strategy and corporate evolution

Sandeep Ghatuary

Kolhan University

Semiester - 4

Strategy and Corporate Evolution

Strategy and Corporate Evolution 2

Unit 1 Strategy and Corporate Evolution in India Context Strategy: - The word Strategy is derived from the Greek word 'Strategos' which means a general. A strategy is a declaration of

intent, it defines what the organization wants to become in the longer term. The overall aim of strategy at corporate level will be to

match or fit the organization to its environment in the most advantageous way possible. It is an integrated set of action at securing a

sustainable competitive advantage.

Johnson and Scholes -"Strategy is the direction and scope of an organization over the long-term: which achieves advantage for the

organization through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfill

stakeholder expectations" Elements –

• Where is the business trying to get to in the long-term (direction?)

• How can the business perform better than the competition in those markets? (Advantage)?

• What external, environmental factors affect the businesses' ability to compete? (Environment)?

• What are the values and expectations of those who have power in and around the business? (Stakeholders)

• What resources (skills, assets, finance) are required in order to be able to compete? (Resources)?

• It is derived from its policies, objectives and goals.

• It is related to per sue those activities which move an organization current position to a desired future state.

• It is concerned with the requisite resources to implement a plan.

Features/charactertics

• Strategy is Significant because it is not possible to foresee the future. Without a perfect foresight, the firms must be ready to

deal with the uncertain events which constitute the business environment.

• Strategy deals with long term developments rather than routine operations, i.e. it deals with probability of innovations or

new products, new methods of productions, or new markets to be developed in future.

• Strategy is created to take into account the probable behavior of customers and competitors. Strategies dealing with

employees will predict the employee behavior.

Functions

• It provides a dual approach to problem solving. Firstly, it exploits the most effective means to overcome difficulties and face

competition. Secondly, it assists in the deployment of scarce resources among critical activities.

• It focuses attention upon changes in the organizational set up, administration of organizational process affecting behavior

and the development of effective leadership.

• It offers a technique to manage changes. The management is totally prepared to anticipate, respond and influence to look at

changes. It also offers a different way of thinking.

• It furnishes the management with a perspective whereby, the latter gives equal importance to present and future

opportunities.

• It provides the management with a mechanism to cope with highly complex environment characterized by diversity of

cultural, social, political and competitive forces.

Kinds of corporate strategy-There are four grand strategic alternatives. They are stability, expansion, retrenchment and

any combination of these three. These strategic alternatives are also called as grand strategies. • Stability Strategy- It is adopted by an organization when it attempts to improve functional performance. They are further

classified as follows: * No change strategy * Profit strategy * Pause/Proceed with caution strategy.

• Expansion Strategy: - It is followed when an organization aims at high growth. They operate through * Concentration*

Integration* Diversification* Cooperation* Internationalization. Mergers, takeovers, Joint ventures and strategic alliances

come under expansion through cooperation.

• Retrenchment Strategy: - It is followed when an organization aims at a contraction of its activities. It is done through

turnaround, divestment and liquidation in any of the following three modes:* Compulsory winding up* Voluntary winding

up* Winding up under supervision of the court.

• Combination Strategies:- They are followed when an organization adopts a combination of stability, expansion and

retrenchment either at the same time in different businesses or at different times in the same business.


Evolution of concepts of Business Strategy In 1960s, most of the business was conducted by the small firms with the focus of the managers on day to day running business and

they are satisfied with little growth. That's why competition was minimal. On that particular period technology were on early stages.

The Firms are focusing on long terms objective and working towards to achieving those goals. There were lots of potentials exist for

business firms to tap. The managers prepare budgets and adopt control systems and procedure manuals for decisions that were to

be made rapidly. These are made for maintain status quo. Budgeting is not done on the basis of environmental changes. Later

variations included capital budgeting and management by objective systems.

In 1970s, The business firms started growing in size looked at environmental threats and opportunities and started assuming greater

importance in strategic planning. That's why this stage is known as first generation planning. In this period Firms are analyzing that

what are their Opportunities and what are the threats for Appraisal of a business. The strategy formulation is done primarily on the

basis of matching of environment. In this period firm face constraint of resources for growth and diversification. The firms have

developed consistent patterns for decision making to deal with the environment.

In 1980-90s, the firms started recognizing the dependency of the business firms on external environment. The firms facing stiff

competition, that's why they have to emphasis on Competitive Advantage. In these period firms offering customers quality products

at minimum cost Firms are producing goods in Bulk amount so that the cost of per unit of goods will minimize. Firms are started to

analyze their business according to Porter's five forces – competitor, buyer, suppliers, substitute producer & Potential new entrants.

The different segments in the market were given importance on customer satisfaction. The Strategists aimed to establish a profitable

and sustainable position against the force that determines competitive advantage.

In 2000s, the move has initiated to engage activity in environment scanning and building competitive intelligence system. The

unprecedented changes like global competition, technological break though, changing consumer taste, ever changing exchange rates

e.tc

In current era, joint venture, strategic business alliance, franchising, licensing, outsourcing e.tc, have gained popularity as alternative

Forms of business. The free flow of across the globe have increased avenues for fresh investment as well as mergers and acquisitions

.many firms have done away with long term plans . The firms are emphasizing on the issue management consciously monitoring the

environment. Now strategists have started playing as a director in board of directors and as corporate planners.


