- MBA Semester 4MB0052 – Strategic Management and Business Policy - 4 Credits

Q1.A well- formulated strategy is vital for growth and development of any organization. Explain corporate strategy in different types of organizations.

Ans: Corporate strategy in small business: if you’re a small business, here’s what you need to do to chalk out your strategy for long-term success: Make customer service your USP:. To stand out from the crowd of other small businesses and stand your ground in the face of competition from the larger corporations, you need to woo your customers with something that they don’t get too often from other companies – excellent customer service. Don’t bite off more than you can chew:Most small businesses that fail commit this mistake – They aspire for too much in a bid to compete with the larger fish in the pond and are then surprised When they fall far short of their goal.

Practice what you preach:A small business comprises of a limited number of employees and is more like a family working together than a corporation with hierarchical rules and policies.Corporate strategy in multinational: As the business portfolio expands into new markets which operate in foreign countries, strategies and strategic planning models must continue to adapt with the increasingly.

Global Economy / Global Strategies Sometimes it only takes a single acquisition or the influence of a large customer to pull a nationally focused business into the realm of global competitors. Global Strategies Sometimes it only takes a single acquisition or the influence of a large customer to pull a nationally-focused business into the realm of global competitors.

“Localizing” Strategies Given these factors, one challenge multinational companies face is recognizing the need to “localize” strategies. Once that recognition has set in, the next challenge is then determining how best to accomplish localization.

Corporate strategy on public sectors:The firm’s consulting activities in the public sector cover a broad range of strategy and policy setting topics, including: 1. Articulation of national economic development plans2. Policy planning and reforms in education, labour, health, and social welfare3.3. Sector -level planning to improve the competitiveness of economic sectors4. Development of action plans for World Trade Organization accession or negotiations5. Development of special economic zones6. Design of fiscal reforms, such as tax, customs, and subsidies reforms7. Development of plans to increase efficiency and effectiveness of government funding across all domains.

Corporate strategy on non-profit organizations:A non-profit organization has a mission statement that defines its reason for being--whom it intends to serve and what good it seeks to accomplish for society. The scope of the mission changes over time.

Current Environment -The organization scans its current environment for new opportunities to serve the community and tries to anticipate threats, such as the potential for declining donations due to an economic recession.

Future Vision -Future vision means looking ahead three to five years, and defining what the organization will look like at the end of that time--how it will have grown and what it will have achieved.

Financial Forecast-The forecast helps the organization avoid cash shortfalls that could lead to having to cut back on programs or critically needed services.

Q2.Businesses need to be planned not only for today, but also for tomorrow, that is, for the future which implies business continuity. Write the importance of business continuity planning. Explain any two strategies for business continuity planning.

Ans: Meaning of business continuity planning:

Business continuity planning (BCP) “identifies an organization’s exposure to internal and external threats and synthesizes hard and soft assets to provide effective prevention and recovery for the organization, while maintaining competitive advantage and value system integrity”. It is also called business continuity and resiliency planning (BCRP).

Business continuity is the activity performed by an organization to ensure that critical business functions will be available to customers, suppliers, regulators, and other entities that must have access to those functions. These activities include many daily chores such as project management, system backups, change control, and help desk. Business continuity is not something implemented at the time of a disaster; Business Continuity refers to those activities performed daily to maintain service, consistency, and recoverability.

The foundation of business continuity are the standards, program development, and supporting policies; guidelines, and procedures needed to ensure a firm to continue without stoppage, irrespective of the adverse circumstances or events. All system design, implementation, support, and maintenance must be based on this foundation in order to have any hope of achieving business continuity, disaster recovery, or in some cases, system support. Business continuity is sometimes confused with disaster recovery, but they are separate entities. Disaster recovery is a small subset of business continuity. It is also sometimes confused with Work Area Recovery (due to loss of the physical building which the business is conducted within); which is but a part of business continuity.The term Business Continuity describes a mentality or methodology of conducting day-to-day business, whereas business continuity planning is an activity of determining what that methodology should be. The business continuity plan may be thought of as the incarnation of a methodology that is followed by everyone in an organization on a daily basis to ensure normal operations.

The term Business Continuity describes a mentality or methodology of conducting day-to-day business, whereas business continuity planning is an activity of determining what that methodology should be. The business continuity plan may be thought of as the incarnation of a methodology that is followed by everyone in an organization on a daily basis to ensure normal operations.Business planning theory is concerned with practical, objective, and organized approaches when planning a business. Although subject matter pertaining to business planning theory is vast, five essential themes are always present: solidify the basics structure and premise of your business, having a marketing plan, having an operational plan, creating a financial plan, and formulating an objective risk analysis.

