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Strategic management notes for anna university

  1. 1. DEPARTMENT OF MANAGEMENT SCIENCES STRATEGIC MANAGEMENT (571309) Dr.K.Prabhakar BSc MBA PhD Professor COURSE SYLLABUS V 1.0 III- Semester III- 2011 Class Hours: 12.50 to 2:30 am Monday and Wednesday Dr. K.Prabhakar, Professor Contact information Office: Room #9Email: (best way to contact me) Tel: 91-44-2659 1860 Office hours: Monday-Friday 8.40 am to 4.40 pm (only by prior appointment) 1
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  4. 4. VELAMMAL ENGINEERING COLLEGE, CHENNAI - 600 066 DEPARTMENT OF MANAGEMENT SCIENCES LECTURE NOTE – CHECK LISTCODE : 571309SUBJECT NAME : Strategic ManagementUNITS : 1-5SL.NO DESCRIPTION AVAILABILITY YES NO NA 1 Cover page 2 Check List 3 Syllabus 4 Lecture plan 5 Lesson plan 6 Key words 7 Question bank 8 University Questions 9 2 Mark Questions Answers 10 Assignment 11 Cases 12 Subject notes 4
  5. 5. 571309 STRATEGIC MANAGEMENT LT P C 3003UNIT- I STRATEGY AND PROCESS 9Conceptual framework for strategic management, the Concept of Strategy andthe Strategy Formation Process – Stakeholders in business – Vision, Missionand Purpose – Business definition, Objectives and Goals - Corporate Governanceand Social responsibility-case study.UNIT – II COMPETITIVE ADVANTAGE 9External Environment - Porter’s Five Forces Model-Strategic GroupsCompetitive Changes during Industry Evolution-Globalization and IndustryStructure - National Context and Competitive advantage Resources-Capabilities and competencies–core competencies-Low cost anddifferentiation Generic Building Blocks of Competitive Advantage-Distinctive Competencies-Resources and Capabilities durability of competitiveAdvantage- Avoiding failures and sustaining competitive advantage-Case study.UNIT - III STRATEGIES10The generic strategic alternatives – Stability, Expansion, Retrenchment andCombination strategies - Business level strategy- Strategy in the GlobalEnvironment-Corporate Strategy- Vertical Integration-Diversification andStrategic Alliances- Building and Restructuring the corporation- Strategicanalysis and choice - Environmental Threat and Opportunity Profile (ETOP) -Organizational Capability Profile - Strategic Advantage Profile - CorporatePortfolio Analysis - SWOT Analysis - GAP Analysis - Mc Kinseys 7s Framework- GE 9 Cell Model - Distinctive competitiveness - Selection of matrix - BalanceScore Card-case study.UNIT – IV STRATEGY IMPLEMENTATION EVALUATION 9The implementation process, Resource allocation, Designing organizationalstructure-Designing Strategic Control Systems- Matching structure and control tostrategy-Implementing Strategic change-Politics-Power and Conflict-Techniques ofstrategic evaluation control-case study. 5
  6. 6. UNIT – V OTHER STRATEGIC ISSUES 8Managing Technology and Innovation- Strategic issues for Non Profitorganizations. New Business Models and strategies for Internet Economy-casestudy.TOTAL:45 PeriodsTEXT BOOKS1.Thomas L. Wheelen, J.David Hunger and Krish Rangarajan, StrategicManagement and Business policy, Pearson Education., 20062.Charles W.L.Hill Gareth R.Jones, Strategic Management Theory, An Integrated approach, Biztantra, Wiley India, 2007.3.Azhar Kazmi, Strategic Management Business Policy, Tata McGraw Hill, ThirdEdition, 2008.REFERENCES1. Fred.R.David, Strategic Management and cases, PHI Learning, 2008.2. Upendra Kachru , Strategic Management concepts cases , Excel Books,2006.3. Adriau HAberberg and Alison Rieple, Dtrategic Management Theory Application, Oxford University Press, 2008.4. Arnoldo C.Hax and Nicholas S. Majluf, The Strategy Concept and Process – A Pragmatic Approach, Pearson Education, Second Edition, 2005.5. Harvard Business Review, Business Policy – part I II, Harvard BusinessSchool.6. Saloner and Shepard, Podolny, Strategic Management, John Wiley, 2001.7. Lawerence G. Hrebiniak, Making strategy work, Pearson, 2005.8. Gupta, Gollakota and Srinivasan, Business Policy and Strategic Management – Concepts and Application, Prentice Hall of India, 2005.STRATEGIC MANAGEMENT 6
  7. 7. (571309)Course Description The logo on the first page indicate the essence of strategicmanagement. Given access to same resources and similar market conditionssome firms show excellent performance. This course answers the questionabout the phenomena of superior performance of some organizationscompared to others. This course introduces students to the concepts andprinciples of Strategic Management. Students will finish this course beingable to understand and apply the steps required to create and evaluatebusinesses from a strategic perspective. Present course focuses on some ofthe current issues in strategic management while examining historicalperspective of strategy formulation and implementation. It will focus onanalytical approaches and on sustainable strategic practices in India andabroad. It is consciously designed with a technological and global outlooksince this orientation highlights the emerging trends in strategic managementand the concept of shared value and look at capitalism in different prismcompared to the past two decades. The course is intended to provide thestudents with a pragmatic approach that will guide the formulation andimplementation of corporate, business, and functional strategies in order tobuild competitive advantage for organizations.Course Interaction TimesLectures: 2 sessions / week, 100 minutes / sessionsStarting Date of the Course: 11.08.2011Ending Date of the Course : 9.12.2011Total number of mandatory hours given is= 45 hoursTotal number of hours planned = 54 hoursOverall Course objectives1. Apply strategic evaluation tools to understand how a business is operating. 7
  8. 8. 2.Implement an industry analysis using Porters Five Forces with the sixthforce being suggested and find its limitation in Indian environment withoperation of Jugged.3.Analyze organization chosen by you and its competitors value chain.4.Conduct financial analysis to determine performance of a company vis asvis its industry so as to use it as inputs for creating a portfolio matrix.5. Interpret qualitative and quantitative information with respect to anorganization taken up for strategic analysis. Find the core competencies of theorganization.7. Utilize the appropriate analytical tools to interpret gatheredinformation/Reference8.Compare information to determine validity and relevance9. Isolate the key information or points and group data into relevant categories11. Reconcile the impact of economic, social, political, and cultural variableswhich affect a business operation.12. Conduct a SWOT analysis; Conduct a PEST analysis13. Recommend strategies to creatively organize, lead and assume the risksof an organization.14.Summarize the options available for the company15.Summarize the impact on the company’s organizational structure of eachAlternative.Teaching MethodologyThis course will use a combination of readings, case studies, lectures, and willrequire the completion of an individual project. Approximately 50 hours or 25sessions are planned for the course. There will be three sessions ofdiscussion on CT 1, CT2 and model examination is also planned. 8
  9. 9. Following Harvard Business Review Articles are given to you as course readings andproviding single page analysis of each of the article is encouraged. 1. Harvard Business Review, May-June 1989; STRATEGIC INTENT; Gary Hamel C.K.Prahalad. 2. Harvard Business Review, November-December 1996; WHAT IS STRATEGY? Michael E.Porter , Z : ,Kt KDWd/d/s KZ^ ^, W ^dZ dz Michael E.Porter 4. Harvard Business Review; THE CORE COMPETENCE OF THE CORPORATION C.K.Prahalad Gary Hamel 5. Harvard Business Review; USING THE BALANCED SCORECARD AS A STRATEGIC MANAGEMENT SYSTEM;Robert S.Kaplan David P.Norton 6. Harvard Business Review;March 2001; STRATEGY AND THE INTERNET;Michael E.PorterNOTE:If you are unprepared for the discussion on any day, please let me know before thatparticular class. To encourage preparation and participation, each case discussionclass will start with the cold calling of one to three members of the class at random.You are encouraged to go through annual reports and from other sources available inthe business press. You should be familiar to use google scholar.This course aims to help you become a critical consumer of company information.Dont accept everything they put on their website as truth; search for alternativesources and critical analysis should be your key.1. Identification and analysis of a business problem or issue that the company faces orhas faced. It is usually good to state the analytical purpose of the paper before startingyou paper; the question you are addressing. Use the topics in the course or in thetextbook as a guide to focusing in on a specific aspect of the business that you willanalyze. It is essential for you to get perspectives from sources other than the 9
  10. 10. company itself—newspapers, competitors, industry reports, etc. These will help youtake a critical stance toward the company information.2. Conclusions (or recommendations). Based on your research and analysis, you maysuggest what the company ought to do about the problem you studied. You mayprovide conclusions about the phenomenon you studied or conclusions formanagement in general. You are expected to take a stand and should address issues.Format of the paper There is a need for sequence in your paper. You should use bestwriting skills and judgment to decide how to structure the paper. My own experiencewith good papers are driven by the analytical goals that are identified at thebeginning of your paper.GROUP WORKThis course can best be learned by group work. In some cases your groups will be assignedand in others you can select your own groups. The professor will decide. It is the individualstudent’s responsibility to ensure they are an active, contributing member of group.Internal Assessment Requirements (Total 20 marks)The requirements for the course and the contribution of each towards the final grade areas follows. ACTIVITIES MARKSClass Test 1 2.5Class Test 2 2.5Model Test 5Strategic Analysis of an organization with focus on a particularorganization of choice of the student; write up of 15 pages confirming toAOM guidelines.Students are expected to submit the organization of choice by22/08/2011 5The format of the paper should be text, exhibits, and a bibliography ofsources used. The paper should be no more than 15 double-spaced pagesof text and 10 exhibits, excluding the bibliography. Length is not a virtueand students should spend the time to make the document shorter. Thepaper should provide you with an opportunity to illustrate the application 10