Unit 2 Nature Process and Level of Strategic Management Concepts Strategic Management - It is art and science of formulating, implementing and evaluating cross-functional decisions that enable an

organization to achieve its objective. It is a process of formulating objective of an organization and developing method to achieve

them. According to Glueck –It is a Stream of decision and actions which leads to the development of an effective strategy to help achieve

corporate objective. It has three aspects

• Determination of basic long term goals and objective

• Adoption of courses of action to achieve these objective

• Allocation of resource of action.

Nature of Strategic management • It involve wide ramification – it activities are related to the total system or a significant segment of these activities may be a

change in organization goals.

• It involves a long time perspective – the directional decision in strategic management can be expected to have effects on

the organization for more than 1 year.

• It Use critical resource towards perceived – opportunities or threats in a changing environment the most important human,

financial and other resources bear in certain situation which provided the organization.

• It is an intellectual process – in it individual perceive, analyses & choose between alternative interrelating such elements as

definition of business, objective, functional strategies.

• It is a continuing dynamic social process – it not just a to be undertaken a few times each year when top management

meets to decide critical issues .rather, it continually implements and revise strategies in the organization as changes occur in

resource & environment.

Function and Importance of Strategic management

1. Pattern in stream of decision and action

2. Provide framework for thinking about business.

3. Creates a fit between the organization and its external environment.

4. Forward looking and it has orientation towards future.

5. Determination of basic long term objective of the organization

6. Recognize which competitor's action need critical attention.

7. Carefully crafted plan with steam of decision and action over a tome.

8. Adopting course of action necessary for allocation of resources.

9. Adopting of course of action to achieve Organization's objective.

10. Developing the company from its position to the desired future position.

Strategy at Different Levels of a Business - Strategies exist at several levels in any organization - ranging from the overall

business through to individuals working in it.

• Corporate Strategy –It is believed that strategic decision making is the responsibility of top management. It is concerned

with the overall purpose and scope of the business to meet stakeholder expectations. This is a crucial level since it is heavily

influenced by investors in the business .At the corporate level, the board of directors and chief executive officers are

involved in strategy making. Corporate planners and consultants may also be involved. Mostly, corporate level strategies are

futuristic, innovative and pervasive in nature.

• Business Unit Strategy -It is concerned more with how a business competes successfully in a particular market. Managers

are involved at this level in taking strategic decisions. These strategies relate to a unit within an organization .It concerns

strategic decisions about choice of products, meeting needs of customers, creating new opportunities etc. It is more specific

and action oriented. It relates mainly with “how” aspect. The corporate level strategy is related to “what” aspect of

corporate strategy.

• Operational Strategy – This level of strategy is at the operating end of the organization. It is also known as functional level

strategy. It is concerned with how each part of the business is organized to deliver the corporate and business-unit level

strategic direction. Operational strategy therefore focuses on issues of resources, processes, people etc. These decisions

relate to training, investment in plant, advertising, sales promotion, total quality management, market segmentation etc.

They deal with a relatively restricted plan providing objectives for specific function, allocation of resources among different

operations within the functional area and coordination between them.


Unit 3 Concept of Core Competence and Organizational Capability A core competency is a concept in management theory originally advocated by CK Prahalad, and Gary Hamel, two business book

writers. The capability to use the competencies exceeding well turns them into core competencies. On the basis of resource and

behavior an org develops certain strength and weakness which when combined lead to synergistic effects such effects manifest

themselves in terms of organizational competencies Competency may be categorized as a core and non-core depending on the

nature of capabilities. Core competencies 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. So the goal is for management to focus attention on competencies that really affect

competitive advantage. The diversified corporation is a large tree the trunks and major limbs are core product, the smaller branches

are business units the leaves flowers and fruits are end products. The root system that provides nourishment, substance and stability

is the core competence. Core competency is a specific factor that a business sees as being central to the way it, or its employees, works. It fulfills three key criteria:

• It is not easy for competitors to imitate. • It can be re-used widely for many products and markets. • It must contribute to the end consumer's experienced benefits.

Core competencies are flexible and developing with time. They do not remain rigid and fixed. The organization can make maximum

utilization of the given resources and relate them to new opportunities thrown by the environment. Resources and capabilities are

the building blocks upon which an organization create and execute value-adding strategy so that an organization can earn reasonable

returns and achieve strategic competitiveness Examples to exemplify concept of core competence are –

• Canon's core competence lies in optics, imaging and microprocessor or control

• Philips in optical media

• Honda in engine & power trains.

The Core competencies of these corporations have enable them to operate in diverse market offering different products for instance

canon has enter into and even dominated ,diverse markets such as copiers , laser printers , camera and image scanners.

Organizational Capability: organizational capability factor are the strategic strengths and weakness existing in different

functional areas within the organization which are crucial importance to strategy formulation and implementation.

