a

business. A weakness could be poor availability or poor retention of skilled

manpower. High cost of capital Outdated or expensive technology High cost of

production Unreliable suppliers. Shallow distribution channels Poor state of

logistics & physical distribution Every organization should try to further

strengthen its abilities and try to overcome or hide or compensate its weaknesses.

These weaknesses or shortcoming are generally made known to the customers by

competitors. The firm should always have a ready strength available to be able to

compensate any or all of its weaknesses in the eyes or the customers. For

example: Weakness of high cost of production may be justified by unique

features, high quality & durability etc. of the product.

c) Opportunities: An opportunity is any chance or an event, which can be

utilized and taken advantage of an opportunity, lies in the external environment

and is open to all the players in the industry serving on the same platform. It

primarily depends upon the perception as well as the resources of the organization

that, whether any occurrence is considered as an opportunity or not. An effective

manager is always receptive to opportunities, which may soon be converted into

strengths. An opportunity may be :- Some favourable law passed by the

legislature of the country Entry or exit of a competitor a substitute Change of the

consumer behaviour Change in the technology compatible to organisational

resources Availability of a cheap finance Possibility of a joint ventures or takes

over Change in the competitor‟s strategy Change of a political party in power etc.

Thus if any event or an occurrence is in favour of the organization it is perceived

to be an opportunity by it. Opportunities are taken advantage of to create a

competitive edge or a first mover‟s advantage in the industry.

d) Threats: Threats exists in the external environment. It is in accordance of an event or

the potential occurrence of an event which may adversely affect the

organisation‟s functioning or potentiality to lead over the competitors in today‟s

time or in future. The above mentioned opportunities may well act as a threat to

an organization If it is not suiting its style or working, resources or business

strategy. It is very significant for any business organization to do its SWOT

analysis on a regular interval to make use of its strength & opportunities, to

overcome its weaknesses and to avoid the threats in hampering its business.

Indicators of competitive strengths

1. Strong market share

2. Growing customer base and customer loyalty.

3. above average market visibility

4. Strongly differentiated products

5. Cost advantages

6. above average profit margins

7. A creative & entrepreneurial alert management

8. above average technological & innovational capability

Indicators of Competitive Weaknesses

1. Competitive disadvantages

2. Short on financial resources

3. Slipping reputation with customers

4. Lag in new product development

5. High cost of production

6. Weak product quality

7. Losing ground to rival companies

8. Lacking skills & capabilities in key areas

CONCLUSION: A Successful strategist concentrates his efforts on the

understanding of both external as well as the internal analysis. The knowledge of

competitive moves and counter moves and the recognition of the potential

competitive advantages of the organization. Both are equality important to be

realized by a Strategist.

Q. 8 what do you understand by organizational appraisal? Explain the different aspects

of the internal environment, emphasizing the nature of their impact on the

capability of an organization and ultimately on its strategic advantage?

Ans. Organizational Appraisal:

The appraisal of the external environment of a firm helps it to think of “what it might

choose to do”. The appraisal of the internal environment, on the other hand, enables a

firm to decide about “what it can do”.

Dynamics of Internal Environment:

• Organizational Resources

• Organizational behavior

• Strengths and weaknesses

• Synergetic Effects

• Competencies

• Organizational Capability

• Strategic Advantage

Framework for the development of Strategic Advantage by an Organization:

Strategic Advantage

Organizational Capability

Competencies

Synergistic Effects

Strengths and Weaknesses

Organizational resources + Organizational Behavior

Organizational Capability Factors:

1. Financial capability: financial capability factors relate to the availability, usage, and

management of funds, and all allied aspects that have a bearing on an organization’s

capacity and ability to implement its strategies.

Typical strengths that support financial capability:

• Assess to financial resources

• Amicable relationship with financial institutions

• High level of creditworthiness

• Efficient capital budgeting system.

• Low cost of capital as compared to competitors

• High level of shareholder's confidence

• Effective management control system

• Tax benefits due to various Government policies.

2. Marketing Capability:

Marketing capability factors relate to the pricing, promotion, and distribution of

products or services.

Typical strengths that support Marketing capability:

• Wide variety of products

• Better quality of products

• Low prices as compared to those of similar products in the market

• Price protection due to Government policy

• Effective sales promotion

• High-profile advertising

• High quality customer service

• Effective distribution system

• Effective marketing management information system

3. Operations Capability:

Operations capability factors relate to the production of products or services, use

of material resources.

Typical Strengths that support operations Capability:

• High level of capacity utilization

• Favorable plant location

• Reliable sources of supply

• Effective control of operational costs

• Existence of good inventory control system

• Availability of high caliber R & D personnel

Personnel Capability:

Personnel capability factors relate to the existence and use of human resources

and skills.

