SUBJECT CODE & NAME -MB0052- Strategic Management and Business Policy

WINTER 2016 Exam APR 2017

SEMESTER- 4

SUBJECT CODE & NAME -MB0052- Strategic Management and Business Policy

Assignments

Q.1 Briefly discuss concept of strategy? Explain the various levels of strategy in an organization.

Answer:

Strategy is a concept that is used universally but understood differently, and, therefore, defined differently. In fact, strategy as a concept is better described and more easily put into practice than defined. Most companies recognize that strategy is central to business and management. It is also recognized that it is strategy that makes the difference between success and failure of many companies and businesses.

The word ‘strategy’ comes from Greek strategies, which refers to a militarygeneral and combines stratus (the army) and ago (to lead). The concept andpractice of strategy and planning started in the military, and, over time, it enteredbusiness and management. The key or common objective of both business strategy and military strategy is the same, i.e., to secure competitive advantageover the rivals or opponents.

Levels of Strategy

Strategies exist at different levels in an organization. Three different levels oforganizational strategy can be clearly distinguished

FIGURE: Levels of Strategy

Corporate-level strategies are concerned with overall purpose or objectiveof the organization; for example, diversification through joint venture, merger oracquisition.

Business unit-level strategies address themselves to issues of aparticular business unit or product group of an organization—strategies forproduct development and/or identification and exploitation of new marketopportunities.

Functional strategies (sometimes, called operational strategies)concentrate on particular functional or operational areas like manufacturing,marketing, logistics, etc.

For single-business companies, corporate-level strategies and businessunit-level strategies may not be much different. But for multi-business companieslike Unilever (or its subsidiary Hindustan Unilever), business unit-level strategieswould be quite distinct from corporate-level strategies. Functional-level strategies,however, would be common in both single-business and multiple-businesscompanies. The three levels of strategy are not isolated: these strategies support,complement or reinforce each other for the achievement of organizational objectives.

Q.2 How strategic planning and strategic management are interrelated to each other? Which comes first?

Answer:

Strategic Planning and Strategic Management

Plan or planning should precede action. And, strategic planning should precedestrategic management. Strategic planning (also called corporate planning)provides the framework (some call it a tool) for all major decisions of anenterprise—decisions on products, markets, investments and organizationalstructure. In a successful organization, strategic planning or strategic planningdivision acts as the nerve centre of business opportunities and growth. It alsoacts as a restraint or defence mechanism that helps an organization foreseeand avoid major mistakes in product, market, or investment decisions.A strategic plan, also called a corporate plan or perspective plan, is ablueprint or document which incorporates details regarding different elementsof strategic management. This includes vision/mission, goals, organizationalappraisal, environmental analysis, resource allocation and the manner in whichan organization proposes to put the strategies into action. The concept and roleof strategic planning would be clear if we mention the major areas of strategicplanning in an organization.

First, strategic planning is concerned withenvironment or rather, the fit between the environment, the internal competenciesand business (es) of a company.

Second, it is concerned with the portfolio ofbusinesses a company should have. More specifically, it is concerned withchanges—additions or deletions—in a company’s product-market postures.

Third, strategic planning is mostly concerned with the future or the long-termdynamics of an organization rather than its day-to-day tasks or operations.

Fourth, strategic planning is concerned with growth—direction, pattern and timingof growth. Fifth, strategy is the concern of strategic planning. Growth prioritiesand choice of corporate strategy are also its concerns.

Finally, strategic planningis intended to suggest to an organization, measures or capabilities required toface uncertainties to the extent possible.

All large organizations formulate strategic plans. In 1997, All IndiaManagement Association (AlMA) conducted a study to find out about businessplans, strategies, techniques and tools adopted by various Indian companies.The study results were published in Business Today. The study showed that 56per cent of the total number of companies (160) surveyed had published strategy.In terms of planning horizon, the period covered in the strategic plan was lessthan 3 years by 44 per cent of the companies, 3–5 years by 40 per cent of thecompanies and more than 5 years by 16 per cent. Analysed in terms of companysize, bigger companies planned for a longer period. For 45 per cent of the largecompanies, the planning period was more than 5 years, but for 70 per cent ofthe small companies, the period was less than 3 years.A characteristic feature of the starting plans of many large Indiancompanies is that the long-term planning horizons of these companies generallycoincide with the national planning period. This means that many of thesecompanies follow a five-year planning period which synchronizes with the 5-year plans of the country. This is particularly true of public sector enterprises inthe core sector.