• Focuses on internal processes and systems for meeting customer needs

• Creates organization-specific competencies that provide competitive advantage since they are unique

• Ensures that employee skills and efforts are directed toward achieving organizational goals and strategies.

It enhances uniqueness because it is difficult to imitate:

• Imitation requires changing the way people think, act, and interact.

• Social engineering of complex social processes such as culture, teamwork, leadership is neither well-understood nor easily

replicated.

Organizational Capability enhances perceived customer value in three ways:

• Responsiveness: the ability of the business to understand and meet customer needs more quickly than competitors

• Relationships: the ability of a business to develop enduring relationship between customer and employee

• Service quality: the ability of business to design, develop and deliver service that meets or exceeds customer expectations.

Four critical elements of capable organizations:

• Shared mindset - Common understanding and goals of ends (strategies) and means (processes, work systems, activities)

Congruence between customer and employee expectations

• Management practices - Policies, programs, operating procedures, and traditions that guide work .Transform individual

behavior to create customer satisfaction and consistency in how customer is treated .Complement and integrate with one

another to create common expectations, behaviors, and goals

• Capacity for change through understanding and managing organizational systems - Ability to reduce cycle time of all

activities Four Principles: *Symbioses * Reflexiveness *Alignment*Self-renewal

• Leadership at all levels in the organization - Owns passionately a vision which is promoted both within and outside the

organization Translates external conditions into vision for organization and how employee must act to attain vision

Empowers individuals at all levels within the organization to act within his or her domain


Different types of capability factors of an organization –

1. Financial capability – Its factors relates to the availability usage and management of funds. Organization capacity and ability

to implement its strategies.

Important influencing factors –

� Factors related source of funds capital structure, financing pattern borrowing, capital & credit availability, reserves

& surplus e.tc

� Factors related to usages of fund capital investment, fixed assets, current assets loan & advance e.tc

2. Marketing capability – Its factors relates to the pricing, promotion and distribution of products and services and all the allied

aspects that have a bearing on an organization. It is measured and compared through the process of organizational

appraising.


� Products related factor - variety, differentiation, packaging e.tc

� Price related factors – pricing objective, policies change, and protection e.tc

� Promotion related factors – sales promotion, advertising, public relation and so on.

� Places related factors – distribution, transportation, marketing channels e.tc

� Integrative & systemic factors – Marketing mix, company image, marketing system and so on.

3. Operation capability - It factors relates to the production of products or services the use of material resource and all allied

aspects that have bearing on an org.


� Factor related to production system – location, layout, production design, and work system e.tc

� Factors related to the operation & control system – production planning, material supply, inventory cost & quality

control so on.

� Factors related to the R&D system – product development, patent right, level of technology used e.tc

4. Personnel capability – It factors relate to the existence and use of human resource and skill and all allied aspects that have a

bearing on an org capacity.


� Factors related to personnel system – manpower planning, selection, development compensation.e.tc

� Factors related organizational & employees characteristics – quality of mangers staff and workers, development

opportunities.

� Factors related to individual relations – union – management relationship, collective bargaining, safety, welfare. e.tc

5. Information capability – It factors relates to the design and management of the flow of information from outside into and

within an org for the purpose of decision making.


� Factors related to acquisition & retention of information sources, quality, quantity and timelines of information

� Factors related to the processing & synthesis of information database management, computer system, software e.tc

� Factors related to retrieval & usage of information availability & appropriateness of information formats e.tc

� Integrated, systematic & supportive factions, IT infrastructure, up gradation facilities so on.

6. General management capability.-It relates to the integration, co ordination and the direction of the functional capabilities

towards common goals.

Important influencing factors-

� Factors related to general management

� Factors related to general manager

� Factors related to external relationship

� Factors related to organizational climate.


Unit 4 Organization Learning- Learning has become an important tool of individual behavior is an organization. It depends upon one's personality perception and

situation. The learning process and its outcome are motivation factors in an organization. Learning shapes human behavior

employees may learn knowingly or unknowing in the organization. Learning is a relative permanent change in behavior that occurs as

a result of experience.

The concept of a learning organization has become popular since organizations want to be more adaptable to change. Two of the

most noteworthy contributors to the field of organizational learning theory have been Chris Argrys and Donald Schon. It is a product

of organizational inquiry. This means that whenever expected outcome differs from actual outcome, an individual will engage in

inquiry to understand and, if necessary, solve this inconsistency. In the process of organizational inquiry, the individual will interact

with other members of the organization and learning will take place. Learning is a dynamic concept and it emphasizes the continually

changing nature of organizations. The focus is gradually shifting from individual learning to organizational learning. Learning is

essential for the growth of individuals; it is equally important for organizations. Since individuals form the bulk of the organization,

they must establish the necessary forms and processes to enable organizational learning in order to facilitate change.

Organizational Learning Theory: The three levels of learning which may be present in the organization:

1. Single loop learning: This occurs when errors are detected and corrected and firms continue with their present policies and

goals. It has also been referred to as "Lower-Level Learning" "Adaptive Learning" and "Non Strategic Learning" E.g. when

sales are down, marketing managers inquire into the cause, and tweak the strategy to try to bring sales back on track.