  11. 11. ACTIVITIES MARKSof one of the frameworks we developed in class to an industry or firm ofyour choice. ( If AOM is found to be difficult the students are expected touse the IIM Style Guide. The project report will be rejected if it is notfollowing any one of the suggested Check: Strategy in ActionYou have to visit any of the organizations and find the strategy adopted 5by the organization to attract and retain customers. You can choose a fishshop, tea shop or a Railway station. You will be given further directionregarding the project. 11
  12. 12. Lesson PlanSESSIONS TOPICSNote: Strategy and Process ( Total Lectures suggested is 9; However, it may require 10lecture sessions of 50 minutes each;The unit is expected to be completed in 5 session days). All your course pptpresentations are available on visit the first class slides at1 Course overview2 Conceptual Framework for Strategic Management3 The concept of strategy and strategy formation process The concept of strategy and strategy formation process4 ( Why some companies fail and other succeed? Wall Mart and Subhikha; Strategic Leadership; Managing strategy Making process for competitive advantage. Study on Future Group; Devdutt Patnaik) Where to start?6 Stakeholders in business7 Vision, Mission and Purpose8 Business Objectives and Goals9 Corporate Governance and Social Responsibility10 Competitive Advantage (9 Hours- 10 hours planned)Unit II External Environment11 Porter’s Five Force Model12 Porter’s Five Force Model (Sixth force) 12
  13. 13. 13 Other important models; Resource based model14 Strategic Groups Competitive Changes during Industry Evolution13 Globalization and Industry Structure14 National Context and Competitive advantage resources15 Capabilities and Competencies16 Core Competencies17 Low cost and differentiation Generic building blocks of competitive advantage18 Resources and Capabilities and durability of competitive advantage Avoiding failures and sustaining competitive advantage19 After completion of the two units there will be a CT 1. As the two units cover substantial subject areas the examination will have a case study.( Unit III. STRATEGIES (Prescribed hours 10; planned hours 15 Hours) This unit is likely to take more thanthe required time prescribed by the university due to its practical importance) The generic strategic alternatives-Stability;Expansion;Retrenchment and21 Combination Strategies (Lecture 2- Deal with examples) Extra Reading: Putting it All Together: Integrating The Critical Tasks of22 Strategy 1 Extra Reading: Putting it All Together: Integrating The Critical Tasks of23 Strategy 224 Corporate Strategy Vertical Integration-Diversification and Strategic Alliances25 (organic and inorganic growth) Building and Reconstructing the Corporation and Strategic Analysis and26 choice 13
  14. 14. Environmental Threat and Opportunity Profile (ETOP)27 ( Index created by Prof.Anatanu Gosh)28 Organizational Capability Profile – Strategic Advantage Profile29 Corporate Portfolio Analysis-SWOT Analysis-Gap Analysis30 Mc Kinsey’s 7s Framework31 GE 9 Cell Model32 Distinctive Competitiveness and selection of Matrix33 Balanced Scorecard35 Balanced Scorecard – ExamplesUnit 4 Strategy Implementation and Evaluation36 Balanced Scorecard – ExamplesUnit IV: Strategy Implementation and Evaluation (9 hours )What is structure of organization and why it is needed?42 Summary and Case study37 The implementation process, resource allocation, organizational structureUnit V Other Strategic Issues41 The implementation process, resource allocation44 Managing Technology42 Designing organizational structure45 Innovation38 Designing strategic control systems-Matching structure and control to strategy46 Innovation39 Implementing strategic change47 Strategic Issues for Non Profit Organizations40 Politics-Power- conflict48 New Business Models and Strategies for Internet Economy41 Techniques of strategic evaluation and control49 Case study 14
  15. 15. 50 Revision of Unit 1 and Unit 251 Revision of Unit 3 and Unit 452 Revision of Unit 553 Important issues in strategic management1. Power point presentations will be given for all the lectures.2. Guest lectures will be arranged for the following topicsi. Leadership and Strategy Formulation. (Pasupathy)ii. Social Entrepreneurship (Lata Suresh)Anna University Examination Question Papers and Comments.1. Except in two occasions no case study was asked in the examinations;that does not mean they are not important. The best way to learn strategicmanagement is through applications and case studies.2. The part B always has either or choice and all questions are compulsory.3 .It is strongly recommended to quote examples from l from BusinessLine ,Business Today , Economic Times and Mint and other business magazines.4. For every month you will be provided with what is latest in the strategicmanagement area with links to the respective news items. They will bediscussed in the class. However, there will be discussion in the classregarding these trends in the class. M.B.A DEGREE EXAMINATION, NOV/DEC 2006 Third Semester BA 1702 – STRATEGIC MANAGEMENT (Regulation 2005) PART A – (10*2=20 Marks) 15
  16. 16. 1. What is Environmental Scanning? 2. Define Corporate Governance. 3. Write the name of factors in Task environment. 4. What is SBU? 5. What is Balanced Scorecard? 6. Define Tactics. 7. What do you mean by ‘Strategic Implementation?’ 8. Define Reengineering. 9. Define Intrapreneurship. 10. What is the meaning of ‘Strategic Piggybacking’? PART B – (5*16=80 Marks)11.a) Explain the basic elements of strategic management process.11.b) What recommendations would you make to improve effectiveness oftoday’s board of directors?12.a) What is relevance of the resource based view of the firm to strategicmanagement in a global environment?12.b) Discuss how a development in a corporations societal environment canaffect the corporations through its task environment.13.a) What is portfolio analysis? Explain the components of portfolio analysis.13.b) Define functional strategy. Explain various functional strategies in anorganization.14.a) Describe the steps in strategic evaluation and control process.14.b) How can a corporate keep from sliding into the decline stage of theorganizational life cycle? 16
  17. 17. 15.a) How can a company develop a corporate entrepreneurship culture?15.b) What considerations should small business environment keep in mindwhen the company grows and develops over time? M.B.A. DEGREE EXAMINATION, MAY/ JUNE 2007 Third Semester BA 1702 – STRATEGIC MANAGEMENT (Regulation 2005) PART A – (10*2=20 Marks)1. What is Business Strategy?2. Define Ethics.3. What do you mean by ‘Strategic Myopia’?4. What is Core Competency?5. Define Joint Ventures.6. Give any two examples of Conglomerate Diversification.7. What is Job enrichment?8. Define Corporate Culture.9. Define Corporate Entrepreneurship.10. What is the meaning of ‘Entrepreneurial Venture’? 17
  18. 18. PART B – (5*16=80 Marks)11.a) Explain the steps involved in strategic Decision Making Process.11.b) Discuss the relationship between Social Responsibility and CorporateGovernance.12.a) How can a decision maker identify strategic factors in the Corporation’sExternal and International Environment?12.b) In what ways can a corporation’s structure and culture be internalstrengths or weakness.13.a) Define Directional Strategy and explain the dimensions of DirectionalStrategy.13.b) Define Strategy. Explain the factors to be considered for selecting thebest strategy.14.a) How should an Owner-Manager prepare a company for its movement inOrganizational Life Cycle?14.b) Explain the primary measures of Corporate performance in StrategicEvaluation.15.a) What is impact of Strategic Management on Not-for-Profit organization?15.b) Define Innovation. What are the characteristics of an attractive industryfrom an Entrepreneur’s point of view? M.B.A DEGREE EXAMINATION, NOV/DEC 2007 Third Semester BA 1702 – STRATEGIC MANAGEMENT (Regulation 2005) PART A – (10*2=20 Marks) 18
  19. 19. 1. What is strategy? 2. What is Corporate Governance? 3. What is competitive advantage? 4. What are core competencies? 5. What is vertical integration? 6. What is hostage taking? 7. What is strategic change? 8. What is strategic control? 9. What are non-profit organizations? 10. What are entrepreneurial ventures?PART B – (5*16=80 Marks) 11.a) Explain the detail components of strategic management process. 11.b) Explain the various governance mechanisms followed to removeincompetent or ineffective managers. 12.a) Explain the Porter’s Five Forces Model to analyze competitiveforces in an industry environment. 12.b) Explain the four generic building blocks of competitive advantage.How to achieve this competitive advantage and make it durable? 13.a) Explain the various strategies to manage rivalry in mature industries. 13.b) What are strategic alliances? Explain their advantages anddisadvantages. How to make strategic alliances work successfully? 14.a) What is the role of organizational structure on strategyimplementation. Explain the two types of organizational design concepts thatdecide how a structure will work. 19
  20. 20. 14.b) What is Organizational Conflict? What are its sources?Explain its process. Suggest strategies to resolve it. 15.a) Why failure rate with regard to innovations is high? Elaborate thevarious steps to build a competency in innovation and avoid failure. 15.b) Read the case given below and answer the questions given at theend. GETTING IT RIGHT AT McDonalds In the restaurant business maintaining product quality is a majorproblem because the quality of food, service, and the restaurant premisesvaries with the chefs and waiters as they come and go. If a customer gets abad meal or poor service or dirty silverware, not only that customers may belost, but other potential customers, too, as negative comments travel by wordof mouth. Consider then the problem Ray Croc, the man who pioneeredMcDonald’s growth, faced when McDonald’s franchises began to open by thethousands throughout the US. How could be maintain product quality toprotect the company’s reputation as it grew? Moreover, how could he try toincrease efficiency and make the organization responsive to the needs ofcustomers to promote its competitive advantage? Kroc’s answer was todevelop a sophisticated control system, which specified every detail of howeach McDonald’s restaurant was to be operated and managed.Kroc’s Control System was based on several components. First, hedeveloped a comprehensive system of rules and procedures for bothfranchise owners and employees to follow in running each restaurant. Themost effective way to perform such tasks as cooking burgers, making fries,greeting customers, or cleaning tables was worked out in advance, writtendown in rule books’, and then taught to each McDonald’s manager andemployee through a formal training process. For example, prospectivefranchise owners had to attend ‘Hamburger University’ the company’s trainingcentre in Chicago, where in an intensive, month-long program they learnt allaspects of a McDonald’s operation. In turn, they were expected to train theirwork force and make sure that employees understand operating procedures 20