Typical Strengths that support Personnel Capability:

• Genuine concern for human resources management and development

• Effective and efficient personnel systems

• The organization perceived as a fair and model employer

• Excellent training opportunities and facilities

• Highly satisfied and motivated workforce

• High level of organizational loyalty

• Low level of absenteeism

• Safe and healthy working conditions

General Management Capability:

general management capability relates to the integration, coordination, and

direction of the functional capabilities towards common goals.

Typical Strengths that support Personnel Capability:

• Effective system for corporate planning

• Control, reward and incentive system for top managers geared to the

achievement of objectives

• Entrepreneurial orientation and high propensity for risk-taking

• Good rapport with the government and bureaucracy

• Favorable corporate image

• Commonly being perceived as a good organization to work for

• Development-oriented organizational culture

• Effective management of organizational change

Consideration in Organizational Appraisal:

The purpose of organizational appraisal is to determine the organizational

capability in terms of strengths and weaknesses that lie in the different functional

areas.

Factors affecting Organizational Appraisal:

The factors that affect organizational appraisal relate to the strategists, the

organization, and to the internal environment.

– Characteristics of strategists: ability to judge the opportunities and threats

– Nature of the organization : Size of the organization

– Internal environment: matching the conditions

Approaches to Organizational Appraisal:

The approaches adopted for preparing organizational appraisal may range from

highly systematic to an Ad hoc one.

Systematic approach is adopted as a proactive measure to appraise the

organization.

Ad hoc approach is generally used as a reactive measure in response to a crisis

and occasional organizational studies may be undertaken to determine capability

Methods and Techniques used for Organizational Appraisal:

– Identical to those used for the performance evaluation of an organization.

– There is an important different between performance evaluation and

organizational appraisal.

– The emphasis in evaluating performance is on assessing the current

behavior of the organization.

– Organizational appraisal is of a comprehensive and long term nature and

emphasis is not only on current behavior but also on what the organization

needs to do in order to gain the capability.

– The difference between performance evaluation and organizational

appraisal, the methods and technique used could be classified as broadly

in three parts as below:

Internal Analysis:

1. VIRO Framework

2. Value chain analysis

3. Quantitative Analysis

I. Financial analysis

II. Non-Financial Analysis

4. Qualitative analysis

Q9 Differentiate between BCG and GE matrix tools used for Strategic planning?

Ans. BCG MATRIX: The Boston Consulting Group (BCG) a leading management-consulting

firm developed and popularized a growth share matrix. The matrix comprises of four

quadrants each describing the size and position of the strategic business unit owned by an

organization.

On the vertical axis is the Market Growth rate of the market in which the business

operates. A market growth rate above 10 percent is considered to be high. On the

horizontal axis is the Relative Market Share. It refers to the Strategic Business Unit‟s

market share as compared to the firm, which is its largest competitor in the segment

under consideration. The relative market share serves a measure of the company’s

strength in the market segment. The two axis are divided into high & low. The growth

matrix is divided into four cells each indicating a different type of business profile.

1. Question marks: These are Businesses that operate in high- growth markets but have

low relative market shares. A question mark requires a lot of cash because the company

has to spend money on plant, equipment and personnel to keep up with the fast growing

market and because it wants to overtake the market leader. The company has to think

hard about whether to keep on investing money into this business or put an end.

2. Stars: It is a market leader in a high growth market. A star does not necessarily

produce a positive cash flow for the company. The company must spend substantial funds

to keep up with the high market growth an to fight off competitor attacks. A star is a

potential business which has the competitive advantage to be a market leader in an

industry that is growing fast.

3. Cash cows: Stars with a falling growth rate that still have the largest relative market

share and produce a lot of cash for the company is called a cash cow. The company does

not have to finance expansion because the markets growth rate has slowed because the

business is the market leader it enjoys economies of scale and higher profit margins. The

company uses its cash cows to pay bills and support other business.

4. Dogs Businesses that have weak market shares in low-growth markets are in the dog

category. The company should consider whether they are expecting a turn around in the

market growth rate or a new chance for market leadership else they should divest this

business. It would be fruitless to spend and money on this matrix business.

GE NINE CELL MATRIX:

A refined version of the BCG Matrix is the one pioneered by General Electric. An

SBU‟s appropriate objectives cannot be determined solely by its position I the growth

share matrix. If additional factors are considered the growth-share matrix can be seen as a

special case of multifactor portfolio matrix. Each business is rated in terms of two major

dimensions – market attractiveness and business strength. Companies are successful to

the extent that they enter attractive markets and posses the required business strengths to

succeed in the markets. If one of these fact is missing the business will not produce

outstanding results. Neither a strong company operating in an attractive market will do

very well. To measure the two dimensions, strategic planners must identify the factors

underlying each dimension and find a way to measure them and combine them. Market

attractiveness varies with the market‟s size, annual market growth rate, historical profit

margins etc. business strength varies with the company‟s market share, share of growth,

product, quality etc. While the BCG matrix considers only two factors, the GE portfolio

matrix helps the strategic planners to look at more factors in evaluating an actual or

potential business than the BCG model does. As against the BCG matrix the GE matrix is

divided into nine cells, which in turn falls into zones. The three cells in the upper left

corner indicates strong SBU‟s in which the company should invest or grow. The diagonal

cells stretching from the lower left to the upper right indicate SBU‟s that are medium in

overall attractiveness. The company should pursue selectively and manage for earnings.