2. Double loop learning: Learning that results in a change in theory-in-use. The values, strategies, and assumptions that govern

action are changed to create a more efficient environment. It is also called Higher-Level Learning, Generative Learning and

Strategic Learning. In the above example, managers might rethink the entire marketing or sales process so that there will be

no (or fewer) such fluctuations in the future.

3. Deuteron learning: Learning about improving the learning system itself. This is composed of structural and behavioral

components which determine how learning takes place. Essentially deuteron learning is therefore "learning how to learn."

Organizational learning focused on five core disciplines, or capacities:

1. Systems thinking are the art of seeing the world in terms of wholes, and the practice of focusing on the relationships among

the parts of a system. In this discipline, people learn to better understand interdependency and change, and thereby to deal

more effectively with the forces that shape the consequences of our actions. Systems thinking are based upon a growing

body of theory about the behavior of feedback and complexity-the innate tendencies of a system that lead to growth or

stability over time.

2. Team learning is what happens when a group of people working on something together experiences that rare feeling of

synergy and productiveness that happens when you're "in the groove." This is a discipline of group interaction. Through

techniques like dialogue and skillful discussion, teams transform their collective thinking, learning to mobilize their energies

and ability greater than the sum of individual members' talents. The icon symbolizes the natural alignment of a learning-

oriented team as the flight of a flock of birds.

3. Shared vision emerges when everyone in an organization understands what the organization is trying to do, is genuinely

committed to achieving that vision, and clearly grasps how his or her role in the organization can contribute to making the

vision real. This collective discipline establishes a focus on mutual purpose. Practicing this discipline involves knowing how

all the parts of the organization work together and being clear about how your own personal goals align with those of your

organization.

4. Mental models are the deep beliefs and assumptions we hold about how the world works. These models shape the

decisions we make in life, the actions we take in response to events, and the ways in which we interpret others' behavior.

Practicing this discipline involves surfacing and testing your deepest assumptions and beliefs, and helping others do the

same.

5. Personal mastery is the art of identifying what mark you want to leave on the world during your lifetime. That is, what's

your unique purpose in life, and how do you want to go about fulfilling that purpose? Practicing this discipline involves some

honest exploration of your own life experiences and desires and a willingness to take some risks.


Unit 5 strategy formation implementation & org. value Strategy formulation – It is useful to consider strategy formulation as part of a strategic management process that comprises

three phases: diagnosis, formulation, and implementation.

1. Diagnosis -

� Performing a situation analysis, including identification and evaluation of current mission, strategic objectives,

strategies, and results, plus major strengths and weaknesses

� Analyzing the organization's external environment, including major opportunities and threats

2. Formulation, the second phase in the strategic management process, produces a clear set of recommendations, with

supporting justification to make the organization more successful. This includes trying to create "sustainable" competitive

advantages. A good recommendation should be effective in solving the stated problem, practical, feasible within a reasonable

time frame, cost-effective, not overly disruptive, and acceptable to key "stakeholders" in the organization. It is important to

consider "fits" between resources plus competencies with opportunities, and also fits between risks and expectations.

3. In organizations, strategies must be implemented to achieve the intended results. The most wonderful strategy in the history

of the world is useless if not implemented successfully. This third and final stage in the strategic management process involves

developing an implementation plan and then doing whatever it takes to make the new strategy operational and effective in

achieving the organization's objectives.

The process of strategy formulation

• Setting Organizations’ objectives – Any strategy statement is to set the long-term objectives of the org. Objectives stress the

state of being there whereas Strategy stresses upon the process of reaching there. Once the objectives and the factors

influencing strategic decisions have been determined, it is easy to take strategic decisions.

• Evaluating the Organizational Environment - To evaluate the general economic and industrial environment in which the

organization operates. It is essential to conduct a qualitative and quantitative review of an organizations existing product line.

The purpose of such a review is to make sure that the factors important for competitive success in the market.

• Setting Quantitative Targets - An organization must fix the quantitative target values for some of the organizational objectives.

The idea behind this is to compare with long term customers, so as to evaluate the contribution made by various operating

departments.

• Aiming in context with the divisional plans – The contributions made by each department or division within the organization is

identified accordingly strategic planning is done for each unit. This requires a careful analysis of macroeconomic trends.

• Performance Analysis A critical evaluation of the organizations past performance, present condition and the desired future

conditions must be done by the organization. It includes discovering and analyzing the gap between the planned or desired

performance.

• Choice of Strategy - This is the ultimate step in Strategy Formulation. The best course of action is actually chosen after

considering organizational goals, organizational strengths, potential and limitations as well as the external opportunities.

Strategy implementation – It is the translation of chosen strategy into organizational action so as to achieve strategic goals and

objectives. It is also defined as the manner in which an organization should develop, utilize, and amalgamate organizational structure,

control systems, and culture to follow strategies that lead to competitive advantage and a better performance. Organizational structure

allocates special value developing tasks and roles to the employees and states how these tasks and roles can be correlated so as

maximize efficiency, quality, and customer satisfaction-the pillars of competitive advantage.