Business Continuity Planning (BCP) is the part of the lifecycle that has the most public face and is sometimes assumed to be the ‘be all and end all’ of Business Continuity Management (BCM). However, on the assumption that a Business Impact Analysis (BIA) has been done and a business continuity strategy agreed, then the creation of the BCP is a fairly mechanistic process.

A BCP should contain at least two types of information:1) The steps to be taken to restore/recover the critical processes.2) Useful information during an incident.

Traditionally there used to be a single BCP for the whole organisation no matter how big or complex Its structure; more recently there would be a BCP for each location or building occupied. These days BCP’s are often at departmental level with an overall organisational BCP as a ‘gluing’ document.The main reason for this evolution has been the need to make the plans increasingly useable. Thus the information in each plan is very specific to a department, such as contact details of staff, clients, suppliers etc. and useful details such as reference numbers. Some of this data such as staff home numbers may be sensitive and should be restricted to as small a circulation list as possible.Many BCP’s are simply word documents containing a series of tables with all the relevant information.

Some have been designed in a format that they can be emailed to a mobile device such a Blackberry and thus instantly is available in an emergency. Others have been stored in a business continuity tool such as Stroh LDRPS or Office Shadow’s Shadow-Planner.

In our experience the best way of detailing the steps required to restore a critical process is to sit with the staff who would in normal circumstance actually have to do it and get them to walk you through it, explaining the ‘why’s’ as well as the ‘how to’s’. It is possible that in an emergency a different set of staff may have to step in and carry out the work and the more straightforward the explanation (i.e. jargon free) the better. However, the level of detail required should not be too detailed; if the detailed steps are held in a standard operating procedure, and assuming it would be available during a crisis recovery phase, it should be referred to rather than repeated in the BCP. During an incident if the staff experts are the ones doing the recovery then the steps in the plan are no more than prompts for them anyway.There is no definitive list of the types of information that a department may find useful during a crisis. The more details are included the more work to keep them up-to-date. When a department has an alternative location to relocate to, it can usually store whatever it may need there in the way of specialized equipment and paper documentation. This is often referred to as a contingency box (or battle-box for the more military-metaphor minded). A list of its contents, together with the last time they were checked/updated is a useful part of the BCP.

Another section that is often included in a BCP is a checklist of the steps that can be used to record exactly who did what and when during an incident. These are useful during tests as well as real incidents, helping the communication process as well as highlighting where the recovery process needs improving.

Q3.Governed Corporation is a model of successful corporate governance. Define and explain governed corporation. Distinguish between managed corporation and governed corporation in terms of board’s role, major characteristics and policies of a company.

Ans: Governed Corporation refers to the way a corporation is governed. It is the technique by which Companies are directed and managed. It means carrying the business as per the stakeholders’ desires. It is actually conducted by the board of Directors and the concerned committees for the Company’s stakeholder’s benefit.

Corporate governance refers to the set of systems, principles and processes by which a company is governed. They provide the guidelines as to how the company can be directed or controlled such that it can fulfil its goals and objectives in a manner that adds to the value of the company and is also beneficial for all stakeholders in the long term. Stakeholders in this case would include everyone ranging from the board of directors, management, shareholders to customers, employees and society.

The management of the company hence assumes the role of a trustee for all the others.Corporate governance is known to be one of the criteria that foreign institutional investors are increasingly depending on when deciding on which companies to invest in. It is also known to have a positive influence on the share price of the company. Having a clean image on the corporate governance front could also make it easier for companies to source capital at more reasonable costs.

A Corporation is managed and run by its directors and officers. The directors are appointed by the shareholders and are responsible for the overall management and corporate governance of the corporation. The directors appoint the officers who are responsible for the day to management and Operations of the corporation. The typical officer positions are president, vice-president, treasurer, and secretary, although there can be more and sometimes different titles are used. In most states only one director and one officer is required, and they can usually be the same person.

