A policy is a general statement which is formulated by an organization for the guidance of its personnel. The objectives are first formulated and then policies are planned to achieve them.

1. Strategic Management
Module 4 – MG University

2. Prepared By
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Manu Melwin Joy
Assistant Professor
Ilahia School of Management Studies
Kerala, India.
Phone – 9744551114
Mail – manu_melwinjoy@yahoo.com

3. Contents
• Corporate Management - Corporate Policy,
Corporate Governance, Top Management,
• Code and Laws of Corporate Management.
• Corporate Scenarios and Strategy.
• Strategies for Stable and Dynamic markets.
• Strategies for Global Markets.

4. Corporate Management

5. Corporate Policy
• A policy is a general
statement which is
formulated by an
organization for the
guidance of its personnel.
• The objectives are first
formulated and then
policies are planned to
achieve them.

6. Considerations in Policy formulation
• Organizational goals – The
policies are formulated to
achieve organizational
goals.
• Proper organization –
Policies should be framed
by the participation of
person at various levels of
management.
• Reflect the business
environment – The policies
should be based on the
internal and external
environment.

7. Considerations in Policy formulation
• Consistency – Various
policies of an enterprise
should conform to each
other.
• Proper communication -
The policies should be
properly communicated
to each level of
management.
• In writing – the policies
should always be in
writing.

8. Process of Policy formulation
• Defining policy area – The
areas for which a policy is to
be framed should be defined.
The objectives and needs of
the organization should be
kept in mind while specifying
the policy area.
• Identifying policy alternatives
– The alternatives should be
decided on the basis of an
analysis of external and
internal environment.

9. Process of Policy formulation
• Evaluating alternatives – All
alternatives are evolved in the
light of organizational objectives.
It should be analyzed to what
contribution these alternatives
will make in helping the
organization for achieving its
purpose.
• Selection of a policy – After
proper evaluation, most
appropriate alternative is
selected. The selection of a policy
is a long term commitment. In
case the alternative do not look
satisfactory, then efforts should
be made to develop other
alternatives.

10. Process of Policy formulation
• Trail run of a policy – The
policy should be
implemented on a trial
basis. It should be
assessed if the policy is
achieving the desired
objectives.
• Implementing policy – If
the policy is finally alright,
it should be implemented.

11. Types of policies
• Major policies – Major policies
are those which give a unified
direction to an enterprise and
imply a commitment of
resources. These policies give
shape to an enterprise in the
accomplishment of its purpose.
• Supportive policies –
Supportive policies are meant
to help in implementation of
major policies. A concern may
have the development of a new
product as a major policy, the
research to find out the
unfulfilled needs of consumer
may be a supportive policy.

12. Types of policies
• Minor policies – The policies
which do not influence main
objectives of the enterprises
may be called minor
policies. These policies may
relate to some routine
matters of less importance.
• Composite policies – Some
concerns have a number of
policies or group of policies.
To achieve one objective, a
number of policies may be
used which are known as
composite policies.

14. Corporate Governance
• The Cadbury Committee
report (1991) defines
corporate governance as a
system by which corporate
are directed and
controlled.
• According to Salins Sheikh
and Williams Ress,
corporate governance is
concerned with ethics,
values and morals of a
company and its directors.

15. Corporate governance in India
• In India, the concept of
corporate governance is
gaining importance mainly
because of two reasons.
– Economic Liberalization
– Deregulation of industry
and business

16. Corporate governance in India
• Economic Liberalization –
After liberalization, there
has been
institutionalization of
financial markets and the
market began to
discriminate between
wealth creators and wealth
destroyers.

17. Corporate governance in India
• Deregulation of industry
and business – The role of
private sector has
increased and the
companies are realizing
that shareholders love to
stay with those corporate
that create value for their
shareholders which is
possible only by adopting
fair, honest and transparent
corporate practices.

18. Mandatory requirements of corporate
governance code
• Composition of Board of
Directors – The board of
directors of the company
shall have an optimum
combination of executive
and non executive
directors with not less
than 50% of the total
number of directors
comprising of non
executive directors

19. Mandatory requirements of corporate
governance code
• Director’s pecuniary
relationship – All
pecuniary relationship or
transactions of the non
executive director’s vis-à-
vis the company should
be disclosed in the
Annual Report.