Following are the main steps in implementing a strategy-

• Developing an organization having potential of carrying out strategy successfully.

• Disbursement of abundant resources to strategy-essential activities.

• Creating strategy-encouraging policies.

• Employing best policies and programs for constant improvement.

• Linking reward structure to accomplishment of results.

• Making use of strategic leadership.

Strategy implementation poses a threat to many managers and employees in an organization. New power relationships are predicted

and achieved. New groups (formal as well as informal) are formed whose values, attitudes, beliefs and concerns may not be known.

Excellently formulated strategies will fail if they are not properly implemented. Also, it is essential to note that strategy implementation

is not possible unless there is stability between strategy and each organizational dimension such as organizational structure, reward

structure, resource-allocation process, etc


Difference Between Strategy Formulation & Implementation:-

Strategy Formulation Strategy Implementation Strategy Formulation includes planning and decision-making

involved in developing organization’s strategic goals and plans.

Strategy Implementation involves all those means related to

executing the strategic plans.

Strategy Formulation is placing the Forces before the action. Strategy Implementation is managing forces during the action.

Strategy Formulation is an Entrepreneurial Activity based on

strategic decision-making. Strategic Implementation is mainly an Administrative Task

based on strategic and operational decisions Strategy Formulation emphasizes on effectiveness. Strategy Implementation emphasizes on efficiency. Strategy Formulation is a rational process. Strategy Implementation is basically an operational process. Strategy Formulation requires co-ordination among few

individuals. Strategy Implementation requires co-ordination among many

individuals. Strategy Formulation requires a great deal of initiative and

logical skills. Strategy Implementation requires specific motivational and

leadership traits. Strategic Formulation precedes Strategy Implementation Strategy Implementation follows Strategy Formulation.

Organizational values define the acceptable standards which govern the behavior of individuals within the organization.

Employees have certain value in a life. They view life from different angle which are reflected in their work performance. Values are a

combination of different attitude and attributes of individuals .they helps employee to decide what is right, good, desirable, favorable

and so on. Without such values, individuals will pursue behaviors that are in line with their own individual value systems, which may

lead to behaviors that the organization doesn't wish to encourage. Honesty, self respect, equality, sincerity, obedience, truthfulness are

various examples of values. In a smaller, co-located organization, the behavior of individuals is much more visible than in larger,

disparate ones. In these smaller groups, the need for articulated values is reduced, since unacceptable behaviors can be challenged

openly. However, for the larger organization, where desired behavior is being encouraged by different individuals in different places

with different sub-groups, an articulated statement of values can draw an organization together.

Why Identify And Establish on impacts Organizational Values?

Effective organizations identify and develop a clear, concise and shared meaning of values/beliefs, priorities, and direction so that

everyone understands and can contribute. Once defined, values impact every aspect of your organization. You must support and

nurture this impact or identifying values will have been a wasted exercise. People will feel fooled and misled unless they see the impact

of the exercise within your organization.

If you want the values you identify to have an impact, the following must occur.

• Organizational values help each person establish priorities in their daily work life.

• Organizational goals are grounded in the identified values.

• Adoption of the values and the behaviors that result is recognized in regular performance feedback.*People hire and promote

individuals whose outlook and actions are congruent with the values.

• Only the active participation of all members of the organization will ensure a truly organization-wide, value-based, shared

culture.

• Values guide every decision that is made once the organization has cooperatively created the values and the value statements.

• Rewards and recognition within the organization are structured to recognize those people whose work embodies the values

the organization embraced

• People demonstrate and model the values in action in their personal work behaviors, decision making, contribution, and

interpersonal interaction


Unit 6 Turn Around Management , Merger ,Acquisition ,Licensing and Franchise Turn Around Management – It is a process dedicated to corporate renewal. It uses analysis and planning to save troubled

companies and returns them to solvency. Turnaround Management involves management review, activity based costing, root failure

causes analysis, and SWOT analysis to determine why the company is failing. Once analysis is completed, a long term strategic plan and

restructuring plan are created. These plans may or may not involve a bankruptcy filing. Once approved, turnaround professionals begin

to implement the plan, continually reviewing its progress and make changes to the plan as needed to ensure the company returns to

solvency. Turn around strategic derive their name from the action involved that is reversing a negative trend.

Before turn around strategies can be formulated one must identify the Root Causes of Strategic distress or crisis –

• Poor Strategy

• Poor Business Model / Execution

• High Operating cost.

• Insufficient resource

• Unsuccessful R&D project

• Excessive debt burden.

• Inadequate financial control.

Managing Turnaround - There are three ways in which turnaround can be handled

1. The existing chief executive and management tea handles the entire turnaround strategies with the advisory support of a

specialist external consultant

2. In another situation, the existing team withdraws temporarily and an executive consultant or turnaround specialist is employed

to do the job.

3. The last method involves the replacements of the existing team, specially the chief executive or merging the sick organization

with a healthy one.