The three cells in the lower-right corner indicate SBU‟s that are low in overall

attractiveness. The company should give serious thought to harvesting or divesting these

business units. Apart from the BCG and GE portfolio matrix, three more portfolio matrix

are used to evaluate the strength of business units and facilitate strategic planning.

A) Direction Policy

B) Space Matrix

CONCLUSION: Portfolio models have helped managers to think more strategically, to

understand the economics of their businesses better, improve the quality of their plans,

improve communication between business and corporate management, eliminate weaker

businesses & strengthen their investment in more promising businesses. However, portfolio

models must be used cautiously. They may lead the company to place too much emphasis

on market-share growth and entry into high growth businesses or to neglect its current

businesses because may end up in the same cell position though differ greatly in underlying

ratings & weights.

Q.10 “The core of general management is Strategy” Elaborate. Also discuss the role that a

strategist plays in strategic management?

Ans. STRATEGY: THE concept of Strategy is central to understanding Business Policy and

Strategic Management. The term „Strategy‟ is derived from the Greek word „Strategos‟

which means generalship. The term Strategy means the art of the managing or adopting a

course of action. A course of action may be:

- To take advantage of opportunities

- To devise ways to counter threats etc.

ACCORDING TO ALFRED D. CHANDLER (1962) “A Strategy is 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.”

ACCORDING TO WILLIAM F.GLUECK (1972) “A Strategy is a unified,

comprehensive and integrated plan designed to assure that the basic objectives of the

enterprise are achieved.” By combining the above definitions we understand that a

Strategy is a plan or course of action or a set of decision rules forming a pattern or

creating a common thread related to the organizations‟ activities which are derived from

its policies, objectives and goals.

Apart from the three levels mentioned, many a times a strategy may be designed at higher

levels. Such strategies may be called the Societal Strategies. The strategies may be set at

levels lower than the functional level, which are called Operational Strategies. “The

stream of decisions and actions which leads to the development of a an effective

strategy or strategies to help achieve corporate objectives.” -Glueck (1984) Strategy

is the most significant concept in Business policy and Strategic Management. It guides

the functional and operational decisions by defining the broad course of action. For

example, for an old and very well established company, which had been the market

leader for several years, suddenly faces threat from the emergence of competitors has e.g.

Bajaj Scooters faced competition from LML scooters. A course of action may involve

strategies like expansion diversification, focus, turn around, stability or divestment

phases in the Strategic Management. Strategists are individuals or groups who are

primarily involved in the formulation, implementation and evaluation of strategy. For

different levels of managers and sometimes even outside experts are involved.

a) Board of Directors: The Board of Directors are the ultimate legal authority which is

elected by the owners of the organization. The board is responsible for providing

guidance and establishing the directives. There may be difference between the role

played by the Boards of different Organizations. The board activities include: To direct

Discuss matters of technology collaboration New product development Senior

management appointments Reviewing and screening executive decisions Setting and

accomplishing objectives Reviewing and evaluating organisational performance

b) Chief Executive Officer:- A CEO may be designated as the Managing Director,

Executive Director, President or General Manager. He is chief Strategist and plays a

major role in decision-making. He is responsible for- Execution of functions of strategic

importance Setting the mission, objectives & goals of the organization Organizational

leader, Organizer, Implementer, Coordinator and controller.

c) Role of Entrepreneurs: An Entrepreneur is the person who starts a new business and

has a high level of “achievement-motivation”. Since the entrepreneurs are the initiators

and owners they provide a sense of direction to the organization and set objectives and

formulates strategies to achieve them. An entrepreneur usually play all strategic roles

simultaneously.

d) Senior Management: The Senior Management consists of managers at the highest

level of the managerial hierarchy. Managers at the senior level may serve the Board of

Directors on rotational basis, may be as a part of executive committees formed to deal

with new project. They look after: Modernization Technology up-gradation

Diversification & expansion Plan implementation & communication New product

development Assisting the board & the CEO in the formulation, implementation &

evaluation of strategy.

e) Consultants: There may be Organizations, which do not have corporate planning

department because of small size, infrequent requirements, financial constraints etc. Such

organisations hire external consultants for strategic planning they may be. Individuals

Academicians Consultancy companies etc. They provide professional service by specially

trained & experienced persons to advise and assist managers & administrators to improve

their performance & effectiveness of their Organizations. E.g. A.F.Ferguson, McKinsey

& Co.