  21. 21. thoroughly. Kroc’s goal in establishing the system of rules and procedureswas to standardize. McDonald’s activities so that whatever franchise customerwalked into they would always find get what they expect from a restaurant, therestaurant has developed superior customer responsiveness.However, Kroc’s attempt to control quality went well beyond written rules andprocedures specifying task activities. He also developed McDonald’sfranchise system to help the company control its structure as it grew. Krocbelieved that a manager who is also a franchise owner(and receives a largeshare of the profits) is more motivated to maintain higher efficiency and qualitythan a manager paid on a straight salary. Thus McDonald’s reward andincentive system allowed it to keep control over its operating structure as itexpanded. Moreover, McDonald’s was very selective in selling its franchises;the franchises had to be people with the skills and capabilities to manage thebusiness, and franchise could be revoked if the holder did not maintain qualitystandards.McDonald’s managers frequently visited restaurants to monitor franchises,and franchises were allowed to operate their restaurant only according toMcDonald’s rules. For instance, they could not put in a television or otherwisemodify the restaurant. McDonald’s was also able to monitor and control theperformance of its franchises through output control. Each franchise providedMcDonald’s with information on how many meals were sold, on operatingcosts, and so forth. So using this mix of personal supervision and outputcontrol, managers at McDonald’s corporate headquarters would quickly learnif sales in a franchise declined suddenly, and thus they could take Correctiveaction.Within each restaurant, franchise owners also paid particular attention totraining their employees and instilling in them the norms and values of qualityservice. Having learned about McDonald’s core cultural values at theirtraining sessions, franchise owners were expected to transmit McDonald’sconcepts of efficiency, quality, and customer service to their employees. Thedevelopment of shared norms, values, and an organizational culture alsohelped McDonald’s standardize employee behavior so that customer would 21
  22. 22. know how they would be treated in a McDonald’s restaurant. Moreover,McDonald’s tried to include customers in its culture. It had customers but theirown tables, but it also showed concern for customer needs, by buildingplaygrounds, offering Happy Meals, and organizing birthday parties forcustomer’s children. In creating its family oriented culture, McDonald’s wasensuring future customer loyalty because satisfied children are likely toremain loyal customers as adults.Through all these means, McDonald’s developed a control system thatallowed it to expand its organization successfully and create an organizationalstructure that has led to superior efficiency, quality, and customerresponsiveness. Its control system has played an important role inMcDonald’s becoming the largest the most successful fast-food company inthe world, and many other fast-food companies have imitated it.QUESTIONS 1) What were the main elements of the control system created by Ray Kroc? 2) In What ways would this control system facilitate McDonald’s strategy of global expansion? M.B.A DEGREE EXAMINATION, MAY/JUNE 2008 Third Semester BA 1702 – STRATEGIC MANAGEMENT (Regulation 2005) PART A – (10*2=20 Marks) 1. Define Strategic Management. 2. What is Corporate Social Responsibility? 3. Explain the concept of Competitive advantage. 4. What is PEST analysis? 22
  23. 23. 5. What are the 3 forms of diversification? State the means and mode of diversification. 6. What is disinvestment? 7. Explain strategy implementation. 8. What are the primary measures of corporate performance? 9. What is corporate entrepreneurship? 10. Give the characteristics of innovative entrepreneurial culture.PART B – (5*16=80 Marks)11.a) How does strategic management typically evolve in a corporation?11.b) Illustrate the strategic planning process.12.a) Discuss porters model for analyzing Industries and Competitors12.b) Briefly discuss the five generic business level strategies.13.a) What are Grand Strategies? Explain the various retrenchment strategiesa firm may follow.13.b) Explain the cooperative strategies used to gain competitive advantagewithin an industry.14.a) Describe the steps in designing an effective control system.14.b) Illustrate the pattern of structural development corporations follow asthey expand and grow.15.a) Discuss the factors affecting new venture success.15.b) What are the impact of constraints on strategic management that arepeculiar to non-profit organizations? 23
  24. 24. M.B.A DEGREE EXAMINATION, NOV/DEC 2008 Third Semester BA 1702 – STRATEGIC MANAGEMENT (Regulation 2005) PART A – (10*2=20 Marks) 1. Define vision and mission with examples. 2. What are planned and reactive strategies? 3. What is strategic intent? 4. What are operating strategies? 5. What is Global compact and global reporting initiative? 6. Differentiate TQM from Reengineering. 7. What are adaptive cultures? Give examples. 8. What is value chain approach to strategy? 9. What is ‘brick and click’ strategy? 10. What are the issues in alliances with foreign companies?PART B – (5*16=80 Marks)11.a) What are the typical industry’s dominant economic features that drivebusiness strategy. (or)11.b) Explain Michael Porter’s five forces model along with three genericstrategies. 24
  25. 25. 12.a) What are key success factors? How do we classify them? (or)12.b) What are the possible strengths of an organization identified as part ofthe SWOT analysis?13.a) What were the mistakes committed by the early internet entrepreneurs? (or)13.b) What are three options for achieving cost competitiveness?14.a) What are the advantages and disadvantages of outsourcing? (or)14.b) What are the factors that affect alliances with foreign companies?15.a) What are the different types of strategy supportive cultures? (or)15.b) Is corporate social responsibility with business sense justified? Explainthe issues in the emerging competitive markets. M.B.A DEGREE EXAMINATION, MAY/JUNE 2009 Third Semester BA 1702 – STRATEGIC MANAGEMENT (Regulation 2005) PART A – (10*2=20 Marks) 1. What is meant by corporate strategy? 2. What is environment scanning? 3. What is strategic fit? 4. What are strategic business units? 25
  26. 26. 5. What is value chain partnership? 6. What is conglomerate diversification? 7. What is organizational life cycle? 8. What is strategy-culture compatibility? 9. Are performance based-budgets suitable for non-profit organizations? 10. Does small business require strategic planning?PART B – (5*16=80 Marks)11.a) Explain the information needed for proper formulation of strategy.11.b) What measures would you suggest for effective corporate governance?12.a) According to Porter, what determines the level of competitive intensity inan industry.12.b) Discuss how a development in a corporations societal environment canaffect the corporations through its task environment.13.a) What are the advantages and disadvantages of being a first mover in anindustry. Give some examples of first mover and later mover firms. Were theysuccessful?13.b) Compare and contrast SWOT analysis and portfolio analysis.14.a) What are some ways to implement a retrenchment strategy withoutcreating a lot of resentment and conflict with labor unions.14.b) Explain the salient techniques of strategic evaluation and control.15.a) How can a company develop a corporate entrepreneurship culture?15.b) What are the popular strategies adopted by Non-Profit organizations? M.B.A DEGREE EXAMINATION, NOV/DEC 2009 Third Semester 26
  27. 27. BA 1702 – STRATEGIC MANAGEMENT (Regulation 2005) PART A – (10*2=20 Marks) 1. Corporate Governance 2. Corporate Strategy. 3. TOWS matrix. 4. Strategic Myopia 5. Merger 6. Balance Score Card. 7. Strategic Business Unit 8. Program 9. Intrapreneur 10. Strategic PiggybackingPART B – (5*16=80 Marks)11.a) Explain the steps involved in Strategic Decision Making Process.11.b) “ It is very difficult to implement Corporate Governance in IndianBusiness Environment”. Discuss.12.a) Discuss how a development in a Corporation’s Societal environmentcan effect the Corporation through its task environment.12.b) Elaborate the process of strategy formulation through TOWS matrix andexplain with example.13.a) Define Functional Strategy. Discuss the different phases in functionalstrategy. 27
  28. 28. 13.b) Explain the role of portfolio analysis in Corporate Strategy formulation.14.a) How can a corporation keep from sliding into the decline state of theOrganizational life? Explain.14.b) Explain the steps in managing Corporate Culture.15.a) Elaborate the sub stages in small Business Development.15.b) Read the following example of a company that has had its share ofsuccesses and failures in a very unique industry. Consider the questions atthe end of the paragraph and discuss them with others.Kinder-Care Learning Centers had been founded to take advantage of theincreasing numbers of dual-career couples who were turning to day-carecenters to watch their children while they were at work. In comparison tosome centers that were nothing more than babysitting services providing onlyminimal attention to the needs of the children. Kinder-Care offered pleasantsurroundings staffed by well-trained personnel. Soon kinder-Care had over1,000 centers in almost 40 cities in the United States. Not satisfied with itssuccess,however,Kinder-Care’s top management decided to take advantageof its relationship with working parents to diversify into the somewhat relatedbusiness of banking, insurance and retailing. Financed through junk bonds,the strategy failed to bring in enough cash to pay for its implementation. Afteryears of losses, the company was driven to bankruptcy in the later 1980s.It emerged from bankruptcy in 1993,divested of its acquisitions and pledgedto stay away from diversification. The new CEO initiated a concentrationstrategy with an emphasis on horizontal growth.Kinder-Care opened its first center catering expressly to commuters in arenovated supermarket near the Metro line to Chicago. It also offered to buildchild-care centers for big employers or to run existing facilities for a fee. 28
