MB0052 –Strategic Management and Business Policy
Q1. Explain the corporate strategy in different types of organization?
Ans. Corporate strategy can be defined as a proposed course of action or sequence of actions designed to
have a far-reaching effect on an organization’s ability to achieve its leading objectives. It is often used in
the context of a company’s plan of action that causes it to allocate its scarce resources specially finance
over time to get from where it is to where it wants to go. Corporate strategy, in association with structure
and systems is supposed to achieve super ordinate goals through skills, staff and style. Corporate
strategies are concerned with the broad and long-term questions of what business the organization is in or
wants to be in & what it wants to do with those businesses.
A well formulated strategy is vital for growth and development of any organization whether it is a small
business, a big private enterprise, a public sector company, a multinational corporation or a non-profit
organization. Small businesses generally operate in a single market or a limited number of markets with a
single product or a limited range of products. The nature and scope of operations are likely to be less of a
strategic issue than in larger organizations. Not much of strategic planning may also be required or
involved; and the company may be content with making and selling existing products and generating
In large businesses whether in the private sector, public sector or multinationals—the situation is entirely
different. Both the internal and external environment and the organizational objectives and priorities are
different. For all large private sector enterprises, there is a clear growth perspective, because the stake
holders want the companies to grow, increase market share and generate more revenue and profit.
Multinationals have a great focus on growth and development and also diversification in terms of both
products and markets. This is necessary to remain internationally competitive and sustain their global
presence. For example multinational companies like General Motors, Honda and Toyota may have to
decide about the most strategic locations or configurations of plants for manufacturing the cars.
In public sector companies, objectives and priorities can be quite different from those in the private
sector. Generation of employment and maximizing output may be more important objectives than
maximizing profit. Stability rather than growth may be the priority many times. Accountability system is
also very different in public sector from that in the private sector. There is also greater focus on corporate
In non-profit organizations the focus on social responsibilities is even greater than in the public sector. In
these organizations, ideology and underlying values are of central strategic significance. Many of these
organizations have multiple service objectives and the beneficiaries of service are not necessarily the
contributors to revenue or resource. All these make strategic planning and management in these
organizations quite different from all other organizations. The evaluation criteria also become different.
The growth objectives of not-for-profit businesses is to increase clients served or patrons attracted, to
broaden the geographic area and to increase programs offered.
Q2. What is the role consultants play in the strategic planning and management process of a company? Is it an
Ans: Managements consultants can play very crucial roles in the strategic planning process of a company.
They render services in different functional areas including the strategic planning and the management
process. They undertake planning and strategy exercises as and when the company management feels the
need for such exercises. Top strategic consultants like McKinsey and Company use or develop latest tools
or models to work out the solutions to the specific strategic management problems or issues whether it be
productivity, cost efficiency, restructuring, long term growth or diversification. Consultants bring
diversified skills and experience from various companies which may not be available internally in a single
Consultants have a tough and delicate role to play. In many companies a situation develops when the top
management needs to bank upon the support of a consultant to push through a strategic change in the
organizational structure or the management of a company. It may be for the growth and development.
Many companies face internal resistance to change the strategy. The resistance is more if it is downsizing
even when it is required for turning around a company. Consultants are engaged to substantiate the
company’s point of view so that change is more easily acceptable to the internal members of the
Q.3.What is strategic audit? Explain its relevance to corporate strategy and corporate governance.
Ans: Strategic Audit is the process of evaluating a firm’s strategy. Strategic audits are examinations and
evaluations of strategic management processes including measuring corporate performance against the
corporate strategy. Whenever a deficiency is noted or performance of an organization is sub-par, the
organization may elect to perform a strategic audit. This may be done with in-house auditors, or an audit
firm may be contracted to perform the audit.
The auditors will audit performance of the organization against the current corporate strategy and seek to
identify problems within the current strategy that may be tied or can be traced to poor performance. Upon
completion of the audit, a report will be created regarding the auditing firm or group’s findings and
submit the report with recommended remedies to the management of the organization. The organization
will then seek to implement the proposed remedies with hopes of increasing organizational performance.
Q.4. What is Corporate Social Responsibility (CSR)? Which are the issues involved in analysis of CSR? Name three
companies with high CSR rating.
Ans. Corporate social responsibility is a form of corporate self-regulation integrated into a business
model. CSR is a process with the aim to embrace responsibility for the company's actions and encourage
a positive impact through its activities on the environment, consumers, employees, communities,
stakeholders and all other members of the public sphere who may also be considered as stakeholders.
The term "corporate social responsibility" came into common use in the late 1960s and early 1970s after
many multinational corporations formed the term stakeholder, meaning those on whom an organization's
activities have an impact. The term "corporate social responsibility" is often used interchangeably with
corporate responsibility, corporate citizenship, social enterprise, sustainability, sustainable development,
triple-bottom line, corporate ethics, and in some cases corporate governance. Though these terms are
different, they all point in the same direction: throughout the industrialized world and in many developing
countries there has been a sharp escalation in the social roles corporations are expected to play.
Companies are facing new demands to engage in public-private partnerships and are under growing
pressure to be accountable not only to shareholders, but also to stakeholders such as employees,
consumers, suppliers, local communities, policymakers, and society-at-large.
There is heated debate about whether it constitutes a legitimate activity for a corporation to be engaged in.