Conclusion: Thus there are various parties involved in the strategy Formulation, Implementation

& evaluation. Strategies give a direction to the company. They coordinate the efforts of all

functions & all levels towards a predetermined common organizational purpose. It facilitates an

optimum resource allocation & helps programming all organizational activities in advance.

Q.11 What are the different types of Strategies under Corporate- level Strategies (a)

Stability (b) Expansion (c) Retrenchment (d) Combination. Discuss its advantages &

disadvantages.

Ans: CORPORATE – LEVEL STRATEGY: Corporate level strategies are basically about

choice of direction that a firm adopts in order to achieve its objectives. These strategies guide

decision – making related to allocating resources among the different businesses of a firm,

transferring resources from one set of business to others and managing & nurturing a portfolio of

businesses in such a way that the overall corporate objectives are achieved. There are different

types of grand strategies.

STABILITY STRATEGY

It is a strategy, which aims at an incremental improvement of its functional performance. It may

aim at marginally changing any one aspect of the business:- Customer segment Alternative

Technology Product mix etc. A stability strategy is adopted because It is less risky Environment

faced is relatively unstable. Expansion may not be suitable. There may be three types of stability

strategies.

a) No-change Strategy:

It involves a conclusions decision to do nothing new and to continue with the present

business.

b) Profit Strategy:

There may be a situation when the firm tries to sustain its profitability by reducing

investments, cutting costs, raising prices, increasing productivity etc.

b) Pause Strategy:

It is a strategy to give a pause to the blasting expansion strategy in the past or toe move

cautiously before moving into a new business aspect.

DISADVANTAGES OF STABILITY STRATEGY

- Acts as a testing ground, before entering into a new venture

- Gives a period of rest if the company had been pursuing aggressive expansion.

- Suitable when any expansion may be threatening

EXPANSIONS STRATEGY

This strategy aims at high growth by substantially broadening the scope of one or more of its

businesses. It aims at the improvement of its overall performance in business.

a) Expansion through concentration:

It is also called as intensification, focus or specialization strategy. It involves

concentration of resources on one or more of a firm business so that it leads to expansion

b) Expansion through Integration:

Integration means combining activities related to present activity of a firm. It is an

expansion strategy which involves integrating to any business activity in the value chain

ahead or backwards existing business of an organization.

c) Expansion through diversification:

Diversification involves a substantial change in the business of the organization.

Concrete Diversification:- When the new activity is related to existing business activity.

d) Expansion through Cooperation:-

it is a strategy which works on the possibility of mutual cooperation with competitors;

with the competition also going at the same time.

Mergers:-

It is a strategy of two or more organisation in which one acquires the assets and

liabilities of the other in exchange of share or cash.

Takeover:-

It is a strategy where an attempt is made by one firm to acquire ownership or control over

another firm against the wishes of the latter‟s management.

Joint venture:-

It is a strategy where two or more companies combine to form a new company in order

to make use of the strengths of the partners to gain access to a new business. Eg. Maruti-

Suzuki.

Strategic alliance:-

Two or more firms unite to pursue a set of agreed upon goals but remain independent

subsequent to the formation of the alliance.

e) Expansion through Internationalization:-

These are the types of expansion strategies that require firms to market their products

beyond the national market.

RETRENCHMENT STRATEGY Retrenchment strategy is followed when organisation aims

at a contraction of the scope of business. It may involve a total or partial withdrawal from an

existing business. A firm may adopt this strategy when faced with adverse external environment

eg. Shrinking market share, diminishing profitability, falling sales, emergence of substitute

products, adverse government policies, tougher competition, changing customer need &

preferences etc. It involves strategies like.

a) Turnaround Strategies:

It means devising a strategy to reversing the trend, negatively affecting the organisation. The

strategy implemented internally focus on the ways and means of reversing the process of

decline.

b) Divestment:

It is a strategy which cuts-off the loss- making units or divisions, a product list or any of its

decline causing function etc. it involves a sale of a portion of business. It is adopted in case a

turn-around strategy is not successful.

c) Liquidation:

It is a strategy adopted to abandon all its activities completely. It involves closing down a

firm and setting its assets. It is considered to be the last resort for any strategist as it involves

both loss to employees as well as to the organisation.

Advantages of Retrenchment strategy

-To move out of loss-making business.

-To meet threatening environment (Government/ competitor/ Substitutes/ Economy/

Customers needs & preferences).

-Supports profitable businesses by reallocation of resources.

-Saves managements efforts by cutting off unprofitable business.

Disadvantages of Retrenchment Strategy

-May be used a short –cut to putting hard work

- May divest a potentially profitable business.

-May be the decline is temporary.

COMBINATION STRATEGIES

It is strategy adopted by an organization as a mixture of Stability, Expansion & Retrenchment

either at the same time in its different businesses or at different times in the same business with

the aim of improving its performance. In practice it is very difficult to find any organization that

has run its business on a single strategy.