  29. 29. It opened its first overseas center in Britain. By 1996, the company wasearning $21.7 million on revenues of $506.5 million with centers in 38 statesand the United Kingdom. i) What did this company do right? ii) What mistakes did it make? iii) Do you think it made the right decision to grow internationally? iv) Should it expand further? If so, what corporate strategy should it use? M.B.A DEGREE EXAMINATION, MAY/JUNE2010 Third Semester BA 1702 – STRATEGIC MANAGEMENT (Regulation 2005) PART A – (10*2=20 Marks) 1. Strategic Management 2. Corporate Governance. 3. Core Competency. 4. Micro-Environment. 5. Balance Score Card. 6. Conglomerate Diversification 7. Politics. 8. Cross Culture Management 9. Intrapreneurship 29
  30. 30. 10. Not for-profit Organization PART B-(5*16=80 Marks)11a.) Explain the steps involved in Strategic Planning Process.11b.) Elaborate the concept of corporate Governance and SocialResponsibility with reference to Indian Scenario.12a.) Describe the forces for driving industry competitions as per Michael E.Porter model.12.b) Discuss the meaning and types of Competitive Strategies and Tactics.13.a) Explain the concept of BCG Matrix and GE Business Screen13.b) Describe the detailed features of Corporate directional strategies withexample.14.a) Enumerate the different stages of Organizational life cycle and highlightthe suitable strategies in each stage.14.b) Explain the steps involved in Managing Corporate Culture.15.a) Discuss the sub stages in Small Business development15.b)Explain how can a company develop a corporate EntrepreneurshipCulture. 30
  31. 31. Key Words that have specific meaning for Strategic ManagementCompetitive advantage - What a firm does better than its competitors.Characteristics that allow a firm to outperform its rivals. Distinctive competence - Special skills and resources that generate strengths that competitors cannot easily match or imitate. First mover advantage - The competitive advantage held by a firm from being first in a market or first to use a particular strategy. Late mover advantage - The competitive advantage held by firms that are late in entering a market. Late movers often imitate the technological advances of other firms or reduce risks by waiting until a new market is established. Sustainable competitive advantage - A competitive advantage that cannot easily be imitated and won’t erode over time. Group think - A tendency of individuals to adopt the perspective of the group as a whole. It occurs when decision makers don’t question the underlying assumptions.Competitive strategy - How an enterprise competes within a specific industry ormarket. Also known as business strategy or enterprise strategy.Competitor analysis - The competitive nature of an industry. It determines how arival will likely react in a given situation. Barriers to entry - Factors that reduce entry into an industry. Switching costs - The costs incurred when a buyer switches from one supplier to another. Barriers to exit - Factors that impede exit from an industry. Contestable markets - Markets where profits are held to a competitive level. Due to the ease of entry into the market. 31
  32. 32. Strategic groups - Clusters of firms within an industry that share certain critical asset configurations and follow common strategies. Predatory pricing - Aggressiveness by a firm against its rivals with the intent of driving them out of business.Concentration - Focus the firm’s efforts and resources in one industry.Core business - The central or major business of the firm. The core business isformed around the core competency of the firm. Management of the firm’s corebusiness is central to any decision about strategic direction.Core competency - What a firm does well. The core competency forms the corebusiness of the firm.Critical success factors - Those few things that must go well if a firm’s is to succeed.Typically 20 percent of the factors determine 80 percent of the performance. Thecritical success factors represent the 20 percent. Also called key success factors.Culture - The collection of beliefs, expectations, and values learned and shared bythe firm’s members and passed on from one generation to another.Diversification - The process a firm into new products or enterprises. Concentric diversification - Diversification into a related industry. Conglomerate diversification - Diversification into an unrelated industry.Economics - Cost savings. Economies of integration - Cost savings generated from joint production, purchasing, marketing or control. Economies of size - Fixed costs decline as output increases. 32
  33. 33. Economies of scope - The products of two or more enterprises produced from shared resources which allows for cost reductions. Minimum efficient scale - The smallest output for which unit costs are minimized.Enterprise - The production of a single crop or type of livestock, such as wheat ordairy. A responsibility center. Primary enterprise - An enterprise that provides the foundation of the firm. The success of the primary enterprise is critical to the success of the firm. Secondary enterprise - An enterprise that supports a primary enterprise and/or the mission and goals of the firm. Competitive enterprises - Enterprises for which the output level of one can be increased only by decreasing the output level of the other. Complementary enterprise - Enterprises for which increasing the output level of one also increased the output level of the other. Supplementary enterprises - Enterprises for which the level of production of one can be increased without affecting the level of production of the other. Enterprise strategy - How an enterprise competes within a specific market or industry. Also called business or competitive strategy.Transfer price - The price at which a good or resource is transferred acrossenterprises within a firm. Entrepreneur - An entrepreneur sees change as normal andhealthy. He/she is involved in searching for change, responding to it, and exploiting itas an opportunity.Environmental scanning - To monitor, evaluate and disseminate information fromthe external environment to key people within the firm. Environmental analysis - An analysis of the environmental factors that influence a firm’s operations. 33
  34. 34. Environmental opportunity - An attractive area for a firm to participate in where the firm would enjoy a competitive advantage. Environmental threat - An unfavourable trend or development in the firm’s environment that may lead to an erosion of the firm’s competitive position.Excess capacity - The ability to produce additional units of output without increasingfixed capacity.Experience curve - Systematic cost reductions that occur over the life of a product.Product costs typically decline by a specific amount each time accumulated output isdoubled.Externalities - A cost or benefit imposed on one party by the actions of another party.Costs are negative externalities and benefits are positive externalities.Firm vision - The collection of statements listed below indicating the desiredstrategic future for the firm. Mission statement - A statement of the reason why a firm exists. Goals - General statements of where the firm is going and what it wants to achieve. Objectives - Specific and quantifiable statements of what the firm is to accomplish and when it is to be accomplished.Innovation - A new way of doing things. Diffusion curve - The rate over time at which innovations are copied by rivals. Systematic innovation - The purposeful and organized search for changes, and the systematic analysis of the opportunities these changes might offer for economics and social innovation. 34
  35. 35. Internal scanning - Looking inside the business and identifying strengths andweaknesses of the firm.Operations management - Focuses on the performance and efficiency of theproduction process. It involves the day-to-day decisions of the business.Portfolio - A group of enterprises within a firm that are managed as individualresponsibility centers. Portfolio analysis - Each product and enterprise is considered as an individual responsibility center for purposes of strategy formulation. Portfolio management - Management of a firm’s individual enterprises and resources across these enterprises.Proactive - Seek out opportunities and take advantage of them. Anticipate threats andneutralize them.Responsibility center - An enterprise whose performance is evaluated separately andis held responsible for its contribution to the firm’s mission and goals. Cost center - An enterprise that has a manager who is responsible for cost performance and controls most of the factors affecting cost. Investment center - An enterprise that has a manager who is responsible for profit and investment performance and who controls most of the factors affecting revenues, costs, and investments. Profit center - An enterprise that has a manager who is responsible for profit performance and who controls most of the factors affecting revenues and costs.Restructuring - Selling off unrelated parts of a business in order to streamlineoperations and return to a core business. 35
