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Summer 2015 Exam Oct / Nov 2015
Masters of Business Administration
Semester 4
MB0052 – STRATEGIC MANAGEMENT AND BUSINESS POLICY
Assignments
Q1. Describe the role of five major participants in the Strategic Management Process (SMP) of
a company.
Answer:
Participants in SMP:
The fact that the strategic management process involves strategy making at the corporate level,
SBU level and functional level also implies that managers at different levels—top, senior and
middle—participate in the strategic planning and management process. Many times,
management consultants also play important roles in the strategic planning and management
of a company. The five participants are:
1. Board of directors
2. Chief Executive Officer (CEO)
3. Corporate planning staff
4. Other managers
5. Consultants
1 Role of Board of Directors
In any organizational hierarchy, the board of directors is the apex/highest level body. The board
is the final authority in managing the affairs of a company, strategic or non-strategic. They
perform these functions according to or subject to the memorandum of association and articles
of association of the company.
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2. Role of Chief Executive
The chief executive plays the most important role in the strategic management process of a
company. Major management functions of a chief executive, however, can be broadly divided
into two categories; strategic and non-strategic. Every chief executive should clearly distinguish
between his/her strategic functions and non-strategic or operational functions so that he can
appropriately allocate his time and concentrate more on strategic functions.
3. Role of Corporate Planning Staff
Every chief executive needs the support of his corporate planning staff. With increasing
volatility of the competitive environment, the strategic planning and management process is
becoming more complex. Also, with the introduction of new tools, techniques and planning
models, the planning system is also becoming more technical and specialized.
4. Role of Senior Managers
The senior managers include SBU heads and also functional heads. Some of these heads are at
the level of directors who are represented on the board. The senior managers are members of
different management committees, including top management committees which are involved
in strategic planning and management.
5. Role of Consultants
Consultants render services in different functional areas of management including the strategic
planning and management process. In companies with no separate planning division or unit,
consultants can fill that gap. They can undertake planning and strategy exercises as and when
the company management feels the need for such exercises or consultancies.
Q2. Differentiate between mission and vision of a company? Explain with examples.
Answer:
Vision and Mission statements
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A well-articulated strategic intent guides the development of goals and helps in inspiring the
employees to achieve targets. It also facilitates in utilizing the intent to allocate resources and
in encouraging team participation. It comprises of the vision and mission statements.
 Vision statement
A vision statement defines the purpose and principles of an organization in terms of the values
of the organization. It is a concise and motivating statement that guides the employees to
select the procedures to attain the goals. Vision statement is the framework of strategic
planning. A vision statement describes the future ambition of an organization. A vision is the
ability to view what the organization wants to be in future. It is prepared for the organization
and its employees. It should be implanted in the organization being collectively shared by
everyone in the organization
Example - Wal-Mart’s vision is to become worldwide leader in retailing.
 Mission statement
A mission statement is the extensive definition of the mission of an organization. It is a concise
description of the existence and fundamental purpose of an organization. It describes the
present potentials and activities of the organization. It conveys the purpose of the organization
to its employees and the public. It gives a framework on the operations of the organization
within which the strategies are devised. It describes the present capabilities, the stakeholders
and the reason for existence of an organization. It should be practical and achievable. It should
be clear and precise so that the actions can be taken based on it. It should be unique and
different to leave an impact on everyone. It should be credible so that the stakeholders accept
it.
Example -Wal-Mart’s mission is to provide ordinary customers the chance to buy the same
thing as rich people.
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Q3. Explain in detail Porter’s four generic strategies.
Answer:
Porter's Generic Strategies
A firm positions itself by leveraging its strengths. Michael Porter has argued that a firm's
strengths ultimately fall into one of two headings: cost advantage and differentiation. By
applying these strengths in either a broad or narrow scope, three generic strategies result: cost
leadership, differentiation, and focus. These strategies are applied at the business unit level.
They are called generic strategies because they are not firm or industry dependent. The
following table illustrates Porter's generic strategies:
Cost Leadership Strategy
This generic strategy calls for being the low cost producer in an industry for a given level of
quality. The firm sells its products either at average industry prices to earn a profit higher than
that of rivals, or below the average industry prices to gain market share. In the event of a price
war, the firm can maintain some profitability while the competition suffers losses. Even without
a price war, as the industry matures and prices decline, the firms that can produce more
cheaply will remain profitable for a longer period of time. The cost leadership strategy usually
targets a broad market.
Differentiation Strategy
A differentiation strategy calls for the development of a product or service that offers unique
attributes that are valued by customers and that customers perceive to be better than or
different from the products of the competition. The value added by the uniqueness of the
product may allow the firm to charge a premium price for it. The firm hopes that the higher
price will more than cover the extra costs incurred in offering the unique product. Because of
the product's unique attributes, if suppliers increase their prices the firm may be able to pass
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along the costs to its customers who cannot find substitute products easily.
Focus Strategy
The focus strategy concentrates on a narrow segment and within that segment attempts to
achieve either a cost advantage or differentiation. The premise is that the needs of the group
can be better serviced by focusing entirely on it. A firm using a focus strategy often enjoys a
high degree of customer loyalty, and this entrenched loyalty discourages other firms from
competing directly.
FIGURE: Generic Strategies and Industry Forces
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A Combination of Generic Strategies
- Stuck in the Middle?
These generic strategies are not necessarily compatible with one another. If a firm attempts to
achieve an advantage on all fronts, in this attempt it may achieve no advantage at all. For
example, if a firm differentiates itself by supplying very high quality products, it risks
undermining that quality if it seeks to become a cost leader. Even if the quality did not suffer,
the firm would risk projecting a confusing image. For this reason, Michael Porter argued that to
be successful over the long-term, a firm must select only one of these three generic strategies.
Generic Strategies and Industry Forces
These generic strategies each have attributes that can serve to defend against competitive
forces. The following table compares some characteristics of the generic strategies in the
context of the Porter's five forces.
Generic Strategies and Industry Forces
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