Big organization facing complex environment cannot run a single strategy. An organization has

different business. Each business lies in different industry requiring a different response.

CONCLUSION:- Thus, the above discussion shows that there exists various strategic

alternatives before a strategist. Depending on the

- Type and nature of business

- Growth & future of business

- Nature and number of competitors

- External environmental variables

- Overall philosophy of the top-management

- Internal strengths & weaknesses etc; a given strategy or a combination is adopted

Q.12 Write a short note on Industry Analysis.

Ans. The purpose of industry analysis, in the context of strategic choice, is to determine

the industry attractiveness, and to understand the structure and dynamics of the

industry with a view to finding out the continued relevance to strategic alternatives that

are there before a firm.

• It follows that, for instance, if the industry is not , or no longer sufficiently attractive

(i.e. it does not offer long-term growth opportunities) then the strategic alternatives

that lie within the industry should not be considered.

• Michael E. Porter has made immense contribution to the development of the ideas

of industry and competitor analysis and their relevance to the formulation of

competitive strategies.

• He advocates that a structural analysis of industries be made so that a firm is in a

better position to identify its strengths and weaknesses.

• A model has been proposed consisting of five competitive forces- entry, threat of

substitution, bargaining power of buyers, bargaining power of suppliers, and rivalry

among current competitors- that determine the intensity of industry competition

and profitability.

Porter’s Five Forces model of Competition

INDUSTRY CHARACTERISTICS THAT COULD IMPACT FIRMS PERFORMANCE

The number of firms in the industry

The level and pattern of Promotional expenditure.

The rate and nature of technological competition.

The relative size of firm.

Consumer preferences for the product and for related products.

The rate of demand growth. The extent of demand growth.

The price behavior of the leading firm.

i) Threats of Entry i) The economies of scale ii) Brand identification iii) Govt.

Limitations (License requirement)

ii) ii) Powerful Buyers:- When buyer can force down prices.

iii) iii) Powerful Suppliers: When Suppliers can force buyers to pay higher prices

Potential threats from firms which make substitute products or serviceSupplier’s

Bargaining Power

Forces of competition created by Rivalry among existing firms

Buyer’s Bargaining Power

Potential threat from entry of new firms

iv) iv) Substitute Products:- By placing a ceiling on the price it can change to

substitute products or services and limit the potential of an industry.

v) V) Jockeying for Position:- The strongest forces which influence the profitability of

a firm become the determining factors in strategy formulation. Usefulness of

Industry Analysis :-

A. Industry Attractiveness

B. Competitive Position.

The minimum efficient scale of production. Buyers switching costs.

Industry Attractiveness:- a) Growth potential b) Profitability of the industry c) Relative

abilities of players. Competitive Position:- Where does the firm stand in comparison to others

ina particular Industry. INDUSTRY ANALYSIS

1. Basic Features:- Size of Industry Product offering Volume

2. Industry Environment:- Fragmented Industry Emerging Industry Nature of Industry

Declining Industry Global Industry

3. Industry Structure: Market Size Number of players Shares of players Nature of

competitions.

4. Industry attractiveness:- Profit Potential Growth Prospects. Barriers in industry entry

5. Industry performance:- Production Sales Profitability

6. Industry Practices:- Product Policy Pricing Strategies Promotion Policy Distribution Policy

etc.

7. Future Scenario:- Change in consumer Preferences Product innovations Entry or exit of firms

in a market. Rate of growth etc.

For any strategist to plan for a policy for future requires a complete internal as well as external

analysis. In the external environmental analysis special effort is put on Industry Analysis. The

analysis of the Industry includes the overall variables of the industry includes the overall

variables of the industry incorporating its size, nature, performance, attractiveness, relative

market share etc. by analysing the industry, a Strategist can very well evaluate whether it should

enter into a given business with investments or refrain from going ahead.

Q. 13 what do you mean by competitive advantage? What are the determinants of national

competitive advantage? Explain approaches and types of competitive advantage?

Ans. Definition:- Competitive Advantage – a situation in which there is a match between the

distinctive competencies of a firm and the factors critical for success within its industry that

permits the firm to out per form competitors. Competitive Advantage profiles a statement

showing competitive position of an organization in the market place. It is also known as Strategic

Advantage. Dynamics of National Competitive Advantage:- National Competitive Advantage:-

Competitive advantage to a country in relation to other countries. Like each organization, each

country is known in terms of its competitive advantage. For ex.:- USA of computers, credit

cards, Japan for electronic & automobiles, Germany for printing Presses, Switzer land for

pharmaceuticals and India for software professionals. The question is what factors have

contributed to generate advantage to these countries in specific areas? The answer of this

question is important for the purpose of generating competitive advantage at the global level.

According to M.Parter have categories various national attributes in four groups.

1. Factor Condition: Factor that provide base for undertaking various business activities.

These resources can be dividing into five broad categories-human resources, knowledge

resource, physic resource, capital resource & infrastructure.