  36. 36. Stakeholder - Individuals and groups inside and outside the firm who have an interestin the actions and decisions of the firm.Strategic - Manoeuvring yourself into a favourable position to use your strengths totake advantage of opportunities. Strategic audit - A checklist of questions that provide an assessment of a firm’s strategic position and performance. Strategic myopia - Management’s failure to recognize the importance of changing external conditions because they are blinded by their shared, strongly held beliefs. Strategic thinking - How decisions made today will effect the business years in the future. Strategic predisposition - A tendency of a firm by virtue of its history, assets, or culture to favour one strategy over competitive possibilities. Strategic decisions - A series of decisions used to implement a strategy.Strategic management - The act of identifying markets and assembling the resourcesneeded to compete in these markets. The set of managerial decisions and actions thatdetermine the long-run performance of the firm.Strategic planning - A comprehensive planning process designed to determine howthe firm will achieve its mission, goals, and objectives over the next five or ten yearsor longer. business planning - A plan that determines how a strategic plan will be implemented. It specifies how, when, and where a strategic plan will be put into action. Also known as tactical planning.Strategy - A pattern in a stream of decisions and actions. 36
  37. 37. Dominant strategy - A strategy that is optimal regardless of the action taken by one’s rival. Emergent strategy - Unplanned strategy that emerge from within the organization. Intended strategy - Planned strategy developed through the strategic planning process. Realized strategy - The real strategy of a firm that is either an intended (planned) strategy of management or an emergent (unplanned) strategy from within the organization. Strategy formulation - The development of long-range plans for the management of environmental opportunities and threats, in light of the firms strengths and weaknesses. Strategy implementation - The process by which strategies and policies are put into action through the development of programs, budgets, and procedures. Strategy control - Compares performance with desired results and provides the feedback for management to evaluate results and take corrective action. Firm strategy - How a firm will reach its goals and objectives by using firm strengths to take advantage of environmental opportunities. Enterprise strategy - How an enterprise competes within its specific market or industry. Also called business or competitive strategies. Niche strategy - A strategy serving a specialized part of the market.SWOT analysis - Analysis of the strengths and weaknesses of the firm, and theopportunities and threats of the firm’s environment. Strategic issues - Trends and forces which occur within the firm or with environment surrounding the firm. Strategic factors - Strategic issues expected to have a high probability of occurrence and impact on the firm. 37
  38. 38. Opportunities and threats - Strategic factors in the firm’s external environment are categorized as opportunities or threats to the firm. Strengths and weaknesses - Strategic factors within the firm are categorized as strengths or weaknesses of the firm. Strategic fit - Fit between what the environment wants and what the firm has to offer. Strategic alternatives - Alternative courses of action that achieve business goals and objectives, by using firm strengths to take advantage of environmental opportunities.Vertical integration - The process in which either input sources or output buyers ofthe firm are moved inside the firm. Backward (upstream) integration - Input sources are the firm. Forward (downstream) integration - Output buyers are the firm. Contractual integration - Separate firms in the various stages of production link the stages through contractual arrangements. Full integration - Where one firm has full ownership and control over all the stages in the production of a product Quasi-integration - A firm gets most of its requirements from an outside supplier that is under its partial control. Tapered integration - A firm produces part of its own requirements and buys the rest from outside suppliers.Vertical coordination - The stages in the production of a product are linked by morethan open markets but less than ownership and control by one firm. Vertical merger - Firms in different stages of the production and distribution chain are linked together. 38
  39. 39. Examination Questions and Answers This is a low hanging fruit. However, this is not a guidebook. You can use it as a quick read book to understand the basic concepts and start working on the material given to you.This material is prepared to help weaker students to understand the concepts and writeexamination. However, students who are keen on getting expert knowledge of thesubject are expected to go through the material given in the class. All the past questionsare answered. It is not given in a question and answer form but in a sequence that willhelp you to understand the subject as well as write the examination. However some typeof questions answered with required elaboration. All the material are from publicsources from the internet. A separate acknowledgement with comments will be sent toyou in the next installment.Key concepts of strategic managementThe study of strategic management Strategic management is the set of managerial decision and actions that determinesthe long-run performance of a corporation and provide more than average performance ofIndustry. It includes environmental scanning (both external and internal), strategy formulation(strategic or long range planning), strategy implementation, and evaluation and control. Thestudy of strategic management therefore emphasizes the monitoring and evaluating ofexternal opportunities and threats in lights of a corporation’s strengths and weaknesses.Evolution of strategic management or why strategic planning Strategic planning is needed if (1) the corporation becomes large, (2) the layers ofmanagement increase, or (3) the environment changes in its complexity (4). GlobalizationPhase 1 – During 1980’s Basic financial planning was given utmost importance: operationalcontrol by trying meeting budgets based on financial data.Phase 2 – Early 1990’s saw this trend and there is need for ensuring sustainability oforganizations. Many organizations in Forbes list were lost disappeared after a decade due tolack of future orientation. This lead to Fore-cast based planning: Trying more effectiveplanning for growth by trying to predict the future for two to three years.Phase 3. Externally oriented planning: Seeking increasing responsiveness to markets andcompetition by trying to think strategically. The focus is on what is happening in the externalenvironment and building those key factors in to the planning. 39
  40. 40. Phase 4. Strategic management: Seeking a competitive advantage and a successful future bymanaging all resources.Phase 4 in the evolution of the strategic management includes a consideration of strategyimplementation and evaluation and control, in addition to the emphasis on the strategicplanning in Phase 3.General Electric led by Jack Welsh one of the pioneers of the strategic planning, hecreated the concept of Boundary less organizations and other concepts that ensuredhigher shareholder return ; Similarly in India Mittal of Airtel used strategic planningby outsourcing key activities to BPOs and marketing was retained. This lead tocreation o largest telecom organization in the world from mere investment of 60,000rupees to 26 billion dollar business.The word “strategy” is derived from the Greek word “stratçgos”; stratus (meaningarmy) and “ago” (meaning leading/moving).Strategy is an action that managers take to attain one or more of the organization’sgoals. Strategy can also be defined as “A general direction set for the company and itsvarious components to achieve a desired state in the future. Strategy results from thedetailed strategic planning process”. An equivalent definition given in the class isselection of actions that will make an organization to have superior performancecompared to industry. Actions means allocating resources. It captures the essence ofstrategy. strategy is all about integrating organizational activities and utilizing andallocating the scarce resources within the organizational environment so as to meetthe present objectives. While planning a strategy it is essential to consider thatdecisions are not taken in a vacuum and that any act taken by a firm is likely to be metby a reaction from those affected, competitors, customers, employees or suppliers.Strategy can also be defined as knowledge of the goals, the uncertainty of events.Features of Strategy 1. 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. 2. 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. 40
  41. 41. 3. Strategy is created to take into account the probable behavior of customers and competitors. Strategies dealing with employees will predict the employee behavior.Strategy is a well defined roadmap or a goal post to be achieved of anorganization. It defines the overall mission, vision and direction of an organization.The objective of a strategy is to maximize an organization’s strengths and to minimizethe strengths of the competitors.Strategy, in short, bridges the gap between “where we are” and “where we want tobe”.Strategic ManagementStrategic management has now evolved to the point that it is primary value is to helpthe organization operate successfully in dynamic, complex global environment.Corporations have to become less bureaucratic and more flexible. In stableenvironments such as those that have existed in the past, a competitive strategy simplyinvolved defining a competitive position and then defending it. Because it takes lessand less time for one product or technology to replace another, companies are findingthat there are no such thing as enduring competitive advantage and there is need todevelop such advantage is more than necessary.Corporations must develop strategic flexibility: the ability to shift from one dominantstrategy to another. Strategic flexibility demands a long term commitment to thedevelopment and nurturing of critical resources. It also demands that the companybecome a learning organization: an organization skilled at creating, acquiring, andtransferring knowledge and at modifying its behaviour to reflect new knowledge andinsights. Learning organizations avoid stability through continuous self-examinationsand experimentations. People at all levels need to be involved in strategicmanagement: scanning the environment for critical information, suggesting changesto strategies and programs to take advantage of environmental shifts, and workingwith others to continuously improve work methods, procedures and evaluationtechniques. At Murugappa Group in Tamil nadu, for example, all employees havebeen trained in small-group activities and problem solving techniques. In Eqitas 41