The governed vs. the managed corporation

A corporation with free-wheeling managers in charge of decision-making and, more or less, Controlling themselves is very much the image of the manager-controlled or managed Corporation Pound (1995) contrasts with the so-called governed corporation which he praises as The ideal governance model for restructuring not only corporate America.The main difference between managed and governed lies in the role the owners ofA company play in monitoring and disciplining the management. The managed corporation is Characterized by a clear separation of control and ownership. Senior management is in charge of Decision-making. The supervisory board is responsible for selecting and monitoring senior Managers and replacing them in case of bad performance. The shareholders participate only Insofar as they can oust the supervisory board in a joint voting effort if the corporation does notPerform as expected. However, as monitoring and controlling efforts of any one shareholderBenefit all others; the free rider problem makes it expensive and unattractive for a small Shareholder to exercise and enforce voting rights. Moreover, coordinating a large number of Different shareholders for joint voting are difficult or even impossible. In times of crisis, Shareholders may then "prefer a cheap 'exit' to an expensive 'voice' " (Bhide 1994, p. 132).

Further, corporate supervisory boards may be inefficient or 'entrenched' monitors. As Warner, Watts and Wruck (1988) find, boards only take action when true performance disasters have Already happened.10 Thus, Pound (1995, p. 92) claims that inadequate governance is inherent to The managed corporation and "allows mistakes to go uncorrected until they becomecatastrophes".

For a corporation to be governed in the sense of Pound, investors must beDifferent from the investors of a managed corporation. "Active" (Jensen 1993, p. 866) or "relationship" (Thompson 1998, p. 27) investors are called for: investors not selling out quickly In times of trouble because they are convinced that the company is being soundly managed and that their interests and concerns are taken seriously by the management. The emphasis in the model of the governed corporation is not on shareholders monitoring the managers more closely than in the managed corporation but on active participation of committed owners in the firm'sDecision - making process. Active participation means in the first place being involved in selecting the top management and initiating replacements in case of inferior performance.

However, for having one's interests and concerns respected, a relationship investor needs to be a large shareholder as well, i.e., he must have sufficient control over the firm's assets.11 Only investors who control a substantial part of the voting capital will be able to keep managers from diverting free cash flow into pet projects and force them to distribute profits to shareholders.Pound's image of the governed corporation thus suggests that the stakes in a firm should be concentrated in the hands of only a few shareholders. Implicitly it is claimed that by reintegrating ownership and control corporate performance (profitability, productivity, innovative thrust etc.) is going to be enhanced.

To sum up, the debate on the managed versus the governed corporation, or theinsider versus the outsider model of the corporate governance, has generated conflicting hypotheses concerning the link between ownership, control, and firm performance. The argumentation of Pound and others implies that the governed, or tightly-held, firm outperforms the managed, or diffusely-held firm, whereas Demsetz suggests that corporate governance in itself does not matter. Cubbin and Leech point to the identity of owners as a more important governance indicator. The cost arguments of Shleifer and Vishny as well as Mayer suggest that there may be a trade-off between the degree of governance exerted and advantages in corporateperformance. It is thus up to empirical research to test the validity of the advanced hypotheses.

Q4.Price or market competitiveness of a product or business depends on its cost competitiveness. Cost competitiveness implies two things-cost efficiency and cost effectiveness. Explain the concept of cost efficiency of an organization. Analyze the major determinants of cost efficiency.

Ans : Cost efficiency :Efficiency refers to quantity or speed, effectiveness refers to quality.Take the example of two Customer Service reps, the first one is very short with the customers. If they start to tell him any unnecessary information, he cuts them off and tells them "that's not important".

He quickly resolves their issue but leaves them with a bad taste for the company - most will never be repeat customers.

An economic system is said to be more efficient than another (in relative terms) if it can provide more goods and services for society without using more resources. In absolute terms, a situation can be called economically efficient if:

No one can be made better off without making someone else worse off (commonly referred to as Pareto efficiency).No additional output can be obtained without increasing the amount of inputs.Production proceeds at the lowest possible per-unit cost.

The concept of economic (productive) efficiency is rooted in neoclassical Micro economic theory, which focuses on resource allocation and utilisation. It advocates for non-wastage of resources by emphasising cost reduction while producing the maximum possible level of output for a given technology and available inputs. Thus, a firm that is economically efficient may possess competitive advantage over rival firms producing less efficiently in the same industry. The main driving force behind economic efficiency is value creation. Accordingly, in the process of transforming inputs into some output value, a change that increases value is an efficient change and one that decreases value is an inefficient change. For purposes of policy intervention efficiency has often been used to evaluate the effectiveness of policy alternatives.