20. Mandatory requirements of corporate
governance code
• Audit Committee – Every
company is required to set up
a Audit Committee consisting
of minimum three members,
all being non executive
directors, majority of them
being independent and at
least one member having
financial and accounting
knowledge. They should meet
at least 3 times in an year,
once in every six months.

21. Mandatory requirements of corporate
governance code
• Director’s remuneration –
The remuneration of non
executive directors shall be
determined by the board of
directors and the following
disclosure shall be in the
annual report : (a) all
elements of remuneration
package of all the directors
(b) details of fixed and
performance related
components of remuneration
and (c) service contracts,
notice period etc.

22. Mandatory requirements of corporate
governance code
• Board meetings –
Minimum four board
meetings should be
conducted in a year.
There should not be a
time gap of more than
four months between
any two board meetings.

23. Mandatory requirements of corporate
governance code
• Management – The
management of the
company must disclose
to its Board details
relating to all material,
financial and commercial
transactions.

24. Mandatory requirements of corporate
governance code
• Shareholders – In case of
appointment of a
director, shareholders
should be provided with
a brief resume of the
person. The company
should publish in their
website details regarding
information on stock
exchanges.

25. Mandatory requirements of corporate
governance code
• Report on corporate
governance – Every
listed company shall
have a separate section
on corporate governance
in the annual report of
the company with a
detailed compliance
report on corporate
governance.

26. Mandatory requirements of corporate
governance code
• Certificate of
compliance – The
company is required to
obtain a certificate from
the auditors of the
company regarding
compliance of conditions
of corporate governance
as stipulated in clause 49
of the listing agreement.

27. Factors influencing corporate
governance
• Promoters – In the
Indian scenario, the
promoters dominate
governance in every
possible way.
• Management culture –
Corporate governance
stems from the culture
and mindset of the
management.

28. Factors influencing corporate
governance
• Board’s value and
dedication – If board
wants to live up to an ideal
Corporate governance, the
it must be prepared to face
ordeals, difficulties and
tribulations.
• Role of professionals –
Professionals like company
secretaries, accountants
and auditors should work
together more closely.

29. Factors influencing corporate
governance
• Corporate objectives – The
overriding objective of any
corporate should be to
optimize overtime, the
returns of its shareholders.
• Communication and
reporting – Corporate should
disclose adequate, accurate
and timely information and
assist investor to make
informed decision regarding
ownership, acquisition and
sales of shares.

30. Committees on corporate governance
• Hampel Committee – The
committee was chaired by Sir
Ronnie Hampel, the chairman
of ICI and the committee
published its reports in
August 1997. The basic aim of
the committee was to
promote high standards of
corporate governance in the
interests of investors
protection and to preserve
and enhance the standing of
companies listed on the
London Stock Exchange.

31. Committees on corporate governance
• Cadbury Committee –
The committee was set
up in May 1991 by the
Financial Reporting
Council, the London
Stock Exchange and the
accountancy profession
to address the financial
aspects of corporate
governance.

32. Committees on corporate governance
• Greenbury committee –
This committee was set
up to determine and to
account for Director’s
remuneration.

33. Committees on corporate governance
• Blue Ribbon committee – The
committee was specifically
formulated for NewYork Stock
Exchange (NYSE), National
Association of Securities
dealers (NASP) and Securities
and Exchange Commission
(SEC). The main objectives
were to strengthen the
independence of audit
committee and making it
more effective.

34. Committees on corporate governance
• Kumar Manglam Birla
Committee – The
committee was chaired
by Mr. Manglam which
submitted its final report
in early 2000. The main
purpose of the
committee is to promote
and raise the standards
of corporate governance.

35. Committees on corporate governance
• Naresh Chandra
Committee – This
committee was appointed
on 21st August 2002 by the
Department of Company
Affairs(DCA). The
committee submitted two
reports and is based on
almost the same grounds
as Kumar Manglam Birla
committee reports.

36. Committees on corporate governance
• Narayana Murthy
Committee – SEBI
appointed this committee
comprising of 23 persons.
The committee
recommended that the
corporate organization
should function in a more
organized manner and
should strive for enhancing
long term value to the
shareholders.

37. Top Management

38. Top Management
• Top management
encompasses mainly two
layers namely, directors
and the chief executives.

39. Board of directors
• Directors are elected
shareholders representing
the equity shareholders to
manage the affairs of the
business in a democratic
manner.
• A well balanced board is
one which has thorough
representation of all
interest of financial stake,
experience and expertise.