  42. 42. reverse roles are planned where the employees sit on the platform and all mangerslisten to them.Strategic intent includes directing organization’s attention on the need of winning;inspiring people by telling them that the targets are valuable; encouraging individualand team participation as well as contribution; and utilizing intent to direct allocationof resources. Strategic intent differs from strategic fit in a way that while strategic fitdeals with harmonizing available resources and potentials to the externalenvironment, strategic intent emphasizes on building new resources and potentials soas to create and exploit future opportunities. Mission StatementMission statement is the statement of the role by which an organization intends toserve it’s stakeholders. It describes why an organization is operating and thusprovides a framework within which strategies are formulated. It describes what theorganization does (i.e., present capabilities), who all it serves (i.e., stakeholders) andwhat makes an organization unique (i.e., reason for existence). A mission statementdifferentiates an organization from others by explaining its broad scope of activities,its products, and technologies it uses to achieve its goals and objectives. It talks aboutan organization’s present (i.e., “about where we are”).For instance, Microsoft’smission is to help people and businesses throughout the world to realize their fullpotential. Wal-Mart’s mission is “To give ordinary folk the chance to buy the samething as rich people.” Mission statements always exist at top level of an organization,but may also be made for various organizational levels. Chief executive plays asignificant role in formulation of mission statement. Once the mission statement isformulated, it serves the organization in long run, but it may become ambiguous withorganizational growth and innovations. In today’s dynamic and competitiveenvironment, mission may need to be redefined. However, care must be taken that theredefined mission statement should have original fundamentals/components. Missionstatement has three main components-a statement of mission or vision of thecompany, a statement of the core values that shape the acts and behaviour of theemployees, and a statement of the goals and objectives.Features of a Mission 42
  43. 43. a. Mission must be feasible and attainable. It should be possible to achieve it. b. Mission should be clear enough so that any action can be taken. c. It should be inspiring for the management, staff and society at large. d. It should be precise enough, i.e., it should be neither too broad nor too narrow. e. It should be unique and distinctive to leave an impact in everyone’s mind. f. It should be analytical, i.e., it should analyze the key components of the strategy. g. It should be credible, i.e., all stakeholders should be able to believe it. VisionA vision statement identifies where the organization wants or intends to be in futureor where it should be to best meet the needs of the stakeholders. It describes dreamsand aspirations for future. For instance, Microsoft’s vision is “to empower peoplethrough great software, any time, any place, or any device.” Wal-Mart’s vision is tobecome worldwide leader in retailing. A vision is the potential to view things ahead ofthemselves. It answers the question “where we want to be”. It gives us a reminderabout what we attempt to develop. A vision statement is for the organization and it’smembers, unlike the mission statement which is for the customers/clients. Itcontributes in effective decision making as well as effective business planning. Itincorporates a shared understanding about the nature and aim of the organization andutilizes this understanding to direct and guide the organization towards a betterpurpose. It describes that on achieving the mission, how the organizational futurewould appear to be.An effective vision statement must have following features- a. It must be unambiguous. b. It must be clear. c. It must harmonize with organization’s culture and values. d. The dreams and aspirations must be rational/realistic. e. Vision statements should be shorter so that they are easier to memorize.In order to realize the vision, it must be deeply instilled in the organization, beingowned and shared by everyone involved in the organization. 43
  44. 44. Goals and objectivesA goal is a desired future state or objective that an organization tries to achieve. Goalsspecify in particular what must be done if an organization is to attain mission orvision. Goals make mission more prominent and concrete. They co-ordinate andintegrate various functional and departmental areas in an organization. Well madegoals have following features- 1. These are precise and measurable. 2. These look after critical and significant issues. 3. These are realistic and challenging. 4. These must be achieved within a specific time frame. 5. These include both financial as well as non-financial components.Objectives are defined as goals that organization wants to achieve over a period oftime. These are the foundation of planning. Policies are developed in an organizationso as to achieve these objectives. Formulation of objectives is the task of top levelmanagement. Effective objectives have following features- 1. These are not single for an organization, but multiple. 2. Objectives should be both short-term as well as long-term. 3. Objectives must respond and react to changes in environment, i.e., they must be flexible. 4. These must be feasible, realistic and operational.TacticsTactics are concerned with the short to medium term co-ordination of activities andthe deployment of resources needed to reach a particular strategic goal. Some typicalquestions one might ask at this level are: What do we need to do to reach our growth/ size / profitability goals? What are our competitors doing? What machinesshould we use? The decisions are taken more at the lower levels to implement thestrategies based on ground realities.How strategy is initiated?A triggering event is something that stimulates a change in strategy .Some of thepossible triggering events is: 44
  45. 45. New CEO: By asking a series of embarrassing questions, the new CEO cuts throughthe veil of complacency and forces people to question the very reason for thecorporation’s existence.Intervention by an external institution: The firm’s bank suddenly refuses to agreeto a new loan or suddenly calls for payment in full on an old one.Threat of a change in ownership: Another firm may initiate a takeover by buyingthe company’s common stock.Management’s recognition of a performance gap: A performance gap exists whenperformance does not meet expectations. Sales and profits either are no longerincreasing or may even be falling.Innovation of a new product that threatens the existence of the present status quo.Basic model of strategic managementStrategic management consists of four basic elements1. Environmental scanning2. Strategy Formulation3. Strategy Implementation and4. Evaluation and controlManagement scans both the external environment for opportunities and threats andthe internal environmental for strengths and weakness. The following factors that aremost important to the corporation’s future are called strategic factors: strengths,weakness, opportunities and threats (SWOT)Strategy FormulationStrategy formulation is the development of long-range plans for they effectivemanagement of environmental opportunities and threats, taking into considerationcorporate strengths and weakness. It includes defining the corporate mission,specifying achievable objectives, developing strategies and setting policy guidelines.Mission 45
  46. 46. An organization’s mission is its purpose, or the reason for its existence. It states whatit is providing to society .A well conceived mission statement defines the fundamental, unique purpose that sets a company apart from other firms of its types and identifiesthe scope of the company ‘s operation in terms of products offered and markets servedObjectives Objectives are the end results of planned activity; they state what is to beaccomplished by when and should be quantified if possible. The achievement ofcorporate objectives should result in fulfillment of the corporation’s mission.Strategies A strategy of a corporation is a comprehensive master plan stating howcorporation will achieve its mission and its objectives. It maximizes competitiveadvantage and minimizes competitive disadvantage. The typical business firm usuallyconsiders three types of strategy: corporate, business and functional.Policies A policy is a broad guideline for decision making that links the formulation ofstrategy with its implementation. Companies use policies to make sure that theemployees throughout the firm make decisions and take actions that support thecorporation’s mission, its objectives and its strategies.Strategic decision making Strategic deals with the long-run future of the entire organization and havethree characteristic1. Rare- Strategic decisions are unusual and typically have no precedent to follow.2. Consequential-Strategic decisions commit substantial resources and demand a greatdeal of commitment3. Directive- strategic decisions set precedents for lesser decisions and future actionsthroughout the organization.Mintzberg’s mode s of strategic decision making 46
  47. 47. According to Henry Mintzberg, the most typical approaches or modes of strategicdecision making are entrepreneurial, adaptive and planning.Making better strategic decisionsHe gives seven steps for strategic decisions1. Evaluate current performance results2. Review corporate governance3. Scan the external environment4. Analyze strategic factors (SWOT)5. Generate, evaluate and select the best alternative strategy6. Implement selected strategies7. Evaluate implemented strategiesSBU or Strategic Business UnitAn autonomous division or organizational unit, small enough to be flexible and largeenough to exercise control over most of thefactors6 affecting its long-term7 performance.Because strategic business units are more agile (and usuallyhave independent11 missions12 and objectives), they allow the owning conglomerate torespond quickly to changing economic or market situations.Corporate Governance Corporate governance is a mechanism established to allow different parties tocontribute capital, expertise and labour for their mutual benefit the investor orshareholder participates in the profits of the enterprise without taking responsibilityfor the operations. Management runs the company without being personallyresponsible for providing the funds. So as representatives of the shareholders,directors have both the authority and the responsibility to establish basic corporatepolicies and to ensure they arte followed. The board of directors has, therefore, an 47