A related concept of economic efficiency is Pareto optimality, which has foundations in welfare economics. Pareto efficiency occurs when an allocation of resources from one economic agent to the other makes one agent better off without compromising the welfare of another economic agent (that is without making the other individual worse off). Therefore Economic efficiency is better explained by profit maximisation (or analogously, cost minimisation) but is often associated with perfectly competitive markets than with monopoly because of deadweight loss associated with monopoly pricing and output restrictions. For firms operating in a competitive industry, efficiency gains accrue when firms earn only normal profits in the long-run and respond to changes in consumer preferences by increasing output. Whether this output in sold at the same, higher or lower price depends in large measure on the position of the cost curves in the long-run (Griffiths & Wall, 2000). In general however, efficiency is associated with welfare improvements. Economic efficiency also encompasses allocative efficiency, which occurs when a firm’s inputs are allocated in such a way as to maximise its benefits (profits, revenue and output) depending on the firm?s objective function. Allocative efficiency is thus concerned with informing resource allocation decisions by taking into account both productive efficiency as well as Pareto efficiency. However, it is still possible to achieve Pareto efficiency without allocative efficiency. At firm level, allocative efficient outcomes occur when price is equal to marginal costs in a perfectly competitive market. Allocative efficiency also addresses the issue of the right mix of inputs and quality of output produced.

Q5.Stability strategy is most commonly used by an organization. An organization will continue in similar business as it currently pursues similar objectives and resource base. Discuss six situations when it is good/best to pursue stability strategy. Give some Indian examples.

Ans : A corporation may choose stability over growth by continuing its current activities without any significant change in direction. although sometimes viewed as a lack of strategy, the stability family of corporate strategies can be appropriate for a successful corporation operating in a reasonably predictable environment. they are very popular with small business owners who have found a niche and are happy with their success and the managerial size of their firms. stability strategies can be very useful in the short run, but they can be dangerous if followed for too long. some of the more popular of these strategies are the pause or proceed-with-caution,no-change,and profit strategies.stability is common for most of the organizations at some point of time. However, itis better that the organizations concerned should evaluate when they should go for change in theirstrategy. In the following conditions, it is better to adopt stability strategy.

When to pursue stability strategy :

In the following conditions, it is better to adopt stability strategy.

1. When the organization is serving a defined market or its segments according to business definitions, itcan adopt stability strategy. This happens with most of organizations in the short term because theirenvironment does not change and they can continue in the same business.

2. If the organization continues to pursue same objectives, it is better to adopt stability strategyadjusting the level of achievement about the same percentage each year as it has achieved in the pastwithout substantial additional investment. For example, renovation of plant and machinery may add toproduction but by better efficiency and not through any substantial increase in the production facilities.

3. When there is scope for incremental improvement of functional performance in the same line of business, the organization should go for stability strategy. This is the motto of taking fullest advantagesof the situation.Though most of the organizations follow stability strategy for a period of time, someorganizations follow it for much longer than others. It has been observed that as the companies getolder, they become more conservative and more likely to pursue a stability strategy.

Following are someimportant factors which suggest why the organizations follow stability strategy:

1. Perception of management about the performance of the organization may motivate it to pursuestability strategy. If the managers are satisfied with present performance they will like to continue withthe same.

2. A stability strategy is less risky in that it offers the safe business to the organization unless there is major environmental change. If management prefers to take less risk it can continue stability strategy.

3. Some organizations are slow to change or resistant to change. Since stability strategy fits in their total framework, they often prefer not to change.

4. If the organization's past history is full of change, it will like to adopt stability so as to become efficient and manageable and to reap the rich harvest of all such past changes.

In fact, stability strategy shouldalways be followed after the growth strategy to take the best advantages of the situation.5. If the organization?s competitive advantage lies in the present business and market, it pursuesstability strategy.The stability strategy is basically defensive in its approach. It may be pursued to protect certain present organizational strengths, e.g., certain patent right,technical collaboration etc. It is implemented on thebasis of ?steady as it goes? approach to decision on the level of business definition and businessobjective. There is not much functional change in any part of the organization.

Q6.Corporate culture governs, to a large extent, business ethics and values in an organization. Describe the state of business ethics in Indian companies. Analyze in terms of KPMG business ethics survey.