40. Board of directors
• In the case of reliance
industries limited, it has in
all 15 members consisting
of board of which 12 are
whole time and 3 are part
time. The whole time
directors are made up of
one chairman and
managing director, 1 vice
chairman and director and
10 executive directors. The
company has no
nominated directors.

41. Role of board of directors
• It acts as the Trustee of
Shareholders – The
director’s act as
representatives of
shareholders and work
with utmost faith and
degree of honesty in
protecting long term
aims of wealth
maximization of
company.

42. Role of board of directors
• Determining the
fundamental objectives
and policies – The board
of directors play vital role
in long range planning
and set the overall goal
of the company within
the framework.

43. Role of board of directors
• Determining the
organization structure
and selecting the top
executives – It is the
prerogative of the board
to select the CEO and
other top level
managers.

44. Role of board of directors
• Approving financial
matters – These financial
matters relate to two
things namely, approval
of budgets and
distribution of the
corporate earnings.

45. Role of board of directors
• Maintaining adequate
checks and controls – In
the final analysis, the
board of directors is held
responsible for the result
of the company.

46. Role of board of directors
• Statutory functions –
Directors are to perform
certain legal functions
which are mandatory on
their part.

47. Chief Executive
• The role of CEO is of paramount
importance so far as strategic
management is concerned –
both in family and professionally
managed companies.
• A company may have either a
chief executive or multiple chief
executives – a team consisting
of more than one person.
• CEO is the person who is to
shoulder the responsibility in
respect to strategic
management.

48. Role of Chief Executive
• Formulating long term
plans – CEO is the brain
behind long term
planning and decision
making.
• Guiding and directing –
CEO provides his
valuable guidance and
direction to different
functionaries in the
organization.

49. Role of Chief Executive
• Integrating – Integration is
an essential part of
coordination as it deals
with integration of
interests, timing the
operations and balancing
of efforts.
• Reviewing and controlling
– Review becomes very
important task of CEO as
he is seeing whether
everything is going
according to his plans.

50. Role of Chief Executive
• Public relations – CEO is
responsible for
maintaining good
rapport with the publics
of the society in which
he works.

51. Entry Strategies

52. Entry Strategies
• Market entry
strategy is
influenced by the
firm and product
characteristics and
the domestic and
international market
characteristics.

53. Foreign Market Entry and Operations Strategies
Exporting
• Direct Exporting.
• Indirect Exporting.
Contractual Agreement
• Licensing & Franchising.
• Strategic Alliance.
• Contract Manufacturing.
Production facility in foreign
market.
• Assembly Operations.
• Wholly owned
manufacturing facility.
• Joint Ventures.
Mergers and Acquisitions

54. Direct exporting
In direct exporting,
the firm becomes
directly involved in
marketing its
products in foreign
markets, because the
firm itself performs
the export task
(rather than
delegating it to
others).

55. Direct exporting
To implement a direct exporting
strategy, the firm must have
representation in the foreign
markets. This can be achieved in a
number of ways:
– Sending international sales
representatives into the foreign
market.
– Selecting local representatives or
agents to prospect the market.
– Using independent local distributors
who will buy the products to resell
them in the local market.
– Creating a fully owned commercial
subsidiary to have a greater control
over foreign operations.

56. Indirect exporting
The market-entry
technique that offers the
lowest level of risk and the
least market control is
indirect export, in which
products are carried
abroad by others. The firm
is not engaging in
international marketing
and no special activity is
carried on within the firm;
the sale is handled like
domestic sales

57. Indirect exporting
There are several different
methods of indirect
exporting:
– The simplest method is to deal
with foreign sales through the
domestic sales organisation.
– A second form of indirect
exporting is the use of
international trading
companies with local offices
all over the world.
– A third form of indirect
exporting is the export
management company
located in the same country as
the producing firm and which
plays the role of an export
department.

58. Example
The mumbai based
American Dry Fruits
(ADF) which began
selling a range of
packaged foods liked
Chutneys, Spices,
Canned vegetables,
ready to eat dals, etc
under different brand
names later moved to
other countries with
large Indian population.

59. Licensing & Franchising
Licensing is another way
to enter a foreign market
with a limited degree of
risk. Under international
Licensing, a firm in one
country permits a firm in
another country to use
its intellectual property(
Patents, trade marks
etc).