Elements in a Turnaround Strategy –

• Change in the top management

• Neutralizing external pressure

• Initial control

• Identifying quick payoff activities

• Quick cost reductions

• Revenue generations

• Assets liquidation for cash generation

• Mobilization of the organization

• Better internal co-ordination.

The Turn Around Process frequently involves the following stages:-

1. Management Changes – Consultant may be called in to manage the turnaround of the firm.

2. Situational analysis – It is performed to evaluate the prospect of survival. Assuming the firm is worth turning around,

depending on the root cause of the distress one or more of the turnaround strategies may be selected and presented to the

board - * change of top management * Reformulation of Strategy * Revenue Increase * Cost reduction.

3. Emergency action plan – Achieve Positive cash flow as soon as possible by eliminating departments , reducing staff e.tc

4. Business restructuring - Once positive cash flow is achieved, the strategic plan is implementing, improving continuing

operations, adjusting product mix and repositioning products if necessary.

5. Return to normalcy – The Company becomes profitable and the change is internalized. Employees regain confidence in the

firm and emphasis is placed on growing the restructured business while maintaining a strong balance sheet.


Merger Strategies - It is a combination of two or more organization in which one acquires the assets and liabilities of the other

in exchange for shares or cash or both the organization are dissolved and the assets and liabilities are combined and new stock is

issued. For the organization which acquires another, it is an acquisition for the organization which is acquired, it is a merger. If both

organization dissolved their identify to create a new organization, it is consolidation. for examples – In Indian corporate world such as

polyolefin industries with NOCIL e.tc

Types of Mergers 1. Horizontal Merger- It takes place when there is a combination of two or more organization in the same business. For instance a

company making footwear combines with another footwear company.

2. Vertical Merger – It take place when there is a combination of two or more organization, not necessarily in the same business

which create complementarily either interims of supply of materials. For instance a footwear company combines with a leather

tannery.

3. Concentric mergers – It take place when there is a combination of two or more organization related to each other in terms of

customer functions, customer groups .Thus a footwear company combining with a hosiery form making socks .

4. Conglomerate Merger – It take place when there is a combination of two or more organization unrelated to each other either

in terms of customer functions or alternative technologies. For examples footwear company combining with a pharmaceutical

firm.

Reasons for Merger- For a merger to take place, two organizations have to act. One is the buyer organization and other is the seller.

Both these type of organization have a set of reasons on the basis of which they merge.

1. Why the buyer wishes to merge – � To increase the value of organizational stock

� To improve stability of earning & sales.

� To reduce competition.

� To acquire needed resources quickly.

� To take advantage of synergy. 2. Why the seller wishes to merge –

� To increase the value of the owner's stock and investment.

� To increase growth rate.

� To acquire resources to stabilities operations.

� To benefits from tax legislation.

� To deal with top management succession problem.


Acquisition or Take Over - It is common way for acquisition and may be defined as -The attempt of one firm acquire

ownership or control over another against the wishes of the latter's management .many takeover may not have any elements of

surprise and may not necessarily be against the wishes of the acquired firm. It is a popular strategic alternative adopted by Indian

companies .the post liberalization period has been an increasing use of takeover strategies as a mean of rapid growth major companies

which have been taken over included Ashok Leyland, Dunlop, ACC e.tc

How Take Over Take Place

• Spell out the objective

• Assess management quality

• Check the compatibility of business style

• Anticipate and solve the problem early

• Treat people dignity & concern.

Reason for Takeovers'

1. Rational Reason –

• Quick growth

• Diversification

• Reducing Competition

• Creating goodwill.

2. Irrational Reasons –

• Greed or Lust to become rich

• To accumulate wealth

• To build an Industrial empire.

Types of Takeover –

• Hostile Takeover – It is resisted or expected to be opposed by the existing management or professional. Here the shares are

picked up from the open markets and controlling interest is obtained. Examples- NEPC bid for Modiluft.

• Friendly Takeover – it is done by mutual consent with the existing management or professionals. Tata tea takeover of

consolidated coffee & Asian coffee is an example of friendly takeovers.

Pro and cons of Takeovers –

For –

• Offer easy growth opportunities

• Create mobility of resource

• Avoid gestation periods &hurdles involved in new projects

• Offer a chance to sick unit to survive

• Open up alternative for selective divestment.

Against –

• Professionalism gets replaced by money power.

• It do not create any real asset for society

• The interest of minority shareholders is not protected

• Stress & strain are created

• Exposed to threat of takeover.


Franchising - It is a term which can be applied to just about any area of Economic Endeavour. Franchising encompasses products

and services from the manufacture, supply for manufacture, processing, distribution and sale of goods, to the rendering of services, the

marketing of those services, their distribution and sale. It may be defined as a business arrangement which allows for the reputation,

(goodwill) innovation, technical know-how and expertise of the innovator (franchisor) to be combined with the energy, industry and

investment of another party (franchisee) to conduct the business of providing and selling of goods and services.