2. Demand Condition: The nature of demand conditions for an organization’s or industry’s

product services in the country is important because it determines the rate of and nature

of improvement & innovation by the organizations. These factors either train

organizations for world-class competitive or fail to adequately prepare them to competent

in the global market place

3. Related & supporting Industries: Apart from the main industry in which context

competitive advantage is talked about, the conditions of related & supporting industries

also determine industry’s competitive advantage. However the Long run , the relationship

between main industry & related & supporting industries becomes reciprocal. For ex.:- If

the main Industry is developed, the relate industries will also develop with a time lag. In

the same way, the related industries will provide support to the further development of

the main industry.

4. Firm strategy, structure & Rivalry: Differences in strategy, structure & rivalry create

advantages or disadvantages to firms. Competing in different types of industries in a

nation. The aggregate of these determines national competitive advantage. The way

different firms shape their strategy- ranging from a broad outlook and long-term

profitability to narrow range and short term profitability-determine how the nation will be

competitive. For ex.:- US companies rank return on investment, share price increase, &

market share in that order.

Approaches for Competitive Advantage:

These approaches are as follows:-

1. Generic competitive strategy

2. STRATEGIC intent

3. Bench Marketing

4. Synergistic approach

5. Critical success factors approach.

1. Generic competitive strategy:- A basic strategy based on the principle that the

achievement of competitive advantage is at the case of superior market strategy.

a) Overall coat leadership:- an organization‟s position as the Industry‟s least cost

producer in broadly defined markets or a wide mix of products.

(b) Cost Focus:- a situation in which an organisation focus on a narrow market

segment & offers product at the lower price than its competitors based on cost

advantage.

(c) Differentiation:- is the act of designing a set of meaning full differences of

distinguish the organisations offerings from competitor‟s offerings

(d) Focused Differentiation:- differentiation of activities to generate competitive

advantage in a narrowly defined market/ coustmor segment.

II. Strategic Intent:- ambitions and obsession for winning which are used a means for

generating competitive advantage. According to Hamel & Prahalad:-

(a) Building layers of advantage

(b) Searching for loose bricks

(c) Changing the rules for engagement

(d) Collaborating

III. Bench marking: - It is another tool which can be used to generate competitive

advantage. It is a process of identifying, understanding, and adapting outstanding

practices from within the same organization or from other business to help improve

performance. Types of Benchmarking:-

1. Product Benchmarking

2. Competitive bench marking

3. Process bench marking

4. Strategic benchmarking

5. Global benchmarking.

IV. Synergic Approach:- can be used as a means do generating competitive advantage

to an organization if the managers are sufficiently aware about how synergistic effect is

developed. 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. Areas of synergistic effect:-

- Production synergy

- Marketing synergy

- Research development synergy

- Financial synergy

- General management synergy

V. Critical Success factors Approach:- characteristics, conditions or variables which

when sustained can have significant impact on the success of an organization

competing in a particular industry.

Organizational Critical success factors:-

Mckinsey 7‟s framework: - Strategy, Structure, systems, staffs, skills, style, shared

values

Types of competitive Advantage:-

1. Volume: - volume of competitive advantage exists when organization has very few

advantages but these are quite large in volume.

For ex.:- In luxury car segment, product differentiation in terms of style, comfort,

design etc. is used for generating competitive advantage and cost becomes secondary.

2. Specialized:- specialized competitive advantage exists when an organization has the

opportunity to adopt many approaches together to generate competitive advantage.

For ex.:- Organizations manufacturing specialized machinery for selected market-

segment can combine both approaches-low cost & product different ion- to be

competitive.

3. Stalemated: - Competitive advantage exists when an organization operates in an

industry in which meaningful product, differentiation is not possible & industry’s cost

structure is quite rigid.

For ex.:- sugar industry, product differentiation does not exist.

4. Fragmented: - competitive advantage exists an organization has many opportunities but

each opportunity has limited payoff.

5. for ex. Restaurants.

Q.14 Discuss the need for stakeholder relationship management? Also describe the

technique of stakeholders’ analysis?

Ans. Stakeholders and Strategic Management:

Stakeholders are the individuals and groups who can affect and are affected by, the

strategic outcomes achieved and who have enforceable claims on a firm’s performance.

– Stakeholders can support the effective strategic management of an organization.

– They could also withhold participation essential for effective strategic

management of an organization

Stakeholders’ Relationship Management

The Organization-Stakeholder Relationship

Stakeholder Analysis:

– All stakeholders are not equally important to an organization in terms of their

power to influence strategy formulation, their interest in the affairs of the

organization and the legitimacy they hold to affect the organization.