Marico Industries, the maker of Parachute coconut oil, had prepared astrategic business plan for the period, 1991–96. For the preparation of the plan,a strategic planning team was formed consisting of six managers from differentfunctional areas/disciplines. The planning team made some forecasts aboutthe general macroeconomic environment during 1991–96 and how the Indianeconomy would perform during the period in terms of aggregate demand,technology development and availability of raw materials. In addition to these,the company had considered other environmental factors also. Based on ananalysis of the major strengths and weaknesses of the company and theenvironmental factors (opportunities and threats), a detailed SWOT analysisof the company was undertaken. The objective ofSWOT analysis was to identify growth and expansion possibilities in existingand new products/businesses. These were finally translated into projectedvolumes, turnover and profitability.

Once a strategic plan is prepared, the same is submitted to the seniormanagement/top management for their consideration and approval. In MaricoIndustries also, the strategic business plan prepared by the planning group wassubmitted to the senior management and finally to the top management (CEO).Deliberations took place at different levels and the business plan was finalized.This became more like an annual plan which was to be revised and updatedevery year during the reference period (1991–96) as per the strategic businessplan. Marico’s target was to increase its turnover to `300 crore by 1995–96. Thebusiness plan also stipulated that Marico should add a new product to its portfolioevery year and seek technology tie-up for introduction of new products.Strategic planning and strategic management are intimately related toeach other. Where strategic planning ends, strategic management takes over;but, both are complementary to each other. They form vital links in an integratedchain in corporate management. Both are continuous processes. Strategicmanagement may be more continuous, because it involves implementation andmonitoring also.

Q.3What is a mission statement? Differentiate between a mission statement and a vision statement.

Answer:

Mission Statement

‘A business is not defined by its name, statutes or articles of incorporation. It is defined by the business mission. Only a clear definition of the mission and the purpose of the organization make possible clear and realistic business objectives.’ — Peter Drucker

EXAMPLE:

Vision and mission statements of Indian Oil Corporation are:

Vision: Indian Oil aims to achieve international standards of excellence in all aspects of energy and diversified business with focus on customer delight through quality products and services.

Mission: Maintaining national leadership in oil refining, marketing and pipeline transportation.

Explanation and Difference between Vision Mission Statement:

All visionary companies have a vision statement. The vision of Microsoft (since 1999) has been ‘to broadbase its outlook to empower people through great software anytime, anywhere and on any device including the PC and an incredibly rich variety of digital devices accessing the power of the Internet’.

Vision and mission statements can be generally found in the beginning of annual reports of companies. These statements are also seen in the corporate or long-term strategic plans of companies. These also appear in many company reports or documents like customer service agreements, loan requests, labour relations contracts, etc. Many companies also display them at prominent points or locations in company premises.

The mission statement of a company is variously called a statement of philosophy, a statement of beliefs, a statement of purpose and, a statement of business principles. A mission statement is many in one. It embodies the business philosophy of a company’s decision makers, implies the image the company wishes to project for itself, reflects the company’s self-concept; indicates the company’s principal product or service areas and, the customer needs the company seeks to satisfy. In short, it describes the company’s product, market and technological focus; and it does so in a way that reflects the values and priorities of the company’s strategic decision makers.

Q.4 What is SWOT analysis in terms of Internal & External Analysis? Explain SWOT analysis in the form of a matrix?

Q.5 Define corporate turnaround? Distinguish between surgical and nonsurgical turnaround. Explain with some examples?

Q.6 What are the major characteristics of an effective strategy evaluation system? Analyze these characteristics.

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