  48. 48. obligation to approve all decisions that might affect the long run performance of thecorporation. The term corporate governance refers to the relationship among thesethree groups (board of directors, management and shareholders) in determining thedirection and performance of the corporationResponsibilities of the board Specific requirements of board members of board members vary, dependingon the state in which the corporate charter is issued. The following fiveresponsibilities of board of directors listed in order of importance1. Setting corporate strategy ,overall direction, mission and vision2. Succession: hiring and firing the CEO and top management3. Controlling , monitoring or supervising top management4. Reviewing and approving the use of resources5. Caring for stockholders interestsRole of board in strategic management The role of board of directors is to carry out three basic tasks1. Monitor2. Evaluate and influence3. Initiate and determineCORPORATE SOCIAL RESPONSIBILITYCorporate Social Responsibility (CSR) is an important activity to forbusinesses . As globalization accelerates and large corporations serve as global providers, these corporations have progressively recognized thebenefits of providing CSR programs in their various locations. CSR activities are now being 48
  49. 49. undertaken throughout the globe.What is corporate social responsibility?The term is often used interchangeably for other terms such as Corporate Citizenship and isalso linked to the concept of Triple Bottom Line Reporting (TBL) that is people, planet and profits., which is used as a framework for measuring an organization’s performance against economic, social and environmental parameters. It is about building sustainable businesses, which need healthy economies, markets and communities.The key drivers for CSR areEnlightened self-interest - creating a synergy of ethics, a cohesive society and asustainable global economy where markets, labour and communities are able tofunction well together. SustainabilityYou need to understand sustainability. It is being used mostly in organizationalforums and a basic understanding is needed for you. The discussion on sustainabilityis only for your understanding.Sustainability means meeting present needs without compromising the ability offuture generations to meet their needs’. These well-established definitions set an idealpremise, but do not clarify specific human and environmental parameters formodelling and measuring sustainable developments. The following definitions aremore specific: 1. Sustainable means using methods, systems and materials that wont deplete resources or harm natural cycles. 2. Sustainability identifies a concept and attitude in development that looks at a sites natural land, water, and energy resources as integral aspects of the development. 3. Sustainability integrates natural systems with human patterns and celebrates continuity, uniqueness and place making.Combining all these definitions; Sustainable developments are those which fulfilpresent and future needs while using and not harming renewable resources andunique human-environmental systems of a site:[air, water, land, energy, and human 49
  50. 50. ecology and/or those of other [off-site] sustainable systems (Rosenbaum 1993 and Vieria 1993). Social investment - contributing to physical infrastructure and social capital is increasingly seen as a necessary part of doing business. Transparency and trust - business has low ratings of trust in public perception. There is increasing expectation that companies will be more open, more accountable and be prepared to report publicly on their performance in social and environmental arenas . Increased public expectations of business - globally companies are expected to do more than merely provide jobs and contribute to the economy through taxes and employment. Corporate social responsibility is represented by the contributions undertaken by companies to society through its core business activities, its social investment and philanthropy programmes and its engagement in public policy. In recent years CSR has become a fundamental business practice and has gained much attention from chief executives, chairmen, boards of directors and executive management teams of larger international companies. They understand that a strong CSR program is an essential element in achieving good business practices and effective leadership. Companies have determined that their impact on the economic, social and environmental landscape directly affects their relationships with stakeholders, in particular investors, employees, customers, businesspartners, governments and communities. According to the results of a global survey in 2002 by Ernst Young, 94 per cent of companies believe the development of a 50
  51. 51. Corporate Social Responsibility (CSR) strategy can deliver real business benefits,however only 11 per cent have made significant progress in implementing the strategyin their organisation. Senior executives from 147 companies in a range of industrysectors across Europe, North America and Australasia were interviewed for thesurvey. The survey concluded that CEOs are failing to recognize the benefits ofimplementing Corporate Social Responsibility strategies, despite increased pressure toinclude ethical, social and environmental issues into their decision-making processes.Research found that company CSR programs influence 70 per cent of all consumerpurchasing decisions, with many investors and employees also being swayed in their choiceof companies. While companies recognize the value of an integrated CSR strategy, the majority are failing to maximize the associated business opportunities, said Andrew Grant, Ernst Young Environment and Sustainability Services Principal. Corporate Social Responsibility is now a determining factor in consumer and client choice which companies cannot afford to ignore. Companies who fail to maximize their adoption of a CSR strategy will be left behind.The World Economic Forum has recognized the importance of corporate social responsibilityby establishing the Global Corporate Citizenship Initiative. The Initiative hopes to increasebusinesses engagement in and support for corporate social responsibility as a businessstrategy with long-term benefits both for the companies themselves as well as society ingeneral. +InitiativeStrategic planning for small businessMany entrepreneurial ventures and small businesses believe that strategic planning isonly for large businesses However, it is very much relevant to learn the gamelans - 51
  52. 52. and strategic planning is a major part of any successful business. Small business needsmore careful thought about business. Strategic planning involves setting up a strategythat your business is going to follow over a defined time period. It can be for aspecific part of the business, like planning a marketing strategy, or for the business asa whole. Usually a board of directors sets the overall strategy for the business andeach area of the company plans their strategy in alignment with the overall strategy.Differing businesses use various time periods for their strategic planning. The timeperiod is usually dependent on how fast the industry is moving. In a fast-changingenvironment like the internet, 5-year plans dont make sense. In big industries longerrange planning is possible and desirable. Small businesses start with Writinga business plan which is different from strategic planning. One writes a business planwhen one is starting something new - a business or a product/service line within abusiness. Strategy looks to growth while business planning looks to beginnings. Partof the strategy of a business may be to introduce a new product line. That product linewould then have its own business plan for its development and introduction. Withouta strategy any business small or big business has no direction. Strategy tells whereyou want to go.Strategic Planning in Public and Non-Profit Sector OrganizationsStrategic Planning is a means to an end, a method used to position an organization, through prioritizing its use of resources according to identified goals, in an effort to guide its direction and development over a period of time . Strategic planning in recent years has been primarily focused on private sector organizations and much of the theory assumes that those in executive control of an organization have the freedom to determine its direction.Current theories also appear to assume, that a profit motive will be the drivingforce behind the planning requirement. In public sector organizations or in non profit organizations , however, those in executive positions often have their powers constrained by statute and regulation which predetermine, to various degrees, not only the very purpose of the organization but also their levels of freedom to diversify or to reduce, for example, a loss-making service for example we cannot close Air India even it is making losses; however, it cannot be totally profit oriented only as it has a social purpose .The primary financial driver in these 52
