1 What is strategy? Explain some of the major reasons for lack of strategic management in some companies?Meaning of strategy: The word ‘strategy’ comes from Greek strategies, which refers to a military general and combines stratus (the army) and ago (to lead). The concept and practice of strategy and planning started in the military, and, over time, it entered business and management. The key or common objective of both business strategy and military strategy is the same, i.e., to secure competitive advantage over the rivals or opponents.A well-formulated strategy is vital for growth and development of any organization—whether it isa small business, a big private enterprise, a public sector company, a multinational corporation or a non-profit organization. But, the nature and focus of corporate strategy in these different types of organizations will be different, primarily because of the nature of their operations and organizational objectives and priorities.Small businesses, for example, generally operate in a single market or a limited number of markets with a single product or a limited range of products.The nature and scope of operations are likely to be less of a strategic issue than in larger organizations. Not much of strategic planning may also be required or involved; and, the company may be content with making and selling existing product(s) and generating some profit. In many cases, the founder or the owner himself forms the senior/top management and his (her) wisdom gives direction to the company.In large businesses or companies—whether in the private sector, public sector or multinationals—the situation is entirely different. Both the internal and the external environment and the organizational objectives and priorities are different. For all large private sector enterprises, there is a clear growth perspective, because the stakeholders want the companies to grow, increase market share and generate more revenue and profit. For all such companies, both strategic planning and strategic management play dominant roles.Multinationals have a greater focus on growth and development, and also diversification in terms of both products and markets. This is necessary to remain internationally competitive and sustain their global presence. For example, multinational companies like General Motors, Honda and Toyota may have to decide about the most strategic locations or configurations of plants for manufacturing the cars. They are already operating multi location (country) strategies, and, in such companies, roles of strategic planning and management become more critical in optimizing manufacturing facilities, resource allocation and control.In public sector companies, objectives and priorities can be quite different from those in the private sector. Generation of employment and maximizing output may be more important objectives than maximizing profit. Stability rather than growth may be the priority many times. Accountability system is also very different in public sector from that in private sector. There is also greater focus on corporate social responsibility. The corporate planning system and management have to take into account all these factors and evolve more balancing strategies.In non-profit organizations, the focus on social responsibilities is even greater than in the public sector. In these organizations, ideology and underlying values are of central strategic significance. Many of these organizations have multiple service objectives, and the beneficiaries of service are not necessarily the contributors to revenue or resource. All these make strategic planning and management in these organizations quite different from all other organizations.The evaluation criteria also become different.

Lack of Strategic Management in Some CompaniesSome companies do not undertake strategic planning and management. Some other companies do strategic planning, but receive no support from managers and employees. In some other cases, managers and employees do not get enough support from the top management. A number of such and other reasons explain why certain companies do not take to strategic planning and management. David (2003) has mentioned various reasons

for poor or no strategic planning and management by companies. These are discussed below:1. Content with success: If an organization is generally successful, the top management or individual managers may feel that there is no need to plan and strategize because everything is fine. However, they forget that success today does not guarantee success tomorrow.2. Poor reward structure: When an organization achieves success, it often fails to reward its managers or planners. But when failure occurs, the company may punish the managers concerned. In such a situation, it is better for individual managers to do nothing than to risk trying to achieve something, fail and be punished.3. Overconfidence: As managers gain experience, they may rely less on formalized planning and more on individual initiative and decisions. But, this is not appropriate. Overconfidence or overestimating experience leads to complacency and ultimately can bring downfall. Forethought and planning are the right virtues and are signs of professionalism.4. Fire-fighting: An organization may be so deeply engrossed in crisis management and fire fighting that it may not have time to plan and strategize. This happens with many companies and is a clear sign of nonprofessionalization.5. Waste of time: Some organizations view planning as a waste of time because no tangible marketable products are produced through planning.But they forget that time spent on planning is an investment, and there would be returns, both tangible and intangible, in due course.6. Too expensive: Some organizations are culturally opposed to spending resources on matters like planning which do not produce instant or immediate results. They feel that spending on planning is a wasteful expenditure.7. Previous bad experience: Managers may have had previous bad experience with planning, that is, cases in which plans have been cumbersome, impractical or inflexible. There could be experience of failures also. They would like to avoid recurrence of this.8. Honest difference of opinion: Some managers may sincerely think that a plan is not correct. They may see the situation from a different viewpoint, or, they may have aspirations for themselves or the organization, which are different from those envisaged in the plan. Different people in different jobs in the same organization may have different perceptions of the same situation, and this may lead to difference of opinions among them and eventually to lack of planning due to lack of consensus.9. Self-interest: When management has achieved status, privilege or selfesteem through effectively using an old system, it often sees a new plan or a new system as unnecessary or a threat.