Ans : Business ethics in Indian companies :The unethical business in India was visible during second world war. During 90s the academic and legal concern with ethics were much visible.. Corruption-of-the poor andbcorruption-of-the-rich need to be distinguished - especially in the

context of globalization. The danger of attributing unethical practices to system failure is recognized. It is also important to bring to bear on intellectual property rights the more fundamental principle of natural property rights. Consciousness ethics will be more crucial than just intellectual ethics.

Ethics is a branch of social science. It deals with moral principles and social values. It helps us to classify, what is good and what is bad? It tells us to do good things and avoid doing bad things.So, ethics separate, good and bad, right and wrong, fair and unfair, moral and immoral and proper and improper human action. In short, ethics means a code of conduct. It tells a person how to behave with another person. So, the businessmen must give a regular supply of good quality goods and services at reasonable prices to their consumers. They must avoid indulging in unfair trade practices like adulteration, promoting misleading advertisements, cheating in weights and measures, black marketing, etc. They must give fair wages and provide good working conditions to their workers. They must not exploit the workers. They must encourage competition in the market. They must protect the interest of small businessmen. They must avoid unfair competition. Theymust avoid monopolies. They must pay all their taxes regularly to the government. In short, business ethics means to conduct business with a human touch in order to give welfare to the society."Business ethics is the study of business situations, activities, and decisions where issues of right and wrong are addressed." Andrew Crane Ethics refers to the study and process of human conduct, as a part of the societyor an institution, in the light of moral principles. There is a strong belief incorporate social responsibility in India. Indian management style differs fromthat in the West in that decisions are made by the person at the top, not in aparticipatory way. This is typically a caste system by education. In this era ofhyper-competition and result-oriented nature of businesses, it is difficult to runhuge empires on ethical grounds and standards but there are some points youcan take into account. Be sure to source all your materials and supplies in anethical way, using local suppliers and paying them the going rate for theirproducts Appreciate the need for protecting human rights in developingcountries such as India, particularly with regards to working hours and benefits.

Opening a business in India can involve a long and tedious process ofregistration with various bureaucratic agencies as well as a lot of time flying toIndia from your own country and back. But, there is untapped profit potentialin this burgeoning economy and the rewards of having an ethical company in aplace like India will see you not only reaping these rewards but being able toinfluence, shape and benefit the local community around it. This is particularlythe case if you wish to set up an NGO in India. If you are determined, then youhave a chance to make a very real and positive contribution to the future of adeveloping country.Business EthicsAn Indian Perspective introduces ethical concepts that are relevant to resolvingmoral issues in business. It sensitizes readers on ethical principles anddevelops reasoning and analytical skills needed to apply ethical concepts tobusiness decisions. The book is interspersed with a lot of case studies, morespecifically Indian scenarios making it relevant for Indian students. Chaptertopics cover ethical theories underlying business, application of ethics in day- to-day business, ethicsand the environment and ethics in consumer protection. It also features ethical issues in various managerial functions such as finance,human resource and marketing. A separate chapter on the IT sector specifically addresses the ethical dilemmas of today's upcoming industry.

The KPMG Ethics Survey 2000: Managing for Ethical Practice, and other KPMG publications areavailable on KPMG’s World Wide Web site at www.kpmg.ca/ethics.

KPMG Ethics & Integrity Services focuses on managing for ethical practice—establishing effective programs, developing ethical awareness within the workforce, and addressing ethical risk through a managed process.

A Solid Baseline—An ethics program must be custom-designed to be effective. We use surveys, focus groups, and other tools to obtain:

a better understanding of how people view the organization’s current policies and practices;

insight into how well existing policies and initiatives address the ethical risks; an analysis of reporting structures, ethical risks, and the incidence of wrongdoing

within the organization and a comparison between the messages being sent to employees with those being received.

Alignment—A strong ethics program is one that is aligned with policies, governance and reporting structures, reward and bonus systems, and other relevant aspects of the organization. A baseline review can identify areas where current practice may be encouraging unintended results. Communication & Management—An effective ethics program requires clear ongoing communication, both up and down the line. Clarity and accountability are just as important for successful management here as anywhere else in the organization. An evaluation of current practices can identify areas where action is required.

Codes & Standards—Ethics, ethical practice, and proper conduct need guidance and a great deal of support. The process of drafting or reviewing a code can be valuable in itself; values and principles are challenged, buy-in and consensus developed, and the goals of an ethics program are clarified. A code should:Q communicate the core principles and values of the organization;Q reflect current issues and best practices; andQ suit the purposes and goals for which it is designed.