The document discusses strategy formulation in business management. It defines strategy as a systematic plan to achieve future objectives. The key stages in strategy formulation are extensive research and analysis, determining strategic goals and plans, and implementing plans through strategic management. There are three levels of strategy: corporate, business, and operational. The summary effectively captures the main points about defining strategy and outlining the strategy formulation process in 3 sentences.

1. August / Fall 2012
Master of Business Administration - MBA Semester IV
MB0052 – Strategic Management and Business Policy
Assignment Set - 1
Q1. What do you understand by the term Strategy in the context of Business
Management and Policy? And what are the stages in the formulation of a Strategy?
Strategy is the method by which an organisation systematically achieves its future objectives. A
business cannot progress for a long term without a reliable strategy. Strategy is a common
direction set for the company and its various components to accomplish a desired position in the
future. A meticulous planning process results in strategy. It is the comprehension of the goals
which has logical step by step process. It defines the general mission and vision of an
organisation. It is important to consider that the decisions taken by an organisation are likely to
affect the employees, customers and competitors.
Strategy guides the organisation to achieve a long term goal. The strategy is advantageous to
the organisation through its configuration of resources within a challenging environment. It helps
to meet the requirements of market and stakeholder expectations. Strategy is a plan that is
aimed to give a competitive advantage to the organisation over rivals through differentiation.
Creating a strategy begins with extensive research and analysis. It is a process through which
senior management concentrates on top priority issues tackled by the company to be successful
in a long term.
It is the design of decisions in an organisation that sets its goals and plans to achieve it. The
organisation plans the future goals to contribute at large to its shareholders, customers and to
the society. Strategy is always improving and is amendable. It is a plan of future activities which
is aimed at the progress of an organisation. It is a set of directions to enhance the position of the
organisation in the overall market. Business strategy is the method by which an organisation
achieves and maintains its success. If an organisation cannot identify its strategy clearly then it
will struggle to survive in the competitive market. A steadfast strategy should be built to grow in
the market.
A fundamental concept is required to direct an organisation to create a sustainable and
successful plan. The organisation must understand the customer requirements and relate to its
customers for the success of business strategy. This understanding should be based on the
attitude of the organisation to progress rather than focusing on a specific competitor or on
current objectives. It is from this principle that the other objectives follow.
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2. Business strategy is used to achieve competitive advantage. The efficient development and
implementation of strategy depends on the capability of the organisation. This includes the
ability to prepare the strategic goals and implement the plans through strategic management.
Levels of strategy
Strategy exists at different business levels. The different levels of strategies are as follows:
• Corporate Strategy – This is regarding the general function and scope of the business to
meet the stakeholder’s expectations. As it is significantly influenced by the investors in
the business, it is also called the critical level strategy.
• Business Strategy – This is regarding how a business competes effectively in a
particular market. It includes strategic decisions about the selection of products and
meeting customer requirements.
• Operational Strategy – This is regarding how each part of the business is organised and
delivered to the corporate and business level. Operational strategy focuses on issues of
resources and practices of an organisation.
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3. Q2. What, in brief, are the types of Strategic Alliances and the purpose of each?
Supplement your answer with one real life example of each.
Types of Strategic Alliances and Business Decisions:
The mutual agreements between the organisations can take a number of forms and are
increasing their common goals to get upper hand over their competitors. The different types of
strategic alliances are listed below:
Joint venture: Joint venture is the most powerful business concept that has the ability to pool
two or more organisations in one project to achieve a common goal. In a joint venture, both the
organisations invest on the resources like money, time and skills to achieve the objectives. Joint
venture has been the hallmark for most successful organisations in the world. An individual
partner in joint venture may offer time and services whereas the other focuses on investments.
This pools the resources among the organisations and helps each other in achieving the
objectives. An agreement is formed between the two parties and the nature of agreement is
truly beneficial with huge rewards such that the profits are shared by both the organisations.
The advantages of joint venture are:
• A long term relationship is built among the participating organisations
• It Increases integrity by teaming with other reputable and branded organisations
• Helps in gaining new customers
• It helps in investing little money or no money
• It provides the capability to compete in the market with other organisations
• Reduces production time as the organisations are into join venture
• More new products and services can be offered to the customers
The disadvantages of joint venture:
• Sometimes the organisations deal with wrong people, thereby losing investments
• The organisations do not have the opportunity to take up decisions individually
• There are risks of disputes among the organisations that lead to poor performance
• If the organisation enters into joint venture agreement with unprofessional selfish
organisation, then it increases the risk of hurting business reputation and devastating
customer’s trust.
Example – The China Wireless Technologies, a mobile handset maker is getting into an
agreement with the Reliance Communications Ltd (RCom) to launch its new mobile. The joint
venture between the two companies is to gain profits and provide affordable mobile phones to
the market that consists of advanced features and aims to earn eight billion dollars in the next
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4. five years. The new mobile consists of dual SIM smart phone with 3G technology at a cheaper
rate.
Mergers and acquisitions
Merger is the process of combining two or more organisations to form a single organisation and
achieve greater efficiencies of scale and productivity. The main reason to involve into mergers is
to join with other company and reap the rewards obtained by the combined strengths of two
organisations. A smart organisation’s merger helps to enter into new markets, acquire more
customers, and excel among the competitors in the market. The participating organisation can
help the active partner in acquiring products, distribution channel, technical knowledge,
infrastructure to drive into new levels of success.