10. Fear of the unknown: Managers may not be sure of their abilities to learn new skills or take on new roles or adapt to new system. This is basically inertia against change or fear for change.11. Fear of failure: Whenever something new or different is attempted, there is a chance of success, but, there is also some risk of failure. Many companies and managers may like to avoid strategic planning and management for fear of failure.12. Suspicion: Employees may not trust management, or, the management may not have enough confidence in the managers. This gives rise to mutual suspicion.

2 Explain the following:(a) Core competence: are those capabilities that are critical to a business achieving competitive advantage. The starting point for analyzing core competencies is recognizing that competition between businesses is as much a race for competence mastery as it is for market position and market power. Senior management cannot focus on all activities of a business and the competencies required undertaking them. Core competence is a management tool that enables an organization to deliver a unique value to its customers. Building up core competency becomes essential to gain competitive advantage because advantages originating from the product-price-performance-tradeoffs are almost short-term

especially when technology keeps on changing. The profits earned by the various business units can only last through competencies.

(b) Value chain analysis: Value Chain Analysis is a useful tool for working out how you can create the greatest possible value for your customers.

In business, we’re paid to take raw inputs, and to “add value” to them by turning them into something of worth to other people. This is easy to see in manufacturing, where the manufacturer “adds value” by taking a raw material of little use to the end-user (for example, wood pulp) and converting it into something that people are prepared to pay money for (e.g. paper). But this idea is just as important in service industries, where people use inputs of time, knowledge, equipment and systems to create services of real value to the

How to perform the analysis?There are two different approaches on how to perform the analysis, which depend on what type

of competitive advantage wants to create (cost or differentiation advantage). The table below lists all the

steps needed to achieve cost or differentiation advantage using VCA.

Cost advantage Differentiation advantage

This approach is used when organizations try to

compete on costs and want to understand the

sources of their cost advantage or disadvantage

and what factors drive those costs.

The firms that strive to create superior products or

services use differentiation advantage approach.

Step 1. Identify the firm’s primary and support

activities.

Step 2. Establish the relative importance of each

activity in the total cost of the product.

Step 3. Identify cost drivers for each activity.

Step 4. Identify links between activities.

Step 5. Identify opportunities for reducing costs.

Step 1. Identify the customers’ value-creating

activities.

Step 2. Evaluate the differentiation strategies for

improving customer value.

Step 3. Identify the best sustainable differentiation.

3 Describe in brief the following environmental factors which a business strategist considers:(a) Political factors: Political factors impact the organizations in many ways. Political factors can create benefits and opportunities for the organizations. The political environment has an important impact on the business. There is a large field with many factors which the companies have to consider if they want to expand overseas Political environment is not stable and can change quickly. Monitoring, understanding and adapting to the political environment is absolutely essential for any(b) Technology: The technology plays a major role in the concept of new economy. The technology has two dimensions; one is the shift from manufacturing to services and second is the shift from physical resources to the knowledge resources. There are so many mechanisms for technology innovation and diffusion, both within and outside the countries. Many of the organisations will include different technologies both for quantitative and qualitative terms.Small scale enterprises play a vital role in the implementation of new technologies. They have added more value in terms of population, employment, and services that they are

offering. Internet also plays a vital role as it helps the small and medium enterprises in providing the cost effective possibilities to advertise their products. Internet also provides the contacts to buyers and suppliers on a global basis. E-business is helps the radical transformation in the way that the business is done. The introduction of technologies like the common database, electronic networks and value added services are helpful for speeding up the transactions and these are fundamental at the industrial level. The e-business has to undergo lot of challenges in implementing the technologies that are helpful for the organisation since many of the people in the organisation will not be interested to shift to the new technology and learn the new skills.