Stakeholder analysis follows the step below:

– Identify the stakeholders

EXTERNALSTAKEHOLDERS

CustomersSuppliers

Government RegulationsBanks/Creditors

Trade UnionsEmployers’ Organizations

Mass MediaNGOs/Activities

Local CommunitiesGeneral Public

CONTRIBUTIONS/SUPPORT

INTERNAL STAKEHOLDERS

ShareholdersEmployeesManagersDirectors

Organization

EXPECTATIONS/CLAIMS

– Identify the stakeholders’ expectations, interests and concerns

– Identify the claims stakeholders are likely to make on the organization

– Identify the stakeholders who are most important from the organization’s

perspective

– Identify the strategic challenges involved in managing the stakeholder

relationship.

Q.15 Describe the major concerns of financial, marketing, operations, personal and

information management plans and policies. Point out the significance of each functional

areas plans and policies for strategy implementation?

Ans. Functional plans and policies:

– For effective implementation, strategists have to provide direction to functional

managers regarding to plans and policies to adopted.

– In fact, the effectiveness of strategic management depends critically on the

manner in which strategies are implemented.

Nature of functional plans and policies:

• In term of the levels of strategy formulation, functional strategies operate below the SBU

or Business level strategies. Within functional strategies there might be several sub-

functional areas.

• within the textile division, there might be functional areas such as marketing, production,

research and development, etc.

• Functional mangers need guidance from the business strategy in order to make decisions.

Need for Functional Plans and Policies:

• The strategic decisions are implemented by all parts of an organization.

• There is a basis available for controlling activities in the different

functional areas of business.

• The time spent by functional managers in decision-making is reduced as

plans lay down what is to be done and policies provide the discretionary framework within

which decisions need to be taken.

• Similar situations occurring in different functional areas are handled in a

consistent manner by the functional managers.

• Coordination across the different functions takes place where necessary.

Development of functional Plans and Policies:

Financial plans and Policies:

The financial plans and policies of an organization are related to the availability, usage

and management of funds. Strategists need to formulate plans and policies in these areas

so that strategies are implemented.

Source of Funds:

– Plans and policies related to the sources of funds deal with financing or capital mix

decisions.

– The major factors regarding which plans and policies have to be made are: Capital

structure, procurement of capital and working capital borrowing, reserve and surplus

as sources of funds, and relationship with lenders, banks and financing institutions.

Usage of Funds:

– Plans and policies for the usage of funds deal with investment or asset-mix

decisions.

– The important factors regarding which plans and policies are to be made are:

dividend decisions and relationship with stakeholders.

Management of Funds:

– It basically deals with decisions related to the systemic aspects of financial

management. The major factors regarding which plans and policies related to the

management of funds have to be made are: systems of finance, accounting, and

budgeting, management control system, cash credit and risk management cost

control and reduction and tax planning and advantages.

Marketing plans and policies:

• Product:

• Pricing:

• Place:

• Promotion:

Operations plans and policies:

• Production system:

• Operations planning and Control:

• Research and Development:

Personnel plans and Policies:

Personnel System:

– Plans and policies related to the personnel system deal with factors like

manpower planning, selection, development, compensation,

communication, and appraisal.

– The importance of such plans and policies lies in the role that personnel

system play in providing and maintaining human resources.

Organizational and employee characteristics:

– Organizational and employee characteristics include factors such as the

corporate image, quality of managers, staff and workers, perception about

and image of the organization as an employer, availability of development

opportunities for employees, working conditions, etc.

Industrial Relations:

– Union-management relationship, collective bargaining, safety, welfare and

security, employee satisfaction and morale etc.

– Industrial relations assume a special significance in an environment where

there are several factors such as a pro-labour attitude of government, rules

and regulations related to unions Integration of Functional plans and

policies:

– Functional tasks are derived from the key activities that have to be

performed for the implementation of a strategy. The functional areas in

any organization are, therefore, based on the segregation of the key

activities.

– Consideration in Integration:

– Need for internal consistency.

– Relevance to development of organizational capability.

– Making trade-off decisions

– Determination of intensity of linkages.

– Timing of implementation of plans and policies.

– and workers,

Q.16 what do you understand by strategic evaluation. Discuss its nature, importance and

technique?

Ans. An Overview of Strategic Evaluation and Control:

• Strategic evaluation and control constitutes the final phase of strategic management.

• Strategic evaluation operates at two levels: strategic and operations.

– At the strategic level, we are concerned more with the consistency of strategy

with the environment.

– At the operational level, the effort is directed at assessing how well the

organization is pursuing a given strategy.

Nature of Strategic Evaluation and Control:

The purpose of strategic evaluation is to evaluate the effectiveness of a strategy in

achieving organizational objectives.

“ strategic evaluation and control could be defined as the process of determining the

effectiveness of a given strategy in achieving the organizational objective and taking corrective

action wherever required.”

Importance of Strategic Evaluation:

– Need for feedback, appraisal and Reward.

– Check on the validity of strategic choice.

– Congruence between decisions and intended strategy.

– Successful culmination of the strategic management process. Creating inputs for

new strategic planning.