Collaborations and co-branding: Collaboration is the process of cooperative agreement of
two or more organisations which may or may not have previous relationship of working together
to achieve a common goal. It is the beginning to pool resources like knowledge, experience and
sharing skills of team members to effectively contribute to the development of a product rather
working on narrow tasks as an individual team member in support to the development. Such
collaborations are the foundation for concepts like concurrent engineering or integrated product
development. Collaboration is a win-win methodology. It means that both the organisations
insist upon each other to gain equal profits with no negative attitude of acquiring each other’s
possessions. Effective collaboration can be obtained by the following actions: The organisations
must get involved in the process from the beginning and avail the necessary resources for
collaboration.
Technological partnering It is the process of associating the technologies of two different
companies to achieve a common goal. The two organisations work as co-owners in business
and share the profits and losses. The technologies of individual organisations are shared to
achieve desired outcome. The required resources like knowledge, machinery, and expertise are
collaborated between the organisations. Example – The software giant, Infosys Technologies
Ltd. has entered into partnership with US based NVIDIA, GPU inventor and the world's visual
technologies giant. The purpose of this partnering is to develop NVIDIA CUDA (Compute
Unified Device Architecture). This technology is viewed as the next big revolution in the field of
technology in lending high performance in computing. The software helps the developers of
various applications to tap into the previously uncultivated power of the GPU. This will enable
certain applications to achieve high performance. The capacity of CUDA is expected to multiply
fifty times the performance of existing computing and reduce the run time to advance the user
enterprise.
Contractual agreements It is the process of agreement with specific terms between two or
more organisations which guarantee in performing a specific task in return for a valuable
benefit. The contractual agreement is the heart of business dealings. It is the most significant
areas of legal concern and involves variations in certain situations and complexities. The
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5. organisations require analysing fundamental factors before involving in contractual agreements.
The elements to be analysed are:
• It is necessary to identify the type of offer being laid by the organisation to make an
agreement.
• The acceptance of the information involved in offer which results in meeting the market
needs.
• The organisations are required to recognise the strong commitment towards the
contractual agreement.
• Systematic scheduling of the process involved in manufacturing product without any
hindrances to both the organisations.
• Discover the terms and conditions for manufacturing the product and the guarantee of
the organisations in fulfilling it. The contract agreement includes several documents such
as letters, orders, offers and counteroffers. There are various types of contractual
agreements. They are:  Conditional – It is based on occurrence of an event.
• Joint and several – The organisations promise to perform together but still they possess
individual responsibilities.
• Implied – The judicial court will determine the contract between the organisations based
on circumstances. The parties will be able to buy all manufactured products, enter into a
contract to supply other’s requirements, or renewal of the existing contract.
Outsourcing
It is the process of entering into a contract with an organisation or a person to perform a
particular function. Most of the organisations outsource the work in numerous ways. The
function being outsourced is considered as noncore to the organisation.
The external firms that provide outsourcing services are called as third parties or it is commonly
called as service providers. The concept of outsourcing existed from the era of work
specialisation. Usually organisations adopt this concept to carry out narrow functions such as
payrolls, billing, and data entry. Since most organisations lack in many resources, it outsources
these processes to other organisations which consists of specialised tools, facilities and trained
personnel.
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6. Q3. What is a Business Plan? What purpose does it serve?
A business plan is a complete internal document that summarises the operational and financial
objectives of a business. It also contains the detailed plans which show how the objectives are
being accomplished.
An accurately made business plan helps to allocate resources properly, to handle unforeseen
complications like financial crisis and to make good business decisions. On the other hand,
business venture is a start-up enterprise which is formed with expectations and plans of
achieving financial gain. Once the need of the organisation is identified, it can be started by a
small investor that has valuable resources and time. Other investors involve themselves by
providing support for further development of the venture once the business is created. In the
case of establishing a business venture, a formal business plan is written to outline the purpose
and mission of the business for the future use.
Common objectives include raising money, attracting talented employees, establishing
creditworthiness and fulfilling dreams the CEO has for the company. A new company may have
objectives that revolve around raising money for business capital. A company desiring to
expand product lines may need to establish creditworthiness. The company CEO may have
established a company with humanitarian goals in mind. When determining objectives, think
about profitability goals and when they are to be achieved. Is there a niche the company should
dominate, or should there be objectives concerning product lines or services offered? Once
objectives are clearly stated, the business plan can be designed.
Determine objectives by answering where will the business be in five years, what is the size of
the company and what are the goals regarding market share, physical growth and human
resources? Objectives monitor progress and keep the company focused on goals. Goals can be
financial or revolve around the products or services provided. Objectives may serve to please
investors or to give direction to management.
A small company's objectives may be the same financially as a large company if they carry
high-end products where size does not determine financial potential. According to Bev Clement,
of "How to Run an Online Business," objectives should be measurable so progress can be
determined, actionable so a clear action can be designed and realistic so that they can be
achievable within the given time frame. Objectives allow those reading the business plan to see
what the future company will look like.
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7. Q4. What is the chief purpose of a Business Continuity Plan and what are its components
for effective implementation. Explain in a sentence or two as to how it is different from a
Business Plan.
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