What Makes a Good Franchise? Franchising to the uninformed is often seen as easy money or a get rich quick scheme. These

perceptions are usually the result of looking from the outside and seeing a successful, flourishing business, being run efficiently, with

charm and grace - seemingly with a minimum of fuss. Successful franchises are the result of innovation, initiative, investment and

industry. A good franchise is always sparked by a good idea which fills a market need. The good idea, for example the “Hire-a-Hubby”,

“Mr. Green” or the “All Around” concepts happened along at the right time and at the right place – The good idea was reinforced by the

initiative and drive of their creator to make the idea work. A blueprint “system” for repeating success was established, developed,

updated and monitored requiring the investment of time, money and innovation. This innovation ensured that client expectations are

met, anticipated and managed and, of course – the innovation resulted in a unique, memorable and exclusive name being devised and

an unique brand established

Advantages of Owning a Franchise

• Freedom of employment

• Proven brand, trade mark, recognition

• Industry know-how

• Reduced risk of failure

• Access to proprietary products or services

• Bulk buying advantages

Things to be Aware of When Choosing a Franchise

• Franchising is business. It is the buying and selling of goods and services and, like every business transaction, requires careful

thought before the transaction action is completed.

• Buying a franchise is just the same as buying into any business. The purchase needs to be made in the cold light of day and not

on impulse.

• Balance sheets need to be looked at and bottom lines investigated. The franchise should also be compared with similar

franchises in similar areas so the at pears are compared with pears and realistic expectations and incomes ascertained.

• The most overlooked aspect of franchising and one that is invariably taken for granted is the Intellectual Property owned by the

franchisor – or in some cases not owned by him.

• A name-brand availability search is therefore essential and should be performed by a professional search service.

• Other aspects of Intellectual Property such as patent ownership, copyright and marketing wishes should also be investigated

and their ownership (right to use) determined.

Licensing - There is no such thing as a standard license. Every arrangement is unique and has its own special requirements, aims

and objectives. All licenses should be read and re-read and should be placed before a licensing professional or IP professional before

being signed. Needless to say, every license should be clear to all parties concerned. The individual parties should be aware of the

obligations that the contract places on them, the conditions that have to be met and the time lines by which specific functions are to be

performed. All of these features should be transparent and measurable. Each party should also be acutely aware of the other parties’

responsibilities. Territorial or geographical boundaries should be made clear, as should all payment obligations and the amounts that

are to be paid (and how they are calculated). All payment, dates should be clearly laid out, preferably in a schedule. Penalties, such as

default payments, breach of contract conditions, rights to assign, the term of the contract, and the right to renew is also important

considerations that are often overlooked or not fully understood. Bonus conditions might also be negotiated and should not be

dismissed in a licensing agreement There are, though certain features that should be considered in the development of every license.

The following is a list of some of the things that should be considered:

• Is the license exclusive, i.e. granted to only one person, or non-exclusive?

• Can the licensee sub-license?

• Who pays for prosecution and maintenance of any Intellectual properties

• Who is responsible for filing for further improvement patents in overseas?

• In whose name will the applications be made in?

• Who pays for any matters such as preparation of the license, record of licensee, etc?

• Is there a required commitment on the part of the licensee to fully exploit the invention?

• What is the term of license?

• Is there a right to renew?


Unit 7 Strategic Management in international and Global Industry:-

Strategic management is the process of strategic decision-making that sets the long-term direction for the organization. The central

thrust of strategic management is achieving a sustainable competitive advantage. The strategy process consists of the analysis,

development, and implementation steps. Hence ‘international strategy’ and ‘global strategy’ are sometimes used interchangeably. We

take global strategy to mean something new and different from international strategy. We group them into four main phases

1. Single-country strategy - Most firms operating around the world at one time operated in a single country. Firms that are now

household names around the world started as small ventures in a single country. Firms operating strictly within the confines of

their home country use single-country strategies to compete in their home market, where they face only one set of business

factors and one set of customers. The firm’s home market kept growing and remained profitable; there was no urgent need to

expand into foreign markets. Internationalization was often considered when the firm’s home market became unprofitable or

the prospect for growth Started to diminish, and attractive opportunities to expand internationally were available. Even for

firms that do not operate internationally, formulating and implementing a strategy that focuses solely on local competitors and

customers may not guarantee their strategic competitiveness.

2. Export strategy - Before a firm establishes subsidiaries outside its home market and becomes directly involved in their

management, it may start by exporting its products and services outside its home market. In most exporting firms the domestic

strategy remains of primary importance. While an exporting firm makes strategic decisions to select appropriate countries to

export to, determines the appropriate level of product modification to meet local market peculiarities, and sets and manages

export channels, the thrust of its strategy deals with the management of the firm in the home country. For this reason, this

phase could be considered as a domestic strategy with an export strategy attached to it.

3. International strategy - When firms first establish subsidiaries outside their home market, they move from a domestic strategy

phase to an international strategy phase. Firms that manufacture and market products or services in several countries are

called ‘multinational firms’. During this phase, each subsidiary is likely to have its own strategy, and will analyse, develop, and

implement that strategy by tailoring it to its particular local market. At this phase, adaptation of products to fit local market

peculiarities becomes the main concern for multinational firms. Internationally scattered subsidiaries act independently and

operate as if they were local companies, with minimum coordination from the parent company. This approach leads to a wide

variety of business strategies, and a high level of adaptation to the local business environment.