4 Write a brief note on Turnaround strategy. 10

The definition of turnaround strategy w.r.t different senses is depicted below.definition of turnaround strategyIn general, the definition of turnaround strategy can be stated as follows.“Turnaround strategy is a corporate practice designed and planned to protect (save) a loss-making company and transform it into a profit-making one.”In financial, commercial, corporate or from a business perspective, the turnaround strategy can be defined as follows.“Turnaround Strategy is a corporate action that is taken (performed) to deal with issues of a loss-making (sick) company like increasing losses, lower return on capital employed, and continuous decrease in the value of its shares.”Finally, from an academic point of view, its definition can be stated as under.“Turnaround strategy is an analytical approach to solve the root cause failure of a loss-making company to decide the most crucial reasons behind its failure. Here, a long-term strategic plan and restructuring plans are designed and implemented to solve the issues of a sick company.”

Some examples of turnaround strategy are depicted below.

Consider following examples of turnaround strategy:Financial Institution, for example, some bank ‘A’ is suffering from losses due to non-performing assets (NPA). NPA is loan given but not yet recovered. This bank ‘A’ will follow turnaround strategy and try to recover its loans by appointing recovery agents.Manufacturing company say ‘XYZ’ is suffering from losses due to excess idle time taken by labour to complete their jobs. The manufacturing company ‘XYZ’ will follow turnaround strategy to reduce labour inactivity by installing modern machines (automation) to carry on the same work or job.Educational institution, for example, ‘C’ is suffering from losses due to non-registration of students in their courses. This institution ‘C’ will follow turnaround strategy to reduce losses by providing facilities like e-Registration, conducting online classes, etc. to attract students.

5 Define the term ‘strategic alliance’. What are its characteristics and objectives?Strategic alliance is the process of mutual agreement between the organisations to achieve objectives of common interest. They are obtained by the co-operation between the companies. Strategic alliance involves the individual organisations to modify its basic business activities and join in agreement with similar organisations to reduce duplication of manufacturing products and improve performance. It is stronger when the organisations involved have balancing strengths. Strategic alliances contribute in successful implementation of strategic plan because it is strategic in nature. It provides relationship between organisations to plan various strategies in achieving a common goal.

The various characteristics of strategic alliances are:

— The two independent organisations involving in agreement have a similar idea of achieving objectives with respect to alliances.— The organisations share the advantages and organise the management of alliance until the agreement lasts.— To develop more areas in alliances, the organisations contribute their own resources like technology, production, R&D, marketing etc to increase the performance.

According to Faulkner (1995) – Strategic alliance is the inter-organisational relationship in which the partners make substantial investment in developing a long-term collaborative effort, and obtain common orientation.

Objective of strategic alliance are below:1. Critical to the success of a core business goal or objective.2. Critical to the development or maintenance of a core competency or other source of competitive advantage.3. Blocks a competitive threat.4. Creates or maintains strategic choices for the firm.5. Mitigates a significant risk to the business.

6 Write short notes on the following:a) Competitive advantage

Answer : Competitive advantage is the favorable position an organization seeks in order to be more profitable than its competitors.

The challenge for a marketing strategy is to find a way of achieving a sustainable competitive advantage over the other competing products and firms in a market.

A competitive advantage is an advantage over competitors gained by offering consumers greater value, either by means of lower prices or by providing

b) Porter’s Competitive threat model

Answer : Porter suggests that there are five basic competitive forces, which influence the state of competition in an industry. He calls the “structural determinants of the intensity of competition‟, which collectively determine the profit potential of the industry as a whole. Some industries have a bigger profit potential than others, since keener competition means lower profits. Porters model of competitive forces assumes that there are five competitive forces that identifies the competitive power in a business situation. These five competitive forces identified by the Michael Porter are:

Threat of substitute productsThreat of new entrantsIntense rivalry among existing playersBargaining power of suppliersBargaining power of Buyers