The adoption of CSR threatens prosperity in poor countries as well as rich. It is likely to reduce
competition and economic freedom and to ‘undermine the market economy’. CSR policies and activities
should only be undertaken when it appears that they can enhance the value of the firm, i.e. when they are
used as strategic CSR. Companies derive from CSR activities arise from two sources. The first source is
expectations held by the immediate stakeholders of a company- its consumers, employees and investors -
for responsible corporate conduct. The second driver behind the adoption of CSR activities by
corporations is the threat that the state will impose new binding regulations on companies.
The three companies with high CSR rating according to Forbes magazine are:
c)The Walt Disney World
Q5. Distinguish between core competence, distinctive competence, strategic competence and
threshold competence. Use examples.
Ans. Competency refers to the ability of a firm to carry out an activity well. It is built and developed by firms
consciously through experience and learning. A competency resides in people in the firm and not in physical
A Core competency is an activity central to a firm's profitability and competitiveness that is performed well by
the firm. Core competencies create and sustain firm's ability to meet the critical success factors of particular
The core competency of Apple can be said to be making user friendly user interfaces and design. The core
competency of Walmart can be said to be groceries at a low cost and the core competency of Dell can be said to
be custom made PC direct from manufacturer at a low cost.
A distinctive competency is a competitively valuable activity that a firm performs better than its competitors.
These provide the basis for competitive advantage. These are cornerstone of strategy. They provide sustainable
competitive advantage because these are hard to copy. Distinctive competence of a firm refers to a set of
activities or capabilities that a company is able to perform better than its competitors and which gives it an
advantage over them. Distinctive competence can lie in different area such as technology, marketing activities,
or management capability.
A company needs to develop its strategy that utilizes its distinctive competence to gain competitive advantage.
It must be remembered that what distinctive competence of a firm may change with time as other companies
develop new capabilities and with change in market requirements. Therefore companies need to identify their
distinctive competence by careful analysis, and if required, strive to develop new competences to meet
changing market requirements and competitive situation. The concept of distinctive competence is quite similar
to the concept of core competence.
Some examples of distinctive competencies are: Sharp Corporation which expertises in flat panel display
Toyota, Honda and Nissan companies have high quality manufacturing capabilities at low cost.
Intel has the ability to design and manufacture more powerful microprocessors for personal computers.
Motorola manufactures defect free six sigma quality of mobile phones.
Strategic competence refers to a speaker’s ability to adapt their use of verbal and nonverbal language to
compensate for communication problems caused by the speaker’s lack of understanding of proper grammar use
or insufficient knowledge of social behaviour and communication norms.
Some examples of behaviors demonstrating strategic competence include using synonyms to substitute for
words the speaker cannot recall or has not yet learned, resorting to physical gestures to convey meaning, asking
for clarification from the listener, raising one's voice in order to be heard, and feigning comprehension in order
to listen for context clues.
The characteristics required by a jobholder to perform a job effectively are called threshold competencies.
These distinguish the people who can do the job from those who cannot. For the position of a typist it is
necessary to have primary knowledge about typing, which is a threshold competency.
A threshold competency is a quality that a person needs in order to do a job; it might be as simple as being able
to speak in the native language. It is different from the competency in a manner that it does not offer any aid in
distinguishing superior performance from average and poor performance. So, every job at any level in the
organization would have a threshold competency.
Q.6. What is global industry? Explain with examples, international strategy, multi-domestic, global &
Ans. The term global industry specifically means an industry where a firm’s competitive position in one
country is affected by its position in other countries. The industries exhibiting global pattern in today’s world
include automobiles, television sets, commercial aircrafts and boats, sporting equipments, watches, clothing,
semiconductors, copiers and also the transfer of funds.
Global industries are industries with organizations that make operational and production decisions based on
global supply and demand and global market conditions established by integrated markets around the world.
Global strategy is based on a strategy implementation on the assumption of one global village, thus one strategy
is implemented for all countries regardless of their social cultural differences. Intel, Motorola, Microsoft,
Global retail chains like Walmart and Marks & Spencer come under this category.
Multidomestic strategy means companies implement a strategy that is more responding to local needs, values
and demands. This usually happens on a regional basis, e.g. Western European countries or Northern part of
Europe. Companies choose to follow this strategy because their products will be better received by local
customers, rather than seen as something unusual that is produced by a foreign company. One of the nation's
most popular hamburger chains is an example of a multidomestic strategy. The company researches each
country’s local customs and foods before creating its menu items and opening up a store. For example, the
restaurant's stores in India do not sell any sandwiches made with beef, since the Indian culture sees cows as
sacred. American theme parks provide another example of multidomestic companies.
Transnational strategy differs, however, in the way the product is marketed in each country. A transnational
product keeps its same characteristics, regardless of the country in which it is sold. The product does not change
according to local customs or preferences, so that the product sold in Asia or Mexico is exactly the same as the
version sold in the United States or Europe. A very well-known coca cola soft drink is one example of a
transnational product. The product is sold in over 200 countries worldwide, and this beverage company retains
exactly the same beverage formulation in each country.
International strategy can be adopted for those products and services which are not available in some countries
and can be transferred from other countries. These are standard products with little or no differentiation.
International strategies are not very popular. Kellogg’s , Indian software and Indian handicrafts come under this