  53. 53. organizations is not profit, but to maximize output within a given budget (some organizations currently having to try to do both) and, while elements of competition do exist, it is much more common to think of comparators rather than competitors. Much of the planning literature, currently being published, addresses the necessity of planning in the profit and non-profit sectors. Strategic thought and action have become increasingly important and have been adopted by public and non-profit planners to enable them to successfully adapt to the future . It has been established in literature that strategic planning, can help public and nonprofit organizations anticipate and respond effectively to their dramatically changing environments. In their efforts to provide increased value for money and to genuinely improve their outputs, public and non-profit sector organizations have been increasingly turning to strategic planning systems and models. For example Indian posts adopted a strategy to face competition from courier service by having SPEED POST. It is a thought from the state organization that is not working for profit. Similarly many of the NGOs such as Hand in Hand in Kancheepuram provide funds to people who can pay back and plans all its activities effectively.Strategic ChangeStrategic Change means changing the organizational Vision, Mission, Objectives andof course the adopted strategy to achieve those objectives.Strategic change is defined as changes in the content of a firms strategy as definedby its scope, resource deployments, competitive advantages, and synergy(Hofer andSchendel 1978)Strategic change is defined as a difference in the form, quality, or state over time inorganizations alignment with its external environment (Rajgopal Spreitzer, 1997Van de Ven Pool, 1995). Considering the definition of strategic change, strategic change could be affected by the states in which s firms exists and their external environments. Because the performance of firms might dependent on the fit between firms and their external environments, the appearances of novel opportunities and threats in the external environments, in other words, the change of external environments, require firms to adapt to the external environments again; as a result, firms would change their 53
  54. 54. strategy in response to the environmental changes. The states of firms will also affect the occurrence of strategic change. For example, firms tend to adopt new strategies in the face of financial distress for the purpose of breaking the critical situations. Based on the argument of Rajagopalan and Spreitzer (1997), the factors which affect decision makers cognition of external environment would affect strategic change in the organization rather than the actual change that happens in an organization.nvironmental scanning and industry analysisEnvironmental scanning Environmental scanning is the monitoring, evaluating and disseminating ofinformation from the external and internal environments to keep people within thecorporation. It is a tool that a corporation uses to avoid strategic surprise and to ensurelong-term health.Scanning of external environmental variables The social environment includes general forces that do not directly touch on theshort-run activities of the organization but those can, and often do, influence its long-run decisions. These forces are • Economic forces • Technological forces • Political-legal forces • Sociocultural forcesScanning of social environment The social environment contains many possible strategic factors. The numberof factors becomes enormous when one realize that each country in the world can berepresented by its own unique set of societal forces, some of which are very similar toneighboring countries and some of which are very different. 54
  55. 55. Monitoring of social trends Large corporations categorized the social environment in any one geographicregion into four areas and focus their scanning in each area on trends with corporate-wide relevance. Trends in any area may be very important to the firms in otherindustries. Trends in economic part of societal environment can have an obvious impacton business activity. Changes in the technological part of the societal environmenthave a significant impact on business firms. Demographic trends are part ofsociocultural aspects of the societal environment.International society consideration For each countries or group of countries in which a company operates,management must face a whole new societal environment having different economic,technological, political-legal, and Sociocultural variables. This is especially an issuefor a multinational corporation, a company having significant manufacturing andmarketing operations in multiple countries. International society environments vary sowidely that a corporation’s internal environment and strategic management processmust be very flexible. Differences in social environments strongly affect the ways inwhich a multinational company.Scanning of the task environmentA corporation’s scanning of the environment should include analysis of all therelevant elements in the task environment. These analyses take the form of individualreports written by various people in different parts of the firms. These and otherreports are then summarized and transmitted up the corporate hierarchy for topmanagement to use in strategic decision making. If a new development reportedregarding a particular product category, top management may then sent memos topeople throughout the organization to watch for and reports on development in relatedproduct areas. The many reports resulting from these scanning efforts when boileddown to their essential, act as a detailed list of external strategic factors.Identification of external strategic factors: 55
  56. 56. One way to identify and analyze developments in the external environment isto use the issues priority matrix as follows.1. Identify a number of likely trends emerging in the societal and task environment. These are strategic environmental issues: Those important trends that, if they happen, will determine what various industries will look like.2. Assess the probability of these trends actually occurring.3. Attempt to ascertain the likely impact of each of these trends of these corporations.Industry analysis: Analyzing the task environmentMichael Porter’s approach to industry analysis Michael Porter, an authority on competitive strategy, contends that acorporation is most concerned with the intensity of competition within its industry.Basic competitive forces determine the intensity level. The stronger each of theseforces is, the more companies are limited in their ability to raise prices and earnedgreater profits.Threat of new entrants New entrants are newcomers to an existing industry. They typically bring newcapacity, a desire to gain market share and substantial resources. Therefore they arethreats to an established corporation. Some of the possible barriers to entry are thefollowing.1. Economies of scale2. Product differentiation3. Capital requirements4. Switching costs5. Access to distribution channels6. Cost disadvantages independent of size 56
  57. 57. 7. Government policyRivalry among existing firms Rivalry is the amount of direct competition in an industry. In most industriescorporations are mutually dependent. A competitive move by one firm can beexpected to have a noticeable effect on its competitors and thus make us retaliation orcounter efforts. According to Porter, intense rivalry is related to the presence of thefollowing factors.1. number of competitors2. rate of industry growth3. product or service characteristics4. amount of fixed costs5. capacity6. height of exit barriers7. diversity of rivalsTreat of substitute product or services Substitute products are those products that appear to be different but cansatisfy the same need as another product. According to Porter, “Substitute limit thepotential returns of an industry by placing a ceiling on the prices firms in the industrycan profitably charge.” To the extent that switching costs are low, substitutes mayhave a strong effect on the industry.Bargaining power of buyers Buyers affect the industry through their ability to force down prices, bargainfor higher quality or more services, and play competitors against each other.Bargaining power of supplier 57
  58. 58. Suppliers can affect the industry through their ability to raise prices or reducethe quality of purchased goods and services. Corporate Governance and Social Responsibility Corporate governance is a mechanism established to allow different parties tocontribute capital, expertise and labour for their mutual benefit the investor orshareholder participates in the profits of the enterprise without taking responsibilityfor the operations. Management runs the company without being personallyresponsible for providing the funds. So as representatives of the shareholders,directors have both the authority and the responsibility to establish basic corporatepolicies and to ensure they arte followed. The board of directors has, therefore, an obligation to approve all decisionsthat might affect the long run performance of the corporation. The term corporategovernance refers to the relationship among these three groups (board of directors,management and shareholders) in determining the direction and performance of thecorporationResponsibilities of the board Specific requirements of board members of board members vary, dependingon the state in which the corporate charter is issued. The following fiveresponsibilities of board of directors listed in order of importance1. Setting corporate strategy ,overall direction, mission and vision2. Succession: hiring and firing the CEO and top management3. Controlling , monitoring or supervising top management4. Reviewing and approving the use of resources5. Caring for stockholders interestsRole of board in strategic management The role of board of directors is to carry out three basic tasks 58
  59. 59. 1. Monitor2. Evaluate and influence3. Initiate and determine 59
  60. 60. Environmental scanning and industry analysisEnvironmental scanning Environmental scanning is the monitoring, evaluating and disseminating ofinformation from the external and internal environments to keep people within thecorporation. It is a tool that a corporation uses to avoid strategic surprise and to ensurelong-term health.Scanning of external environmental variables The social environment includes general forces that do not directly touch on theshort-run activities of the organization but those can, and often do, influence its long-run decisions. These forces are • Economic forces • Technological forces • Political-legal forces • Sociocultural forcesScanning of social environment The social environment contains many possible strategic factors. The numberof factors becomes enormous when one realize that each country in the world can berepresented by its own unique set of societal forces, some of which are very similar toneighboring countries and some of which are very different.Monitoring of social trends Large corporations categorized the social environment in any one geographicregion into four areas and focus their scanning in each area on trends with corporate-wide relevance. Trends in any area may be very important to the firms in otherindustries. Trends in economic part of societal environment can have an obvious impacton business activity. Changes in the technological part of the societal environment 60