60. Licensing & Franchising
Franchising is a business model
in which many different
owners share a single brand
name. A parent company
allows entrepreneurs to use
the company's strategies and
trademarks; in exchange, the
franchisee pays an initial fee
and royalties based on
revenues. The parent company
also provides the franchisee
with support, including
advertising and training, as
part of the franchising
agreement.

61. Licensing & Franchising
Licensing is similar to
franchising except that
the franchising
organisation tends to be
more directly involved in
the development and
control of the marketing
programme.

62. Licensing & Franchising
The major drawback of
licensing is the problem of
controlling the licensee
due to the absence of
direct commitment from
the international firm
granting the licence. After
few years, once the know-
how is transferred, there is
a risk that the foreign firm
may begin to act on its
own and the international
firm may therefore lose
that market.

63. Example
ITC Hotels and ITT
Sheraton corporation had
an agreement under which
ITC Hotel’s Welcom group
franchised two of its hotels
in Bangkok and Hong kong
to ITT Sheraton holding, in
exchange, the franchise for
Sheraton in India. Later,
partners decided to set up
a joint venture with
Sheraton having major
stake to manage all new
ITC hotel projects in India.

64. Strategic Alliance
It is an arrangement
between two companies
that have decided to share
resources to undertake a
specific, mutually
beneficial project. A
strategic alliance is less
involved and less
permanent than a joint
venture, in which two
companies typically pool
resources to create a
separate business entity.

65. Strategic Alliance
In a strategic alliance,
each company maintains
its autonomy while
gaining a new
opportunity. A strategic
alliance could help a
company develop a more
effective process, expand
into a new market or
develop an advantage
over a competitor,
among other
possibilities.

66. Example
An oil and natural gas
company might form a
strategic alliance with a
research laboratory to
develop more commercially
viable recovery processes. A
clothing retailer might form
a strategic alliance with a
single clothing
manufacturer to ensure
consistent quality and
sizing. A major website
could form a strategic
alliance with an analytics
company to improve its
marketing efforts.

67. Contract Manufacturing
In contract
manufacturing, the firm’s
product is produced in
the foreign market by
local producer under
contract with the firm.
Because the contract
covers only
manufacturing, marketing
is handled by a sales
subsidiary of the firm
which keeps the market
control.

68. Contract Manufacturing
Contract manufacturing
obviates the need for plant
investment, transportation
costs and custom tariffs and
the firm gets the advantage
of advertising its product as
locally made. Contract
manufacturing also enables
the firm to avoid labour and
other problems that may
arise from its lack of
familiarity with the local
economy and culture.

69. Example
Balsara’s private label
manufacturing activity is
focused on the supply of
children’s toothpaste
formulations. Balsara’s
empahsis on Private lable
products and contract
manufacturing has
resulted in increased
business from North
American and European
Markets.

70. Assembly Operations
Assembling is a
compromise between
exporting and foreign
manufacturing. The firm
produces domestically all
or most of the
components or
ingredients of its product
and ships them to foreign
markets to be put
together as a finished
product.

71. Assembly Operations
By shipping CKD
(completely knocked
down), the firm is saving on
transportation costs and
also on custom tariffs which
are generally lower on
unassembled equipment
than on finished products.
Another benefit is the use
of local employment which
facilitates the integration of
the firm in the foreign
market.

72. Example
Notable examples of
foreign assembly are the
automobile and farm
equipment industries. In
similar fashion, Coca-Cola
ships its syrup to foreign
markets where local bottle
plants add the water and
the container.

73. Wholly owned manufacturing facility.
Companies with long term
and substantial interest in
the foreign market normally
establish wholly owned
manufacturing facilities
there. A number of factors
like trade barriers,
difference in the production
and other costs encourage
the establishment of
production facilities in the
foreign markets.

74. Joint Ventures
Foreign joint ventures have
much in common with
licensing. The major
difference is that in joint
ventures, the international
firm has an equity position
and a management voice in
the foreign firm. A
partnership between host-
and home-country firms is
formed, usually resulting in
the creation of a third firm.

75. Mergers and Acquisitions
From a legal point of view,
a merger is a legal
consolidation of two
companies into one
entity, whereas an
acquisition occurs when
one company takes over
another and completely
establishes itself as the
new owner