4. Global strategy - As multinationals mature and move through the first three stages, they become aware of the opportunities to

be gained from integrating and creating a single strategy on a global scale. A global strategy involves a carefully crafted single

strategy for the entire network of subsidiaries and partners, encompassing many countries simultaneously and leveraging

synergies across many countries. A global strategy involves the carefully crafted single strategy for the entire network of

subsidiaries and partners, encompassing many countries simultaneously and leveraging synergies across many countries. This

stands in contrast to an international strategy, which involves a wide variety of business strategies across countries, and a high

level of adaptation to the local Business environment.

International strategy and global strategy: what is the difference? There are three key differences.

• The first relates to the degree of involvement and coordination from the centre. Coordination of strategic activities is the

extent to which a firm’s strategic activities in different country locations are planned and executed interdependently on a

global scale to exploit the synergies that exist across different countries. International strategy does not require strong

coordination from the centre. Global strategy, on the other hand, requires significant coordination between the activities of the

centre and those of subsidiaries.

• The second difference relates to the degree of product standardization and responsiveness to local business environment.

Product standardization is the degree to which a product, service, or process is standardized across countries An international

strategy assumes that the subsidiary should respond to local business needs unless there is a good reason for not doing so. In

contrast, the global strategy assumes that the centre should standardize its operations and products in all the different

countries, unless there is a compelling reason for not doing so

• The third difference has to do with strategy integration and competitive moves. ‘Integration’ and ‘competitive move’ refer to

the extent to which a firm’s competitive moves in major markets are interdependent. For example, a multinational firm

subsidizes operations


Unit 8 Evaluation of Strategy :- Strategy Evaluation is as significant as strategy formulation because it throws light on the efficiency and effectiveness of the

comprehensive plans in achieving the desired results. The managers can also assess the appropriateness of the current strategy in

today's dynamic world with socio-economic, political and technological innovations. Strategic Evaluation is the final phase of strategic

management. The significance of strategy evaluation lies in its capacity to co-ordinate the task performed by managers, groups,

departments etc, through control of performance. Strategic Evaluation is significant because of various factors such as - developing

inputs for new strategic planning, the urge for feedback, appraisal and reward, development of the strategic management process,

judging the validity of strategic choice etc.

The following factors were considered by executives to be most important for the success of a company strategy.

• Quality of top management

• Development of future managers

• Managerial interaction and drive to earn profits for the firms

• Improved system of long range planning

• Better judgment, creativity and imagination at top management

• Improvement in service to customers

• Assuring a competitive financial return to investor

• Maximizing the value of shareholder's investment.

The process of Strategy Evaluation consists of following steps-

1. Fixing benchmark of performance - While fixing the benchmark, strategists encounter questions such as - what benchmarks to

set, how to set them and how to express them. In order to determine the benchmark performance to be set, it is essential to

discover the special requirements for performing the main task. The performance indicator that best identify and express the

special requirements might then be determined to be used for evaluation. The organization can use both quantitative and

qualitative criteria for comprehensive assessment of performance. Quantitative criteria include determination of net profit,

ROI, earning per share, cost of production, rate of employee turnover etc. Among the Qualitative factors are subjective

evaluation of factors such as - skills and competencies, risk taking potential, flexibility etc.

2. Measurement of performance - The standard performance is a bench mark with which the actual performance is to be

compared. The reporting and communication system help in measuring the performance. If appropriate means are available

for measuring the performance and if the standards are set in the right manner, strategy evaluation becomes easier. But

various factors such as manager’s contribution are difficult to measure. Similarly divisional performance is sometimes difficult

to measure as compared to individual performance. Thus, variable objectives must be created against which measurement of

performance can be done. The measurement must be done at right time else evaluation will not meet its purpose. For

measuring the performance, financial statements like - balance sheet, profit and loss account must be prepared on an annual

basis.

3. Analyzing Variance - While measuring the actual performance and comparing it with standard performance there may be

variances which must be analyzed. The strategists must mention the degree of tolerance limits between which the variance

between actual and standard performance may be accepted. The positive deviation indicates a better performance but it is

quite unusual exceeding the target always. The negative deviation is an issue of concern because it indicates a shortfall in

performance. Thus in this case the strategists must discover the causes of deviation and must take corrective action to

overcome it.

4. Taking Corrective Action - Once the deviation in performance is identified, it is essential to plan for a corrective action. If the

performance is consistently less than the desired performance, the strategists must carry a detailed analysis of the factors

responsible for such performance. If the strategists discover that the organizational potential does not match with the

performance requirements, then the standards must be lowered. Another rare and drastic corrective action is reformulating

the strategy which requires going back to the process of strategic management, reframing of plans according to new resource

allocation trend and consequent means going to the beginning point of strategic management process.

strategy and corporate evolution

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