Participants in strategic management:

the board of directors

chief executives

financial controller.

audit and executive committees.

middle –level managers.

Barriers in Evaluation:

Limits of Control.

Difficulties in management.

Resistance to Evaluation.

Short-termism.

Relying on Efficiency Versus Effectiveness.

Requirement for Effective Evaluation:

1. Control should involve only the minimum amount of information.

2. Control should monitor only managerial activities and results .

3. Controls should be timely.

4. Long-term and short-term controls should be used.

5. Controls should aim at pinpointing exceptions.

6. Reward of meeting or exceeding standards should be emphasized.

Q.17 what do you mean by strategic control? Describe the different elements that constitute

the evaluation process for operational control. Also discuss the difference between

strategic control and operational control?

Ans. Strategic Control: Strategic controls take into account the changing assumptions that

determine a strategy, continually evaluate the strategy as it is being implemented and take

the necessary steps to adjust the strategy to the new requirements.

The four basic types of strategic controls are:

1. Premise control

2. Implementation control.

3. Strategic surveillance

4. Special alert control.

Premise control:

Premise control is necessary to identify the key assumptions and keep track of any

change in them so as to assess their impact on strategy and its implementation.

For example, a company may base its strategy on important assumptions related

to environment factors (Favorable government policies), industrial factors

(changing nature of competition) and organizational factors (expected

breakthrough in R&D).

Premise control serves the purpose of continually testing the assumptions to find

out whether they are still valid or not.

This enables the strategists to take corrective action at the right time rather than

continuing with a strategy based on erroneous assumptions.

Implementation Control:

Implementation control is aimed at evaluating whether the plans, programmes and

projects are actually guiding the organization towards its predetermined objectives or

not. if, at any time,

it is felt that the commitment of resources to a plan, programme or project would not

benefit the organization as envisaged, they have to revised.

Strategic surveillance:

The premise and implementation types of strategic controls are specific in nature.

Strategic surveillance, on the other hand, is aimed at a more generalized and

overarching control ‘designed to monitor a broad range of events inside and outside

the company that are likely to threaten the course of a firm’s strategy.

Special alert control:

• The last of the strategic control systems is the special alert control, which is based on

a trigger mechanism for rapid response and immediate reassessment of strategy in the

light of sudden and unexpected events.

• Special alert control can be exercised through the formulation of contingency

strategies and assigning the responsibility of handling unforeseen events to crisis

management teams.

Operational Control:

Operational control is aimed at allocation and use of organizational resources

through evaluation of the performance of organizational units such as divisions,

SBUs, etc, to assess their contribution to the achievement of organizational

objectives.

Process of evaluation:

– Setting standards of performance.

– Measurement of performance.

– Analyzing variances.

– Taking corrective action.

– The evaluation process for operational control

Technique of strategic evacuation and Control:

It is necessary for strategists to have an idea the techniques of strategic

evaluation and control in order to make a choice from among the many available

and to use them.

Evaluation technique for strategic control:

Strategic Momentum Control:

– Responsibility control centers:

– The underlying success factors.

Strategy/plan/

objectives

Strategy/plan/

objectives

Strategy/plan/

objectives

Strategy/plan/

objectives

Strategy/plan/

objectives

– Generic strategies.

Strategic Lead Control;

– Strategic issue management.

– Strategic field analysis.

– Systems’ modeling.

– Scenarios.

Q 18. write short note on strategic evaluation?

Ans. An Overview of Strategic Evaluation and Control:

• Strategic evaluation and control constitutes the final phase of strategic management.

• Strategic evaluation operates at two levels: strategic and operations.

– At the strategic level, we are concerned more with the consistency of strategy

with the environment.

– At the operational level, the effort is directed at assessing how well the

organization is pursuing a given strategy.

Nature of Strategic Evaluation and Control:

The purpose of strategic evaluation is to evaluate the effectiveness of a strategy in

achieving organizational objectives.

“ strategic evaluation and control could be defined as the process of determining the

effectiveness of a given strategy in achieving the organizational objective and taking corrective

action wherever required.”

Importance of Strategic Evaluation:

– Need for feedback, appraisal and Reward.

– Check on the validity of strategic choice.

– Congruence between decisions and intended strategy.

– Successful culmination of the strategic management process. Creating inputs for

new strategic planning.

Participants in strategic management:

the board of directors

chief executives

financial controller.

audit and executive committees.

middle –level managers.

Barriers in Evaluation:

Limits of Control.

Difficulties in management.

Resistance to Evaluation.

Short-termism.

Relying on Efficiency Versus Effectiveness.

Requirement for Effective Evaluation:

7. Control should involve only the minimum amount of information.

8. Control should monitor only managerial activities and results .

9. Controls should be timely.

10. Long-term and short-term controls should be used.

11. Controls should aim at pinpointing exceptions.

12. Reward of meeting or exceeding standards should be emphasized.